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					Australia Financials
FINANCIALS
                                                                                                                EQUITY RESEARCH




Checks and balances – December 2012                                                                     January 10, 2013



Quarterly publication outlines
our views on financial stocks

Underweight the banks sector … preference for NAB                                                       Anchor themes
We are cautious on the banking sector’s ability to continue to deliver                                  Given our more cautious view
relative outperformance in 2013. In the “risk-on” environment, banks                                    on the macro environment in
performance is likely to lag market-levered stocks, while if economic                                   Australia, we prefer the
conditions were to deteriorate materially we expect banks’ earnings to be                               Insurance sector over Banks.
impacted by elevated credit costs. In that regard we see banks’ earnings
growth of 1-3% in FY13F as not attractive enough to justify the current                                 Nomura vs consensus
relative valuation. Given these settings, we prefer the more defensive                                  We have non-consensus views
characteristics of the insurance sector. Within the banks sector, NAB (Buy)                             on NAB and QBE.
remains our preferred exposure.
                                                                                                        Research analysts
Overweight the insurance sector … preference for QBE and SUN
We expect a significant recovery in insurance sector earnings in 2013                                   Australia Banks

driven by a continuingly favourable pricing environment. The sector offers                              Victor German - NAL
                                                                                                        victor.german@nomura.com
a defensive return profile for investors with limited correlation to economic                           +61 2 8062 8411
conditions and a strong source of growing dividends. We see QBE and
                                                                                                        Anthony Hoo - NAL
SUN as the stocks best positioned to take advantage of these trends.                                    anthony.hoo@nomura.com
                                                                                                        +61 2 8062 8414
Other financials appear fully valued … preference for CPU, CGF, HGG                                     Matthew Dunger - NAL
Following strong share-price performance in the December quarter, we                                    matthew.dunger@nomura.com
                                                                                                        +61 2 8062 8416
see little fundamental value in the Div Fin and Wealth sectors. In our view
current multiples largely incorporate further earnings upside.
                                                                                                        Australia Insurance
Fig. 1: Stocks for action                                                                               Toby Langley, CFA - NAL
                                                             Old    New Up/Down FY13F          FY13F    toby.langley@nomura.com
 Company                    Code     Rating         Price     PT     PT side (%) P/E (x)    yield (%)   +61 2 8062 8436

 ANZ                        ANZ      Neutral       25.02    26.00   26.50     5.9    11.4        5.9
 Commonwealth Bank          CBA      Reduce        61.40    53.50   55.00   (10.4)   13.9        5.8
 National Aust. Bank        NAB      Buy           25.35    30.00   31.00   22.3     10.3        7.2
 Westpac Banking Corp WBC            Neutral       26.51    27.50   27.50     3.7    12.4        6.5
 Bank of Queensland         BOQ      Neutral         7.56    7.40    8.00     5.8    10.5        7.1
 Bendigo & Adel. Bank BEN            Neutral         8.83    9.00    9.50     7.6    10.9        6.9
 AMP Limited                AMP      Neutral         5.06    5.00    5.15     1.8    19.5        4.9
 Insurance Aust Group IAG            Neutral         4.76    4.70    4.70    (1.3)   18.4        4.8
 QBE Insurance Group QBE             Buy           11.47    14.00   14.00   22.1     14.9        5.2
 Suncorp Group              SUN      Buy           10.68    11.70   11.70     9.6    13.1        5.6
 Macquarie Group Ltd        MQG      Neutral       35.85    31.00   35.00    (2.4)   15.8        4.4
 ASX Ltd                    ASX      Neutral       32.29    31.00   31.00    (4.0)   16.7        5.4
 Computershare Ltd          CPU      Neutral         9.50    8.50    9.50     0.0    18.7        3.0
 Challenger                 CGF      Buy             3.65    4.90    4.90   34.2      7.3        4.4
 IOOF Holdings              IFL      Neutral         7.33    6.40    7.00    (4.5)   16.5        4.7
 Perpetual                  PPT      Neutral       34.30    27.00   33.00    (3.8)   20.0        3.2
 Platinum Asset Mgmt        PTM      Neutral         4.18    4.40    4.55     8.9    18.6        4.8
                                                                                                        See Appendix A-1 for analyst
 Henderson Group            HGG      Neutral         2.05    1.75    2.25     9.8    10.3        5.6
                                                                                                        certification, important
Source: Nomura estimates. Pricing as at 9 January 2013                                                  disclosures and the status of
                                                                                                        non-US analysts.
Nomura | Australia Financials                                          January 10, 2013



Contents
     3        Sector outlooks and stock preferences
  




     4        Recent performance trends
  




     5        Australian Banks
  




              7    On P/E basis, banks look fair value

           




              8    Dividend yield attraction remains

           




     9        NAB remains our top pick
  




              10   So what is NAB worth?

           




              12   Major bank forecasts

           




              13   Earnings downgrades

           




              13   Key forecast drivers

           




     15       Non-life Insurance
  




     18       Life Insurance
  




              19   Earnings changes for Insurance stocks

           




     20       Australian Diversified Financials
  




              20   Capital markets trends

           




              21   ASX market trends

           




              23   CPU relative valuation is looking more attractive

           




              23   MQG appears fully valued

           




              24   Earnings changes for Diversified Financials

           




     25       Australian Wealth Management
  




              27   Earnings changes for Wealth Management stocks

           




     51       Appendix A-1
  




                                                                                   2
Nomura | Australia Financials                                                                                        January 10, 2013



Sector outlooks and stock preferences
While banks remained relatively defensive throughout FY12, in our view the sector’s
relative attractiveness wanes should economic conditions deteriorate (predominantly as
a result of rising credit costs). Consistent with our house view of a deteriorating
economic environment in Australia throughout 2013, we are underweight the banks
sector. In our view the key upside for banks is from better than expected margin
performance (from less competition on deposits), which will largely be achieved as a
direct result of slower volume growth. In that regard we see banks’ earnings growth of 1-
3% in FY13F as not attractive enough to justify the current relative valuation.
The Australian bank sector looks slightly overvalued, both in a relative and an absolute
sense:
• Absolute P/E of 12.0x, broadly in line with its 10-year average, and ~7% premium to
 its long-term average.
• P/E relative of 0.82x, broadly in line with its 10-year average of 0.83x, and ~11%
 above its long-term average of 0.74x.
• Yield of ~6.3% remains relatively attractive relative to 10-year average of 5.9%.
  While yields at the top end of the historical range, and well above bond yields, should
  continue to provide good support to bank share prices, we note that insurance stocks
  now offer similar yields and better earnings growth profiles.
Our preferred exposure to the sector is NAB (Buy). While NAB’s ongoing issues are, in
our view, likely to continue to weigh on market sentiment, its relative valuation upside is
increasingly difficult to ignore. NAB is now trading at a ~15% discount to peers (which is
one of the widest gaps over the past 10 years), while its FY13 earnings have been
rebased by ~15% (relative to 3-5% for peers) in the last 12 months.
We reiterate our positive view on the Australian insurance sector; see our 10 December
initiation note for further detail: Australia Insurance: Bouncing back. We believe sector
valuations fail to capture the earnings improvement we anticipate. We expect a 73%
uplift in FY13 sector insurance earnings, driven by the consistent price increases
delivered over the last five years. While pricing trends are a clear reason to be positive
on the sector, we also highlight its defensive credentials. Underwriting profits are
uncorrelated with economic conditions and financial market performance. Being a
strongly cash-generative industry, the insurance sector offers a relatively unique
combination of high (6% yield) and growing dividends (12% CAGR over 2011-14F).
QBE and SUN (both rated Buy) are our preferred plays within the insurance sector. We
believe SUN offers exposure to the domestic trends we observe at an attractive valuation
– still at a material discount to IAG based on our calculations. QBE should benefit from a
recovery in its core earnings base, after a difficult year, and favourable pricing trends in
the key North American non-life market. QBE should also benefit significantly from any
improvements in US economic conditions.
Within the diversified financials sector, following strong share-price performance in the
December quarter, we see little fundamental value. In our view, current multiples largely
incorporate further earnings upside. While we raised our earnings expectations by 3-5%
for MQG and CPU, we believe market conditions (ie, market activity) need to continue to
improve materially to justify recent relative outperformance. Our preference in the sector
is for CPU (Neutral); given its exposure to the Northern hemisphere, we see its earnings
as more defensive to the slowing Australian economy. .
In the wealth management sector, the favourable market conditions in the second half           In wealth management we
of 2012 have led to strong share price performances. We are now taking a more                  prefer HGG given it has the
cautious view, and believe current valuation multiples have priced in an ongoing market        most attractive valuation multiple
rally. We have downgraded PTM to Neutral, largely on valuation grounds. Our
preference in the sector is for HGG (Neutral) – it is trading at what we view as an
attractive multiple (10x fwd P/E), and its exposure to UK and Europe is now beginning to
appear to be a potential positive differentiator.




                                                                                                                                    3
Nomura | Australia Financials                                                                                                                                  January 10, 2013



Recent performance trends
The Australian banking sector, on a relative basis, performed broadly in line for the
December quarter. On a relative stock basis, NAB has been a clear underperformer,
while CBA outperformed peers and the industrials by ~4% in the quarter. Over 12
months, WBC was the strongest performer, returning ~38% in an absolute sense and
~11% above the All Industrials. Within the regionals, BOQ underperformed, having
announced downgraded earnings due to higher bad debts in October.
With the exception of QBE, the Australian insurance stocks have all outperformed the                                               Insurance stocks outperformed
All Ordinaries Index over the past year and over the December quarter. QBE’s 30%                                                   the index over both the last
underperformance follows its two profit warnings during the year, concerns around the                                              quarter and year, with the
group’s earnings profile and continued speculation about the company’s capital position.                                           exception of QBE…
IAG has been the sector’s star-performer in 2012, outperforming the All Ordinaries by
44%, on the back of fast-improving underwriting trends. IAG’s strong run in 2012 limits its
near-term upside, in our view, but highlights the potential for improvement in SUN’s
multiple which we believe fails to capture the earnings upside within its GI franchise.
Performance of the diversified financial stocks was dominated by MQG’s
outperformance. MQG benefited from improvement in market outlook and comfort
around earnings (the downgrade cycle appears to have played its course), as well as
relatively solid deal flow in the December quarter. However, we believe market activity
needs to continue to improve materially to justify ~20% relative outperformance in the
December quarter.
Among wealth management stocks, there was strong outperformance in the December
quarter, relative to the market. This would have been driven by the broader market rally,
with the market now appearing to price in further earnings upside. This leads us to be
more cautious on the sector. PPT was the strongest performing stock, with a solid rally in
the last two months of 2012, and it is now amongst the most expensive asset managers
globally.

Fig. 2: Absolute and relative performance
                                                       Absolute                            Relative to All Ordinaries                    Relative to All Industrials
                                           1m            3m              12m              1m           3m          12m                  1m           3m          12m
 Banks
 Banks (J4010AI)                           3.1            7.1            30.3            (0.3)          0.3            11.5            0.0             (0.4)            2.3
 ANZ                                       2.8            4.4            29.1            (0.6)          (2.4)          10.2            (0.2)           (3.1)            1.1
 CBA                                       4.2           11.5            33.1             0.7           4.7            14.3            1.1              4.0             5.1
 NAB                                       2.9            1.6            14.7            (0.6)          (5.2)          (4.1)           (0.2)           (5.9)          (13.3)
 WBC                                       2.1            8.2            38.5            (1.3)          1.4            19.7            (1.0)            0.6            10.5
 BEN                                       5.2           10.7            13.3             1.8           3.9            (5.5)           2.1              3.1           (14.7)
 BOQ                                       4.7            0.4            11.0             1.3           (6.4)          (7.8)           1.6             (7.1)          (17.0)
 Insurance
 AMP                                      4.6             11.1           24.7             1.1            4.3            5.9            1.5              3.6            (3.3)
 IAG                                      1.3              7.3           63.1            (2.1)           0.5           44.2            (1.8)           (0.2)           35.1
 QBE                                      (0.4)          (15.8)          (10.8)          (3.8)          (22.6)         (29.7)          (3.4)          (23.4)          (38.8)
 SUN                                      5.0             10.1           28.2             1.5            3.3            9.4            1.9              2.5             0.2
 Diversified Financials
 MQG                                       8.3           27.3            55.5             4.9           20.6           36.6             5.3            19.8            27.5
 CPU                                       3.3            8.3            15.7            (0.1)           1.5            (3.1)           0.3             0.8           (12.3)
 ASX                                       6.0            5.5             7.9             2.6           (1.2)          (11.0)           2.9            (2.0)          (20.1)
 Wealth Management
 CGF                                       6.3            8.3            (9.9)           2.9             1.5           (28.8)           3.2            0.7            (37.9)
 IFL                                      10.6           25.6            48.0            7.2            18.8           29.2             7.5           18.1             20.0
 PPT                                      11.2           33.8            74.4            7.8            27.0           55.6             8.2           26.2             46.4
 PTM                                       5.9           11.8            18.8            2.4             5.0            (0.1)           2.8            4.3             (9.3)
 HGG                                       9.9           22.8            42.2            6.5            16.0           23.4             6.8           15.2             14.2
Note: All Ordinaries refers to the XAO accumulation index, while All Industrials refers to the XJI accumulation Index. Pricing as at 31 December 2012. Performance includes
dividends
Source: Nomura research, IRESS




                                                                                                                                                                               4
Nomura | Australia Financials                                                                                                                                                                                                               January 10, 2013



Australian Banks
Australian banks remained relatively defensive throughout 2012, with downgrades to                                                                                     Bank downgrades relative to
consensus forecasts remaining well below those of some of the larger downgrades seen                                                                                   consensus remain well below
elsewhere in the market (ie, energy, transport and materials). This defensive nature of                                                                                some of the larger downgrades
the sector, coupled with attractive dividend yields, led to the banks sector relative                                                                                  seen elsewhere in the market…
outperformance of ~12%.
We are less optimistic on the sector’s relative performance in 2013. In the “risk-on”
environment, banks performance is likely to lag market-levered stocks, while if economic
conditions were to deteriorate materially, we expect banks’ earnings to be impacted by
elevated credit costs. In our view, the key upside for banks is from better-than-expected
margin performance (from less competition on deposits), which will largely be achieved
as a direct result of slower volume growth. In that regard, we see banks’ earnings growth
of 1-3% in FY13F as not attractive enough to justify the current relative valuation (we are
1-2% below consensus).

Fig. 3: Banks vs All Industrials (ex banks) EPS growth                         Fig. 4: Quarterly consensus earnings changes 2013F
                                                                               q-q changes to Dec 12
  (%)                                                                             (%) 6
              11.3                                                                 6               4
 12                                                                                4
                                                  10.2                                                       2
 10                                                                                2
                                                                                   0
  8                                                                              (2)                                   (1) (1) (2)
                                                                                 (4)                                               (2) (2) (2) (2)
  6                                                        4.6   4.7             (6)                                                                                                                  (4) (4) (4)
                               4.3                                                                                                                                                                                                          (5)
                                                                                 (8)                                                                                                                                                                        (6) (6)
  4                    2.6
                                                                                (10)                                                                                                                                                                                             (8)


                                                                                                          Healthcare
  2




                                                                                                                                                                                                      Utilities
                                                                                                                                                         Food retail




                                                                                                                                                                                                                                                                                 Transport
                                                                                                                                                                                                                  Cons. serv.


                                                                                                                                                                                                                                            Capital goods
                                                                                                                                                                                          Insurance




                                                                                                                                                                                                                                                            Energy
                                                                                                  Media
                                                                                         Pharma




                                                                                                                                     Retailing



                                                                                                                                                                       Telco
                                                                                                                                                                               Software




                                                                                                                                                                                                                                Beverages



                                                                                                                                                                                                                                                                     Materials
                                                                                                                                                 Banks
                                                                                                                       Real Estate
  0
             EPS growth 1-yr fwd                EPS growth 2-yr fwd
       All Industrials ex-banks       Nomura banks       Banks - consensus
Source: Nomura estimates, FactSet, Bloomberg                                   Note: ASX 200 average weighted EPS changes as at 31 December 2012
                                                                               Source: Nomura estimates, FactSet


For the majors’ wealth management businesses, the December quarter had generally
positive mark-to-market impacts with the improvement in market conditions. Domestic
equities markets improved by ~7% in 1Q13, and international markets were up ~2%.
This has generally led to earnings upgrades across the majors' WM businesses,
although the impact on the group was not material.

Fig. 5: Wealth management performance – December year-end
                     Aust equities             Int'l        Aust fixed       Int'l fixed                    Property
 (%)                                       equities           income           income
 2H09                        35.2              31.9               0.4                                                      50.2
 1H10                          4.8               8.7              2.3              6.2                                       (6.4)
 2H10                         (4.0)             (3.9)             4.9              5.3                                          2.5
 1H11                          7.7             11.5               1.8             (3.9)                                         2.4
 2H11                        (15.1)            (16.4)             7.1              1.2                                       (8.5)
 1H12                        10.7              19.1               2.7              2.1                                     11.0
 2H12                          3.7              (0.3)             6.6              0.3                                     16.3
 1Q13                          6.9               2.4              0.2             (8.7)                                         6.9
Source: Nomura research, IRESS, FactSet


We continue to view deposit funding as a key priority for banks in the medium term.
Against the backdrop of solid deposit growth and meagre credit growth in recent periods,
we see a potential window of more rational deposit pricing for household and business
deposits (competition appears to have eased over the past six months, with spreads on
special offers generally down 5-30bps). While this is positive for margins, we note that
credit spreads also continued to narrow, and in a low credit growth environment we
expect banks to increasingly see margin pressure on the asset side of the balance sheet
(particularly in larger-end corporate).




                                                                                                                                                                                                                                                                                   5
Nomura | Australia Financials                                                                                                                    January 10, 2013


Fig. 6: Deposit growth vs credit growth (% y-y)                            Fig. 7: Best offer term deposits – change in spreads
   (%)                                                                         (bps)
  30                                                                           20
                                                                                                                                     78
                                                                                                                                                   1

  20                                                                             0
                                                                                                         (1) (4)
                                                                                                               (3)
                                                                                       (3)
                                                                                     (6) (7)           (4)
                                                                                                           (7)
                                                                                                                                  (4)              (5) (2) (6)
                                                                                                                                               (9)
                                                                             (20)                                (13) (12) (13)                       (14)
  10
                                                                                                                    (19)        (17)
                                                                                                 (27)                   (20)
                                                                                                    (28)                              (29)
                                                                             (40)              (32)                                         (34)
    0                                                                                                                      (35)          (39)

                                                                             (60)




                                                                                                 CBA


                                                                                                        NAB




                                                                                                                                     BWA
                                                                                                                      SGB
                                                                                       ANZ




                                                                                                                             Ubank




                                                                                                                                                  BEN


                                                                                                                                                          MQG
                                                                                                                                           BOQ
                                                                                                               WBC
 (10)
    1988          1992     1996     2000          2004     2008     2012
                   Deposit growth (%)             Credit growth (%)                                           1m      3m       6m

Note: Total deposits ex-certificates of deposit                            Note: Best offer across 30-, 90-, 180-day deposits; spreads are versus bank bill rates.
Source: Nomura estimates, RBA                                              Movement in spread is December versus average of past 1, 3 and 6 months.
                                                                           Source: Nomura research, Infochoice, IRESS




                                                                                                                                                                 6
Nomura | Australia Financials                                                                                          January 10, 2013


On P/E basis, banks look fair value
The bank sector appears fully valued at current levels relative to its recent and long-term
history. On an absolute P/E basis, the bank sector is trading at ~12x, ~7% above its
long-term average of 11.2x. While the sector is trading on par with its 10-year average,
we note that the growth profile of the sector has changed materially from mid 1990s -
2007 levels.

Fig. 8: Banks prospective absolute P/E
      (x)
 16

 14

 12

 10

  8

  6
   1994       1996       1998       2000   2002   2004   2006     2008         2010    2012

Note: Averages are LT and 10 year
Source: Nomura research, FactSet, IRESS



On a relative basis, the sector is also trading broadly in line with its 10-year average
relative to the All Industrials (ex-banks) – its current forward P/E relative is 0.82x (vs the
10-year average of 0.83x). Compared to the long-term average, however, the current
P/E relative is at a ~9% premium.
Relative to the All Ordinaries (ex-banks), the sector is trading at 0.84x, which is slightly
above the 10-year average of 0.89x, but a ~14% premium to the long-term average (of
0.74x).

Fig. 9: Banks prospective P/E relative to All Industrials             Fig. 10: Banks prospective P/E relative to All Ordinaries
(ex banks)                                                            (ex banks)
  (x)                                                                      (x)
 1.2                                                                     1.3

                                                                         1.1
 1.0

                                                                         0.9
 0.8
                                                                         0.7
 0.6
                                                                         0.5

 0.4                                                                     0.3
    1994 1996 1998 2000 2002 2004 2006 2008 2010 2012                       1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Note: Averages are LT and 10 year                                     Note: Averages are LT and 10 year
Source: Nomura research, FactSet, IRESS                               Source: Nomura research, FactSet, IRESS



Given the volatility around bad debts, we also find it useful to look at underlying valuation
measures. We derive the underlying bank sector prospective P/E by backing out tax
expenses and impairment charges. On this basis, the sector is trading at 7.3x, ~3%
above its long-term average of ~7.1x, (and in line with its 10-year average of 7.4x). On a
relative (underlying P/E) basis, the sector is trading ~9% above the long-term average at
0.5x and broadly in line with its 10-year average.




                                                                                                                                   7
Nomura | Australia Financials                                                                                                                          January 10, 2013


Fig. 11: Banks underlying P/E                                                       Fig. 12: Banks underlying P/E vs All Industrials (ex banks)
  (x)                                                                                  (x)
 10                                                                                  0.60

  9
                                                                                     0.50
  8

  7                                                                                  0.40

  6                                                                                  0.30
  5
                                                                                     0.20
  4                                                                                      1996      1998     2000     2002     2004     2006     2008     2010      2012
   1996 1998 2000 2002 2004 2006 2008 2010 2012

Note: Underlying P/E refers to pre-provision EPS of the majors weighted by market   Note: Underlying P/E refers to pre-provision EPS of the majors weighted by market
capitalisation. Averages are 10-year and long-term                                  capitalisation. Averages are 10-year and long-term
Source: Nomura research, FactSet                                                    Source: Nomura research, FactSet



Fig. 13: Australian banks valuation summary
                                                                  Current           LT ave.            10 yr ave. LT (Disc.)/ prem.               10yr (Disc.)/
                                                                       (x)              (x)                   (x)               (%)                 prem. (%)
 Absolute
 Banks forward PE                                                      12.0             11.2                  12.0                    7.2                   0.1
 Banks underlying PE                                                    7.3              7.1                   7.4                    2.7                  (1.3)
 Banks dividend yield                                                   6.3              5.8                   5.9                    0.6                   0.5
 Relative
 Bank PE relative to XAIXB                                             0.82             0.73                  0.83                    8.9                  (1.3)
 Banks PE relative to XAOXB                                            0.84             0.74                  0.89                   10.0                  (4.9)
 Banks underlying PE vs XAIXB                                          0.50             0.45                  0.51                    4.1                  (1.2)
 Banks divi premium to XAIXB dividend (%)                              1.78             1.15                  1.05                    0.63                  0.7
 Banks gross divi prem.to 10yr bond yield (%)                           5.8              2.6                   3.5                    3.1                   2.3
Note: Data is 1 yr forward. Data as of 9 January 2013
Source: Nomura estimates, FactSet.



Dividend yield attraction remains
In recent times bank yields have offered a significant premium compared to bond yields,
as well as to industrials. While this trend has lessened over the past few months, the
relative attractiveness remains. As shown below, the current 12-month forward nominal
and actual yields (not grossed up for imputations) are ~178bps above industrials yields,
which are ~60bps above their long-term averages. Further, bank yields (on a gross
basis) offer a ~580bp premium to 10-year Australian bonds, down from a ~730 premium
at June 2012, but materially above the ~250bp long-term average.

Fig. 14: Banks prospective dividend yield less All Industrials                      Fig. 15: Banks grossed up prospective dividend yield less
ex-banks                                                                            10-year bond yields
  (%)                                                                                 (%)
  3                                                                                  10

                                                                                      8
  2

                                                                                      6
  1
                                                                                      4

  0                                                                                   2

                                                                                      0
 (1)
                                                                                       2000        2002        2004         2006       2008        2010         2012
   2000         2002       2004        2006        2008       2010        2012
Source: Nomura research, FactSet                                                    Source: Nomura research, FactSet




                                                                                                                                                                        8
Nomura | Australia Financials                                                                                           January 10, 2013



NAB remains our top pick
While NAB’s ongoing issues are, in our view, likely to continue to weigh on market
sentiment, its relative valuation upside is increasingly difficult to ignore. As we
highlighted in our 7 December 2012 report, NAB a bargain before Christmas, we
believe our sum-of-the-parts valuation adequately captures downside risk associated
with: (i) NAB’s UK CRE portfolio (A$1.2bn negative contribution); (ii) relative
underprovisioning (captured by our BDD charge, which is 50-80% above peers over the
next three years); and its weaker capital position (A$1.1bn negative contribution). We
also note that NAB’s domestic business RoRWA has improved materially over the past
two years and is now just 20bps below peers, while credit quality trends (ex-UK) do not
appear materially different compared with peers.
FY12 was clearly a disappointing year for NAB. While at the start of 2012 the market had
been expecting NAB to deliver sector-leading EPS growth of ~5%, NAB ultimately
delivered negative ~4% EPS growth (excluding larger-than-peers non-cash
adjustments). In that regard it’s hardly surprising that NAB has been a laggard in terms
of share price performance.
NAB’s EPS expectations for FY13 came down by ~14% vs reductions for peers of ~5%.
NAB’s current EPS expectations, in our view, appear more conservative and reflect the
current challenging environment as well as NAB’s specific issues (such as exposure to
UK, underprovisioning and overweight position in Australian SME).

Fig. 16: NAB FY13 consensus EPS forecasts                                  Fig. 17: Major bank peers (ex. NAB) FY13 consensus EPS
                                                                           forecasts
    (cps)
                                                                            101
  2.85                                             3Q12 trading
                                1H12 result
                                                   update /
                                announcement                                100
  2.80                                             conversion of
                                                   hybrids
  2.75                                                     UK                99
                                                           provisioning
  2.70                                                     announcement/     98
                                                           2H12 result
  2.65                                                                       97
  2.60        1Q12 trading                                                   96
              update/ UK
  2.55        review announced
                                                                             95
  2.50                                                                        Jan-12               Apr-12     Jul-12         Oct-12
     Jan-12        Mar-12         May-12       Jul-12      Sep-12                                  ANZ      CBA        WBC
Source: Nomura research, Bloomberg                                         Source: Nomura research, IRESS



Concurrently, NAB has underperformed peers by ~15% in 2012 in terms of share price,
which more than offsets its relative decline in EPS. NAB’s valuation discount has opened
further and now stands at ~15% (at the higher end of relative discounts observed over
the past 20 years). In this regard, it appears that investors have “doubled-up”, by
incorporating both earnings and valuation discounts. While we believe NAB’s franchise
issues are far from over, there appears to be an emotional element in NAB’s current
pricing. In particular, our analysis suggests that NAB’s problems in the UK should be
approaching a low point, and in that regard an ongoing valuation discount would seem
difficult to justify in perpetuity when earnings have already been adjusted.




                                                                                                                                      9
Nomura | Australia Financials                                                                                                 January 10, 2013


Fig. 18: NAB share price relative to Australian banks index                Fig. 19: NAB P/E relative to major banks average
        (x)     1Q12 trading                      3Q12
                                                                              (x)
                                        Stock
 1.05           update/ UK review       ex-div    trading      UK           1.3
                announced                         update /     provision
                                                  conversion   / 2H12       1.2
 1.00
                                                  of hybrids   result
                                                                            1.1
 0.95
                                                                            1.0
              UK strategic
 0.90         review                                                        0.9
              announced          1H12 result
                                 announcement                               0.8
 0.85
                                                                            0.7




                                                                                  1993
                                                                                  1994
                                                                                  1995
                                                                                  1996
                                                                                  1997
                                                                                  1998
                                                                                  1999
                                                                                  2000
                                                                                  2001
                                                                                  2002
                                                                                  2003
                                                                                  2004
                                                                                  2005
                                                                                  2006
                                                                                  2007
                                                                                  2008
                                                                                  2009
                                                                                  2010
                                                                                  2011
                                                                                  2012
 0.80
    Jan-12      Mar-12       May-12      Jul-12       Sep-12    Nov-12
Source: Nomura research, company data, IRESS                               Source: Nomura research, company data, IRESS



So what is NAB worth?
In our view, in order to adequately capture NAB’s value, investors should look to value
NAB on a segmental basis, taking the following issues into account:
• Gaining comfort around UK is important. In our view, while UK clearly presents
  further ongoing risk, we believe FY12 has marked the low point of NAB’s earnings
  trajectory and losses in the combined business should diminish in future years. While
  we forecast a negative value contribution from the newly created CRE portfolio, we
  believe a positive valuation for the rest of the UK business mitigates this. We have
  attributed a ~A$1.5bn valuation to the combined UK and CRE books.
• Relative underprovisioning issues are likely to continue to weigh on sentiment.
  However, from an earnings perspective we believe the difference has been adequately
  captured in our and the market’s forecasts, while from a balance sheet perspective the
  GRCL largely addresses relative differences. In that regard we don’t believe investors
  should place a further discount on NAB due to its provisioning.
• Outlook on domestic credit quality. NAB’s business mix (greater exposure to the
  SME sector) presents a potential downside risk in the event of a material deterioration
  in economic conditions. However, in the event of a slowdown, we would expect other
  parts of the book to also be impacted (including lower-end institutional). We estimate
  that for every 10bps rise in SME BDDs, NAB’s impact is ~1% above peers, but its
  underweight position in institutional and retail should partly mitigate this.
• Capital differences. Following the transition of the CRE portfolio to NAB’s balance
  sheet, UK’s core Tier 1 ratio has improved by ~200bps, which comes at the expense of
  NAB’s (ex UK) capital ratio. We estimate that excluding the UK business, NAB’s core
  Tier 1 ratio (APRA basis) now stands at ~7.6%. NAB is also yet to fully absorb the
  impact of operational risk charges (which should largely be offset by recent hybrid
  conversion). In aggregate, we estimate NAB’s capital shortfall at ~A$1bn relative to
  better-capitalised peers which is captured in our valuation.
• Below the line items. In recent periods banks’ usage of below-the-line adjustments
  has increased. While NAB is not the sole offender, we note that NAB has had more
  “non-recurring items” than peers. We adjust our bank multiple by 5% to incorporate
  quality differences in the reported numbers (this is consistent with NAB’s historic
  discount).
Our P/E-based valuation is based on our implied bank earnings, which largely consist of
the Australian base (we expect combined Clydesdale and CRE portfolio to deliver broadly
neutral contribution to earnings). Putting this on a 5% discount multiple to the domestic
peers (consistent with its long-term average and factoring NAB’s greater use of below-the-
line items), we derive a bank’s valuation of A$62bn. We value NAB’s WM business at
A$7.8bn (consistent with our valuation derived in a previous note, If it glitters is it gold?, 8
December 2011), and we adjust our valuation for the relative capital shortfall. Our valuation
of the combined UK business is just A$1.5bn. Based on this adjusted sum-of the-parts
valuation, we believe NAB is ~20% undervalued relative to peers.




                                                                                                                                          10
Nomura | Australia Financials                         January 10, 2013


Fig. 20: NAB group valuation
                                            (A$bn)
 Bank earnings                                 5.2
 Peer banking multiple at 5% discount (x)     11.8
 Bank valuation                              61.9
 WM business                                  7.8
 Capital shortfall                            (1.1)
 Value of UK CRE portfolio                    (1.2)
 Value of UK ex-CRE                           2.7
 Group valuation                             70.1
 Current market capitalisation               59.4
 Implied upside (%)                          18.1
Source: Nomura estimates, company data




                                                                  11
Nomura | Australia Financials                                                          January 10, 2013


Major bank forecasts
Fig. 21: Major bank forecasts
                                                                                       Major bank
                                                         ANZ    CBA*   NAB     WBC       average
 P&L
               Growth in revenues (%)
               FY13F                                       4      3      2       3               3
               FY14F                                       4      5      4       4               4
               FY15F                                       5      5      4       4               5
               Growth in costs (%)
               FY13F                                       2      2      0       3               2
               FY14F                                       3      2      2       2               2
               FY15F                                       4      2      2       3               3
               Growth in bad debts (%)
               FY13F                                      17     12     (10)     (3)             4
               FY14F                                       6     10      (0)     6               5
               FY15F                                       7      6      (5)    11               5
               Net int. margin (%)
               FY13F                                     2.22   2.03   2.04    2.15           2.11
               FY14F                                     2.15   1.99   2.01    2.11           2.07
               FY15F                                     2.09   1.95   1.97    2.07           2.02
 Balance sheet
               Growth in gross loans (%)
               FY13F                                       5      4      4       4               4
               FY14F                                       6      6      6       6               6
               FY15F                                       6      5      5       5               5
               Total loans / Total deposits (x)
               FY13F                                     1.33   1.24   1.19    1.31           1.27
               FY14F                                     1.32   1.23   1.19    1.31           1.26
               FY15F                                     1.32   1.23   1.19    1.31           1.26
               Tier 1 ratio (%)
               FY13F                                     10.7   10.5   10.4    10.6           10.6
               FY14F                                     11.0   10.8   10.5    10.4           10.7
               FY15F                                     11.1   11.2   10.7    10.5           10.9
               Basel III Core Tier 1 (%)
               FY13F                                      8.0    8.1    8.1     8.6            8.2
               FY14F                                      8.4    8.3    8.3     8.5            8.4
               FY15F                                      8.6    8.7    8.5     8.6            8.6
 Credit Quality
               Gross NPLs / Total loans (%)
               FY13F                                      1.2    0.9    1.3     0.5            1.0
               FY14F                                      0.8    0.4    1.0     0.4            0.6
               FY15F                                      0.7    0.3    1.0     0.4            0.6
               Provisions / NPLs (%)
               FY13F                                     0.85   1.36   0.56    1.25           1.01
               FY14F                                     1.17   2.45   0.66    1.77           1.51
               FY15F                                     1.17   3.56   0.66    1.88           1.82
               Bad debt exp/ Avg loans (%)
               FY13F                                     0.32   0.21   0.45    0.22           0.30
               FY14F                                     0.32   0.22   0.42    0.22           0.30
               FY15F                                     0.32   0.23   0.38    0.23           0.29
               Bad debt/ average Non housing loans (%)
               FY13F                                     0.70   0.63   1.38    0.67           0.84
               FY14F                                     0.70   0.65   1.31    0.67           0.83
               FY15F                                     0.70   0.65   1.17    0.70           0.81
Note: CBA is June year-end
Source: Nomura estimates, company data




                                                                                                     12
Nomura | Australia Financials                                                                                                                                         January 10, 2013


Earnings downgrades
We have reviewed our earnings forecasts across the major and regional banks. Minor                                                   Earnings changes are driven by
downgrades to our forecasts are predominantly driven by lower volume expectations,                                                   lower volume growth, partially
                                                                                                                                     offset by easing deposit
partially offset by better margins (driven by less competition in deposits).
                                                                                                                                     competition.
Small increases in dividends reflect our expectations for slightly higher payout ratios.

Fig. 22: Earnings changes
                            Cash earnings                                               EPS                                                                 DPS
                   2013F                       2014F                       2013F                       2014F                         2013F                            2014F
                      New                          New                   New                       New                             New                                     New
          Old      (A$mn)        %      Old     (A$mn)       %      Old (cps)           %     Old (cps)                 %     Old (cps)                %      Old         (cps)           %
 ANZ      6,211     6,218       0.1   6,531       6,515    (0.2)   218       219      0.1     226      226        (0.2)       147      148        0.8        149          152           2.0
 CBA      7,327     7,297      (0.4) 7,809        7,692    (1.5)   442       441      (0.2) 464        459        (1.0)       349      355        1.7        366          369           0.8
 NAB      5,778     5,770      (0.1) 6,230        6,215    (0.2)   246       246      (0.1) 261        260        (0.2)       183      183        (0.1) 194               194           (0.2)
 WBC      6,837     6,832      (0.1) 7,219        7,169    (0.7)   213       213      (0.0) 222        221        (0.5)       173      173        (0.0) 179               179           0.1
 BEN        346       346       0.1    376          368    (2.1)    81           81   0.1         86        84    (1.9)        61          61     0.1         64           62           (2.0)
 BOQ        232       232       0.2    266          266    0.1      72           72   0.2         81        82     0.1         54          54     0.2         53           53           0.9
Source: Nomura estimates



Key forecast drivers
We continue to expect margins to decline predominantly as a result of donwrad pressure
on asset spreads. In FY13F, we also incorporated some benefit of out-of-cycle re-pricing
of mortgages and more benign funding environment.

Fig. 23: NIM forecasts (%)                                                            Fig. 24: Revenue growth (y-y)
    (%)                                                                                     (%)
 2.3    2.23                                                                            8
            2.17                                                                                                                                              6.5
 2.2                                         2.16
                                                 2.12                                   6
 2.1                 2.04         2.05
                                      2.02
                                                                                                                                                                    4.7
                        2.00                                                                       3.84.0              4.0                                                        3.8
 2.0                                                                                    4                        3.0                 3.3              3.5
                                                                                                                                                2.5
 1.9                                                                                                                           1.9                                           1.9
                                                        1.78                            2
 1.8                                                        1.78

 1.7                                                               1.64
                                                                                        0
                                                                          1.63
 1.6
 1.5                                                                                   (2)
          ANZ        CBA         NAB   WBC                BEN        BOQ                           ANZ           CBA            NAB             WBC     BEN                   BOQ
                               2013F 2014F                                                                                   2013F                2014F
Source: Nomura estimates                                                              Source: Nomura estimates



While we expect costs to be generally well managed in a constrained environment, we
note that in FY13 banks are faced with a higher amortisation expense driven by a
material increase in capitalised balances over the last few years. However, we generally
expect banks to deliver positive jaws in FY13 as a result of their more aggressive cost
management.




                                                                                                                                                                                          13
Nomura | Australia Financials                                                                                                                            January 10, 2013


Fig. 25: Cost growth (y-y)                                                         Fig. 26: Jaws (y-y)
      (%)                                                                             (%)
  6                                                                                 10
                                                            4.3
  4               3.2                                                   3.2
                                                2.9           2.8                     5
                              2.4                                         2.5
            2.0                                       1.8                                               1.9 1.6                                2.1 1.9
  2                                       1.5                                                1.8                     1.6 1.8       1.7                                1.3
                        1.1                                                                     0.8
                                    0.3                                               0
  0                                                                                                                            (0.4)
                                                                                                                                                             (1.3)

 (2)                                                                                 (5)
            ANZ         CBA    NAB              WBC     BEN             BOQ                  ANZ        CBA          NAB       WBC             BEN               BOQ
                         2013F                    2014F                                                           2013F                2014F
Source: Nomura estimates, company data                                             Source: Nomura estimates, company data



While we expect the majors to deliver 3-8% earnings growth in FY13, due to continuing
dilution, expected EPS growth is only 1-3%.



Fig. 27: Cash earnings growth (y-y)                                                Fig. 28: EPS growth (y-y)
    (%)                                                             Large             (%)
  20                                                                                 20
                                                                            14.4
                                                                                                                                                                     13

  10                                  7.7
                                     6.9                    7.3
                                                              6.4                    10
                4.8        5.4                        4.9                                                                 6
             3.2                                                                                  3          4        3                              4
                         3.2                    3.5                                                      1                       2 4
                                                                                              1
   0                                                                                  0
                                                                                                                                               (1)
 (10)                                                                               (10)

                                                                                                                                                         Large
 (20)                                                                               (20)
             ANZ         CBA          NAB       WBC         BEN         BOQ                  ANZ         CBA          NAB       WBC    BEN                       BOQ
                                    2013F       2014F                                                                2013F       2014F
Source: Nomura estimates, company data                                             Source: Nomura estimates, company data




                                                                                                                                                                          14
Nomura | Australia Financials                                                                                                          January 10, 2013



Non-life Insurance
Recent industry data suggests the Australian insurance industry continued to benefit
from rate increases in the second half of CY12. This follows an extended period of
positive price momentum seen over the past three years in the wake of increased
catastrophe claims costs and rising reinsurance expenses. The strong premium
increases already achieved, together with ongoing price rises currently in train, are a key
driver of our positive stance on the Australian insurance sector. We expect the upcoming
reporting season to provide support for our positive view on sector earnings.
Average premium rate increases of close to 10% have been achieved in the first nine
months of CY12 as Australian domestic players sought to recoup losses incurred during
a period of sustained catastrophe costs (see below). Latest industry pricing data
suggests limited slowdown in rate increases, and we assume higher-than-average rate
increases persist for at least the next year.

Fig. 29: Premium rate increases have more than doubled over the past few years
2002-2012: Australia catastrophe losses and personal lines rate increases
 6 (A$bn)                                                                                        12%

 5                                                                                               10%

 4                                                                                               8%

 3                                                                                               6%

 2                                                                                               4%

 1                                                                                               2%

 0                                                                                               0%
     2002   2003    2004       2005   2006   2007   2008     2009    2010    2011    2012
                 Australia catastrophe losses (LHS)            Industry rate increases (RHS)

Source: ICA, Nomura research



Q3 2012 data (see charts below) shows rate trends across all three major personal lines
categories of home, contents and motor remain positive. Home insurance has risen by
an average c. 20% in CY12, while contents insurance has also risen strongly, up an
average of 7%. Motor rate rises have been less dramatic but remain in positive territory.

Fig. 30: Home increases remain at 20%                 Fig. 31: Contents rate rises still strong        Fig. 32: Motor still relatively subdued
Average policy price increase - Home                  Average policy price increase - Contents         Average policy price increase - Motor
 25%                                                   25%                                              25%

 20%                                                   20%                                              20%

 15%                                                   15%                                              15%

 10%                                                   10%                                              10%

  5%                                                    5%                                               5%

  0%                                                    0%                                               0%

 -5%                                                   -5%                                              -5%
       2002
       2003
       2004
       2005
       2006
       2007
       2008
       2009
       2010
       2011
       2012




                                                             2002
                                                             2003
                                                             2004
                                                             2005
                                                             2006
                                                             2007
                                                             2008
                                                             2009
                                                             2010
                                                             2011
                                                             2012




                                                                                                              2002
                                                                                                              2003
                                                                                                              2004
                                                                                                              2005
                                                                                                              2006
                                                                                                              2007
                                                                                                              2008
                                                                                                              2009
                                                                                                              2010
                                                                                                              2011
                                                                                                              2012




Source: ICA, Nomura research                          Source: ICA, Nomura research                     Source: ICA, Nomura research



When paired with the more benign catastrophe environment seen over recent months,
we expect the pricing actions seen above to result in a significant improvement in
industry returns. Below we show the evolution of industry combined ratios over the past
decade. Latest data shows combined ratios have improved consistently through CY12, in
all three major personal lines categories, supporting our expectation of a significant
improvement in underwriting returns in FY13. As we show below, the peak benefit of the




                                                                                                                                                   15
Nomura | Australia Financials                                                                                                                    January 10, 2013


pricing actions taken in recent periods is yet to be earned. We anticipate both IAG and
SUN will only take maximum benefit from recent actions on price in FY13. As a result,
we expect combined ratios and insurance margins across the sector to return to levels
close to those seen in 2002-06 period.

Fig. 33: Home has recovered from very                   Fig. 34: The Contents market also                     Fig. 35: Motor insurance data suggests
high losses seen in recent periods                      appears very attractive                               combined ratios should improve
Effective combined ratio - Home                         Effective combined ratio - Contents                   Effective combined ratio - Motor
 180%                                                    120%                                                  120%
                                                         110%                                                  110%
 160%
                                                         100%                                                  100%
 140%
                                                           90%                                                  90%
 120%                                                      80%                                                  80%
                                                           70%                                                  70%
 100%
                                                           60%                                                  60%
  80%
                                                           50%                                                  50%
  60%                                                      40%                                                  40%
        2001
        2002
        2003
        2004
        2005
        2006
        2007
        2008
        2009
        2010
        2011
        2012




                                                                  2001
                                                                  2002
                                                                  2003
                                                                  2004
                                                                  2005
                                                                  2006
                                                                  2007
                                                                  2008
                                                                  2009
                                                                  2010
                                                                  2011
                                                                  2012




                                                                                                                      2001
                                                                                                                      2002
                                                                                                                      2003
                                                                                                                      2004
                                                                                                                      2005
                                                                                                                      2006
                                                                                                                      2007
                                                                                                                      2008
                                                                                                                      2009
                                                                                                                      2010
                                                                                                                      2011
                                                                                                                      2012
Source: ICA, Nomura research                            Source: ICA, Nomura research                          Source: ICA, Nomura research



Fig. 36: Peak earned rate rise of 7% yet to be earned for SUN                      Fig. 37: We expect IAG to benefit by a similar amount
2011-17F: Written/earned rate rise for SUN Personal Lines Australia unit           2010-2017F: Written/earned rate rise for IAG Direct Australia unit
 9%                                                                                    8%
 8%                                                                                    7%
 7%                                                                                    6%
 6%
                                                                                       5%
 5%
                                                                                       4%
 4%
 3%                                                                                    3%
 2%                                                                                    2%
 1%                                                                                    1%
 0%
                                                                                       0%
        2011      2012     2013F     2014F      2015F   2016F     2017F
                                                                                             2010   2011   2012 2013F 2014F 2015F 2016F 2017F
                 Rate rise written             Rate rise earned
                                                                                                     Rate rise written            Rate rise earned
Source: Company data, Nomura estimates                                             Source: Company data, Nomura estimates



Fig. 38: We expect combined ratios to recover towards 90%                          Fig. 39: Insurance margins should also recover strongly
2006-2016: Combined ratios by company                                              2006-2016: Insurance margins by company
 110%                                                                                  25%

 105%
                                                                                       20%
 100%

  95%                                                                                  15%
  90%
                                                                                       10%
  85%

  80%
                                                                                       5%
         2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
                                                                                             2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
                         SUN             IAG         QBE                                                    SUN             IAG        QBE
Source: Company data, Nomura estimates                                             Source: Company data, Nomura estimates




                                                                                                                                                             16
Nomura | Australia Financials                                                               January 10, 2013


The domestic catastrophe environment remained subdued in the second half of CY12,
with the Insurance Council of Australia declaring no insured losses greater than
A$100mn over this period. This compares very favourably with recent history (2007-2011
average annual losses were A$2.5bn) and the long-run average of catastrophe losses
(1967-2012 average annual losses were A$1.2bn), as we show below.
Amongst domestically focused names, the upcoming reporting season could see some
positive surprise driven by a lack of domestic 2H12 claims activity. International
catastrophe losses on the other hand were more prevalent with Superstorm Sandy the
most significant reported loss. However, QBE preannounced its Sandy-related loss, of
US$400-500mn, within its November 2012 profit warning.

Fig. 40: A$1bn long-run average losses compare to the A$2.5bn seen in 2007-2011
1967-2012: Catastrophe losses (>A$100mn) - Normalised cost
 9,000
 8,000
 7,000
 6,000
 5,000
 4,000
 3,000
 2,000
 1,000
      0
          1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
                             Catastrophe losses              Long-run average
Source: ICA, Nomura research




                                                                                                        17
Nomura | Australia Financials                                                                                                January 10, 2013



Life Insurance
Growth within the Australian life insurance market remained strong throughout CY12 with
in-force premiums rising by more than 10% in the first three quarters of the year (see
chart below). We forecast industry growth to continue at a double-digit pace, driven by
the following factors:
• Favourable demographic trends – protection premiums typically increase on an
  annual basis due to policyholder ageing
• Increasing need for protection coverage – The 20-30 somethings entering the
  housing market or starting a family today are far more indebted than previous
  generations. As a result, we see increasing demand for life insurance cover.
• Favourable (direct and indirect) government/regulatory policies – The Australian
  life insurance industry continues to benefit from the favourable tax treatment of risk
  protection when purchased within a superannuation fund. We expect the Australian
  Government and regulators to retain a relatively supportive bias towards life insurance,
  as its role as a social ‘pillar’ can reduce demands on the State resources.
• Adviser selling behaviour, regulatory shifts – Life insurance is exempt from the
  upcoming changes to adviser remuneration under FOFA (Future of Financial Advice).
  This could encourage advisers to reallocate resources from savings and investment
  products to no-commission protection products.
Offsetting the above structural drivers of protection premium growth we highlight the
following near-term risk factors:
• Declining disposable incomes – Economic pressures can result in increased lapses
  and partial lapses (reductions in cover) which drag on growth in in-force premiums.
  AMP has already booked A$12mn of negative experience charges (in 3Q12) related to
  higher than expected lapses and partial lapses.
• Increased claims activity due to economic conditions – While economic pressures
  can put pressure on policyholders’ ability to pay premiums, it can also result in a higher
  propensity to claim. AMP has already booked A$25mn of negative experience charges
  as a result of higher income protection claims in FY12.
Fig. 41: Growth in risk in-force premiums has been                  Fig. 42: Individual lapses remain elevated but showed signs
consistently strong over the last 20 years                          of improvement in 3Q12
1990-2002: Risk annual premiums in-force and Y/Y growth             2000-2012: Individual risk lapse rates
 12                                                          25%     20%
      (A$bn)
 10                                                                  19%
                                                             20%
                                                                     18%
  8
                                                             15%     17%
  6                                                                  16%
                                                             10%
  4                                                                  15%
  2                                                          5%      14%
                                                                     13%
  0                                                          0%
                                                                     12%
      1990
      1991
      1992
      1993
      1994
      1995
      1996
      1997
      1998
      1999
      2000
      2001
      2002
      2003
      2004
      2005
      2006
      2007
      2008
      2009
      2010
      2011
      2012




                                                                     11%
                 Risk annual in-force premiums                       10%
                 Risk annual in-force premium growth (RHS)              2000         2002       2004         2006   2008   2010    2012
Source: Plan for Life, Nomura research                              Source: Plan for Life, Nomura research




                                                                                                                                          18
Nomura | Australia Financials                                                                                                              January 10, 2013


Earnings changes for Insurance stocks
Our insurance earnings estimates are little changed following our recent sector initiation.
Our SUN and IAG earnings estimates remain unchanged, whilst we have adjusted our
forecasts for QBE for mild changes in related currency rates since our initiation. We have
adjusted our AMP earnings estimates to reflect financial market movements towards the
end of CY12, raising our 2013/14 EPS estimates by 2.5% and our target price by 3% to
A$5.15.

Fig. 43: Changes to forecasts – Insurance stocks
                                 NPAT                                                    EPS                                    DPS
              2012/13F                     2013/14F                   2012/13F                2013/14F             2012/13F          2013/14F
                New                          New                        New                     New                  New               New
          Old (A$mn)           %       Old (A$mn)           %      Old (cps)   %           Old (cps)   %        Old (cps)   %     Old (cps)   %
 AMP      739       755        2.1    1021      1045       2.3      25       26      2.2       38   39    2.6   25   25    0.0        31     31      0.0
 IAG      537       537        0.0     842       842       0.0      26       26      0.0       41   41    0.0   23   23    0.0        26     26      0.0
 QBE      947       949        0.2    1654      1663       0.5      77       77      0.2   135      135   0.4   60   60    0.0        92     92      0.0
 SUN     1085      1085        0.0    1299      1299       0.0      82       82      0.0       97   97    0.0   60   60    0.0        70     70      0.0
Note: AMP/QBE forecasts relate to FY12/ FY13, IAG / SUN forecasts relate to FY13/FY14.
Source: Nomura estimates




                                                                                                                                                       19
Nomura | Australia Financials                                                                                                                                                              January 10, 2013



Australian Diversified Financials
While abnormally subdued market conditions began to improve towards the end of 2012,
the level of activity remains at cyclically low levels. However, improved macro dynamics
in the Northern hemisphere gave the market some confidence that 2012 marked the low
point and that conditions are likely to continue to normalise throughout 2013. This gave
us comfort to lift our earnings expectations by 3-5% for MQG and CPU, but we believe
market activity will need to continue to improve materially to justify recent relative
outperformance, particularly for MQG. Our preference in the sector is now for CPU
(Neutral); given its exposure to the Northern hemisphere, we see its earnings as more
defensive to the slowing Australian economy.


Capital markets trends
4Q12 showed signs of recovery from subdued capital market conditions earlier in 2012.                                                                    Based on the number of
Improving Investment Banking revenue trends were underpinned by ECM activity, while                                                                      transactions, ECM increased by
M&A activity was flat, with investors choosing to remain on the sidelines given the                                                                      ~1%, while M&A declined by
volatile and uncertain global environment.                                                                                                               ~13% in 2H CY12 versus pcp

According to Dealogic data, the value of completed Global ECM transactions increased
by ~42% in 2H12 (from the low base of 2H11), while the value of completed M&A
transactions declined by ~7% in 2H12 (albeit from relatively robust levels in 2H11).
In terms of the number of transactions (more relevant for CPU), ECM transactions
increased by ~1%, while M&A transactions declined by ~13% in 2H CY12 versus pcp.

Fig. 44: Global IB industry deal value (completed) - FY basis                                              Fig. 45: Global IB industry deal number (completed) - FY
                                                                                                           basis
   (US$bn)                                                                                     (US$bn)         (no. of deals)
                                                                                                            4,000
 400                                                                                               2,000

 300                                                                                               1,500    3,000

 200                                                                                               1,000    2,000

 100                                                                                               500      1,000

   0                                                                                               0             0
       2H00
              2H01
                     2H02
                            2H03
                                   2H04
                                          2H05
                                                 2H06
                                                        2H07
                                                               2H08
                                                                       2H09
                                                                              2H10
                                                                                     2H11
                                                                                            2H12




                                                                                                                     2H00

                                                                                                                            2H01

                                                                                                                                   2H02

                                                                                                                                          2H03

                                                                                                                                                 2H04

                                                                                                                                                        2H05

                                                                                                                                                               2H06

                                                                                                                                                                      2H07

                                                                                                                                                                             2H08

                                                                                                                                                                                    2H09

                                                                                                                                                                                           2H10

                                                                                                                                                                                                  2H11

                                                                                                                                                                                                         2H12
                               ECM (LHS)                              M&A (RHS)                                                           ECM                                  M&A
Source: Nomura research, Dealogic                                                                          Source: Nomura research, Dealogic



Looking at specific trends relating to MQG, Dealogic data indicates Macquarie's
Investment Banking revenue up ~60% on pcp in 4Q CY2012, reflecting a solid quarter
for MQG's IB business.
Should trends in 4Q CY2012 continue into 1Q CY2013, we would expect a strong
recovery in Macquarie's 2H FY13 capital markets earnings (see Fig 65). However, we
note that Securities business is likely to continue to struggle, with 1Q13 ASX cash
trading falling to the lowest level in the past five years. With similar trends observed
globally, the near-term outlook for the securities business appears highly challenging, in
our view.
Also, FICC volumes have been relatively weak in 4Q12 and we are looking for a pickup
in activity in 1Q13, which traditionally has been a strong quarter for this business.




                                                                                                                                                                                                                20
Nomura | Australia Financials                                                                                                                                                         January 10, 2013


Fig. 46: MQG ECM revenue by qtr                                          Fig. 47: MQG M&A revenue by qtr                                          Fig. 48: MQG IB revenue (Dealogic) -
                                                                                                                                                  MQG FY basis
   US$mn                                                                   US$mn                                                                   US$mn
 160                                                                      160                                                                      400
 140                                                                                                                                                                                          341
                                                                          140                                                                      350
 120                                                                      120                                                                      300
 100                                                                      100                                                                      250
  80                                                                       80                                                                      200
  60                                                                       60
                                                                                                                                                   150
  40                                                                       40
                                                                                                                                                   100
  20                                                                       20
                                                                                                                                                    50
   0                                                                        0
                                                                                                                                                     0
       4Q06

                4Q07

                         4Q08

                                 4Q09

                                        4Q10

                                                4Q11

                                                        4Q12




                                                                                   4Q06

                                                                                             4Q07

                                                                                                      4Q08

                                                                                                             4Q09

                                                                                                                     4Q10

                                                                                                                                4Q11

                                                                                                                                       4Q12




                                                                                                                                                           1H2011
                                                                                                                                                           2H 2007
                                                                                                                                                           1H 2008
                                                                                                                                                           2H 2008
                                                                                                                                                           1H 2009
                                                                                                                                                           2H 2009
                                                                                                                                                           1H 2010
                                                                                                                                                           2H 2010

                                                                                                                                                           2H 2011
                                                                                                                                                           1H 2012
                                                                                                                                                           2H 2012
                                                                                                                                                           1H 2013
                                                                                                                                                          2H 2013*
                        ECM net revenue                                                               M&A net revenue

Source: Nomura research, Dealogic                                        Source: Nomura research, Dealogic                                        * 2H 2013 estimation assumes Macquarie investment
                                                                                                                                                  banking revenue for 1Q 2013 same as for 4Q 2012
                                                                                                                                                  Source: Nomura research, Dealogic




Fig. 49: MQG Investment Banking net revenue
                                            ECM                      M&A                         Total ECM & M&A                         Growth
                                         (US$mn)                  (US$mn)                                (US$mn)                            (%)
 2H 2013*                                    73.0                    198.2                                  271.2                            53
 1H 2013                                     41.5                    136.0                                  177.5                             1
 2H 2012                                     50.7                    125.0                                  175.7                            -5
 1H 2012                                     61.5                    123.1                                  184.6                           -33
 2H 2011                                    108.5                    166.6                                  275.0                            30
 1H 2011                                    105.5                    106.1                                  211.6                           -27
Source: Nomura research, Dealogic



ASX market trends
For ASX, cash market values traded continued to decline in 1H13. The average daily                                                                         Trend in average value
value traded in the half was ~14% lower than the previous half, which is worse than the                                                                    continued to decline in 1H13
~13% decline seen in 2H12 (vs 1H12). This is the worst half that we have seen in a
number of years, as seen in the chart below.

Fig. 50: Cash market average daily value (by month)                                                             Fig. 51: Average daily value traded (by month)
  (A$mn)                                                                                                             (A$mn)
 6,500 6,226                                                                                                        8,000
 6,000                                          5,610
                                                                 5,396                                              6,000
 5,500                                  5,148           5,195
                       4,989                                               4,992
 5,000                                                                                                              4,000
                                                                                     4,366
 4,500
                                3,985
 4,000                                                                                           3,768              2,000
 3,500
                                                                                                                            0
 3,000                                                                                                                           Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
              2H08

                        1H09

                                 2H09

                                         1H10

                                                 2H10

                                                          1H11

                                                                  2H11

                                                                            1H12

                                                                                          2H12

                                                                                                    1H13




                                                                                                                                     FY08              FY09               FY10
                                                                                                                                     FY11              FY12               FY13
Source: Nomura research, company data                                                                           Source: Nomura research, company data



On a monthly basis, trends continue to be negative compared to the pcp, whereas the                                                                        Most global stock markets have
key Asian exchanges in Singapore and Hong Kong saw strong improvements in                                                                                  also seen a decline in values
December 2012. Northern hemisphere exchanges remained negative, albeit the negative                                                                        traded
trend improved in the final month of the year.




                                                                                                                                                                                                    21
Nomura | Australia Financials                                                                                                                                                                                           January 10, 2013


Fig. 52: Average daily value by month – growth vs pcp                                                                  Fig. 53: Average daily value by month – growth vs pcp
  (%)                                                                                                                    (%)
                                                                                                                         60
  80
                                                                                                                         40
  60
                                                                                                                         20
  40
                                                                                                                          0
  20
   0                                                                                                                   (20)

(20)                                                                                                                   (40)

(40)                                                                                                                   (60)
(60)                                                                                                                   (80)
   Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12                                                                Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12
               ASX             HK            SGX                                                                                                  NYSE                                  LSE                               TSX

Source: Nomura research, Bloomberg                                                                                     Source: Nomura research, Bloomberg



In the derivatives market, trading volumes have remained slightly more positive, albeit
trends have weakened since the very strong periods in FY11 and FY12. In 1H13, total
derivatives volume was ~4% lower than the pcp, but ~2% higher than 2H12. The key
driver was an improvement in volume growth for futures contracts, the mainstay of the
Derivatives business. While there has been strong growth in options volumes, this
contributes relatively little to revenue.

Fig. 54: Monthly total volume for all derivatives                                                                      Fig. 55: Growth in daily average volume by product (vs pcp)
 (No.)                                                                                                                   (%)
35,000,000                                                                                                               300

30,000,000                                                                                                               250

25,000,000                                                                                                               200
                                                                                                                         150
20,000,000
                                                                                                                         100
15,000,000
                                                                                                                          50
10,000,000
                                                                                                                           0
  5,000,000
                                                                                                                         (50)
            0
                   Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun                                                     (100)
                                                                                                                           Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12
                                                         FY12                             FY13                                   Equity derivatives     Futures       Options

Source: Nomura research, company data                                                                                  Source: Nomura research, company data



In capital raisings, the most recent half has been positive. For secondary capital raisings,
1H13 saw ~37% more capital raised than in 2H12. Initial listings rose ~7% in the same
period vs 2H12. Compared to the pcp, initial listings are still ~45% lower (and secondary
raisings are ~15% higher).

Fig. 56: Initial listings                                                                                              Fig. 57: Secondary raisings
  (A$mn)                                                                                                       (%)       (A$mn)                                                                                                       (%)
 25,000                                                                                                         100     60,000                                                                                                         200
                                                                                                                75      50,000                                                                                                        150
 20,000
                                                                                                                50
                                                                                                                25      40,000                                                                                                        100
 15,000
                                                                                                                0       30,000                                                                                                        50
 10,000                                                                                                        (25)     20,000                                                                                                        0
                                                                                                               (50)
  5,000                                                                                                                 10,000                                                                                                        (50)
                                                                                                               (75)
        0                                                                                                      (100)            0                                                                                                     (100)
            2H06
                   1H07
                           2H07
                                  1H08
                                         2H08
                                                1H09
                                                       2H09
                                                              1H10
                                                                     2H10
                                                                            1H11
                                                                                   2H11
                                                                                          1H12
                                                                                                 2H12
                                                                                                        1H13




                                                                                                                                    2H06
                                                                                                                                           1H07
                                                                                                                                                  2H07
                                                                                                                                                         1H08
                                                                                                                                                                2H08
                                                                                                                                                                       1H09
                                                                                                                                                                              2H09
                                                                                                                                                                                     1H10
                                                                                                                                                                                            2H10
                                                                                                                                                                                                   1H11
                                                                                                                                                                                                          2H11
                                                                                                                                                                                                                 1H12
                                                                                                                                                                                                                        2H12
                                                                                                                                                                                                                               1H13




                          Initial listings (LHS)                                   vs pcp (RHS)                                             Sec capital raised (LHS)                                        vs pcp (RHS)
Note: 1H10-1H11 comparatives excluded due to weak FY09 comparatives                                                    Source: Nomura research, company data
Source: Nomura research, company data




                                                                                                                                                                                                                                           22
Nomura | Australia Financials                                                                                                                                               January 10, 2013


CPU relative valuation is looking more attractive
CPU is trading at a ~13% premium to the All Industrials ex-Banks (~7% below its long-
term average). While prima facie it may not look attractive, we note that CPU’s implied
earnings growth over the next two years is ~10% higher than the market’s (largely as a
result of synergy benefits), leaving its implied valuation at a similar multiple relative to the
market. We believe this appears attractive from a medium-term perspective, should
market conditions improve and given CPU offers investors exposure to the recovery in
the Northern hemisphere while domestic economic conditions are deteriorating.

Fig. 58: PE relative to All Industrials (ex banks)                                                             Fig. 59: Relative EPS growth
   (x)                                                                                                              (%)
 2.0                                                                                                                                                         19.8
                                                                                                                20
 1.7
                                                                                                                15
 1.4                                                                                                                                            11.3
                                                                                                                                                                               10.2
                                                                                                                               9.1
                                                                                                                10
 1.1
                                                                                                                                                                      4.6
 0.8                                                                                                                5                  2.6

 0.5                                                                                                                0
       Jul-02

                Jul-03

                         Jul-04

                                  Jul-05

                                           Jul-06

                                                    Jul-07

                                                             Jul-08

                                                                      Jul-09

                                                                               Jul-10

                                                                                         Jul-11

                                                                                                   Jul-12
                                                                                                                                     1-yr fwd                       2-yr fwd
                                                                                                                           CPU         Nomura Banks         All Industrials ex-Banks
Source: Nomura estimates, IRESS                                                                                Source: Nomura estimates, IRESS, Factset



MQG appears fully valued
From a valuation perspective, MQG is trading at higher P/E and P/B multiples than
peers, although its ROE and dividend yield are both superior at 7.2% and 4.3%,
respectively, in FY13F (peer averages are ~5.6% and ~1.5%).

Fig. 60: MQG valuation comparison
                                               Div yield (%)                                      PE (x)                                        Price/NTA            ROE (%)
                                            FY13F         FY14F                         FY13F               FY14F         Price to Bk (x)           (x)        FY13F         FY14F
 Bank of America                             0.3           1.1                           22.9                12.2              0.59                0.9          2.5           4.9
 Morgan Stanley                              1.0           1.3                           14.2                9.9               0.64                0.8          2.2           6.1
 Goldman Sachs                               1.4           1.5                           11.1                10.5              0.94                1.0          9.0           8.8
 UBS                                         0.9           1.9                           14.6                13.9              1.14                1.2          1.8           6.8
 Citi                                        0.1           1.1                           10.5                9.2               0.67                0.8          6.0           7.2
 JP Morgan                                   2.6           3.1                           9.1                 8.6               0.89                1.2          10.3          10.1
 Credit Suisse                               2.9           3.7                           13.2                9.7               0.89                1.2          6.4           9.9
 Barclays                                    2.2           2.5                           8.0                 7.5               0.65                0.8          6.0           8.5
 Deutsche Bank                               2.1           2.2                           9.7                 8.3               0.59                0.8          6.4           7.0
 Average                                     1.5           2.1                           12.6                10.0              0.78                1.0          5.6           7.7
 MQG                                         4.3           4.8                           16.2                12.5               1.1                1.4          7.2           9.1
Note: Data for investment banks is CY12 and CY13 for better comparison with MQG’s year-end. Prices as of 8 January 2013
Source: Nomura estimates, company data



Over the past quarter MQG has outperformed global investment banks by ~10%
(delivering return of ~27% vs ~17% for global peers). Similarly, over the CY12 MQG has
outperformed peers strongly by ~16%.




                                                                                                                                                                                        23
Nomura | Australia Financials                                                                                                        January 10, 2013


Fig. 61: Total return across global investment banks
 (%)                                             1m                      3m                  CY12 YTD
 BAC                                            17.9                    31.6                    109.8
 C                                              14.4                    20.9                     50.6
 GS                                              8.3                    12.7                     43.4
 DBK                                            (2.9)                    7.2                     15.0
 MS                                             13.3                    14.6                     27.9
 CSGN                                            1.5                    11.7                      4.8
 UBSN                                           (1.6)                   24.6                     28.8
 BARC                                            6.7                    22.6                     53.1
 JPM                                             7.0                     9.4                     36.2
 Average                                         7.2                    17.3                     41.1
 MQG                                             8.3                    27.8                     57.0
Note: Share price performance up to 31 December 2012
Source: Nomura research, FactSet



Earnings changes for Diversified Financials
Our earnings forecasts for MQG and CPU have been upgraded by ~3-4% over the next
two years, driven by improved activity levels in their key markets over the past quarter.
For MQG, it has benefited from more positive data in ECM in particular.
For ASX, the ~1-3% reduction in our forecasts has been driven by the ongoing weak
activity levels in cash equities markets. This is only partially offset by a stronger period
for capital raisings. Our assumptions also now take into account the new rebate scheme
for cash trading, clearing and settlement revenue.

Fig. 62: Earnings changes
                       Cash earnings (A$mn)                                    EPS (cps)                                DPS (cps)
                  2013F                      2014F                  2013F                 2014F               2013F                  2014F
          Old        New           %     Old    New        %     Old New         %     Old New       %     Old New       %     Old     New        %
 MQG        790       815       3.1    1,015     1,060   4.4     220   226     3.0     284   296   4.2     153   157   2.8     170    178       4.2
 CPU        288       298       3.2      346       356   3.0     52    53      3.2     62    64    3.0     28    29    2.3     34       35      2.7
 ASX        342       340     (0.8)      370       359   (2.9)   195   193     (0.8)   209   203   (2.9)   175   174   (0.8)   188    183      (2.9)
Source: Nomura estimates, company data




                                                                                                                                                 24
Nomura | Australia Financials                                                                                                                                       January 10, 2013



Australian Wealth Management
Financial markets generally saw a strongly positive performance in the December 2012
quarter, continuing on from the September quarter. This would have a positive effect on
the wealth managers, via the mark-to-market impact on their FUM levels.
The wealth managers all saw a turnaround in FUM movement in the September quarter,
and with a continuation of this trend in the following quarter, this is driving upgrades to
our forecasts for the WM stocks. To date PTM is the only company to have reported for
2012 year-end, and it saw a 9.5% increase in the final three months of the calendar year.
Following the recent equity market run, we now take a more cautious view on the wealth
management sector. We believe current valuation multiples have priced in further equity
market upside that is difficult to justify. We have downgraded PTM to Neutral, largely on
valuation grounds. Our preference in the sector is for HGG (Neutral) – it is trading at
what we view as an attractive multiple (10x fwd P/E), and its exposure to UK and Europe
is now beginning to appear to be a potential positive differentiator.

Fig. 63: Performance of key asset classes                                                Fig. 64: FUM movement (quarterly)
  (index)                                                                                  12    (%)
                                                                                                                                                                   9.5
 130                                                                                        9                                                         8.6
 125
 120                                                                                        6        3.5
                                                                                                           4.4                4.1     4.4
                                                                                                                                                                         3.6
                                                                                                                      3.0                    2.3
 115                                                                                        3                                                                 1.9               1.9
 110                                                                                                                                0.5
 105                                                                                        0
 100
   95                                                                                      (3)                     (1.1)                  (1.1)
                                                                                                                                                                     (2.2)
                                                                                                   (2.6)                   (3.2)
   90                                                                                      (6)          (4.6)
   85                                                                                                                                                                        (5.0)
   80                                                                                      (9)                                                     (7.5)
    Jun 11     Sep 11 Dec 11           Mar 12     Jun 12 Sep 12 Dec 12                    (12)                                                             (9.6)
               XJOAI                                   UBS Composite                                   PPT            IFL      AMP      PTM                                  HGG
               XPJAI                                   MSCI World ex-AU
               DJ Corp Bond                                                                                      Dec-11 Mar-12   Jun-12 Sep-12                               Dec-12
Source: Nomura research, IRESS, FactSet                                                  Note: HGG excludes Phoenix book, IFL excludes DKN acquisition
                                                                                         Source: Nomura research, company data


Fig. 65: Wealth management performance – June year-end
                    Aust equities                 Int'l         Aust fixed            Int'l fixed               Property
 (%)                                          equities            income                income
 2H10                          (9.9)               (8.0)                4.9                 10.3                    (2.8)
 1H11                          12.8               17.7                  1.1                 (1.5)                    2.5
 2H11                          (0.9)                1.8                 4.4                  0.9                     3.3
 1H12                          (9.7)               (8.9)                6.7                 (0.8)                   (4.6)
 2H12                           3.3                 5.2                 5.4                  2.5                   16.4
 1H13                          16.4                 7.4                 2.2                 (8.9)                  14.3
Note: Australian equities is based on XJOAI, International equities on MSCI World ex-AU, Australian fixed income on UBS
Composite Bond Index, International fixed income on Capital Markets Bond Index, and Property on ASX200 Property.
Source: Nomura research, IRESS, FactSet, Bloomberg


The latest industry funds flow data from Plan For Life shows continuing weak trends. On
a 12-month rolling basis, net flows into total retail funds are only running at ~0.2% (vs
10-year average of ~4%). Latest readings of consumer sentiment have been slightly
more positive in the past couple of months, as has the domestic market, but we have yet
to see any sustained improvement in order to boost investor sentiment.




                                                                                                                                                                                      25
Nomura | Australia Financials                                                                                                                                                                                                                                 January 10, 2013


Fig. 66: Consumer sentiment vs net flows                                                                                                     Fig. 67: Net flows vs XJO
 (index)                                                                                                                 (%)                   (index)                                                                                                                             (%)
 125                                                                                                                       15                 7,060                                                                                                                                  15
 120                                                                                                                                          6,060
                                                                                                                               12                                                                                                                                                     12
 115
                                                                                                                                              5,060
 110                                                                                                                           9                                                                                                                                                      9
 105                                                                                                                                          4,060
                                                                                                                               6                                                                                                                                                      6
 100                                                                                                                                          3,060
  95                                                                                                                           3                                                                                                                                                      3
                                                                                                                                              2,060
  90
                                                                                                                               0              1,060                                                                                                                                   0
  85
  80                                                                                                                           (3)               60                                                                                                                                   (3)




                                                                                                                                                            2000
                                                                                                                                                            2000
                                                                                                                                                            2001
                                                                                                                                                            2002
                                                                                                                                                            2003
                                                                                                                                                            2003
                                                                                                                                                            2004
                                                                                                                                                            2005
                                                                                                                                                            2006
                                                                                                                                                            2006
                                                                                                                                                            2007
                                                                                                                                                            2008
                                                                                                                                                            2009
                                                                                                                                                            2009
                                                                                                                                                            2010
                                                                                                                                                            2011
                                                                                                                                                            2012
                                                                                                                                                            2012
         2000
         2000
         2001
         2002
         2003
         2003
         2004
         2005
         2006
         2006
         2007
         2008
         2009
         2009
         2010
         2011
         2012
         2012
                    Cons. sentiment (LHS)                                             All retail funds (RHS)                                                                          XJO (LHS)                                   All retail funds (RHS)

Source: Nomura research, Plan For Life, Westpac-Melbourne Institute                                                                          Source: Nomura research, Plan For Life, IRESS


Fig. 68: Net flows into retail discretionary (12-m rolling)                                                                                  Fig. 69: Net flows into retail superannuation (12-m rolling)
  (%)                                                                                                                  (%)                     (%)                                                                                                                     (%)
  15                                                                                                                     30                    15                                                                                                                        30

  10                                                                                                                           20              10                                                                                                                              20

   5                                                                                                                           10                  5                                                                                                                           10

   0                                                                                                                           0                   0                                                                                                                           0

  (5)                                                                                                                          (10)            (5)                                                                                                                             (10)

 (10)                                                                                                                          (20)           (10)                                                                                                                             (20)
        Sep 00

                 Sep 01

                          Sep 02

                                   Sep 03

                                            Sep 04

                                                     Sep 05

                                                              Sep 06

                                                                        Sep 07

                                                                                  Sep 08

                                                                                           Sep 09

                                                                                                    Sep 10

                                                                                                             Sep 11

                                                                                                                      Sep 12




                                                                                                                                                        Sep 00

                                                                                                                                                                 Sep 01

                                                                                                                                                                          Sep 02

                                                                                                                                                                                    Sep 03

                                                                                                                                                                                             Sep 04

                                                                                                                                                                                                      Sep 05

                                                                                                                                                                                                               Sep 06

                                                                                                                                                                                                                        Sep 07

                                                                                                                                                                                                                                  Sep 08

                                                                                                                                                                                                                                           Sep 09

                                                                                                                                                                                                                                                    Sep 10

                                                                                                                                                                                                                                                             Sep 11

                                                                                                                                                                                                                                                                      Sep 12
                             Net flows (LHS)                                     Inv returns (RHS)                                                                           Net flows (LHS)                                     Inv returns (RHS)

Source: Nomura research, Plan For Life, Westpac-Melbourne Institute                                                                          Source: Nomura research, Plan For Life, IRESS



PPT appears fully valued at current levels … prefer HGG
As the figure below highlights, PPT is now amongst the most expensive asset managers
globally. Trading at ~20x FY13 P/E, it is carrying a ~35% premium to the average of
major asset managers overseas. To this extent further upside is limited, in our view. For
investors looking for Wealth Management exposure, our preference is for HGG given its
more attractive valuation and exposure to Europe.

Fig. 70: Global comparison for asset managers
                                                                       Dividend yield (%)                                                 PE (x)                                    Price to Book (x)                                                  ROE (%)
                                                                   FY13F                            FY14F                      FY13F               FY14F                           FY13F                       FY14F                       FY13F                        FY14F
 Schroders                                                              2.3                          2.4                           17.9            15.8                             2.4                         2.2                          13.4                         13.8
 Aberdeen                                                               3.4                          3.9                           14.9            13.1                             3.4                         3.2                          23.7                         25.5
 Man Group                                                             24.3                          9.0                           11.3                8.9                          0.4                         0.4                            4.5                             4.8
 Henderson                                                              5.4                          5.7                           11.5            11.7                             2.0                         1.9                          16.5                         15.5
 Jupiter                                                                2.6                          2.9                           16.0            14.1                             3.1                         4.5                          20.0                         19.5
 Blackrock                                                              2.0                          2.2                           12.5            11.3                             0.9                         0.8                            7.2                             7.6
 Franklin                                                               6.9                          7.0                           11.0            10.5                             0.9                         0.8                            8.0                             8.3
 Legg Mason                                                             1.7                          1.9                           15.9            12.0                             0.6                         0.6                            3.7                             5.2
 T Rowe Price                                                           2.0                          2.2                           20.0            17.7                             4.4                         4.1                          23.7                         24.3
 Invesco                                                                2.5                           2.8                          15.7            13.2                             1.4                         1.4                            9.4                        10.7
 CI Financial                                                           3.8                          4.0                           19.5            17.2                             4.3                         4.0                          22.2                         24.1
 Average                                                                5.2                           4.0                          15.1            13.2                             2.2                         2.2                          13.8                         14.5
 PPT                                                                    3.4                          5.4                           20.0            17.5                             3.8                         3.5                          24.6                         25.0
 Premium/discount to                                                   (34.6)                       35.5                           32.2            32.3                            76.2                        58.8                          77.9                         72.9
 average (%)
Source: Nomura research, Bloomberg




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Earnings changes for Wealth Management stocks
The most recent months have been a more positive period for financial markets, and
hence we have upgraded our forecasts to reflect this recent uplift in FUM and rebasing
effect for future years. However looking forward, we are more cautious, in line with our
Australian strategist's view that the domestic market is currently trading above fair value
and near term earnings forecasts are overly optimistic.

Fig. 71: Changes to forecasts - Wealth Management stocks
                           NPAT (A$mn)                                          EPS (cps)                                                               DPS (cps)
                 2013F                       2014F                   2013F                         2014F                                   2013F                             2014F
           Old     New          %   Old        New       %    Old      New         %       Old       New               %      Old            New               %   Old         New               %
 AMP*      739     755       2.1 1,021       1,045     2.3   25.4     25.9       2.2       38.2       39.2            2.6      25.0          25.0         0.0       31.0      31.0        0.0
 CGF       269     268      (0.3)    279      277     (0.6) 50.4      50.3      (0.3)      53.2       52.9        (0.6)        16.1          16.1         (0.3)     17.0      16.9       (0.6)
 IFL       101     103       2.1     110      115      5.1   43.4     44.3       2.1       47.1       49.5            5.1      34.7          35.5         2.1       37.7      39.6        5.1
 PPT       68      71        4.1        76     81      7.4 164.9     171.8       4.1     182.6      196.0             7.3   109.0          115.8          6.2      172.4     185.8        7.8
 PTM       124     128       3.4     144      150      4.2   21.7     22.5       3.4       25.2       26.2            4.2      20.1          20.9         4.2       23.3      24.2        4.1
 HGG*      128     132       3.1     131      141      7.4    11.9     12.3      3.1       12.1       13.0            7.4            6.6        6.9       4.8          7.5       8.0      6.6
Note: AMP and HGG forecasts relate to CY12 and CY13. HGG forecasts are in £mn and pence.
Source: Nomura estimates



Fig. 72: Net flows (as % of beginning balance)                                     Fig. 73: FUM growth (h-h growth)
  (%)                                                                                   (%)
    8                                                                                   8

                                                                                         4
       4
                                                                                         0
       0
                                                                                        (4)
    (4)
                                                                                        (8)
    (8)
                                                                                       (12)
                                                                                                  Jun-10




                                                                                                                            Jun-11




                                                                                                                                                      Jun-12




                                                                                                                                                                              Jun-13
                                                                                                             Dec-10




                                                                                                                                           Dec-11




                                                                                                                                                                   Dec-12




                                                                                                                                                                                        Dec-13
  (12)
           Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13
                      IFL PPT PTM HGG AMP                                                                  IFL              PPT                     PTM              HGG               AMP
Source: Nomura research, company data                                              Note: Data adjusted for acquisitions
                                                                                   Source: Nomura research, company data

Acknowledgement: The authors of this report would like to acknowledge the
contribution of Jeremy Brown (2013 Nomura summer intern).




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Nomura | Australia Financials                                                                        January 10, 2013


Fig. 74: Bank investment fundamentals
 9/01/2013                                         ANZ           CBA      NAB      WBC       BEN             BOQ
 Recommendation                                  Neutral       Reduce      Buy   Neutral   Neutral         Neutral
 Price target (A$)                                26.50         55.00    31.00    27.50      9.50            8.00
 Upside/downside to TP (%)                            6           (10)      22        4         8               6
 Last price (A$)                                   25.02        61.40    25.35    26.51      8.83             7.56

 Cash NPAT (A$mn)
 2011                                              5,638        6,793    5,423    6,301      336               167
 2012                                              6,025        7,071    5,395    6,598      323                21
 2013                                              6,218        7,297    5,770    6,832      346               232
 2014                                              6,515        7,692    6,215    7,169      368               266

 Fully diluted EPS (A$)
 2011                                               2.10         4.21     2.48     2.02      0.87             0.69
 2012                                               2.17         4.35     2.39     2.08      0.82             0.11
 2013                                               2.19         4.41     2.46     2.13      0.81             0.72
 2014                                               2.26         4.59     2.60     2.21      0.84             0.82

 EPS growth (%)
 2011                                                   8          11      16         5        12              (14)
 2012                                                   3           3      (4)        3        (5)             (84)
 2013                                                   1           1       3         2        (1)             544
 2014                                                   3           4       6         4         4               13

 Price/ Earnings ratio (x)
 2011                                               11.9         14.6     10.2     13.1      10.2             10.9
 2012                                               11.5         14.1     10.6     12.7      10.8             67.5
 2013                                               11.4         13.9     10.3     12.4      10.9             10.5
 2014                                               11.1         13.4      9.7     12.0      10.5              9.3

 PE rel to All industrials (ex banks) (x)
 1-yr fwd                                           0.80         0.97     0.72     0.87      0.76             0.71

 PE rel to bank sector (x)
 2011                                               0.96         1.17     0.82     1.05      0.82             0.87
 2012                                               0.94         1.15     0.87     1.04      0.88             5.52
 2013                                               0.95         1.16     0.86     1.03      0.91             0.87
 2014                                               0.96         1.16     0.84     1.04      0.91             0.80

 DPS (A$)
 2011                                               1.40         3.20     1.72     1.56      0.60             0.54
 2012                                               1.45         3.34     1.80     1.66      0.60             0.52
 2013                                               1.48         3.55     1.83     1.73      0.61             0.54
 2014                                               1.52         3.69     1.94     1.79      0.62             0.53

 Yield (%)
 2011                                               5.60         5.21     6.79     5.88      6.80             7.14
 2012                                               5.80         5.44     7.10     6.26      6.80             6.88
 2013                                               5.90         5.78     7.23     6.51      6.87             7.15
 2014                                               6.09         6.02     7.65     6.76      7.05             7.06

 Price/ Book ratio (x)
 2011                                               1.78         2.67     1.50     1.92      0.86             0.72
 2012                                               1.69         2.44     1.50     1.85      0.88             0.86
 2013                                               1.59         2.32     1.49     1.78      0.86             0.84
 2014                                               1.51         2.21     1.43     1.71      0.85             0.81

 ROE (%)
 2011                                              16.28        19.73    15.38    16.08      9.17             0.77
 2012                                              15.61        18.78    14.27    15.35      8.29             7.86
 2013                                              14.87        17.70    14.67    15.05      8.41             8.62
 2014                                              14.50        17.53    15.05    15.06      8.59             8.94
Note: Pricing as of 9 January 2013. Source: Nomura estimates




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Nomura | Australia Financials                                                                 January 10, 2013


Fig. 75: Insurance investment fundamentals
 9/01/2013                                                       AMP        IAG       QBE              SUN
 Recommendation                                                Neutral   Neutral       Buy              Buy
 Price target (A$)                                               5.15      4.70      14.00            11.70
 Upside/downside to TP (%)                                        1.8      (0.8)      21.2             11.9
 Last price (A$)                                                 5.06      4.74      11.55            10.46
 Norm NPAT (A$mn)                                                                  (US$mn)
 2011                                                             688      250         704              453
 2012                                                             755      207         949              724
 2013                                                           1,045      537       1,663            1,085
 2014                                                           1,187      842       1,801            1,299
 2015                                                           1,304      916       1,929            1,403

 Fully diluted EPS (A$)                                                              (US$)
 2011                                                            0.26      0.12       0.61             0.36
 2012                                                            0.26      0.10       0.77             0.56
 2013                                                            0.35      0.26       1.28             0.82
 2014                                                            0.39      0.41       1.35             0.97
 2015                                                            0.42      0.44       1.41             1.05

 EPS growth (%)
 2011                                                           (30.5)    174.5      (48.7)           (40.8)
 2012                                                            (0.9)    (17.2)      25.3             56.8
 2013                                                            35.4     159.3       67.1             46.1
 2014                                                            11.6      56.9        5.4             19.0
 2015                                                             8.4       8.8        4.2              7.8

 Price/ Earnings ratio (x)
 2011                                                            19.3      39.4       19.4             29.4
 2012                                                            19.5      47.6       15.6             18.8
 2013                                                            14.4      18.4        9.2             12.8
 2014                                                            12.9      11.7        8.6             10.8
 2015                                                            11.9      10.8        8.3             10.0

 PE rel to All Industrials (ex-banks) (x)
 2013                                                            0.98      1.25       0.62             0.87

 DPS (A$)
 2011                                                            0.29      0.16       0.87             0.35
 2012                                                            0.25      0.17       0.60             0.40
 2013                                                            0.29      0.23       0.84             0.60
 2014                                                            0.31      0.26       0.92             0.70
 2015                                                            0.33      0.29       1.02             0.76
 Dividend yield (%)
 2011                                                             5.7       3.4        7.3               3.3
 2012                                                             4.9       3.6        5.0               3.8
 2013                                                             5.7       4.9        7.1               5.7
 2014                                                             6.1       5.5        7.9               6.7
 2015                                                             6.5       6.1        8.7               7.3

 P/B ratio (x)
 2011                                                              2.1       2.2       1.3               1.0
 2012                                                              2.0       2.3       1.3               1.0
 2013                                                              1.9       2.2       1.2               0.9
 2014                                                              1.8       2.0       1.2               0.9
 2015                                                              1.7       1.9       1.1               0.9

 ROE (%)
 2011                                                             11.5       5.4       6.8               3.3
 2012                                                             10.8       4.5       9.1               5.2
 2013                                                             13.9      11.9      14.7               7.7
 2014                                                             14.8      17.8      15.0               9.0
 2015                                                             15.2      18.0      15.2               9.5
Note: Pricing as of 9 January 2013. Source: Nomura estimates




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Nomura | Australia Financials                                                                                                           January 10, 2013


Fig. 76: Diversified Financials investment summary
 9/01/2013                                                                       ASX                                   CPU                     MQG
 Recommendation                                                                Neutral                               Neutral                 Neutral
 Price target (A$)                                                              31.00                                  9.50                   35.00
 Upside/downside to TP (%)                                                         (4)                                  -                        (2)
 Last price (A$)                                                                32.29                                  9.50                   35.85

 Norm NPAT (A$mn)                                                                                                 (US$mn)
 2011                                                                              357                                309                       956
 2012                                                                              346                                273                       730
 2013                                                                              340                                298                       815
 2014                                                                              359                                356                     1,060

 Fully diluted EPS (A$)                                                                                               (US$)
 2011                                                                              2.04                                 0.55                   2.76
 2012                                                                              1.98                                 0.49                   2.02
 2013                                                                              1.93                                 0.53                   2.26
 2014                                                                              2.03                                 0.64                   2.96

 EPS growth (%)
 2011                                                                               5.7                                 (3.5)                  (13.1)
 2012                                                                              (3.1)                               (11.7)                  (26.8)
 2013                                                                              (2.3)                                 9.1                    12.2
 2014                                                                               5.3                                 19.8                    30.7

 Price/ Earnings ratio (x)
 2011                                                                              15.8                                 18.0                   13.0
 2012                                                                              16.3                                 20.4                   17.8
 2013                                                                              16.7                                 18.7                   15.8
 2014                                                                              15.9                                 15.6                   12.1

 DPS (A$)
 2011                                                                              1.83                                 0.28                   1.86
 2012                                                                              1.86                                 0.28                   1.40
 2013                                                                              1.74                                 0.29                   1.57
 2014                                                                              1.83                                 0.35                   1.78

 Yield (%)
 2011                                                                              5.67                                 2.95                   5.19
 2012                                                                              5.75                                 2.95                   3.91
 2013                                                                              5.38                                 3.01                   4.39
 2014                                                                              5.67                                 3.67                   4.95

 Price/ Book ratio (x)
 2011                                                                              1.87                                  4.29                   1.09
 2012                                                                              1.89                                  4.54                   1.12
 2013                                                                              1.87                                  4.41                   1.09
 2014                                                                              1.83                                  4.13                   1.04

 ROE (%)
 2011                                                                             12.00                                 27.00                   8.54
 2012                                                                             11.51                                 22.79                   6.48
 2013                                                                             11.24                                 25.20                   7.39
 2014                                                                             11.67                                 28.78                   9.50

 Price/ NTA ratio (x)
 2011                                                                              8.05                                    n/a                  1.38
 2012                                                                              8.38                                    n/a                  1.39
 2013                                                                              7.84                                    n/a                  1.42
 2014                                                                              7.20                                    n/a                  1.34
Note: Pricing as of 9 January 2013. CPU valuation multiples are based on AUD/USD rate of 1.05. Source: Nomura estimates, company data




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Nomura | Australia Financials                                                                                                                 January 10, 2013


Fig. 77: Wealth management investment fundamentals
 9/01/2013                                               AMP                   CGF                  IFL                 PPT           PTM             HGG
 Recommendation                                        Neutral                  Buy             Neutral              Neutral        Neutral         Neutral
 Price target (A$)                                       5.15                  4.90               7.00                33.00           4.55            2.25
 Upside/downside to TP (%)                                1.8                  34.2               (4.5)                (3.8)           8.9             9.8
 Last price (A$)                                          5.06                 3.65                7.33               34.30           4.18             2.05
 Norm NPAT (A$mn)                                                                                                                                    (£mn)
 2011                                                    688.0               248.0                111.5                 72.9         150.1            125.7
 2012                                                    754.6               266.8                 96.4                 67.6         126.4            132.3
 2013                                                  1,044.8               268.1                103.4                 70.8         128.3            140.6
 2014                                                  1,187.3               277.0                115.4                 81.4         149.9            152.1

 Fully diluted EPS (A$)                                                                                                                                  (£)
 2011                                                     0.26                 0.48                0.48                 1.66          0.26             0.12
 2012                                                     0.26                 0.50                0.41                 1.63          0.23             0.12
 2013                                                     0.35                 0.50                0.44                 1.72          0.22             0.13
 2014                                                     0.39                 0.53                0.49                 1.96          0.26             0.14

 EPS growth (%)
 2011                                                    (30.5)                12.0                14.3                 (2.0)         12.8             31.8
 2012                                                     (0.9)                 4.0               (13.8)                (1.9)        (14.4)            (1.8)
 2013                                                     35.4                  0.5                 7.0                  5.5          (0.2)             5.9
 2014                                                     11.6                  5.3                11.6                 14.1          16.8              8.2

 Price/ Earnings ratio (x)
 2011                                                     19.3                  7.6                15.3                 20.7          15.9             10.7
 2012                                                     19.5                  7.3                17.7                 21.1          18.6             10.9
 2013                                                     14.4                  7.3                16.5                 20.0          18.6             10.3
 2014                                                     12.9                  6.9                14.8                 17.5          15.9              9.5

 PE rel to All Industrials (ex-banks) (x)
 2013                                                     0.98                 0.49                1.12                 1.36          1.27             0.70

 PE rel to peer group (x)
 2011                                                     1.30                 0.51                1.02                 1.39          1.07             0.72
 2012                                                     1.23                 0.46                1.12                 1.33          1.17             0.69
 2013                                                     0.99                 0.50                1.14                 1.38          1.28             0.71
 2014                                                     1.00                 0.53                1.15                 1.35          1.23             0.74

 DPS (A$)                                                                                                                                                (£)
 2011                                                     0.29                 0.17                0.43                 1.85          0.25             0.07
 2012                                                     0.25                 0.18                0.37                 0.90          0.21             0.07
 2013                                                     0.29                 0.16                0.35                 1.16          0.21             0.08
 2014                                                     0.31                 0.17                0.40                 1.86          0.24             0.09

 Yield (%)
 2011                                                       5.7                 4.5                  5.9                 5.4           6.0              5.2
 2012                                                       4.9                 4.9                  5.0                 2.6           5.0              5.2
 2013                                                       5.7                 4.4                  4.8                 3.4           5.0              6.0
 2014                                                       6.1                 4.6                  5.4                 5.4           5.8              6.4

 Price/ Book ratio (x)
 2011                                                      2.12                 1.17                1.92                3.50           9.51             2.86
 2012                                                      1.97                 1.14                2.09                4.34           9.52             3.01
 2013                                                      1.88                 1.03                2.06                3.82           9.04             2.91
 2014                                                      1.79                 0.92                2.03                3.45           8.18             2.82

 ROE (%)
 2011                                                      11.5                 17.5                12.7                20.1           63.6             22.0
 2012                                                      10.8                 16.8                11.4                21.3           51.2             17.1
 2013                                                      13.9                 15.2                12.6                24.6           50.7             18.3
 2014                                                      14.8                 14.3                13.9                25.0           54.9             19.1
Note: Pricing as of 9 January 2013. HGG valuation multiples based on AUD/GBP rate of 0.65. Source: Nomura estimates, company data




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Nomura | Australia Financials                                                                                                                                                        January 10, 2013


Fig. 78: ANZ financial summary
Income statement (A$mn)                                                                               Valuation metrics
Year-end 30 Sep                        FY11       FY12         FY13F       FY14F            FY15F     Valuation Methodology
Interest income                       30,366     30,510        31,563      33,042           35,226    DCF valuation
Interest expense                     -18,885    -18,399       -19,009     -20,254          -22,016    Rf (%)                                      5.25
Net interest income                   11,481     12,111        12,554      12,788           13,209    Rm-Rf (%)                                   6.00
Net fees and commissions               2,391      2,412         2,466       2,626            2,817    Beta (x)                                    1.0
Trading related profits                1,847      1,743         2,077       2,312            2,548    Cost of equity (%)                          11.25
Other operating revenue                1,112      1,361         1,193       1,295            1,416    WACC (%)                                    11.25
Non interest income                    5,350      5,516         5,735       6,233            6,780    PV of curr. CF (A$mn)                       69,289
Total operating income                16,831     17,627        18,289      19,021           19,989
Depreciation                            -534       -613          -660        -724             -786    Multiples at TP (x)              FY11           FY12        FY13F              FY14F     FY15F
Amortisation                               0          0             0           0                0    FD norm. P/E at PT               12.4           12.0         11.9               11.5      11.0
Operating expenses                    -7,198     -7,428        -7,539      -7,739           -8,001
Employee share expense                     0          0             0           0                0    Multiples (x)
Pre prov. operating profit             9,099      9,586        10,090      10,558           11,202    FD normalised P/E                11.9           11.5             11.4            11.1     10.6
Bad debts                             -1,211     -1,246        -1,432      -1,487           -1,610    Reported P/E                     12.0           11.8             11.0            10.7     10.2
Operating profit                       7,888      8,340         8,658       9,071            9,592
Associates                                 0          0             0           0                0    Price/NTA                         2.2            2.0              1.9             1.8       1.7
Pretax profit                          7,888      8,340         8,658       9,071            9,592    Dividend yield (%)                5.6            5.8              5.9             6.1       6.4
Income tax                            -2,229     -2,298        -2,424      -2,540           -2,686    Price/book                        1.7            1.7              1.6             1.5       1.4
NPAT                                   5,659      6,042         6,234       6,531            6,906
Minorities                                -9         -6            -4          -4               -4    Comps (x)                                       FY12        FY13F              FY14F     FY15F
Preferences                              -12        -11           -12         -12              -12    CBA                       PE                    14.1         13.9               13.4      12.7
Normalised NPAT                        5,638      6,025         6,218       6,515            6,890                              P/NTA                  3.3          3.0                2.8       2.7
Non cash items                          -268       -364            12          12               12                              P/BV                   2.4          2.3                2.2       2.1
Reported NPAT                          5,370      5,661         6,230       6,527            6,902
                                                                                                      NAB                       PE                    10.6             10.3             9.7       9.1
Per share (A$)                                                                                                                  P/NTA                  1.8              1.8             1.7       1.6
Shares (m)                             2,804        2,907       2,966       3,007            3,041                              P/BV                   1.3              1.3             1.3       1.2
Reported EPS                            2.08         2.13        2.28        2.35             2.45
Norm. EPS                               2.18         2.26        2.27        2.34             2.45    WBC                       PE                    12.7             12.4            12.0      11.5
Fully diluted norm EPS                  2.10         2.17        2.19        2.26             2.35                              P/NTA                  2.5              2.3             2.2       2.1
Book value per share                   14.42        15.15       16.01       16.91            17.78                              P/BV                   0.0              0.0             0.0       0.0
DPS                                     1.40         1.45        1.48        1.52             1.59
                                                                                                                                       2011           2012             2013            2014      2015
Balance sheet (A$mn)                                                                                  Operating metrics
Year-end 30 Sep                        FY11      FY12          FY13F      FY14F             FY15F     Key metrics (%)                  FY11           FY12        FY13F              FY14F     FY15F
Cash & equivalents                    24,899    36,578         37,869     40,175            42,829    P&L
Marketable securities                112,456   110,093        113,980    120,921           128,907    NIM                               2.46           2.31            2.23            2.17      2.10
Inter-bank lending                     8,824    17,103         17,707     18,785            20,026    EPS growth                           9              4               0               3         4
Deposits with central bank                 0         0              0          0                 0    Pre-prov profit growth               3              5               5               5         6
Other IEA                                  0         0              0          0                 0    Cash NPAT growth                    12              7               3               5         6
Gross loans                          403,767   433,799        448,395    474,897           506,317    Cost/ income                        46             46              45              44        44
Less provisions                       -6,460    -5,976         -5,467     -4,998            -5,381
Net loans                            397,307   427,823        442,928    469,899           500,936    Balance sheet
Long-term investments                  3,513     3,520          3,644      3,866             4,122    NPA/GLA                           1.93           1.63            1.21            0.77      0.69
Fixed assets                           2,125     2,114          2,189      2,322             2,475    BDD/GLA                           0.30           0.29            0.32            0.31      0.32
Goodwill                               6,964     7,082          7,082      7,082             7,082    BDD/NHL                           0.69           0.64            0.70            0.70      0.70
Other intangible assets                    0         0              0          0                 0    Loan growth                      10.11           7.68            3.53            6.09      6.61
Other non IEAs                        38,400    37,814         39,149     41,533            44,276
Total assets                         594,488   642,127        664,548    704,584           750,654    Capital
Customer deposits                    297,346   326,848        338,388    358,993           382,705    Tier 1 ratio                     10.9           10.8             11.1            11.3     11.2
Bank dep., CDs, deb.                  94,395   100,813        104,372    110,728           118,042    Total capital ratio              12.1           12.2             12.7            12.9     12.6
Other IBL                            119,602   127,651        132,158    140,205           149,466    ROE                              16.3           15.6             14.9            14.5     14.4
Total IBL                            511,343   555,312        574,918    609,927           650,213
Non IBL                               45,191    45,595         45,453     47,297            50,167
Total liabilities                    556,534   600,907        620,371    657,224           700,379                 EPS growth                                   Return on Equity
                                                                                                      (%)                                              (%)
Minority interests                        48        49             49         49                49     6                                                17
                                                                                                                                                                15.6
Preferred stock                          871       871            871        871               871                                            4                               14.9      14.5
                                                                                                                                                           15                                  14.4
Common stock                          21,343    23,070         24,010     25,081            25,762            4
                                                                                                      4                          3
Retained earnings                     17,787    19,728         21,745     23,856            26,090                                                         13
Proposed dividends                         0         0              0          0                 0    2
                                                                                                                                                           11
Other equity & reserves               -2,095    -2,498         -2,498     -2,498            -2,498                     0
Total SHE                             37,906    41,171         44,128     47,311            50,225    0                                                    9
                                                                                                            FY12    FY13F      FY14F     FY15F                  FY12      FY13F        FY14F   FY15F
Total liabilities & equity           594,488   642,127        664,548    704,584           750,654

                       NIM                                    Cost to income                                         Tier 1                                            BDD/GLA
       (%)                                     (%)                                                   (%)                                               (%)
 2.5                                           48                                                                                                     0.4
                                                       45.6                                          13                                                                       0.32      0.31    0.32
 2.4                                                                                                                 11.1      11.3      11.2                   0.29
             2.31                              46               44.8     44.5                               10.8                                      0.3
                                                                                    44.0             11
 2.3                2.23
                             2.17              44                                                                                                     0.2
 2.2                                                                                                 9
                                     2.10
                                               42                                                                                                     0.1
 2.1                                                                                                 7
 2.0                                           40                                                    5                                                0.0
             FY12   FY13F    FY14F   FY15F             FY12    FY13F    FY14F       FY15F                   FY12    FY13F     FY14F     FY15F                   FY12      FY13F        FY14F   FY15F


Source: Nomura estimates, company data




                                                                                                                                                                                                   32
Nomura | Australia Financials                                                                                                                                                       January 10, 2013


Fig. 79: CBA financial summary
 Income statement (A$mn)                                                                                     Valuation metrics
 Year-end 30 Jun                          FY11        FY12       FY13F               FY14F      FY15F        Preferred methodology
 Interest income                         36,813      38,301      38,588              40,198     42,543       DCF valuation
 Interest expense                       -24,155     -25,144     -25,285             -26,613    -28,453       Rf (%)                 5.25
 Net interest income                     12,658      13,157      13,303              13,585     14,090       Rm-Rf (%)              6.00
 Net fees and commissions                 3,413       2,994       3,140               3,323      3,551       Beta (x)               1.00
 Trading related profits                  2,871       3,477       3,605               3,898      4,152       Cost of equity (%)    11.25
 Other operating revenue                    717         522         710                 784        846       WACC (%)              11.25
 Non interest income                      7,001       6,993       7,454               8,005      8,550       PV of curr. cf (A$mn 90,399
 Total operating income                  19,659      20,150      20,758              21,591     22,639
 Depreciation                              -262        -270        -364                -459       -518       Multiples at PT (x)          FY11         FY12     FY13F               FY14F     FY15F
 Amortisation                                 0           0           0                   0          0       FD norm. P/E at PT           12.7         12.3      12.1                11.7      11.1
 Operating expenses                      -8,629      -8,926      -8,937              -9,063     -9,218
 Employee share expense                       0           0           0                   0          0       Multiples (x)
 Pre provision profit                    10,768      10,954      11,456              12,069     12,904       FD normalised P/E              14.6       14.1       13.9               13.4      12.7
 Bad debts                               -1,280      -1,089      -1,240              -1,305     -1,458       Reported P/E                   14.9       13.6       13.4               12.9      12.2
 Operating profit                         9,488       9,865      10,216              10,764     11,446
 Associates                                 -16         -16         -14                 -14        -14       Price/NTA                       3.7        3.3           3.0             2.8       2.7
 Pretax profit                            9,472       9,849      10,202              10,750     11,432       Dividend yield (%)              5.2        5.4           5.8             6.0       6.3
 Income tax                              -2,637      -2,736      -2,860              -3,014     -3,205       Price/book                      2.6        2.4           2.3             2.2       2.1
 NPAT                                     6,835       7,113       7,341               7,736      8,227
 Minorities                                   0           0           0                   0          0       Comparable multiples (x)                  FY12     FY13F               FY14F     FY15F
 Preferences                                -42         -42         -44                 -44        -44       ANZ              PE                       11.5      11.4                11.1      10.6
 Normalised NPAT                          6,793       7,071       7,297               7,692      8,183                        P/NTA                     2.0       1.9                 1.8       1.7
 Non cash items                            -399          19          44                  44         44                        P/BV                      1.7       1.6                 1.5       1.4
 Reported NPAT                            6,394       7,090       7,341               7,736      8,227
                                                                                                             NAB                    PE                 10.6       10.3                9.7       9.1
 Shares (m)                              1,671        1,680          1,708            1,727      1,741                              P/NTA               1.8        1.8                1.7       1.6
 Per share (A$)                                                                                                                     P/BV                1.3        1.3                1.3       1.2
 Reported EPS                             4.13         4.51           4.58             4.77       5.03
 Norm. EPS                                4.39         4.49           4.55             4.74       5.00       WBC                    PE                 12.7       12.4               12.0      11.5
 Fully diluted norm EPS                   4.21         4.35           4.41             4.59       4.83                              P/NTA               2.5        2.3                2.2       2.1
 Book value per share                    23.58        25.78          27.02            28.40      29.65                              P/BV                0.0        0.0                0.0       0.0
 DPS                                      3.20         3.34           3.55             3.69       3.89

 Balance sheet (A$mn)                                                                                     Operating metrics
 Year-end 30 Jun                      FY11            FY12      FY13F                FY14F      FY15F     Key metrics (%)                 FY11         FY12     FY13F               FY14F     FY15F
 Cash & equivalents                  13,241          19,666     20,260               21,390     22,582    P&L                             2011         2012      2013                2014      2015
 Marketable securities               96,781         114,560    118,023              124,602    131,549    NIM                              2.19         2.09      2.04                2.00      1.96
 Inter-bank lending                  10,393          10,886     11,215               11,840     12,500    EPS                                11            2         1                   4         5
 Deposits with central bank               0               0          0                    0          0    Preprov earnings gro                3            2         5                   5         7
 Other interest earning assets            0               0          0                    0          0    Earnings                           12            4         3                   5         6
 Gross loans                        518,075         542,097    557,272              587,277    619,683    Cost/ income                       45           46        45                  44        43
 Less provisions                     -7,284          -6,698     -5,690               -4,945     -4,886
 Net loans                          510,791         535,399    551,581              582,332    614,797       Balance sheet
 Long-term investments               16,710          16,423     16,862               17,696     18,577       NPA/GLA                        1.02        0.83          0.54            0.25      0.16
 Fixed assets                         2,366           2,503      2,579                2,722      2,874       BDD/GLA                        0.25        0.20          0.22            0.22      0.24
 Goodwill                             9,603          10,281     10,281               10,281     10,281       BDD/NHL                        0.70        0.58          0.65            0.67      0.70
 Other intangible assets                  0               0          0                    0          0       Loan growth                    1.1         4.8           3.0             5.6       5.6
 Other non IEAs                       8,014           8,511      8,739                9,171      9,628
 Total assets                       667,899         718,229    739,540              780,035    822,789       Capital
 Customer deposits                  401,147         437,655    450,883              476,020    502,558       Tier 1 ratio                 10.01        10.01     10.71              10.95      10.86
 Bank dep., CDs, deb                 15,899          22,126     22,795               24,066     25,407       Total capital ratio          11.7         11.0      11.7               11.9       11.7
 Other IBL                          140,947         144,451    148,817              157,114    165,873       ROE                           19.7         18.8      17.7               17.5       17.6
 Total IBL                          557,993         604,232    622,495              657,199    693,838
 Non IBL                             72,619          72,425     72,962               75,968     79,762
 Total liabilities                  630,612         676,657    695,457              733,167    773,600          EPS growth                                     Return on Equity

                                                                                                         (%)                                             (%)
 Minority interests                        528          531        531                  531        531
                                                                                                                                                        19     18.8
 Preferred stock                           939          939        939                  939        939 10
 Common stock                           23,602       25,175     26,383               27,621     28,277
 Retained earnings                      11,826       13,356     14,659               16,207     17,871                                             5    18                  17.7              17.6
                                                                                                                                                                                      17.5
 Proposed dividends                          0            0          0                    0          0 5                              4
 Other equity & reserves                   392        1,571      1,571                1,571      1,571             2                                    17
 Total SHE                              36,759       41,041     43,552               46,338     48,658                        1

                                                                                                         0                                              16
 Total liabilities & equity         667,899         718,229    739,540              780,035    822,789           FY11     FY12      FY13F FY14F                FY11      FY12        FY13F FY14F

                     NIM                                        Cost to income                                      Tier 1                                        BDD/GLA
  (%)                                                  (%)                                                (%)                                          (%)
  2.50                                                  48                                               12                  10.7    11.0      10.9     0.4
                                                                                                                   10.0
                                                              45.6                                       10
  2.25      2.09                                        46                   44.8                                                                       0.3                                    0.24
                       2.04      2.00                                                   44.1               8                                                   0.20          0.22      0.22
                                             1.96
  2.00                                                  44                                     43.0        6                                            0.2
  1.75                                                  42                                                 4
                                                                                                                                                        0.1
                                                                                                           2
  1.50                                                  40                                                 0                                            0.0
            FY11       FY12      FY13F      FY14F             FY11       FY12         FY13F    FY14F               FY11      FY12   FY13F FY14F                FY11          FY12     FY13F FY14F


Source: Nomura estimates, company data




                                                                                                                                                                                                 33
Nomura | Australia Financials                                                                                                                                                                January 10, 2013


Fig. 80: NAB financial summary
Income statement (A$mn)                                                                                Valuation metrics
Year-end 30 Sep                       FY11        FY12             FY13F      FY14F         FY15F      Preferred methodology
Interest income                      34,270      34,542            34,569     36,011        38,111     DCF valuation
Interest expense                    -21,178     -21,245           -21,071    -22,141       -23,650     Rf (%)                               5.25
Net interest income                  13,092      13,297            13,498     13,870        14,461     Rm-Rf (%)                            6.00
Net fees and commissions              2,507       2,468             2,513      2,660         2,843     Beta (x)                             1.00
Trading related profits               1,791       1,871             1,985      2,034         2,128     Cost of equity (%)                  11.25
Other operating revenue                 234         626               580        620           669     WACC (%)                            11.25
Non interest income                   4,532       4,965             5,078      5,314         5,639     PV of curr. CF (A$mn)             69,425
Total operating income               17,624      18,262            18,576     19,183        20,100
Depreciation                           -624        -645              -642       -704          -742     Multiples at TP (x)                 FY11          FY12            FY13F               FY14F       FY15F
Amortisation                              0           0                 0          0             0     FD norm. P/E at PT                  12.1          12.6             12.2                11.5        10.7
Operating expenses                   -7,272      -6,969            -7,005     -7,056        -7,182
Employee share expense                  -78        -214              -203       -207          -213     Multiples (x)
Pre provision operating pro           9,650      10,434            10,726     11,217        11,964     FD normalised P/E                   10.2          10.6                 10.3             9.7         9.1
Bad debts                            -1,822      -2,615            -2,313     -2,186        -2,142     Reported P/E                        10.5          13.9                 10.2             9.5         8.8
Operating profit                      7,828       7,819             8,414      9,031         9,821
Associates                                0           0                 0          0             0     Price/NTA                            1.9           1.8                  1.8             1.7         1.6
Pretax profit                         7,828       7,819             8,414      9,031         9,821     Dividend yield (%)                   6.8           7.1                  7.2             7.7         8.3
Income tax                           -2,142      -2,178            -2,405     -2,578        -2,799     Price/book                           1.3           1.3                  1.3             1.3         1.2
NPAT                                  5,686       5,641             6,009      6,454         7,022
Minorities                               -1          -1                -1         -1            -1     Comparable multiples (x)                          FY12            FY13F               FY14F       FY15F
Preferences                             -37         -38               -38        -38           -38     ANZ                    PE                          11.5             11.4                11.1        10.6
Other                                  -225        -207              -200       -200          -200                            P/NTA                        2.0              1.9                 1.8         1.7
Normalised NPAT                       5,423       5,395             5,770      6,215         6,783                            P/BV                        2.4              2.3                 2.2         2.1
Non cash items                         -204      -1,313                44        138           148
Reported NPAT                         5,219       4,082             5,814      6,353         6,931     CBA                        PE                     14.1                 13.9            13.4        12.7
                                                                                                                                  P/NTA                   3.3                  3.0             2.8         2.7
Per share (A$)                                                                                                                    P/BV
Shares (mn)                           2,225          2,296          2,350      2,388           2,423
Reported EPS                           2.41           1.82           2.49       2.67            2.87   WBC                        PE                     12.7                 12.4            12.0        11.5
Norm. EPS                              2.50           2.41           2.47       2.62            2.81                              P/NTA                   2.5                  2.3             2.2         2.1
Fully diluted norm EPS                 2.48           2.39           2.46       2.60            2.80                              P/BV                    0.0                  0.0             0.0         0.0
Book value per share                  19.16          19.05          19.14      19.77           20.41
DPS                                    1.72           1.80           1.83       1.94            2.10

Balance sheet (A$mn)                                                                                   Operating metrics
Year-end 30 Sep                       FY11           FY12          FY13F      FY14F         FY15F      Key metrics (%)                     FY11          FY12            FY13F               FY14F       FY15F
Cash & equivalents                   27,093      19,464            20,052     21,170       22,350      P&L                                 2011          2012                 2013            2014        2015
Marketable securities                       0           0              0             0            0    NIM                                 2.25           2.11                2.05             2.02        1.99
Inter-bank lending                   47,106      47,410            48,843     51,566       54,441      EPS growth                            17             -4                   3               6              8
Deposits with central bank                  0           0              0             0            0    Preprov earnings growth                9                 8                3               5              7
Other IEA                            63,920      68,414            70,482     74,411       78,560      Cash NPAT growth                      19             -1                   7               8              9
Gross loans                         482,125     500,857           515,137    543,398      573,693      Cost/ income                          45             43                  42              42             40
Less provisions                      -6,267      -6,138            -5,465     -5,312        -5,608
Net loans                           475,858     494,719           509,672    538,086      568,084      Balance sheet
Long-term investments                       0           0              0             0            0    NPA/GLA                             1.77           1.78                1.30             1.01        1.01
Fixed assets                          1,919          1,901          1,958      2,068           2,183   BDD/GLA                             0.38           0.52                0.45             0.40        0.37
Goodwill                              7,262          7,088          7,088      7,088           7,088   BDD/NHL                             1.00           1.50                1.38             1.29        1.18
Other intangible assets                     0           0              0             0            0    Loan growth                           7.9           4.0                 3.0              5.6            5.6
Other non IEAs                      130,599     124,094           127,845    134,972      142,497
Total assets                        753,757     763,090           785,940    829,361      875,203      Capital
Customer deposits                   402,964     419,921           432,613    456,731      482,194      Tier 1 ratio                         9.70         10.27            10.67              10.86        10.93
Bank dep. CDs, debentures            40,162      28,691            29,558     31,206       32,946      Total capital ratio                 11.3          11.7             12.1               12.2         12.2
Other IBL                           214,835     214,091           220,352    232,536      245,682      ROE                                 15.4          14.3             14.7               15.1         15.6
Total IBL                           657,961     662,703           682,523    720,473      760,822
Non IBL                              53,608      56,584            58,294     61,544       64,975
Total liabilities                   711,569     719,287           740,818    782,017      825,797                    EPS growth                                         Return on Equity
                                                                                                                                                     (%)
                                                                                                       (%)
Minority interests                       20          47                47         47           47      12                                           16
Preferred stock                       4,914       4,914             4,914      4,914        4,914                                            8                                                          15.6
                                                                                                        8                          6
Common stock                         20,360      22,459            22,501     23,238       23,694
                                                                                                        4                    3                                                                15.1
Retained earnings                    17,667      18,702            19,980     21,464       23,070
                                                                                                                                                    15
Proposed dividends                        0           0                 0          0            0       0                                                                       14.7
Other equity & reserves                -773      -2,319            -2,319     -2,319       -2,319
                                                                                                       -4                                                       14.3
Total shareholders' equity           42,168      43,756            45,076     47,297       49,359              -4
                                                                                                       -8                                           14
                                                                                                             FY12      FY13F     FY14F     FY15F                FY12           FY13F         FY14F      FY15F
Total liabilities & equity          753,757     763,090           785,940    829,361      875,203

                     NIM                                          Cost to income                                        Tier 1                                                BDD/GLA
  (%)                                           (%)                                                    (%)                                               (%)
 2.4                                                                                                                              10.9       10.9         0.5                        0.45
                                                                                                              10.3       10.7                                                                    0.40
                                                46                                                     11                                                                                                 0.37
                                                                                                                                                          0.4
                                                44           43                                         9                                                 0.3
 2.2                                                                  42
        2.11                                                                   42                                                                         0.2
                  2.05                          42                                                      7
                             2.02                                                         40
                                                                                                                                                          0.1
 2.0                                            40                                                      5                                                 0.0
        FY12      FY13F    FY14F    FY15F                FY12        FY13F   FY14F       FY15F                FY12      FY13F    FY14F      FY15F                      FY12          FY13F      FY14F     FY15F

Source: Nomura estimates, company data




                                                                                                                                                                                                               34
Nomura | Australia Financials                                                                                                                                                      January 10, 2013


Fig. 81: WBC financial summary
 Income statement (A$mn)                                                                             Valuation metrics
 Year-end 30 Sep                           FY11       FY12       FY13F           FY14F      FY15F    Preferred methodology
 Interest income                          38,073     36,865      36,682          38,212     40,441   DCF valuation
 Interest expense                        -25,904    -24,302     -23,846         -25,089    -26,865   Rf (%)                             5.25
 Net interest income                      12,169     12,563      12,836          13,123     13,576   Rm-Rf (%)                          6.00
 Net fees and commissions                  2,568      2,630       2,722           2,881      3,078   Beta (x)                           1.00
 Trading related profits                   1,828      2,036       2,160           2,298      2,436   Cost of equity (%)                11.25
 Other operating revenue                     558        847         814             870        939   WACC (%)                          11.25
 Non interest income                       4,954      5,513       5,696           6,049      6,453   PV of curr. CF (A$mn)            87,407
 Total operating income                   17,123     18,076      18,531          19,172     20,030
 Depreciation                               -500       -683        -853            -891       -916   Multiples at TP (x)               FY11       FY12              FY13F          FY14F    FY15F
 Amortisation                                  0          0           0               0          0   FD norm. P/E at PT                13.6       13.2               12.9           12.4     11.9
 Operating expenses                       -6,606     -6,696      -6,742          -6,840     -7,016
 Employee share expense                        0          0           0               0          0   Multiples (x)
 Pre prov. Profit                         10,017     10,697      10,937          11,441     12,099   FD normalised P/E                 13.1       12.7               12.4           12.0      11.5
 Bad debts                                  -993     -1,212      -1,150          -1,175     -1,321   Reported P/E                      11.4       13.6               12.0           11.6      11.1
 Operating profit                          9,024      9,485       9,787          10,266     10,778
 Associates                                    0          0           0               0          0   Price/NTA                          2.7            2.5            2.3            2.2       2.1
 Pretax profit                             9,024      9,485       9,787          10,266     10,778   Dividend yield (%)                 5.9            6.3            6.5            6.8       7.1
 Income tax                               -2,655     -2,818      -2,887          -3,028     -3,179
 NPAT                                      6,369      6,667       6,900           7,237      7,598
 Minorities                                  -68        -69         -68             -68        -68   Comparable multiples (x)                     FY12              FY13F          FY14F    FY15F
 Preferences                                   0          0           0               0          0   ANZ                 PE                       12.0               11.9           11.5     11.0
 Normalised NPAT                           6,301      6,598       6,832           7,169      7,530                       P/NTA                     2.0                1.9            1.8      1.7
 Non cash items                              690       -628           0               0          0                       P/BV
 Reported NPAT                             6,991      5,970       6,832           7,169      7,530
                                                                                                     CBA                      PE                  14.1               13.9           13.4      12.7
 Per share (A$)                                                                                                               P/NTA                3.3                3.0            2.8       2.7
 Shares (mn)                               3,181      3,232          3,278        3,309     3,325
 Reported EPS                               2.32       1.95           2.20         2.29      2.39
 Norm. EPS                                  2.09       2.16           2.20         2.29      2.39 NAB                         PE                  10.6               10.3            9.7       9.1
 Fully diluted norm EPS                     2.02       2.08           2.13         2.21      2.31                             P/NTA                1.8                1.8            1.7       1.6
 Book value per share                      13.80      14.37          14.93        15.49     15.99
 DPS                                        1.56       1.66           1.73         1.79      1.87
                                                                                                                                        2011       2012              2013           2014      2015
 Balance sheet (A$mn)                                                                                Operating metrics
 Year-end 30 Sep                           FY11       FY12       FY13F           FY14F     FY15F     Key metrics (%)                   FY11       FY12              FY13F          FY14F    FY15F
 Cash & equivalents                       16,258     12,523      12,902          13,621    14,380    P&L
 Marketable securities                   118,151    107,228     110,469         116,628   123,130    NIM                                2.22       2.17               2.16          2.12       2.07
 Inter-bank lending                        8,551     10,228      10,537          11,125    11,745    EPS growth                            6          3                  2             4          5
 Deposits with central bank                    0          0           0               0         0    Preprov earnings grow                 1          7                  2             5          6
 Other interest earning assets                 0          0           0               0         0    Earnings growth                       7          5                  4             5          5
 Gross loans                             500,654    518,279     533,198         562,827   594,470    Cost/ income                         41         41                 41            40         40
 Less provisions                          -4,045     -3,834      -3,204          -3,286    -3,735
 Net loans                               496,609    514,445     529,994         559,541   590,736    Balance sheet
 Long-term investments                         0          0           0               0         0    NPA/GLA                            0.92       0.85               0.54          0.37       0.37
 Fixed assets                              1,158      1,137       1,171           1,237     1,306    BDD/GLA                            0.20       0.23               0.22          0.21       0.22
 Goodwill                                 11,779     12,134      10,417          10,417    10,417    BDD/NHL                            0.59       0.71               0.67          0.67       0.70
 Other intangible assets                       0          0           0               0         0    Loan growth                         4.0        3.6                3.0           5.6        5.6
 Other non IEAs                           17,722     17,270      17,792          18,784    19,831
 Total assets                            670,228    674,965     693,282         731,352   771,544    Capital
 Customer deposits                       370,278    394,991     406,930         429,616   453,567    Tier 1 ratio                       9.68      10.25              10.84         10.81     10.57
 Bank dep. CDs, debentures                14,512      7,564       7,793           8,227     8,686    Total capital ratio               11.0       11.7               12.2          12.1      11.8
 Other IBL                                   272        266         274             289       305    ROE                               16.1       15.4               15.1          15.1      15.2
 Total IBL                               385,062    402,821     414,996         438,132   462,558
 Non IBL                                 241,358    225,925     229,775         242,560   256,630
 Total liabilities                       626,420    628,746     644,771         680,692   719,188                  EPS growth                                   Return on Equity
                                                                                                      (%)                                         (%)
 Minority interests                        1,982      1,970       1,970           1,970     1,970      6                                          17
 Preferred stock                            -187       -192        -192            -192      -192                                         4.5
 Common stock                             25,456     26,355      27,181          27,785    27,847                               3.9
                                                                                                        4    3.1                                  16
 Retained earnings                        16,059     17,128      18,594          20,138    21,773                                                            15.4
                                                                                                                                                                                            15.2
 Proposed dividends                            0          0           0               0         0                      2.0                                              15.1        15.1
                                                                                                        2                                         15
 Other equity & reserves                     498        958         958             958       958
 Total SHE                                41,826     44,249      46,541          48,689    50,386
                                                                                                        0                                         14
                                                                                                            FY12     FY13F    FY14F      FY15F               FY12      FY13F        FY14F   FY15F
 Total liabilities & equity              670,228    674,965     693,282         731,352   771,544

                     NIM                                        Cost to income                                       Tier 1                                           BDD/GLA
  (%)                                                   (%)                                           (%)                                         (%)
 2.5                                                   45                                                                                         0.3
         2.17        2.16                                                                                              10.8     10.8      10.6                0.23
                                 2.12       2.07              40.8      41.0                         11.0    10.3                                                           0.22             0.22
                                                                                  40.3                                                                                               0.21
                                                                                          39.6
 2.0                                                   40                                                                                         0.2
                                                                                                      9.0

 1.5                                                   35                                                                                         0.1
                                                                                                      7.0

 1.0                                                   30                                             5.0                                         0.0
         FY12      FY13F         FY14F      FY15F             FY12      FY13F     FY14F   FY15F             FY12      FY13F     FY14F     FY15F               FY12      FY13F       FY14F   FY15F

Source: Nomura estimates, company data




                                                                                                                                                                                                    35
Nomura | Australia Financials                                                                                                                                                 January 10, 2013


Fig. 82: BEN financial summary
 Income statement (A$mn)                                                                  Valuation metrics
 Year-end 30 Jun                       FY11      FY12       FY13F      FY14F     FY15F    Preferred methodology
 Interest income                       3,381     3,435       3,485      3,634     3,828   DCF valuation
 Interest expense                     -2,446    -2,491      -2,483     -2,587    -2,731   Rf (%)                                5.25
 Net interest income                     935       944       1,001      1,047     1,097   Rm-Rf (%)                                6
 Net fees and commissions                237       221         239        251       266   Beta (x)                                0.9
 Trading related profits                  61        61          65         69        73   WACC (%)                             10.65
 Other operating revenue                   0         0           0          0         0   PV of curr. cashflows (A$mn)          3,832
 Non interest income                     298       282         304        320       339                                          2011           2012         2013              2014          2015
 Total operating income                1,233     1,226       1,305      1,367     1,435   Multiples at PT (x)                   FY11            FY12        FY13F             FY14F         FY15F
 Depreciation                            -43       -44         -45        -45       -45   FD norm. P/E at PT                    10.4            11.0         11.1              10.7          10.1
 Amortisation                              0         0           0          0         0
 Operating expenses                     -693      -708        -739       -761      -786   Multiples (x)
 Employee share expense                    0         0           0          0         0   FD normalised P/E                     10.2            10.8         10.9               10.5             9.9
 Pre provision profit                    498       474         521        561       604   Reported P/E                           9.4            17.4         10.6               10.2             9.6
 Bad debts                               -44       -32         -42        -51       -54
 Operating profit                        454       442         479        510       550   Price/NTA                                1.5           1.4             1.4               1.3           1.3
 Associates                                0         0           0          0         0   Price/book                               0.8           0.8             0.8               0.8           0.8
 Pretax profit                           454       442         479        510       550   Dividend yield (%)                       6.8           6.8             6.9               7.1           7.5
 Income tax                             -124      -130        -142       -151      -163
 NPAT                                    330       312         337        359       387   Comparable multiples (x)              FY11            FY12        FY13F             FY14F         FY15F
 Minorities                               -5         0           0          0         0   ANZ                                PE                 11.5         11.4              11.1          10.6
 Preferences                              -9        -9         -10        -10       -10                                      P/BV                5.8          5.9               6.1           6.4
 Other                                    20        20          20         20        20                                      P/NTA               2.0          1.9               1.8           1.7
 Normalised NPAT                         336       323         346        368       397
 Non cash items                            6      -128         -10        -10       -10   CBA                                PE                 14.1         13.9               13.4            12.7
 Reported NPAT                           342       195         337        359       387                                      P/BV                5.4          5.8                6.0             6.3
                                                                                                                             P/NTA               3.3          3.0                2.8             2.7

 Per share (A$)                                                                           NAB                                PE                 10.6         10.3                  9.7           9.1
 Shares (m)                              401       401         439        448      454                                       P/BV                7.1          7.2                  7.7           8.3
 Reported EPS                           0.94      0.51        0.83       0.87     0.92                                       P/NTA               1.8          1.8                  1.7           1.6
 Norm. EPS                              0.92      0.84        0.85       0.89     0.94
 Fully diluted norm EPS                 0.87      0.82        0.81       0.84     0.89    WBC                                PE                 12.7         12.4               12.0            11.5
 Book value per share                  10.77     10.49       10.68      10.90    11.15                                       P/BV                6.3          6.5                6.8             7.1
 DPS                                    0.60      0.60        0.61       0.62     0.66                                       P/NTA               2.5          2.3                2.2             2.1

 Balance sheet (A$mn)                                                                     Operating metrics
 Year-end 30 Jun                       FY11     FY12        FY13F      FY14F    FY15F     Key metrics (%)                      FY11             FY12        FY13F             FY14F         FY15F
 Cash & equivalents                      469      289          299        314      332    P&L                                  2011             2012         2013              2014          2015
 Marketable securities                 5,288    5,324        5,512      5,791    6,114    NIM                                   1.84             1.77         1.78              1.78          1.77
 Inter-bank lending                      202      272          282        296      313    EPS                                     11               -9            1                 4             6
 Deposits with central bank                0        0            0          0        0    Preprovision earnings                   10               -5           10                 8             8
 Other interest earning assets             0        0            0          0        0    Earnings                                16               -4            7                 6             8
 Gross loans                          46,492   48,832       50,508     53,053   56,011    Cost/ income                            60               61           60                59            58
 Less provisions                        -154     -162         -119       -114     -120
 Net loans                            46,338   48,670       50,388     52,939   55,891    Balance sheet
 Long-term investments                     0        0            0          0        0    NPA/GLA                                  0.77          0.73            0.59              0.51         0.51
 Fixed assets                            100       69           71         75       79    BDD/GLA                                  0.10          0.07            0.08              0.10         0.10
 Goodwill                              1,655    1,548        1,548      1,548    1,548    BDD/NHL                                  0.30          0.22            0.28              0.33         0.33
 Other intangible assets                   0        0            0          0        0    Loan growth                              6.47          5.03            3.53              5.06         5.58
 Other non IEAs                          877    1,066        1,103      1,159    1,224
 Total assets                         54,928   57,238       59,204     62,123   65,500    Capital
 Customer deposits                    40,521   44,573       46,146     48,483   51,186    Tier 1 ratio                           7.8             8.4          9.5                9.6             9.5
 Bank dep., CDs, deb                     216      327          339        356      376    Total capital ratio                   10.6            10.4         11.5               11.6            11.3
 Other IBL                                 0        0            0          0        0    ROE                                    9.2             8.3          8.4                8.6             8.9
 Total IBL                            40,737   44,900       46,485     48,838   51,562
 Non IBL                              10,236    8,120        8,324      8,717    9,227
 Total liabilities                    50,973   53,020       54,809     57,555   60,788

 Minority interests                        0         0           0          0        0                   EPS growth                                        Return on Equity
 Preferred stock                           0         0           0          0        0
                                                                                            (%)                                            (%)
 Common stock                          3,597     3,870       3,944      4,009    4,038                                                                                                      9
                                                                                           10                                             10          8           8            9
 Retained earnings                       350       296         400        508      623                                         6
                                                                                                                       4                   8
 Proposed dividends                        0         0           0          0        0      5                   1
 Other equity & reserves                   8        51          51         51       51                                                     6
                                                                                            0
 Total SHE                             3,955     4,218       4,395      4,567    4,712                                                     4
                                                                                           (5)                                             2
 Total liabilities & equity           54,928   57,238       59,204     62,123   65,500    (10)                                             0
                                                                                                   -9                                             FY12       FY13F        FY14F           FY15F
                                                                                                  FY12    FY13F      FY14F   FY15F
                    NIM                                     Cost to income                                  Tier 1                                               BDD/GLA
  (%)                                          (%)                                         (%)                                                  (%)
                                                                                                           9.5        9.6     9.5
                                                                                           10                                                  0.20
  2.5                                          70                                                 8.4
                                                     61.3       60.1
  2.0     1.77     1.78       1.78     1.77                             59.0    57.9        8
                                               60                                                                                              0.15
  1.5                                                                                       6                                                                                      0.10         0.10
                                               50                                                                                              0.10                    0.08
  1.0                                                                                       4                                                             0.07
  0.5                                          40                                                                                              0.05
                                                                                            2
  0.0                                          30                                           0
         FY12     FY13F       FY14F   FY15F                                                                                                    0.00
                                                     FY12      FY13F   FY14F    FY15F             FY12    FY13F      FY14F   FY15F                        FY12        FY13F     FY14F       FY15F

Source: Nomura estimates, company data




                                                                                                                                                                                                  36
Nomura | Australia Financials                                                                                                                                                       January 10, 2013


Fig. 83: BOQ Financial summary
Income statement (A$mn)                                                                                   Valuation metrics
Year-end 31-May                          FY11              FY12     FY13F          FY14F     FY15F        Preferred methodology
Interest income                          2,682             2,596     2,540          2,648     2,775       DCF valuation
Interest expense                        -2,053            -1,940    -1,879         -1,965    -2,063       Rf (%)                                      5.3
Net interest income                        628               656       661            683       712       Rm-Rf (%)                                     6
Net fees and commissions                    93                91        95            100       105       Beta (x)                                   1.10
Trading related profits                     79                63        63             67        71       WACC (%)                                 11.85
Other operating revenue                      5                 6        13             14        14       PV of curr. cashflows (A$mn)              2,464
Non interest income                        178               161       171            181       190
Total operating income                     806               817       832            864       903       Multiples at PT (x)                       FY11          FY12     FY13F     FY14F         FY15F
Depreciation                                 0                 0         0              0         0       FD norm. P/E at PT                        11.0          67.1      10.3       9.1           8.4
Amortisation                                 0                 0         0              0         0
Operating expenses                        -204              -213      -222           -228      -235       Multiples (x)
Employee share expense                    -155              -161      -163           -167      -175       FD normalised P/E                         11.2          68.6      10.5          9.3           8.6
Pre provision profit                       447               444       447            469       494       Reported P/E                              10.5            na      10.0          8.9           8.3
Bad debts                                 -201              -401      -100            -75       -69
Operating profit                           247                42       347            394       424       Price/NTA                                   0.0          0.0        1.0         0.0           0.0
Associates                                   0                 0         0              0         0       Price/book                                  0.7          0.8        0.8         0.8           0.7
Pretax profit                              247                42       347            394       424       Dividend yield (%)                          7.1          6.9        7.1         7.1           7.5
Income tax                                 -70               -12      -104           -118      -127
NPAT                                       177                31       243            276       297       Comparable multiples (x)                                FY12     FY13F     FY14F         FY15F
Minorities                                   0                 0         0              0         0       ANZ                                     PE              11.5      11.4      11.1          10.6
Preferences                                -10               -10       -10            -10       -10                                               P/BV             5.8       5.9       6.1           6.4
Other                                        0                 0         0              0         0                                               P/NTA            2.0       1.9       1.8           1.7
Normalised NPAT                            167                21       232            266       287
Non cash items                              -8               -38         4              4         4       CBA                                     PE              14.1      13.9      13.4             12.7
Reported NPAT                              159               -17       236            270       291                                               P/BV             5.4       5.8       6.0              6.3
                                                                                                                                                  P/NTA            3.3       3.0       2.8              2.7
Shares (m)                                    261           278           336        339           339
                                                                                                          NAB                                     PE              10.6      10.3          9.7           9.1
Per share (A$)                                                                                                                                    P/BV             7.1       7.2          7.7           8.3
Reported EPS                              0.72             -0.07      0.76           0.85      0.91                                               P/NTA            1.8       1.8          1.7           1.6
Norm. EPS                                 0.76              0.08      0.74           0.84      0.90
Fully diluted norm EPS                    0.68              0.11      0.72           0.82      0.88       WBC                                     PE              12.7      12.4      12.0             11.5
Book value per share                     11.42              9.39      9.59           9.91     10.27                                               P/BV             6.3       6.5       6.8              7.1
DPS                                       0.54              0.52      0.54           0.53      0.57                                               P/NTA            2.5       2.3       2.2              2.1

Balance sheet (A$mn)                                                                                      BEN                                     PE              11.0      11.1      10.7             10.1
Year-end 31-May                         FY11               FY12     FY13F          FY14F    FY15F                                                 P/BV             0.8       0.8       0.8              0.8
Cash & equivalents                        433                671       692            728      761                                                P/NTA            1.4       1.4       1.3              1.3
Marketable securities                   5,147              5,689     5,876          6,173    6,454
Inter-bank lending                        132                120       124            130      136        Operating metrics
Deposits with central bank                  0                  0         0              0        0        Key metrics (%)                           FY11          FY12     FY13F     FY14F         FY15F
Other interest earning assets           7,359              8,115     8,381          8,805    9,206        P&L
Gross loans                            26,706             26,889    27,702         29,076   30,400        NIM                                        1.66          1.67      1.63         1.62         1.61
Less provisions                          -789               -857      -817           -830     -868        EPS                                         -15           -89       826           13            7
Net loans                              25,917             26,032    26,885         28,246   29,531        Preprovision earnings                        18            -1         1            5            5
Long-term investments                       0                  0         0              0        0        Earnings                                    -12           -87     1,007           14            8
Fixed assets                               31                 31        32             34       35        Cost/ income                                 44            46        46           46           45
Goodwill                                    0                  0         0              0        0
Other intangible assets                     0                  0         0              0        0        Balance sheet
Other non IEAs                            882              1,100     1,136          1,194    1,248        NPA/GLA                                    1.66          1.95      1.61         1.50         1.50
Total assets                           39,901             41,758    43,126         45,309   47,371        BDD/GLA                                    0.75          1.49      0.36         0.26         0.23
Customer deposits                      29,627             31,172    32,193         33,823   35,362        Loan growth                                7.07          0.44      3.28         5.06         4.55
Bank dep., CDs, deb                       169                178       184            193      202
Other IBL                               5,526              5,793     5,982          6,285    6,571        Capital
Total IBL                              35,321             37,142    38,359         40,301   42,135        Tier 1 ratio                               8.4           9.3       9.6       9.7              9.7
Non IBL                                 2,006              1,717     1,751          1,856    1,968        Total capital ratio                       11.4          12.5      12.8      12.7             12.6
Total liabilities                      37,327             38,859    40,111         42,157   44,104        ROE                                        6.4          (0.6)      8.0       8.8              9.1

Minority interests                           0                 0         0              0         0                          EPS growth                                   Return on Equity
Preferred stock                              0                 0         0              0         0
Common stock                             2,153             2,660     2,705          2,738     2,738         50                                              12
                                                                                                            30                           12.9      7.3                                       8.8        9.1
Retained earnings                          305               133       209            308       420                                                                                 8.0
                                                                                                            10                                                      6.4
Proposed dividends                           0                 0         0              0         0        (10)                                              7
Other equity & reserves                    115               106       101            106       110        (30)
Total SHE                                2,574             2,899     3,016          3,153     3,268        (50)
                                                                                                           (70)                                              2
                                                                                                           (90)
Total liabilities & equity              39,901            41,758    43,126         45,309   47,371        (110)     (89.4)                                                  (0.6)
                                                                                                                                                            (3)
                                                                                                                    FY12      FY13F      FY14F    FY15F             FY11    FY12 FY13F FY14F FY15F

                      NIM                                          Cost to income                                               Tier 1                                       BDD/GLA
  (%)                                               (%)                                                  (%)                                                 (%)
 2.0                                                                        46.3                                                  9.62     9.68     9.69            0.75
                                                    50      44.5   45.7              45.7   45.3                         9.27                               0.8
        1.66   1.67    1.63     1.62                40                                                   9.0      8.37                                      0.6
                                       1.61
                                                    30                                                                                                                              0.36
 1.5                                                                                                                                                        0.4                                 0.26
                                                    20                                                   7.0                                                                                             0.23
                                                    10                                                                                                      0.2

 1.0                                                 0                                                   5.0                                                0.0
        FY11   FY12   FY13F FY14F FY15F                    FY11    FY12    FY13F FY14F FY15F                      FY11   FY12 FY13F FY14F FY15F                     FY11    FY12    FY13F FY14F FY15


Source: Nomura estimates, company data




                                                                                                                                                                                                         37
Nomura | Australia Financials                                                                                                                                                            January 10, 2013


Fig. 84: AMP Financial summary
Income statement (A$mn)                                                                           Valuation metrics
Year-end 31 Dec                        FY10        FY11         FY12F        FY13F     FY14F      Preferred methodology
Aus. cont. wealth manag.                303          322           353          455       509     Residual income valuation
Aus. cont. wealth protect.              138          215           223          277       302     Risk free rate (%)                     4.5%
Australian mature                       140          153           151          146       139     Equity risk premium (%)                6.0%
New Zealand                              58           76            76           81        88     Beta (x)                                 1.1
AMP Fin. Services                       639          766           804          959     1,038     Cost of equity (%)                    11.0%
AMP Capital                              94           83            87           91        96     Valuation (A$mn)                      15,307
BU operating earnings                   733          849           891        1,049     1,134     Val. per share (A$)                     5.13
Group office costs                      -40          -57           -61          -57       -53
Total op. earnings                      693          792           830          992     1,081     Multiples at PT (x)                    FY10             FY11             FY12F         FY13F              FY14F
Investment income                       123          183           247          266       282     FD norm. P/E at PT                     13.7             19.7              19.9          14.7               13.1
Interest expense                        -72          -82           -96          -96       -96
Other underlying profit                  16           16             0            4         6     Multiples (x)
Underlying profit                       760          909           981        1,166     1,273     FD normalised P/E                      13.4             19.3           19.5       14.4       12.9
Market adj. & other                       8           20            46            0         0     Reported P/E                           13.4             15.4           19.1       14.2       12.7
NPAT before adj.                        768          929         1,027        1,166     1,273     P/B                                     3.6              2.1            2.0        1.9        1.8
Amort. of intangibles                     0          -75           -98          -89       -81     P/B (excl. goodwill)                    4.7              3.6            3.2        2.9        2.7
Other non-operating                       7         -166          -175          -32        -4     Dividend yield (%)                      5.9              5.7            4.9        5.7        6.1
Net profit                              775          688           755        1,045     1,187     Price/book                            #REF!            #REF!         #REF!      #REF!      #REF!
                                                                                                                                                 fy11f             FY12F      FY13F      FY14F
Shares (m)                             2,094      2,855          2,923       2,985      3,032     Comparable multiples (x)                                FY11         FY12F      FY13F      FY14F
Per share (A$)                                                                                    IAG                    P/E                              39.6           47.8       18.4       11.7
Reported EPS                      37.88c         32.85c        26.43c      35.74c     39.78c                             P/B                               2.2            2.3        2.2        2.0
Norm EPS                          37.88c         32.85c        26.43c      35.74c     39.78c                             P/B ex. GW                        3.6            3.6        3.4        3.0
Fully diluted norm EPS            37.66c         26.17c        25.93c      35.11c     39.18c
Book value per share                 1.40           2.39          2.57        2.69       2.83     QBE                           P/E                       19.2              15.5              9.1             8.6
DPS                               30.00c         29.00c        25.00c      29.00c     31.00c                                    P/B                        1.2               1.3              1.2             1.2
                                                                                                                                P/B ex. GW                 2.3               2.1              1.9             1.8

                                                                                                  SUN                           P/E                       30.0              19.1          13.1               11.0
                                                                                                                                P/B                        1.0               1.0           1.0                0.9
                                                                                                                                P/B ex. GW                 1.5               1.5           1.5                1.4



Balance sheet (A$mn)                                                                              Operating metrics (A$mn)
Year-end 31 Dec                     FY10          FY11          FY12F       FY13F      FY14F      Key metrics                            FY10             FY11             FY12F         FY13F              FY14F
Cash and deposits                   3,158         4,652          4,595       5,256      5,920     AFS                                    2010             2011               2012          2013               2014
Fixed interest                     21,364        30,733         36,302      39,071     42,119     Net cashflows                           789              -581             1,587         3,012              3,508
Equities                           32,130        32,223         37,730      40,554     43,670     AUM (A$bn)                             77.8            111.2             131.5         141.3              152.2
Other investments                  19,158        22,647         26,804      28,811     31,024     Net flow as % of AUM                    1.0              (0.5)              1.4           2.3                2.5
Total investments                  75,810        90,255        105,432     113,693    122,732
Investments in JCEs                    89           115            119         119        119     AMPC
Debtors/prepayments                   887         2,221          2,851       3,065      3,300     Net cashflows                           248            -5,165            -1,536         2,948              3,357
Banking loans                      10,202        11,254         12,360      13,597     14,920     AUM (A$bn)                             98.0            123.0             130.4         141.3              153.3
Fixed assets                          452           479            475         475        475     Net flow as % of AUM                    0.3              (3.9)             (1.2)          2.3                2.4
Goodwill                              702         2,815          2,809       2,809      2,809
Other intangible assets               217         1,532          1,480       1,407      1,343     CWP
Other Assets                          902         1,619          1,597       1,618      1,642     Total risk API                          808            1,640             1,797          1,969              2,158
Total assets                       89,261       110,290        127,123     136,783    147,340
Life insurance liabilities         17,762        24,399         24,484      24,143     23,854     Div. payout ratio (%)                  82.5            107.0             101.0          81.6               78.2
Separate account liab.             54,471        60,164         74,566      82,322     90,789     Growth in EPS (%)                                      (30.5)             (0.9)         35.4               11.6
Interest bearing liabilities       11,136        12,359         13,171      14,331     15,571
Other liabilities                   2,894         6,471          7,297       7,827      8,406     Capital
Total liabilities                  86,263       103,393        119,518     128,622    138,620     Solvency margin (%)                   149.7            132.3         143.7       151.1                    155.7
                                                                                                  ROE (%)                                26.7             11.5           10.8       13.9                     14.8
Minority interests                     60             68           106          118       131                EPS growth                                               Return on Equity
Common stock                        5,051          9,080         9,377        9,716     9,993
Retained earnings                     452            283           287          491       762 (%)                                                   (%)
                                                                                                                         35.4
Other reserves                     -2,565         -2,534        -2,164       -2,164    -2,164 40                                                    16                                              14.8
Other equity                       -2,113         -2,251        -1,877       -1,673    -1,402                                                                                          13.9
                                                                                              20                                  11.6              14
Total S/H equity                    2,938          6,829         7,500        8,043     8,590
                                                                                                                                                             11.5
                                                                                                 0                                                  12                      10.8
Total liabilities and equity       89,261       110,290        127,123     136,783    147,340                 -0.9
                                                                                                -20                                                 10

                                                                                                -40   -30.5                                          8
                                                                                                      FY11 FY12F FY13F FY14F                                 FY11          FY12F     FY13F      FY14F

             AFS Net Flows                                       AUM (AFS)                                 CWP Total Risk API                                      Solvency Margin Ratio

   4,000                                3,508
                               3,012            200                                                                                                                                                        155.7
                                                                                      152.2      2,500                                             160.0                                  151.1
   3,000                                                                     141.3                                                        2,158
                                                150                131.5                                                                           150.0                       143.7
                      1,587                            111.2                                                                    1,969
   2,000                                                                                         2,000               1,797                         140.0           132.3
                                                100                                                       1,640
   1,000                                                                                                                                           130.0
                                                 50                                              1,500                                             120.0
        0
                                                                                                                                                   110.0
  -1,000     -581                                0                                               1,000                                             100.0
             FY11 FY12F FY13F FY14F                    FY11       FY12F      FY13F    FY14F               FY11     FY12F FY13F FY14F                               FY11       FY12F      FY13F         FY14F

Source: Nomura estimates, company data




                                                                                                                                                                                                               38
Nomura | Australia Financials                                                                                                                                                         January 10, 2013


Fig. 85: IAG Financial summary
Income statement (A$mn)                                                                                 Valuation metrics
Year-end 30 Jun                         FY11      FY12           FY13F      FY14F            FY15F      Preferred methodology
GWP                                     8,050     8,992           9,560      9,855           10,377     Residual income valuation
Change in unearned                       -192      -415            -375       -259             -265     Risk free rate (%)                4.5%
GEP                                     7,858     8,577           9,185      9,596           10,112     Equity risk premium (%)           6.0%
Reinsurance ceded                        -620      -734            -849       -914             -963     Beta (x)                            0.9
Net premium earned                      7,238     7,843           8,336      8,682            9,149     Cost of equity (%)               10.0%
Net claims expense                     -5,089    -5,791          -5,294     -5,570           -5,878     Valuation (A$mn)                  9,702
Acquisition expense                      -633      -671            -687       -701             -736     Val. per share (A$)                4.67
Administration expense                 -1,345    -1,473          -1,571     -1,600           -1,646
Underwriting result                       171       -92             784        810              889     Multiples at PT (x)               FY11             FY12            FY13F      FY14F      FY15F
Income - insur. funds                     489       924             426        411              420     FD norm. P/E at PT                39.1             47.2             18.2       11.6       10.7
Trading result                            660       832           1,210      1,221            1,309
Other fee income                            6        12              16         17               17     Multiples (x)
Associates & JCEs                          -2        -4               5         15               22     FD normalised P/E                 39.6             47.8          18.4       11.7       10.8
Group & H/O costs                         -87      -153            -178       -123             -123     Reported P/E                      39.4             47.5          18.4       11.7       10.8
Income on S/H funds                       213        89             216        228              245     P/B                                2.2              2.3           2.2        2.0        1.9
Operating profit                          790       776           1,269      1,358            1,470     P/B (excl. goodwill)               3.6              3.6           3.4        3.0        2.7
Amort. of intangibles                    -176      -333             -35        -30              -30     Dividend yield (%)                 3.4              3.6           4.8        5.5        6.1
Other non-op. income                        0         0            -240          0                0     Price/book                       #REF!            #REF!        #REF!      #REF!      #REF!
Pre-tax profit                            614       443             994      1,328            1,440                                               fy11f            FY12F      FY13F      FY14F
Income tax                               -276      -178            -381       -407             -441     Comparable multiples (x)                           FY12        FY13F      FY14F      FY15F
Net profit after tax                      338       265             614        921              999     AMP                    P/E                         19.5          14.4       12.9       11.9
Minority interests                        -88       -58             -77        -78              -83                            P/B                          2.0           1.9        1.8        1.7
Reported NPAT                             250       207             537        842              916                            P/B ex. GW                   3.2           2.9        2.7        2.5

Shares (m)                             2,079     2,079            2,079      2,079            2,079     QBE                         P/E                    15.5              9.1        8.6           8.4
Per share (A$)                                                                                                                      P/B                     1.3              1.2        1.2           1.1
Reported EPS                          12.09c    10.01c           25.82c     40.52c       44.08c                                     P/B ex. GW              2.1              1.9        1.8           1.7
Norm EPS                              12.09c    10.01c           25.82c     40.52c       44.08c
Fully diluted norm EPS                12.03c     9.96c           25.82c     40.52c       44.08c         SUN                         P/E                    19.1             13.1       11.0       10.2
Book value per share                     2.12      2.09             2.18       2.34         2.51                                    P/B                     1.0              1.0        0.9        0.9
DPS                                   16.00c    17.00c           23.00c     26.00c       29.00c                                     P/B ex. GW              1.5              1.5        1.4        1.4



Balance sheet (A$mn)                                                                                    Operating metrics
Year-end 30 Jun                        FY11      FY12            FY13F      FY14F            FY15F      Key metrics (%)                   FY11             FY12            FY13F      FY14F      FY15F
Cash and deposits                        509       969            1,295      1,434            1,575     P&L                               2010             2011             2012       2013       2014
Fixed interest                        10,331    11,430           12,014     12,711           13,435     Net claims ratio                  70.3             73.8             63.5       64.2       64.2
Equities                                 846       753              787        847              909     Expense ratio                     27.3             27.3             27.1       26.5       26.0
Other investments                        716       770              806        865              925     Combined op. ratio                97.6            101.2             90.6       90.7       90.3
Total investments                     12,402    13,922           14,902     15,857           16,844     Insurance margin                   9.1             10.6             14.5       14.1       14.3
Investments in JCEs                      284       384              384        384              384     Income - insur. funds              5.9             10.4              4.4        4.1        3.9
Reinsurance recoveries                 3,904     3,928            4,119      4,341            4,572     Income - S/H funds                 6.2              2.5              5.9        5.9        5.9
Deferred acq. costs                      683       753              775        817              860     Dividend payout ratio            112.4            120.8             81.3       59.2       61.3
Debtors/prepayments                    3,184     3,622            3,730      3,933            4,141     Growth in GWP                                      11.7              6.3        3.1        5.3
Fixed assets                             284       274              274        274              274     Growth in NEP                                       8.4              6.3        4.2        5.4
Goodwill                               1,644     1,625            1,597      1,582            1,567     Growth in trading result                           11.7              6.3        3.1        5.3
Other intangible assets                  225       225              197        182              167     Growth in EPS                                     (17.2)           159.3       56.9        8.8
Other Assets                             313       399              411        433              456
Total assets                          22,923    25,132           26,389     27,802           29,266     Capital
Unearned premium liab.                 4,355     4,942            5,317      5,576            5,841     Solvency margin ratio            157.6            173.9            175.1      180.4      185.3
Outstanding claims liab.              10,783    11,709           12,279     12,941           13,629     Net prem./capital ratio          163.9            180.6            184.3      178.4      175.2
Interest bearing liabilities           1,377     1,659            1,659      1,659            1,659     Net tech. res./net prem.          95.0             99.2             97.9       99.1       99.0
Other liabilities                      1,828     2,298            2,410      2,540            2,675     ROE                                5.4              4.5             11.9       17.8       18.0
Total liabilities                     18,343    20,608           21,665     22,716           23,804
                                                                                                                       EPS Growth                                        Return on Equity
Minority interests                       163        181             200        220              240
Common stock                           5,353      5,353           5,353      5,353            5,353     (%)                                                (%)
                                                                                                                       159.3                                                          17.8     18.0
                                                                                                      160                                                 20
Retained earnings                       -795       -887            -787       -443              -88
Other reserves                          -141       -123             -43        -43              -43   130                                                 15                  11.9
Other equity                            -936     -1,010            -830       -486             -131   100
                                                                                                                               56.9                       10
Total S/H equity                       4,417      4,343           4,523      4,867            5,222    70
                                                                                                                                                                   4.5
                                                                                                       40                                                  5
                                                                                                                                         8.8
Total liabilities and equity          22,923    25,132           26,389     27,802           29,266    10                                                  0
                                                                                                      -20     -17.2                                               FY12      FY13F     FY14F    FY15F
                                                                                                              FY12    FY13F FY14F FY15F

        Combined Operating Ratio                            Insurance Margin                                          Growth in GWP                                Solvency Margin Ratio
  (%)                                            (%)                                                   (%)                                           (%)
                                                                                                               11.7
 110                                             20                                                    12                                            190
                                                                     14.5                                                                                                                       185.3
         101.2                                                              14.1      14.3             10
                                                 15                                                                                                                                    180.4
 100                                                      10.6                                          8                6.3                          180
                                                                                                                                          5.3                      173.9      175.1
                   90.6        90.7     90.3     10                                                     6
  90                                                                                                    4                          3.1
                                                   5                                                                                                  170
                                                                                                        2
  80                                               0                                                    0                                             160
         FY12     FY13F FY14F FY15F                       FY12      FY13F FY14F FY15F                          FY12     FY13F FY14F FY15F                          FY12      FY13F    FY14F     FY15F

Source: Nomura estimates, company data




                                                                                                                                                                                                       39
Nomura | Australia Financials                                                                                                                                                               January 10, 2013


Fig. 86: QBE Financial summary
Income statement (US$mn)                                                                                Valuation metrics
Year-end 31 Dec                         FY10       FY11        FY12F          FY13F        FY14F        Preferred methodology
GWP                                    13,629     18,291       18,318         19,572       20,387       Residual income valuation
Change in unearned                       -197       -451         -338           -538         -393       Risk free rate (%)                   4.5%
GEP                                    13,432     17,840       17,980         19,034       19,993       Equity risk premium (%)              6.0%
Reinsurance ceded                      -2,070     -2,481       -2,243         -2,184       -2,306       Beta (x)                               1.1
Net premium earned                     11,362     15,359       15,736         16,851       17,687       Cost of equity (%)                  11.1%
Net claims expense                     -6,807    -10,466      -10,385        -10,195      -10,656       Valuation (A$mn)                    17,154
Acquisition expense                    -1,759     -2,291       -2,547         -2,687       -2,821       Val. per share (A$)                  14.01
Administration expense                 -1,628     -2,108       -2,235         -2,317       -2,438
Underwriting result                     1,168        494          570          1,652        1,772       Multiples at PT (x)                     FY10           FY11             FY12F       FY13F      FY14F
Income - insur. funds                     535        591          719            599          617       FD norm. P/E at PT                      10.8           23.5              18.9        11.1       10.5
Trading result                          1,703      1,085        1,289          2,251        2,390
Associates & JCEs                           5          6            6              7            8       Multiples (x)
Group & H/O costs                        -222       -275         -316           -332         -332       FD normalised P/E                     8.8               19.2          15.5        9.1        8.6
Income - S/H funds                        124        185          394            343          377       Reported P/E                          8.5               18.2          14.4        8.5        8.0
Operating profit                        1,610      1,001        1,373          2,269        2,442       P/B                                   1.2                1.2           1.3        1.2        1.2
Amort. of intangibles                     -59       -133         -213           -170         -170       P/B (excl. goodwill)                  2.1                2.3           2.1        1.9        1.8
Pre-tax profit                          1,551        868        1,160          2,099        2,272       Dividend yield (%)                   12.1                7.4           5.1        7.2        8.0
Income tax                               -257       -149         -197           -420         -454       Price/book                          #REF!              #REF!        #REF!      #REF!      #REF!
Net profit after tax                    1,294        719          963          1,679        1,818                                                      fy11f            FY12F      FY13F      FY14F
Minority interests                        -16        -15          -14            -16          -17       Comparable multiples (x)                               FY11         FY12F      FY13F      FY14F
Reported NPAT                           1,278        704          949          1,663        1,801       AMP                    P/E                             19.3           19.5       14.4       12.9
                                                                                                                               P/B                              2.1            2.0        1.9        1.8
Shares (m)                              1,048     1,112           1,192       1,224           1,258                            P/B ex. GW                       3.6            3.2        2.9        2.7
Per share (US$)
Reported EPS                          123.72c    64.94c          82.38c     137.68c      145.12c        IAG                             P/E                     39.6             47.8        18.4       11.7
Norm EPS                              123.72c    64.94c          82.38c     137.68c      145.12c                                        P/B                      2.2              2.3         2.2        2.0
Fully diluted norm EPS                119.60c    61.30c          76.81c     128.37c      135.30c                                        P/B ex. GW               3.6              3.6         3.4        3.0
Book value per share                      9.84      9.34            9.47        9.78        10.07
DPS (A$)                              128.00c    87.00c          60.00c      84.00c       92.40c        SUN                             P/E                     30.0             19.1        13.1       11.0
                                                                                                                                        P/B                      1.0              1.0         1.0        0.9
                                                                                                                                        P/B ex. GW               1.5              1.5         1.5        1.4



Balance sheet (US$mn)                                                                                   Operating metrics
Year-end 31 Dec                         FY10      FY11           FY12F       FY13F        FY14F         Key metrics (%)                         FY10            FY11            FY12F       FY13F      FY14F
Cash and deposits                       8,669     8,615           8,821       9,281        9,838        P&L                                     2010            2011             2012        2013       2014
Fixed interest                         16,290    18,982          20,802      21,888       23,200        Net claims ratio                        59.9            68.1             66.0        60.5       60.2
Equities                                  279       326             693         774          844        Expense ratio                           29.8            28.6             30.4        29.7       29.7
Other investments                          66       101             111         124          136        Combined op. ratio                      89.7            96.8             96.4        90.2       90.0
Total investments                      25,304    28,024          30,427      32,067       34,018        Insurance margin                        15.0             7.1              8.2        13.4       13.5
Investments in JCEs                        77        55              59          59           59        Income - insur. funds                    3.3             3.3              3.7         3.0        3.0
Reinsurance recoveries                  3,219     3,693           3,663       3,696        3,773        Income - S/H funds                       1.6             2.1              4.0         3.0        3.0
Deferred acq. costs                     2,003     2,432           3,352       3,581        3,730        Dividend payout ratio                   96.7           197.6             80.0        60.6       63.2
Debtors/prepayments                     5,506     5,514           5,361       5,712        5,959        Growth in GWP                                           34.2              0.1         6.8        4.2
Fixed assets                              432       448             489         489          489        Growth in NEP                                           35.2              2.5         7.1        5.0
Goodwill                                4,573     4,666           4,624       4,539        4,454        Growth in trading result                                34.2              0.0         6.8        4.2
Other intangible assets                   814     1,399           1,527       1,442        1,357        Growth in EPS                                          (48.7)            25.3        67.1        5.4
Other Assets                              260       506             212         225          238
Total assets                           42,188    46,737          49,713      51,810       54,076        Capital
Unearned premium liab.                  6,788     8,069           8,658       9,196        9,589        Solvency margin ratio               161.8              151.0            158.2       165.8      171.7
Outstanding claims liab.               18,236    20,677          21,561      21,944       22,807        Net prem./capital ratio             110.2              147.9            139.5       140.8      139.6
Interest bearing liabilities            3,243     4,757           4,289       4,289        4,289        Net tech. res./net prem.            132.2              110.6            113.7       108.3      107.6
Other liabilities                       3,528     2,796           3,863       4,337        4,635        ROE                                  13.9                6.8              9.1        14.7       15.0
Total liabilities                      31,795    36,299          38,371      39,766       41,320
                                                                                                                         EPS growth                                        Return on Equity
Minority interests                         82        52              62          73           85
Hybrid stock                              132       132             132         132          132       (%)                                              (%)
                                                                                                                                 67.1                  20
Common stock                            7,972     8,939           9,694       9,729        9,769      70
                                                                                                                                                                                           14.7      15.0
Retained earnings                       3,735     3,093           3,279       3,934        4,595      50                                               15
                                                                                                                        25.3
Other reserves                         -1,528    -1,778          -1,825      -1,825       -1,825      30
                                                                                                                                          5.4                                    9.1
Other equity                            2,207     1,315           1,454       2,109        2,770      10                                               10         6.8
Total S/H equity                       10,311    10,386          11,280      11,970       12,671      -10
                                                                                                                                                        5
                                                                                                      -30
Total liabilities and equity           42,188    46,737          49,713      51,810       54,076
                                                                                                      -50       -48.7                                   0
                                                                                                                FY11 FY12F FY13F FY14F                          FY11            FY12F      FY13F     FY14F

        Combined Operating Ratio                             Insurance Margin                                           Growth in GWP                                   Solvency Margin Ratio
  (%)                                              (%)                                                  (%)
                                                                                       13.5                                                                 (%)
 100                                               15                        13.4                       40       34.2
          96.8     96.4                                                                                                                                     180
                                                                                                                                                                                                      171.7
  95                                                                  8.2                               30                                                  170                              165.8
                                                   10      7.1
                               90.2                                                                                                                                                158.2
                                         90.0                                                           20                                                  160
  90                                                5                                                                                                                   151.0
                                                                                                        10                          6.8
                                                                                                                                                4.2         150
                                                                                                                           0.1
  85                                                0                                                       0                                               140
         FY11     FY12F FY13F FY14F                        FY11     FY12F FY13F FY14F                            FY11     FY12F FY13F FY14F                             FY11      FY12F     FY13F    FY14F

Source: Nomura estimates, company data




                                                                                                                                                                                                             40
Nomura | Australia Financials                                                                                                                                                 January 10, 2013


Fig. 87: SUN financial summary
Income statement (A$mn)                                                                             Valuation metrics
Year-end 30 Jun                         FY11      FY12      FY13F          FY14F        FY15F       Preferred methodology
GWP                                     7,280     7,955      8,493          8,923        9,353      Residual income valuation
Change in unearned                       -197      -371       -260           -218         -218      Risk free rate (%)            4.5%
GEP                                     7,083     7,584      8,233          8,705        9,136      Equity risk premium (%)       6.0%
Reinsurance ceded                        -806      -780       -979         -1,072       -1,126      Beta (x)                        1.1
Net premium earned                      6,277     6,804      7,254          7,633        8,010      Cost of equity (%)           11.1%
Net claims expense                     -4,750    -5,396     -4,847         -4,988       -5,230      Valuation (A$mn)             15,038
Acquisition expense                      -912      -903       -958         -1,008       -1,058      Val. per share (A$)           11.69
Administration expense                   -711      -712       -764           -803         -842
Underwriting result                       -96      -207        686            834          880      Multiples at PT (x)           FY11            FY12            FY13F       FY14F      FY15F
Income - insur. funds                     508       718        391            363          343      FD norm. P/E at PT            32.9            21.0             14.4        12.1       11.2
Trading result                            412       511      1,077          1,197        1,223
Banking income                            470       444        474            520          565      Multiples (x)
Life insurance income                     223       323        219            238          258      FD normalised P/E             30.0             19.1         13.1       11.0       10.2
Other fee income                           18        13         14             15           15      Reported P/E                  30.0             18.8         12.7       10.6        9.8
Associates & JCEs                          16         9          8              8            8      P/B                            1.0              1.0          1.0        0.9        0.9
Group & H/O costs                         -60        -8        -22            -21          -20      P/B (excl. goodwill)           1.5              1.5          1.5        1.4        1.4
Income - S/H funds                        206       203        158            165          173      Dividend yield (%)             3.3              3.7          5.6        6.6        7.1
Operating profit                        1,285     1,495      1,928          2,121        2,222      Price/book                   #REF!            #REF!       #REF!      #REF!      #REF!
Amort. of intangibles                    -149      -127       -121           -115         -109                                            fy11f           FY12F      FY13F      FY14F
Other non-operating                      -434      -405       -275           -167         -125      Comparable multiples (x)                      FY12        FY13F      FY14F      FY15F
Pre-tax profit                            702       963      1,533          1,840        1,988      AMP                    P/E                    19.5          14.4       12.9       11.9
Income tax                               -245      -235       -441           -532         -577                             P/B                     2.0           1.9        1.8        1.7
Net profit after tax                      457       728      1,092          1,307        1,411                             P/B ex. GW              3.2           2.9        2.7        2.5
Minority interests                         -4        -4         -7             -8           -8
Reported NPAT                             453       724      1,085          1,299        1,403      IAG                     P/E                    47.8            18.4        11.7       10.8
                                                                                                                            P/B                     2.3             2.2         2.0        1.9
Shares (m)                             1,287     1,287          1,287       1,287           1,287                           P/B ex. GW              3.6             3.4         3.0        2.7
Per share (A$)
Reported EPS                          35.56c    56.68c      84.37c        100.98c     109.07c       QBE                     P/E                    15.5             9.1         8.6           8.4
Norm EPS                              35.56c    56.68c      84.37c        100.98c     109.07c                               P/B                     1.3             1.2         1.2           1.1
Fully diluted norm EPS                35.56c    55.78c      81.52c         97.00c     104.54c                               P/B ex. GW              2.1             1.9         1.8           1.7
Book value per share                    10.88     10.97       11.22          11.44       11.62
DPS                                   35.00c    40.00c      60.00c         70.00c      76.35c
Balance sheet (A$mn)                                                                             Operating metrics
Year-end 30 Jun                        FY11      FY12       FY13F          FY14F       FY15F     Key metrics (%)               FY11                FY12           FY13F       FY14F      FY15F
Cash and deposits                      1,271       866       2,111          2,837       3,173    P&L                           2010                2011            2012        2013       2014
Fixed interest                        19,903    20,991      22,177         23,257      24,351    Net claims ratio              75.7                79.3            66.8        65.3       65.3
Equities                               1,327     2,176       2,299          2,411       2,524    Expense ratio                 25.9                23.7            23.7        23.7       23.7
Other investments                      2,784     1,714       1,811          1,899       1,988    Combined op. ratio           101.5               103.0            90.5        89.1       89.0
Total investments                     25,285    25,747      28,398         30,404      32,037    Insurance margin               6.6                 7.5            14.9        15.7       15.3
Reinsurance recoveries                 4,660     3,656       3,844          4,022       4,205    Income - insur. Funds          6.2                 8.6             4.3         3.8        3.4
Deferred acq. costs                    1,138     1,511       1,603          1,685       1,766    Income - S/H funds             6.9                 6.7             5.0         5.0        5.0
Debtors/prepayments                    7,434     7,462       7,643          7,891       8,205    Dividend payout ratio         98.0                70.6            71.1        79.2       85.0
Banking loans                         48,639    49,180      49,448         50,561      52,339    Growth in GWP                                      9.3             6.8         5.1        4.8
Life insurance assets                    671       721         793            872         960    Growth in NEP                                      8.4             6.6         5.2        4.9
Fixed assets                             351       216         228            239         251    Growth in trading result                           9.3             6.8         5.1        4.8
Goodwill                               5,006     5,036       5,036          5,036       5,036    Growth in EPS                                     56.8            46.1        19.0        7.8
Other intangible assets                1,304     1,228       1,107            993         884
Other Assets                           1,000     1,305       1,348          1,395       1,447    Capital
Total assets                          95,488    96,062      99,450        103,098     107,130    Solvency margin ratio        167.1               161.1           164.3       168.8      173.1
Unearned premium liab.                 3,854     4,226       4,512          4,740       4,969    Net premium/capital ratio     44.8                48.2            50.2        51.9       53.6
Outstanding claims liab.              10,977    10,609      11,154         11,671      12,203    Net tech. res./net prem.     100.6               102.2           100.8       100.2       99.9
Banking deposits                      38,858    40,708      41,958         43,583      45,555    ROE                            3.3                 5.2             7.7         9.0        9.5
Life insurance liabilities             6,183     5,786       6,365          7,001       7,701
Interest bearing liabilities          15,917    15,505      15,768         15,994      16,234                 EPS growth                                     Return on Equity
Other liabilities                      5,681     5,101       5,239          5,371       5,506
Total liabilities                     81,470    81,935      84,995         88,360      92,168 (%)                                   (%)
                                                                                                    56.8                             12
                                                                                              60                                                                                        9.5
                                                                                                             46.1                    10                                       9.0
Minority interests                        17        17          18             18          17 50                                                                   7.7
Common stock                          12,662    12,672      12,685         12,699      12,714 40                                      8
Retained earnings                      1,306     1,493       1,807          2,076       2,286 30                                      6             5.2
                                                                                                                      19.0
Other reserves                            33       -55         -55            -55         -55 20                                      4
Other equity                           1,339     1,438       1,752          2,021       2,231 10                           7.8
                                                                                                                                      2
Total S/H equity                      14,001    14,110      14,437         14,720      14,945
                                                                                               0                                      0
                                                                                                    FY12 FY13F FY14F FY15F                         FY12           FY13F      FY14F     FY15F
Total liabilities and equity  95,488            96,062       99,450    103,098        107,130
       Combined Operating Ratio                            Insurance Margin                                 Growth in GWP                                 Solvency Margin Ratio
  (%)                                              (%)                                              (%)
        103.0                                                                                                                                (%)
 105                                               20                                               12                                        200
                                                                   14.9     15.7     15.3                 9.3
 100                                                                                                10                                                                         168.8    173.1
                                                   15                                                                                         180         161.1      164.3
                                                                                                     8              6.8
  95                                                      7.5                                                              5.1    4.8         160
                   90.5                            10                                                6
                               89.1     89.0                                                         4                                        140
  90                                                5
                                                                                                     2                                        120
  85                                                0                                                0                                        100
         FY12     FY13F FY14F FY15F                       FY12    FY13F FY14F FY15F                       FY12    FY13F FY14F FY15F                       FY12      FY13F     FY14F    FY15F

Source: Nomura estimates, company data




                                                                                                                                                                                               41
Nomura | Australia Financials                                                                                      January 10, 2013


Fig. 88: MQG earnings summary
 Year end 31 March (A$mn)                                  1H13        2H13F        1H14F           FY12       FY13F      FY14F
 Net interest income                                        644          641          624          1,333       1,285       1,224
 Fee & Commission income                                  1,667        1,803        1,971          3,364       3,470       4,091
 Net trading income                                         551          567          599          1,035       1,118       1,229
 Share of profit/losses from associates                      75           71           75            108         146         153
 Other income and charges                                   144          296          360          1,123         440         756
 Net operating income                                     3,081        3,378        3,628          6,963       6,459       7,453
 Employment expenses                                     (1,538)      (1,700)       (1,820)       (3,560)     (3,238)     (3,735)
 Brokerage expenses                                        (347)        (364)         (419)         (724)       (711)       (880)
 Occupancy expenses                                        (188)        (188)         (194)         (456)       (376)       (391)
 Non salary IT expenses                                    (130)        (129)         (133)         (290)       (259)       (266)
 Other operating expenses                                  (361)        (357)         (365)         (884)       (718)       (733)
 Total operating expenses                                (2,564)      (2,738)       (2,930)       (5,914)     (5,302)     (6,005)
 Operating profit before tax                                517          640           698         1,049       1,157       1,448
 Tax                                                       (156)        (160)         (175)         (287)       (316)       (362)
 Profit after ordinary activities after income tax          361          480           524           762         841       1,086
 Minorities                                                   0          (26)            1           (32)        (26)        (26)
 Profit attrIbutable to ordinary equity holders of MQG      361          454           524           730         815       1,060

 Diluted EPS (A$)                                          1.00         1.27          1.47          2.02        2.27        2.96
 Basic EPS (A$)                                            1.05         1.35          1.59          2.10        2.40        3.21

 Divisional Forecasts (A$mn)                               1H13        2H13F        1H14F           FY12       FY13F       FY14F
 Securities                                                 (64)         (38)          (6)          (194)       (102)         17
 Capital                                                     10          137          207             82         147         449
 Funds                                                      356          352          376            656         708         759
 FIC&C                                                      219          331          324            539         550         683
 CAF                                                        335          327          322            698         662         641
 RE Banking                                                   0            0            0            (36)          0           0
 Banking and FS                                             185          179          198            265         364         417
 Corporate                                                 (680)        (805)        (886)        (1,280)     (1,485)     (1,879)
 Total                                                      361          483          535            730         844       1,086
Source: Nomura estimates. Shaded regions are forecasts




Fig. 89: CPU earnings summary
 Year end 30 June (US$mn)                                  2H12      1H13F       2H13F           FY12         FY13F        FY14F
 Operating revenue                                       1,030.6    1,037.6     1,060.4       1,802.6       2,098.0      2,297.9
 Interest income                                             2.1        2.1         2.1            4.6           4.2          4.2
 Other revenue                                               4.6        4.7         4.9          11.6           9.6         10.2
 Total revenue                                           1,037.3    1,044.5     1,067.4       1,818.7       2,111.9      2,312.3

 Total operating expenses                                 (790.2)    (788.8)     (810.3)      (1,360.1)     (1,599.2)   (1,723.0)
 Equity-accounted profit                                     0.3        0.3         0.3            0.3           0.5         0.5
 Mgmt EBITDA                                               247.4      255.9       257.3          459.0         513.2       589.8
 Depreciation/amortisation                                 (22.1)     (27.2)      (27.4)         (42.2)        (54.7)      (57.9)
 Interest expense                                          (29.9)     (29.3)      (28.0)         (48.3)        (57.3)      (52.2)
 Operating profit before tax                               195.4      199.4       201.9          368.5         401.3       479.7
 Tax                                                       (49.1)     (49.8)      (50.4)         (92.5)       (100.2)     (119.8)
 Profit after tax                                          146.3      149.6       151.5          276.0         301.1       359.9
 Minorities                                                 (1.8)      (1.8)       (1.8)          (3.2)         (3.5)       (3.5)
 Management NPAT                                           144.5      147.9       149.7          272.8         297.6       356.4

 Diluted EPS (US$) (Mgmt EPS)                              0.26       0.27        0.27           0.49          0.53         0.64
 Basic EPS (US$)                                           0.26       0.27        0.27           0.49          0.54         0.64
Source: Nomura estimates. Shaded regions are forecasts




                                                                                                                               42
Nomura | Australia Financials                                                                                          January 10, 2013


Fig. 90: ASX earnings summary
 Year end 30 June (A$mn)                                                 2H12      1H13F    2H13F      FY12     FY13F         FY14F
 Operating revenue
 - Listings                                                              64.8       68.8     70.5     133.4     139.3          149.0
 - Cash market                                                           57.6       52.1     52.1     124.5     104.2          110.4
 - Derivatives                                                           92.1       94.4     93.9     188.7     188.3          193.1
 - Information Services                                                  32.3       33.9     34.9      66.9      68.8           74.8
 - Technical Services                                                    22.7       24.8     26.0      45.3      50.8           54.5
 - Austraclear Services                                                  18.2       19.0     19.8      36.0      38.9           42.0
 - Other revenue                                                          7.6        7.9      7.5      15.6      15.3           15.1
 Total revenue                                                          295.3      300.8    304.8     610.4     605.5          638.8


 Total operating expenses                                               (70.7)     (72.5)   (74.1)   (141.1)    (146.6)       (152.1)

 EBITDA                                                                 224.6      228.3    230.6     469.3     458.9          486.7
 Depreciation/amortisation                                              (14.7)     (14.6)   (15.0)    (27.6)    (29.6)         (30.1)
 EBIT                                                                   209.9      213.6    215.7     441.7     429.3          456.6

 Net interest income (expense)                                           18.6       19.8     19.6      40.5      39.4           38.4
 Dividend revenue                                                         6.0        6.3      6.6       9.3      12.9           14.2

 Operating profit before tax                                            234.5      239.7    241.8     491.5      481.6         509.3
 Tax                                                                    (69.0)     (70.7)   (71.3)   (145.3)    (142.1)       (150.2)
 Underlying NPAT                                                        165.5      169.0    170.5     346.2      339.5         359.0

 Diluted EPS (A$) (Mgmt EPS)                                             0.94      0.963    0.969      1.98      1.93           2.03
 Basic EPS (A$)                                                          0.94       0.96     0.97      1.98      1.93           2.03
 DPS (A$)                                                                0.93       0.87     0.87      1.86      1.74           1.83
Source: Nomura estimates, company data. Shaded regions are forecasts


Fig. 91: CGF earnings summary
 Year end 30 June (A$mn)                                               2H12      1H13F      2H13F     FY12     FY13F         FY14F
 Operating revenue                                                     272.5     265.6      275.6     527.5     541.2         557.2
 Total operating expenses                                              (89.5)    (84.8)     (81.5)   (181.0)   (166.2)       (162.3)

 EBITDA                                                                183.0     180.8      194.1    346.5     374.9          395.0
 Depreciation/amortisation                                              (4.6)    (16.0)     (17.7)     (8.2)    (33.7)        (40.3)
 EBIT                                                                  178.4     164.8      176.4    338.3     341.2          354.6
 Net interest income (expense)                                          (2.3)     (1.0)      (1.0)     (3.3)     (2.0)          (2.0)
 Operating profit before tax                                           176.1     163.8      175.4    335.0     339.2          352.6
 Tax                                                                   (36.0)    (34.6)     (36.6)    (68.2)    (71.3)        (73.6)
 Underlying NPAT                                                       140.1     129.1      138.8    266.8     268.0          279.0

 Diluted EPS (cents)                                                    26.0      24.3       26.0     50.0      50.3           52.9
 Basic EPS (cents)                                                      26.3      24.8       26.5     51.6      51.2           54.0
 DPS (cents)                                                            10.5       7.8                18.0      16.1           16.9

 Divisional forecasts
 Life division
 Cash spread earnings (revenue)                                        203.3     196.4      204.0    392.0     400.3          411.1
 Normalised capital growth                                              21.6      21.9       22.7     43.7      44.7           47.8
 Total norm revenue (Norm COE)                                         224.9     218.3      226.7    435.7     445.0          458.9
 Normalised EBIT                                                       191.1     183.2      192.0    367.7     375.2          387.0

 Funds management division
 Revenue                                                                43.3      42.9       44.3     83.0      87.2           88.8
 Expenses                                                              (31.8)    (32.1)     (32.1)    (62.0)    (64.2)        (63.9)
 Normalised EBIT                                                        11.5      10.7       12.2     21.0      22.9           24.9
Source: Nomura estimates, company data




                                                                                                                                   43
Nomura | Australia Financials                                                                January 10, 2013


Fig. 92: IFL earnings summary
 Year end 30 June (A$mn)                   2H12     1H13F     2H13F       FY12       FY13F          FY14F
 Operating revenue                         144.7     143.1     152.1     286.2       295.3           312.8
 Other revenue                              33.0      35.1       36.6      66.8       71.8            73.6
 Total revenue                            177.7     178.3      188.8     353.0       367.0           386.4

 Total operating expenses                 (114.3)   (112.3)   (115.3)    (227.1)    (227.6)         (232.4)
 Equity-accounted profits                     3.9      4.7       4.8        8.2         9.6           10.2
 EBITDA                                     67.3      70.7      78.3     134.1       149.0           164.1
 Depreciation/amortisation                  (2.2)     (2.2)     (2.3)      (4.4)       (4.5)          (4.8)
 EBIT                                       65.1      68.5      76.0     129.7       144.5           159.3
 Net interest income (expense)                1.3      0.8       1.2        4.4         2.0            3.3
 Operating profit before tax                66.4      69.4      77.1     134.1       146.5           162.5
 Tax                                       (71.2)    (17.3)    (19.3)     (87.7)      (36.6)         (40.6)
 Minority interests                         (0.3)     (0.3)     (0.3)      (0.3)       (0.7)           (0.7)
 Non-cash items                             52.8      (2.9)     (2.9)      50.3        (5.8)           (5.8)
 Underlying NPAT                            47.7      48.8      54.6       96.4      103.4           115.4

 Diluted EPS (cents)                        20.4      20.9      23.4       41.4       44.3            49.5
 Basic EPS (cents)                          20.5      21.0      23.5       41.6       44.6            49.8
 DPS (cents)                                18.0      16.7      18.7       37.0       35.5            39.6
 Divisional revenue forecasts
 Platform administration                    81.3      83.7      90.2     167.5       173.9           181.7
 Investment management                      40.5      38.2      39.2       80.6       77.4            82.7
 Advice/distribution                        44.6      41.7      44.5       79.5       86.2            91.6
 Trustee                                    10.4      11.2      11.2       21.2       22.3            22.8
 Corporate                                  0.9       3.5        3.7       4.1         7.2             7.6
 Total                                    177.7     178.3      188.8     352.9       367.0           386.4
Source: Nomura estimates, company data



Fig. 93: PPT earnings summary
 Year end 30 June (A$mn)                  2H12      1H13F     2H13F      FY12      FY13F           FY14F
 Total revenue                           196.6      178.3     187.9     399.0      366.2           366.7

 Total operating expenses                (143.3)    (125.4)   (123.0)   (287.5)    (248.4)        (232.8)
 EBITDA                                   53.3       52.9      64.9     111.5      117.9           133.9
 Depreciation/amortisation                 (7.3)      (6.9)     (7.3)    (14.8)     (14.2)          (14.5)
 EBIT                                     46.0       46.0      57.6      96.7      103.7           119.4
 Net interest income (expense)             (1.2)      (1.3)     (1.3)     (2.5)      (2.5)           (3.2)
 Operating profit before tax              44.8       44.8      56.4      94.2      101.2           116.2
 Tax                                      (11.9)     (13.4)    (16.9)    (26.6)     (30.3)          (34.9)
 Underlying NPAT                          32.9       31.3      39.5      67.6       70.8            81.4


 Diluted EPS (cents)                      81.9       76.1      95.6     162.8      171.8           196.0
 Basic EPS (cents)                        86.6       82.1     103.1     174.6      185.2           211.2
 DPS (cents)                              40.0       40.5      75.3      90.0      115.8           185.8

 Divisional forecasts
 Revenue
 Perpetual Investments                    91.4       90.5      98.1     190.5      188.6           204.7
 Private Wealth                           57.9       57.7      58.6     114.7      116.2           102.8
 Corporate Trust                          25.9       26.3      26.8      52.0       53.1            48.8
 Group and Support Services                 3.3        3.9       4.4       7.1        8.3           10.4
 Total                                   178.5      178.3     187.9     364.3      366.2           366.7
Source: Nomura estimates, company data




                                                                                                           44
Nomura | Australia Financials                                                               January 10, 2013


Fig. 94: PTM earnings summary
 Year end 30 June (A$mn)                 2H12       1H13F      2H13F      FY12      FY13F          FY14F
 Total revenue                           111.4      109.2      122.0      226.7     231.1          264.5

 Total operating expenses                (32.5)     (26.2)     (33.2)     (58.6)    (59.4)          (62.9)
 EBITDA                                   78.8       82.9       88.8      168.1     171.8          201.6
 Depreciation/amortisation                (0.3)      (0.3)      (0.3)      (0.6)     (0.6)           (0.6)
 EBIT                                     78.5       82.7       88.5      167.6     171.2          201.0
 Net interest income (expense)             5.7        6.2        6.0       11.9      12.2           13.2
 Operating profit before tax              84.2       88.8       94.5      179.4     183.3          214.2
 Tax                                     (25.0)     (26.7)     (28.4)     (53.1)    (55.0)          (64.3)
 Underlying NPAT                          59.2       62.2       66.2      126.4     128.3          149.9


 Diluted EPS (cents)                     10.6       10.9       11.6       22.5       22.5           26.2
 Basic EPS (cents)                       10.6       11.1       11.8       22.5       22.9           26.7
 DPS (cents)                             13.0        8.2       12.7       21.0       20.9           24.2
Source: Nomura estimates, company data



Fig. 95: HGG earnings summary
 Year end 31 December (£mn)                1H12      2H12F      1H13F       FY11    FY12F          FY13F
 Total revenue                            224.3      217.6      246.4      476.8    441.9          500.2

 Total operating expenses                (140.4)     (140.7)   (154.8)    (300.7)   (281.1)       (313.2)
 EBITDA                                    83.9       76.9       91.6      176.1    160.8          187.1
 Depreciation/amortisation                  (1.4)      (1.6)      (1.6)     (3.0)     (3.0)          (3.2)
 EBIT                                      82.5       75.3       90.0      173.1    157.8          183.8
 Net interest income (expense)              (3.5)      (3.2)      (2.5)    (13.9)     (6.7)          (4.7)
 Underlying profit before tax              79.0       72.1       87.5      159.2    151.1          179.1


 Underlying tax                             (8.0)     (10.8)     (18.8)    (33.6)    (18.8)         (38.5)
 Minority interests                          0.0        0.0        0.0       0.1       0.0            0.0
 Underlying NPAT                           71.0       61.3       68.7      125.7    132.3          140.6


 Other charges                             (33.5)     (32.0)     (28.4)    (77.0)    (65.5)         (56.8)
 Non-recurring items                         0.0        0.0        0.0     (69.2)      0.0            0.0
 Tax                                         8.9        9.0        8.0      54.5     17.9           15.9
 Reported NPAT                             46.4       38.2       48.2       34.0     84.6           99.7


 Diluted EPS (pence)                        6.6        5.7        6.3      12.5      12.3           13.0
 Basic EPS (pence)                          6.9        5.9        6.6      13.3      12.8           13.6
 DPS (pence)                                2.1        4.8        2.3       7.0       6.9            8.0
Source: Nomura estimates, company data




                                                                                                        45
Nomura | Australia Financials                                                                                                               January 10, 2013


Fig. 96: Bank valuations
 Company                Ticker      Rating     Old TP      New TP            Valuation     Valuation methodology and risks
                                                                       DCF/GG          PE
 ANZ                  ANZ AU       Neutral      26.00        26.50      26.36      26.24 Our valuation for ANZ is broadly based on the midpoint of our
                                                                                          DCF valuation and SOTP valuation
                                                                                          Risks: Margins remaining high for ANZ, Trading income
                                                                                          maintained at currently elevated levels, continued ability to
                                                                                          repatriate deposits from Asian operations. Key downside
                                                                                          risks: Regulatory changes in Asian jurisdictions, with possibly
                                                                                          tougher capital requirements, tougher competition in Asia from
                                                                                          global peers chasing higher growth markets and further
                                                                                          appreciation in the AUD currency, which would impact
                                                                                          overseas profit contributions.


 Commonwealth         CBA AU       Reduce       53.50        55.00         58.66   52.02   Our 12-month price target is based broadly on the mid-point of
 Bank                                                                                      our DCF and SOTP-based valuations.
                                                                                           Risks: Key upside risks include: 1) benefits from the repricing
                                                                                           of mortgages outside of cash rate changes, given overweight
                                                                                           retail lending book and 2) significant benefits in costs from
                                                                                           investment in IT platforms. Key downside risks include 1)
                                                                                           material changes in the regulatory environment for retail
                                                                                           banks due to government intervention, and higher funding
                                                                                           costs from greater competition for retail deposits.


 National Aust.       NAB AU           Buy      30.00        31.00         30.99   32.56   Our 12-month price target is based broadly on the midpoint of
 Bank                                                                                      our SOTP based and DCF valuations. Our methodology is
                                                                                           unchanged.
                                                                                           Risks: Key upside risk is from a better and earlier than
                                                                                           expected run-off in the SGA portfolio, while the key downside
                                                                                           risk is from a deterioration in the domestic SME portfolio and
                                                                                           further material losses in the UK.

 Westpac             WBC AU        Neutral      27.50        27.50         28.37   26.49   Our 12-month price target is based broadly on the mid-point of
 Banking Corp                                                                              our DCF and P/E based valuations.
                                                                                           Risks: Key downside risk is from a material deterioration in
                                                                                           the credit quality in the SGB portfolio, market share losses in
                                                                                           the mortgages portfolio due to higher interest rates versus
                                                                                           peers, and material changes in the regulatory environment for
                                                                                           retail banks due to government intervention.


 Bank of QLD         BOQ AU        Neutral      7.40         8.00          7.98            Our 12-month price target is based broadly on our DCF
                                                                                           valuation.
                                                                                           Risks: Upside risks for BOQ include significant improvement
                                                                                           in wholesale funding market conditions and improving health
                                                                                           of the securitisation market, which would enable it to diversify
                                                                                           funding sources. Key downside risks include further significant
                                                                                           losses in commercial loans.

 Bendigo & Adel.      BEN AU       Neutral      9.00         9.50          9.52    9.57    Our 12-month price target is based broadly on our DCF and
 Bank                                                                                      P/E based valuations.
                                                                                           Risks: Downside risks include significant losses on
                                                                                           commercial property and the Great Southern portfolio.
 Macquarie Bank MQG AU             Neutral      31.00        35.00         34.79           Our 12 month target price is based on our DCF valuation.
                                                                                           Risks: Loss of key staff and inability to compete with peers on
                                                                                           compensation. Loss of marketshare in key markets.
                                                                                           Prolonged deterioration in equity markets leading to losses in
                                                                                           equity investments.


Source: Nomura estimates, company data, IRESS, FactSet estimates for AMP




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Nomura | Australia Financials                                                                                                            January 10, 2013


Fig. 97: Insurance valuations
 Company                            Ticker     Rating    Old TP New TP Valuation methodology and risks
 AMP Limited                       AMP AU Neutral         5.00   5.15 We value AMP using our standard residual income methodology. Our
                                                                       valuation comprises AMP's estimated one-year forward book value per
                                                                       share (excluding goodwill) plus the present value of residual returns earned
                                                                       thereafter. Residual returns are calculated as the difference between
                                                                       forecast net income and an annual equity charge calculated based on
                                                                       assumed cost of equity. Beyond our explicit net income forecasts, we
                                                                       assume a gradual (10-year) normalisation in returns to an assumed long-
                                                                       run RoE (ex-goodwill) of 18%. We estimate the cost of equity to be 11%
                                                                       based on historic and current market data. Our target price is A$5.15.
                                                                           Risks: Risks that may impact on our target price and rating include, but
                                                                           are not confined to: Favourable/ adverse movements in equity markets and
                                                                           net flows; Competition in the retirement market (particularly from industry
                                                                           funds); Favourable/ adverse changes in regulatory capital requirements;
                                                                           Favourable/ adverse regulatory changes to the superannuation system.

 Insurance Australia Group         IAG AU      Neutral    4.70     4.70    We value IAG using our standard residual income methodology. Our
                                                                           valuation comprises IAG's estimated one-year forward book value per
                                                                           share (excluding goodwill) plus the present value of residual returns earned
                                                                           thereafter. Residual returns are calculated as the difference between
                                                                           forecast net income and an annual equity charge calculated based on
                                                                           assumed cost of equity. Beyond our explicit net income forecasts, we
                                                                           assume a gradual (10-year) normalisation in returns to an assumed long-
                                                                           run RoE (ex-goodwill) of 15%. We estimate the cost of equity to be 10%
                                                                           based on historic and current market data. Our target price is A$4.70

                                                                           Risks: Risks include, but are not confined to: A significantly more
                                                                           adverse/benign than expected catastrophe claims environment; Lower than
                                                                           expected premium rate increases; Faster than expected growth in earnings
                                                                           from IAG’s Asian businesses; A quicker, and more significant turnaround
                                                                           of the Australia Intermediated business; A faster than anticipated decline in
                                                                           investment yields; Higher than expected reinsurance costs; Adverse
                                                                           regulatory changes.
 QBE Insurance Group               QBE AU       Buy      14.00     14.00   We value QBE using our standard residual income methodology. Our
                                                                           valuation comprises QBE's estimated one-year forward book value per
                                                                           share (excluding goodwill) plus the present value of residual returns earned
                                                                           thereafter. Residual returns are calculated as the difference between
                                                                           forecast net income and an annual equity charge calculated based on
                                                                           assumed cost of equity. Beyond our explicit net income forecasts, we
                                                                           assume a gradual (10-year) normalisation in returns to an assumed long-
                                                                           run RoE (ex-goodwill) of 15%. We estimate the cost of equity to be 11.1%
                                                                           based on historic and current market data. Our target price is A$14.00.

                                                                           Risks: Risks that may impact on our target price and rating include, but
                                                                           are not confined to: Capital adequacy relative to minimum requirements;
                                                                           Pressure from ratings agencies; Significantly higher reserve strengthening
                                                                           required than we currently forecast; Significantly higher catastrophe claims
                                                                           environment than we forecast; Continued strengthening of the AUD against
                                                                           the USD, GBP and EUR; Higher than expected reinsurance costs; Adverse
                                                                           regulatory changes.

 Suncorp Group                     SUN AU       Buy      11.70     11.70   We value SUN using our standard residual income methodology. Our
                                                                           valuation comprises SUN's estimated one-year forward book value per
                                                                           share (excluding goodwill) plus the present value of residual returns earned
                                                                           thereafter. Residual returns are calculated as the difference between
                                                                           forecast net income and an annual equity charge calculated based on
                                                                           assumed cost of equity. Beyond our explicit net income forecasts, we
                                                                           assume a gradual (10-year) normalisation in returns to an assumed long-
                                                                           run RoE (ex-goodwill) of 15%. We estimate the cost of equity to be 11.1%
                                                                           based on historic and current market data. Our target price is A$11.70.

                                                                           Risks: Risks include, but are not confined to: A significantly more
                                                                           adverse/benign than expected catastrophe claims environment; Higher
                                                                           than expected credit losses within the banking operations; Higher than
                                                                           expected claims and lapses within SUN’s life business; Lower than
                                                                           expected premium rate increases within SUN’s GI business; A faster than
                                                                           anticipated decline in investment yields; Higher than expected reinsurance
                                                                           costs; Adverse regulatory changes.

Source: Nomura estimates, company data, IRESS, FactSet




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Fig. 98: Diversified Financials valuations
 Company                Ticker Rating Old TP       New TP   Valuation        Valuation methodology and risks
                                                             DCF        PE
 Macquarie Bank MQG AU Neutral             31.00   35.00    34.80            Our 12 month target price is based broadly on our DCF valuation
                                                                             and MQG's implied valuation using the Gordon Growth model. We
                                                                             assume sustainable RoTE of 13% which implied P/NTA of 1.15x.
                                                                             Risks: Continued loss of key staff and inability to compete with
                                                                             peers on staff. Continued loss of marketshare in key markets.
                                                                             Prolonged deterioration in equity markets leading to losses in
                                                                             equity investments. Larger than expected impact of Basel III
                                                                             implementation, which may lead to higher capital requirements.

 ASX                  ASX AU Neutral       31.00   31.00    30.76            Our 12-month target price is based on our DCF valuation. Our DCF
                                                                             valuation assumes a cost of equity of 12.15% (beta of 1.15, risk-
                                                                             free rate of 5.25%, equity risk premium of 6%) and terminal growth
                                                                             rate of 2.5%.
                                                                             Risks: Key upside risks include: 1) A more immediate recovery in
                                                                             equity markets trading in FY12. 2) A stronger-than-expected take-
                                                                             up of ASX's product initiatives such as PureMatch. 3)
                                                                             Consolidation of exchanges, particularly involving ASX as a target.
                                                                             Key downside risks include: 1) A sustained downturn in equities
                                                                             trading markets. 2) Competitors such as Chi-X being more
                                                                             successful than expected. 3) Entry of further competitors into
                                                                             equities trading and clearing.

 Computershare       CPU AU      Neutral   8.50     9.50     9.39   9.37 Our 12-month target price is based broadly on our P/E relative and
 Ltd                                                                     DCF valuations. Our DCF valuation assumes a cost of equity of
                                                                         12.45% (beta of 1.2x, risk-free rate of 5.25%, equity risk premium
                                                                         of 6%) and terminal growth rate of 2.5%.
                                                                         Risks: Key upside risks include: a more immediate and stronger
                                                                         recovery in corporate activity in key markets, significantly accretive
                                                                         acquisitions of meaningful size, and a higher inflationary
                                                                         environment leading to increased interest income on margin
                                                                         balances.

Source: Nomura research, company data




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Nomura | Australia Financials                                                                                                        January 10, 2013


Fig. 99: Wealth Management valuations
 Company              Ticker    Rating    Old TP   New TP   DCF valuation Valuation methodology and risks
 Challenger          CGF AU      Buy       4.90     4.90        4.97      Our 12-month target price of A$4.90 is based on our DCF valuation.
                                                                          Our valuation assumes a WACC of 11.8% with a cost of equity of
                                                                          12.45% (beta of 1.20, risk-free rate of 5.25%, equity risk premium of
                                                                          6%), and a terminal growth rate of 2.5%
                                                                          Risks: Downside risks to our recommendation include: 1)
                                                                          Competitors engaging in price competition in annuities, thereby
                                                                          impacting CGF's net margin on its book. 2) Continued weakness in
                                                                          financial markets, which would impact on CGF's FUM in its
                                                                          investment management business.
 IOOF Holdings       IFL AU     Neutral    6.40     7.00         6.95       Our 12-month price target of A$7.00 is based on our DCF valuation.
                                                                            Our DCF valuation assumes a WACC of 11.1% with a cost of equity
                                                                            of 12.45% (beta of 1.2, risk-free rate of 5.25%, equity risk premium
                                                                            of 6%) and a terminal growth rate of 2.5%.
                                                                            Risks: Upside risks: 1) Consolidation activity in the sector, either as
                                                                            acquirer or as target. 2) A significant shift in asset allocation earlier
                                                                            than expected, improving margins. 3) Greater synergies than
                                                                            expected from DKN acquisition. Downside risks: 1) Weakness in
                                                                            markets causing funds outflows. 2) Integration of platforms may
                                                                            alienate clients, leading to funds outflows. 3) Risks involved in
                                                                            making further acquisitions, by overpaying or failing to integrate
                                                                            businesses.

 Perpetual           PPT AU     Neutral   27.00    33.00        33.06       Our 12-month target price is based on our DCF valuation. Our
                                                                            valuation assumes a WACC of 11.1%, with a cost of equity of
                                                                            12.45% (beta of 1.20, risk-free rate of 5.25%, equity risk premium of
                                                                            6%) and a terminal growth rate of 2.5%.
                                                                            Risks: Upside risks include: 1) Reversal of negative funds flows, as
                                                                            investors get more comfortable with the investment team. 2) Cost
                                                                            initiatives are more successful than guided, resulting in greater
                                                                            savings. 3) A stronger and earlier recovery in markets than
                                                                            anticipated, resulting in higher FUM balances and thus higher
                                                                            revenues. Downside risks include: 1) Negative funds flow
                                                                            deteriorates. 2) Investment performance in the Investments
                                                                            business declines.

 Platinum Asset      PTM AU     Neutral    4.40     4.55         4.55       Our 12-month target price is based on our DCF valuation. Our DCF
 Management                                                                 valuation assumes a WACC of 11.8%, with a cost of equity of
                                                                            12.45% (beta of 1.20, risk-free rate of 5.25% and equity risk
                                                                            premium of 6%), and a terminal growth rate of 3%.
                                                                            Risks: Key upside risks include: 1) A sustained rally in global
                                                                            markets, leading to continued uplift in FUM; 2) Significantly
                                                                            improved performance, thus boosting inflows into PTM funds. Key
                                                                            downside risks include: 1) A prolonged downturn in financial
                                                                            markets; 2) Withdrawal of mandates from institutional investors,
                                                                            reducing performance fees. 3) Key man risk - if main fund managers
                                                                            depart the company.

 Henderson          HGG AU Neutral         1.75     2.25         2.27       Our 12-month target price is based on our DCF valuation of £1.45,
 Group                                                                      translated to A$2.26 at the forward rate of AUD/GBP0.65. Our DCF
                                                                            valuation assumes a WACC of 11.8% (beta of 1.20, risk-free rate of
                                                                            5.25%, equity risk premium of 6%), and a terminal growth rate of
                                                                            2.5%.
                                                                            Risks: Upside risks include: 1) A market recovery in the UK/Europe
                                                                            occuring earlier than anticipated, resulting in higher AUM and
                                                                            inflows. 2) Integration of Gartmore generating better synergies than
                                                                            expected. 3) Significant boost from distribution capabilities acquired
                                                                            from Gartmore. Downside risks include: 1) Prolonged weakness in
                                                                            European markets, impacting AUM. 2) Integration of Gartmore not
                                                                            proceeding successfullly, resulting in key staff departures or
                                                                            outflows.


Source: Nomura research, company data




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                                            50
Nomura | Australia Financials                                                                                                     January 10, 2013



Appendix A-1
Analyst Certification
We, Victor German, Anthony Hoo and Toby Langley, hereby certify (1) that the views expressed in this Research report
accurately reflect our personal views about any or all of the subject securities or issuers referred to in this Research report, (2)
no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in
this Research report and (3) no part of our compensation is tied to any specific investment banking transactions performed by
Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.


Issuer Specific Regulatory Disclosures
The term "Nomura Group" used herein refers to Nomura Holdings, Inc. or any of its affiliates or subsidiaries, and may refer to one or more
Nomura Group companies.

Materially mentioned issuers

Issuer                      Ticker               Price         Price date     Stock rating   Sector rating   Previous rating    Date of change
ASX Ltd                     ASX AU               AUD 32.34     10-Jan-2013    Neutral        Not rated       Not Rated          15-Jul-2011
Challenger                  CGF AU               AUD 3.68      10-Jan-2013    Buy            Not rated       Not Rated          17-Oct-2011
Insurance Australia Group   IAG AU               AUD 4.86      10-Jan-2013    Neutral        Not rated       Not Rated          10-Dec-2012
QBE Insurance Group         QBE AU               AUD 11.79     10-Jan-2013    Buy            Not rated       Not Rated          10-Dec-2012
Suncorp Group               SUN AU               AUD 10.78     10-Jan-2013    Buy            Not rated       Not Rated          10-Dec-2012
Westpac Banking Corp        WBC AU               AUD 26.60     10-Jan-2013    Neutral        Not rated       Buy                10-Oct-2012




Subject issuer                    Ticker                   Price         Price date     Stock rating   Sector rating    Disclosures
AMP Limited                       AMP AU                   AUD 5.09      10-Jan-2013    Neutral        Not rated
ANZ                               ANZ AU                   AUD 25.15     10-Jan-2013    Neutral        Not rated        A4,A5,A7,A13
Bendigo and Adelaide Bank         BEN AU                   AUD 8.82      10-Jan-2013    Neutral        Not rated        A4,A5,A7
Bank of Queensland                BOQ AU                   AUD 7.56      10-Jan-2013    Neutral        Not rated
Commonwealth Bank                 CBA AU                   AUD 61.61     10-Jan-2013    Reduce         Not rated        A4,A5,A6,A7,A13
Computershare                     CPU AU                   AUD 9.56      10-Jan-2013    Neutral        Not rated
Henderson Group PLC               HGG AU                   AUD 2.09      10-Jan-2013    Neutral        Not rated
IOOF Holdings                     IFL AU                   AUD 7.40      10-Jan-2013    Neutral        Not rated        A4,A5,A6
Macquarie Group                   MQG AU                   AUD 36.32     10-Jan-2013    Neutral        Not rated        A4,A5,A6
National Australia Bank           NAB AU                   AUD 25.43     10-Jan-2013    Buy            Not rated        A4,A6,A13
Perpetual                         PPT AU                   AUD 34.93     10-Jan-2013    Neutral        Not rated
Platinum Asset Management         PTM AU                   AUD 4.25      10-Jan-2013    Buy            Not rated


A4   The Nomura Group had an investment banking services client relationship with the issuer during the past 12 months.
A5   The Nomura Group has received compensation for investment banking services from the issuer in the past 12 months.
A6   The Nomura Group expects to receive or intends to seek compensation for investment banking services from the issuer in the next three
     months.
A7   The Nomura Group has managed or co-managed a publicly announced or 144A offering of the issuer's securities or related derivatives in
     the past 12 months.
A13 The Nomura Group has a significant financial interest (non-equity) in the issuer.




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Nomura | Australia Financials                                                                                                                       January 10, 2013



ANZ (ANZ AU)                                                                       AUD 25.15 (10-Jan-2013) Neutral (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                             Date        Rating    Target price   Closing price
                                                                                                             10-Oct-12                 26.00           25.56
                                                                                                             17-Aug-12                 25.00           24.61
                                                                                                             04-Apr-12                 24.00           23.01
                                                                                                             10-Jan-12                 22.50           20.75
                                                                                                             03-Nov-11                 23.00           20.49
                                                                                                             18-Oct-11                 23.50           21.07
                                                                                                             20-Aug-11                 22.00           19.50
                                                                                                             05-Jul-11                 22.50           21.93
                                                                                                             01-May-11   Neutral                       24.23
                                                                                                             01-May-11                 24.00           24.23
                                                                                                             18-Mar-11                 22.00           22.70
                                                                                                             18-Feb-11                 23.00           24.89
                                                                                                             24-Jan-11                 21.50           23.66
                                                                                                             28-Oct-10                 23.00           24.73
                                                                                                             20-Sep-10   Reduce                        23.96
                                                                                                             20-Sep-10                 22.50           23.96




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our valuation for ANZ is broadly based on the midpoint of our DCF valuation and SOTP valuation. We
have derived a DCF valuation which assumes a WACC of 11.25% (beta of 1.0, risk-free rate of 5.25%, equity risk premium of
6%) and a terminal growth rate of 2.5%, which is based on LT inflation growth. Our target price is AUD26.00.

Risks that may impede the achievement of the target price Key upside risk include: 1) margins remaining high for ANZ, due
to lessening of competition in the institutional space. Key downside risks include: 1) regulatory changes in Asian jurisdictions,
with possibly tougher capital requirements; and 2) tougher competition in Asia from global peers chasing higher growth markets.


Commonwealth Bank (CBA AU)                                                         AUD 61.61 (10-Jan-2013) Reduce (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                             Date        Rating    Target price   Closing price
                                                                                                             10-Oct-12                 53.50           56.65
                                                                                                             01-Aug-12   Reduce                        57.27
                                                                                                             17-May-12                 52.00           51.02
                                                                                                             04-Apr-12                 54.00           49.90
                                                                                                             15-Feb-12                 52.00           50.23
                                                                                                             10-Jan-12                 51.50           49.78
                                                                                                             15-Nov-11                 52.00           49.15
                                                                                                             18-Oct-11                 53.00           47.45
                                                                                                             10-Aug-11                 50.00           48.23
                                                                                                             05-Jul-11                 50.50           51.78
                                                                                                             09-Feb-11                 52.00           55.07
                                                                                                             24-Jan-11                 50.00           52.32
                                                                                                             15-Nov-10   Neutral                       48.86
                                                                                                             15-Nov-10                 47.50           48.86
                                                                                                             25-Oct-10                 48.50           50.95
                                                                                                             20-Sep-10   Reduce                        52.58
                                                                                                             20-Sep-10                 50.00           52.58




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our target price of AUD53.50/share is based broadly on the midpoint of our DCF and SOTP-based
valuations. Our SOTP valuation captures earnings contributions from Banking and Wealth Management and attributes a peer-
based multiple. Our DCF valuation assumes a WACC of 11.25% (beta of 1, risk-free rate of 5.25%, equity risk premium of 6%)
and a terminal growth rate of 2.5%.

Risks that may impede the achievement of the target price Key upside risks include: 1) Benefits from the repricing of
mortgages outside the cash rate increase, given an overweight retail lending book; 2) Significant benefits in costs from
investment in IT platforms. Key downside risks include: 1) Higher funding costs from greater competition among banks for retail
deposits; 2) Material reduction in real estate prices.




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National Australia Bank (NAB AU)                                                   AUD 25.43 (10-Jan-2013) Buy (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                             Date        Rating Target price    Closing price
                                                                                                             31-Oct-12              30.00             25.79
                                                                                                             10-Oct-12              31.00             26.20
                                                                                                             27-Apr-12              29.00             25.15
                                                                                                             22-Mar-12              28.50             24.39
                                                                                                             08-Mar-12              28.00             23.38
                                                                                                             07-Feb-12              28.50             23.21
                                                                                                             27-Oct-11              31.00             25.87
                                                                                                             18-Oct-11              30.00             24.23
                                                                                                             09-Aug-11              28.00             21.50
                                                                                                             05-Jul-11              30.00             25.14
                                                                                                             05-May-11   Buy                          27.01
                                                                                                             05-May-11              31.00             27.01
                                                                                                             08-Feb-11              27.50             25.48
                                                                                                             24-Jan-11              26.50             24.61
                                                                                                             27-Oct-10              27.50             25.26
                                                                                                             20-Sep-10   Neutral                      25.86
                                                                                                             20-Sep-10              27.00             25.86




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology We base our 12-month target price of AUD30.00 broadly on our sum-of-the-parts valuations and DCF.
Our sum-of-the-parts valuation captures earnings contributions from banking and wealth management and attributes a peer-
based multiple. We apply a P/E multiple to our banking earnings, which is representative of the peer average banking P/E
multiple after adjusting each bank’s multiple to exclude the funds management business. For the wealth business, we apply a
FY12F P/E multiple. Our a DCF valuation assumes a WACC of 11.25% (beta of 1.0, risk-free rate of 5.25%, equity risk premium
of 6%) and terminal growth rate of 2.5%, which is based on inflation rate.

Risks that may impede the achievement of the target price A key downside risk is from deterioration in the domestic SME
portfolio and further material losses in the UK.


Bendigo and Adelaide Bank (BEN AU)                                                  AUD 8.82 (10-Jan-2013) Neutral (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                             Date        Rating Target price    Closing price
                                                                                                             20-Aug-12   Neutral                       8.68
                                                                                                             04-Apr-12   Buy                           7.68
                                                                                                             10-Jan-12               9.00              8.23
                                                                                                             16-Dec-11              10.00              9.00
                                                                                                             08-Aug-11               9.00              7.95
                                                                                                             05-Jul-11               9.50              8.75
                                                                                                             14-Feb-11              10.50             10.12
                                                                                                             24-Jan-11              10.00             10.03
                                                                                                             26-Oct-10               9.50              9.01
                                                                                                             20-Sep-10   Neutral                       9.39
                                                                                                             20-Sep-10               9.00              9.39




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our AUD9.00 target price is based broadly on our DCF- and P/E-based valuations. We use a P/E
multiple for BEN which is representative of the peer average banking P/E multiple after adjusting each bank’s multiple to
exclude their funds management businesses. Our key DCF assumptions include a WACC of 10.65% (beta of 0.9, bond yield of
5.25% and equity risk premium of 6%) and terminal growth rate of 2.5%.




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Nomura | Australia Financials                                                                                                                       January 10, 2013


Risks that may impede the achievement of the target price Upside risk include: 1) return of securitisation – BEN is likely to
benefit from the health of the securitisation market, which will enable them to diversify their funding sources; 2) reduced level of
competition in retail deposits. Downside risks include: 1) BEN is underprovisioned relative to its peers – any deterioration in
credit quality is likely to directly affect the bottom line given low levels of provisioning; and 2) negative capital outcome from
Basel III implementation.


Bank of Queensland (BOQ AU)                                                         AUD 7.56 (10-Jan-2013) Neutral (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                             Date        Rating    Target price   Closing price
                                                                                                             18-Oct-12                  7.40             7.27
                                                                                                             05-Oct-12                  7.50             7.55
                                                                                                             18-Apr-12                  7.75             7.14
                                                                                                             10-Jan-12                  8.00            7.224
                                                                                                             13-Oct-11   Neutral                        7.854
                                                                                                             13-Oct-11                  9.00            7.854
                                                                                                             05-Jul-11                  10.50           8.193
                                                                                                             16-Feb-11   Buy                            9.754
                                                                                                             16-Feb-11                  12.00           9.754
                                                                                                             14-Oct-10                  11.00          10.084
                                                                                                             20-Sep-10   Neutral                        10.86
                                                                                                             20-Sep-10                  11.50           10.86




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our 12-month target price of AUD7.40 is based broadly on our DCF valuation. Our DCF assumptions
include a WACC of 11.85% (beta of 1.1, bond yield of 5.25% and equity risk premium of 6%) and a terminal growth rate of 5%,
which is based on the LT GDP growth forecast.

Risks that may impede the achievement of the target price Risks: Upside risks for BOQ include significant improvement in
wholesale funding market conditions and improving health of the securitisation market, which would enable it to diversify funding
sources. Key downside risks include significant losses in commercial loans.


Macquarie Group (MQG AU)                                                           AUD 36.32 (10-Jan-2013) Neutral (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                             Date        Rating    Target price   Closing price
                                                                                                             26-Oct-12                 31.00            30.85
                                                                                                             10-Jul-12                 30.00            25.47
                                                                                                             27-Apr-12   Neutral                        29.27
                                                                                                             27-Apr-12                  32.00           29.27
                                                                                                             04-Apr-12                  33.50           29.03
                                                                                                             10-Jan-12                  30.00           23.75
                                                                                                             28-Oct-11                  32.00           25.15
                                                                                                             04-Oct-11                  33.00           20.80
                                                                                                             07-Sep-11                  35.00           23.53
                                                                                                             28-Jul-11                  37.00           27.99
                                                                                                             05-Jul-11                  40.00           31.14
                                                                                                             22-Mar-11   Buy                            35.55
                                                                                                             22-Mar-11                  42.00           35.55




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology We base our A$31 target price on a DCF valuation that assumes a WACC of 12.75% (beta of 1.25,
risk-free rate of 5.25%, equity risk premium of 6%) and a terminal growth rate of 2.5%, which is based on the blended GDP
growth rate.




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Nomura | Australia Financials                                                                                                                      January 10, 2013



Risks that may impede the achievement of the target price Downside risks include: • Loss of key staff; • Market share losses
in key markets. • Prolonged deterioration in equity markets leading to losses in equity investments. Upside risks include: • A
stronger than expected market recovery which should underpin healthier ROEs. • Further material asset realisations and
performance fees.


Computershare (CPU AU)                                                             AUD 9.56 (10-Jan-2013) Neutral (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                            Date        Rating    Target price   Closing price
                                                                                                            08-Aug-12                  8.50            8.00
                                                                                                            10-Jul-12   Neutral                        7.33
                                                                                                            04-Apr-12   Reduce                         8.91
                                                                                                            04-Apr-12                  8.00            8.91
                                                                                                            19-Mar-12                  9.00            8.60
                                                                                                            09-Nov-11                  8.50            8.24
                                                                                                            07-Nov-11                  9.00            8.44
                                                                                                            23-Aug-11                  8.00            7.19
                                                                                                            10-Aug-11                  7.75            6.95
                                                                                                            15-Jul-11   Neutral                        8.25
                                                                                                            15-Jul-11                  9.50            8.25




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our A$8.50 target price is based broadly on our P/E relative and DCF valuations. We have derived our
P/E relative valuation based on the assumption that CPU should trade at a 10% premium to the All Industrials ex-Banks forward
P/E. Its 10-year average premium is ~20%, however, we believe CPU’s future earnings growth will be more limited given less
upside from acquisitions, and hence believe a lower premium is justified. Our DCF valuation is A$8.81, assuming a cost of
equity of 12.45% (beta of 1.2x, risk-free rate of 5.25%, equity risk premium of 6%) and terminal growth rate of 2.5%. We have
discounted USD cashflows, and converted the USD valuation at 1-year forward AUD/USD exchange rate to derive our AUD
valuation.

Risks that may impede the achievement of the target price Key upside risks include: a more immediate and stronger
recovery in corporate activity in key markets, significantly accretive acquisitions of meaningful size, and a higher inflationary
environment leading to increased interest income on margin balances. Key downside risks include: a sustained downturn in
corporate activity in global financial markets, and currency risk for CPU if the USD appreciates significantly.




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Nomura | Australia Financials                                                                                                                       January 10, 2013



IOOF Holdings (IFL AU)                                                              AUD 7.40 (10-Jan-2013) Neutral (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                             Date        Rating Target price      Closing price
                                                                                                             22-Feb-12   Neutral                        5.84
                                                                                                             23-Nov-11               6.40               5.37
                                                                                                             17-Oct-11   Buy                            6.17
                                                                                                             17-Oct-11               7.00               6.17




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our 12-month target price of AUD6.40 is based on our DCF valuation of AUD6.35. We assume a
WACC of 11.1% with a cost of equity of 12.45% (beta of 1.20, risk-free rate of 5.25% and equity risk premium of 6%), with a
terminal growth rate of 2.5%.

Risks that may impede the achievement of the target price Upside risks to our recommendation include: •Consolidation
activity in the sector, whether involving IFL as a target or as acquirer. •A significant shift in asset allocation earlier than expected,
benefiting IFL’s margins. •Greater synergies than expected from DKN integration. Downside risks include: •Weakness in
markets causing a net funds outflows from IFL’s business. •Integration of platforms may risk alienating clients. •Risks involved in
making further acquisitions, by overpaying or failing to integrate businesses successfully.


Perpetual (PPT AU)                                                                 AUD 34.93 (10-Jan-2013) Neutral (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                             Date        Rating    Target price   Closing price
                                                                                                             30-Aug-12                 27.00            26.59
                                                                                                             10-Jul-12                 26.00            23.27
                                                                                                             25-Jun-12                 27.00            24.03
                                                                                                             04-Apr-12                 25.90            24.76
                                                                                                             23-Feb-12                 24.90            23.59
                                                                                                             15-Feb-12                 24.20            23.21
                                                                                                             10-Jan-12                 23.20            20.00
                                                                                                             03-Nov-11                 23.40            20.74
                                                                                                             17-Oct-11   Neutral                        23.44
                                                                                                             17-Oct-11                  26.00           23.44




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our target price is A$33.00, based on our DCF valuation. Our valuation assumes a WACC of 11.08%,
with a cost of equity of 12.45% (beta of 1.20, risk-free rate of 5.25%, equity risk premium of 6%) and a terminal growth rate of
2.5%.

Risks that may impede the achievement of the target price Risks to the upside include: 1) reversal of negative funds flows,
as investors get more comfortable with the investment team; 2) cost initiatives more successful than guided, resulting in greater




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Nomura | Australia Financials                                                                                                                      January 10, 2013


savings; and 3) a stronger and earlier recovery in markets than anticipated, resulting in higher FUM balances and thus higher
revenues.


Henderson Group PLC (HGG AU)                                                       AUD 2.09 (10-Jan-2013) Neutral (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                            Date        Rating    Target price   Closing price
                                                                                                            10-Jul-12                  1.75            1.47
                                                                                                            04-Apr-12                  1.95            1.97
                                                                                                            29-Feb-12                  1.80            1.88
                                                                                                            10-Jan-12                  1.70            1.51
                                                                                                            17-Oct-11   Neutral                        1.89
                                                                                                            17-Oct-11                  2.00            1.89




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our target price of A$1.75 is based on our DCF valuation of £1.21 translated at the current spot rate of
AUD/GBP0.67. Our DCF valuation assumes a WACC of 11.8% (beta of 1.20, risk-free rate of 5.25%, equity risk premium of 6%),
and a terminal growth rate of 2.5%. Cashflow is discounted back to 2013.

Risks that may impede the achievement of the target price Risks to the upside include: 1) a market recovery in the UK and
Europe occurring earlier than anticipated, resulting in higher AUM and inflows from investors; 2) integration of Gartmore
generating better synergies than expected; and 3) significant boost from distribution capabilities acquired from Gartmore, in new
geographies. Risks to the downside include: 1) prolonged weakness in European markets, impacting AUM and hence revenues;
and 2) integration of Gartmore not proceeding successfully, resulting in possible key staff departures or investors withdrawing
funds.


Platinum Asset Management (PTM AU)                                                 AUD 4.25 (10-Jan-2013) Buy (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                            Date        Rating    Target price   Closing price
                                                                                                            17-Aug-12                  4.40            3.69
                                                                                                            04-Apr-12                  4.75            4.15
                                                                                                            14-Mar-12   Buy                            3.89
                                                                                                            14-Mar-12                  4.48            3.89
                                                                                                            17-Feb-12                  3.70            3.47
                                                                                                            16-Feb-12                  3.65            3.50
                                                                                                            10-Jan-12                  3.60            3.56
                                                                                                            17-Oct-11   Neutral                        3.83
                                                                                                            17-Oct-11                  3.90            3.83




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our 12-month target price is A$4.55/share, based on our DCF valuation. Our DCF valuation assumes
a WACC of 11.8%, with a cost of equity of 12.45% (beta of 1.20, risk-free rate of 5.25%, and equity risk premium of 6%), and a
terminal growth rate of 3%.




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Nomura | Australia Financials                                                                                                                       January 10, 2013



Risks that may impede the achievement of the target price Key upside risks include: • A prolonged downturn in financial
markets, leading to poor inflows from investors. • Withdrawal of mandates by institutional investors, which would reduce
performance fee potential. • Key man risk – if the main fund managers depart the company.


AMP Limited (AMP AU)                                                               AUD 5.09 (10-Jan-2013) Neutral (Sector rating: Not rated)
Rating and target price chart (three year history)
                                                                                                               Date        Rating Target price   Closing price
                                                                                                               10-Dec-12   Neutral                     4.78
                                                                                                               10-Dec-12               5.00            4.78




For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology We value AMP using our standard residual income methodology. Our valuation comprises AMP's
estimated one-year forward book value per share (excluding goodwill) plus the present value of residual returns earned
thereafter. Residual returns are calculated as the difference between forecast net income and an annual equity charge
calculated based on assumed cost of equity. Beyond our explicit net income forecasts, we assume a gradual (10-year)
normalisation in returns to an assumed long-run RoE (ex-goodwill) of 18%. We estimate the cost of equity to be 11% based on
historic and current market data. Our target price is A$5.15.

Risks that may impede the achievement of the target price Risks that may impact on our target price and rating include, but
are not confined to: Favourable/ adverse movements in equity markets and net flows; Competition in the retirement market
(particularly from industry funds); Favourable/ adverse changes in regulatory capital requirements; Favourable/ adverse
regulatory changes to the superannuation system.


Rating and target price changes
Issuer                                             Ticker                      Old stock rating     New stock rating       Old target price      New target price
AMP Limited                                        AMP AU                      Neutral              Neutral                AUD 5.00              AUD 5.15
ANZ                                                ANZ AU                      Neutral              Neutral                AUD 26.00             AUD 26.50
Bendigo and Adelaide Bank                          BEN AU                      Neutral              Neutral                AUD 9.00              AUD 9.50
Bank of Queensland                                 BOQ AU                      Neutral              Neutral                AUD 7.40              AUD 8.00
Commonwealth Bank                                  CBA AU                      Reduce               Reduce                 AUD 53.50             AUD 55.00
Computershare                                      CPU AU                      Neutral              Neutral                AUD 8.50              AUD 9.50
Henderson Group PLC                                HGG AU                      Neutral              Neutral                AUD 1.75              AUD 2.25
IOOF Holdings                                      IFL AU                      Neutral              Neutral                AUD 6.40              AUD 7.00
Macquarie Group                                    MQG AU                      Neutral              Neutral                AUD 31.00             AUD 35.00
National Australia Bank                            NAB AU                      Buy                  Buy                    AUD 30.00             AUD 31.00
Perpetual                                          PPT AU                      Neutral              Neutral                AUD 27.00             AUD 33.00
Platinum Asset Management                          PTM AU                      Buy                  Buy                    AUD 4.40              AUD 4.55




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Nomura | Australia Financials                                                                                                       January 10, 2013


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Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin America
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STOCKS
A rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral',
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SECTORS
A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance,
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the analyst expects the sector to underperform the Benchmark during the next 12 months. Benchmarks are as follows: United States: S&P 500;
Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.

Explanation of Nomura's equity research rating system in Japan and Asia ex-Japan
STOCKS
Stock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price,
subject to limited management discretion. In most cases, the Target Price will equal the analyst's 12-month intrinsic valuation of the stock,
based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc. A 'Buy' recommendation indicates that
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'Reduce' recommendation indicates that potential downside is 5% or more. A rating of 'Suspended' indicates that the rating and target price
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SECTORS
A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive
absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks
under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average
recommendation of the stocks under coverage is) a negative absolute recommendation.

Target Price
A Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any target price may be
impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the
company's earnings differ from estimates.




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Nomura | Australia Financials                                                                                                                               January 10, 2013


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