Business Description:
Commonwealth Bank of Australia (CBA) is Australia's largest retail bank and one of the 'Big Four'. It also operates in New Zealand and Asia. Its core business is the provision of retail, business and institutional banking services. It is also a major fund manager and has increasing market shares in general and life insurance.

Strategy Analysis:
CBA aims for superior shareholder returns by optimising revenue growth, productivity, capital efficiency and staff culture. The strategy is to invest in the competitive advantages that are difficult to replicate. The bank specifies its three primary sources of advantage as industry-leading application of technology to financial services, a customer-focused staff culture and a strong balance sheet. Each of these respectively supports returns on equity by making CBA more attractive to customers in a multi-channel banking world (an intangible asset), enhancing customer loyalty and satisfaction (another intangible asset), and reducing bad debts expense below peers´ (a cost advantage). Lower losses on bad debts give CBA more room to price keenly to win and retain business while remaining sufficiently profitable. The group will continue to invest in all three sources of advantage. CBA´s industry-leading technology project is the $1.1bn Core Banking Modernisation initiative, which is rolling out real-time banking and same-day settlement across the depositor and borrower customer base. CBA will soon be the only major bank offering these features across its customer base, an advantage which will take competitors years to replicate given the project was launched in 2008. CBA´s policy on acquisitions is to acquire only when it can create more value for shareholders than they can create for themselves. Commonwealth Bank of Australia reported NPAT up 13% to $6.39bn for the year ended 30 June 2011. Revenues from ordinary activities were $46.22bn, up 11% from last year. Diluted EPS was 395.1 cents compared to 354.2 cents last year. Net operating cash flow was $7.08bn compared to $2.92bn last year. The final dividend declared was 188 cents, taking the full year dividend to 320 cents compared with 290 cents last year. The 2011 financial year has been characterised by subdued system credit growth and intense competition. At this stage there is nothing to suggest that the 2012 financial year will see any material improvement nor is it clear what the catalyst will be for a meaningful revival in consumer and corporate confidence which is prerequisite to stronger demand for credit.