annual report of the Commonwealth Bank of Australia

Assignment: Question 1: Segment analysis (Notes to the financial statements, Note 2.7) (25 marks)
The 2020 annual report of the Commonwealth Bank of Australia (CBA) is available at:
https://www.commbank.com.au/content/dam/commbank/aboutus/shareholders/pdfs/results/fy20/cba-2020-annual-report-print.pdf
Carefully examine the annual report and answer the following questions. To answer these
questions, please consult the relevant concepts in the lecture materials and specified financial
report notes.
Question 1: Segment analysis (Notes to the financial statements, Note 2.7) (25 marks)
(a) Identify the most and the least profitable segments of CBA for the 2020 financial year.
How do they compare to the rest of the segments? (8 marks)
(Tips: Calculate the net profit before income tax/total income for each bank segment
for the 2020 financial year)
(b) What are the factors responsible for the results in (a)? (5 marks)
(c) Will the factors idenrified in (b) continue to the 2021 financial year or do you see
changes to the most and least profitable segments for 2021? Explain your answer. (5
marks)
(d) Which segment experienced highest credit risk in 2020? Discuss how this should be
managed. (7 marks)
Question 2: Industry analysis (Notes to the financial statements, Notes 3.1 & 3.2) (25
marks)
(a) Calculate the duration of ‘Gross Loans, bills discounted and other receivables’ of CBA for the
2020 Financial year. (For each maturity period, use the minimum maturity. For instance,
assume all loans maturing between 1 and 5 years have a maturity of 1 year for this exercise). (8
marks)
(b) Repeat (a) for the 2019 Financial year. (5 marks)
(c) Compare part (a) and part (b). Explain changes, if any, of duration between 2019 and 2020. (5
marks)
(d) Identify the industy lendings with the longest and the shortest duration. What are the inherent
risk of such a pattern and how should this be managed? (7 marks)
BANK3011 S1 2021 Assignment
Page 4 of 4
Question 3: Market risk (Notes to the financial statements, Note 9.3) (25 marks)
(a) Estimate CBA’s 30-day Total market risk VaR at the top 5% worst case as at June 30 2020. (9
marks)
(b) On page 228 of Notes 9.3, the last table provides two types of VaRs for the 2020 Financial
Year. One is the year average VaR for the period ended at 30 June 2020. The other is the VaR
as at 30 June 2020. The difference captures the current market risk as at 30 June 2020 versus
the average risk in the past whole year. Compare the traded market risk VaRs for average June
2020 and as at June 2020. Discuss the changes in the following market risk conditions:
(1) Interest rate risk (2) Forex risk, and (3) Credit risk. (9 marks)
(c) Read through page 229 of Non-traded market risk section and explain why the interest rate risk
for the 2020 financial year is higher than the interest rate risk for the 2019 financial year. (7
marks)
Question 4 Fintech risk (25 marks)
What Fintech risks are faced by CBA, and what have been their responses? Do you feel their
responses have been adequate? If not, how would they improve their current strategies?

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