Corporate Accounting 2 Report: Commonwealth Bank Share Price Analysis

This report provides a comprehensive financial analysis of Commonwealth Bank (CBA), one of Australia's major financial institutions. It begins with a description of the company, its services, and global operations. The analysis then identifies the ownership and governance structure of CBA, highlighting key shareholders and board composition. The report presents graphs illustrating the company's performance compared to the All Ordinary Index, calculating correlations and comparing returns over a two-year period. Significant factors influencing CBA's share price are identified, including profitability and the impact of the Royal Commission. A scenario analysis evaluates potential project outcomes, and a letter of recommendation is provided, advising on the inclusion of CBA stock in an investment portfolio. The report concludes with a list of references and a bibliography of sources consulted.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Author’s Note

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Table of Contents
1. Description of the Company:.......................................................................................................2
2. Identifying the company in terms of ownership-governance structure:......................................2
3. Providing graphs with description of the results:........................................................................3
4. Identifying any significance factors that influences share price of the organisation:..................5
5. Performing scenario analysis:......................................................................................................5
6. Providing the letter of recommendation:.....................................................................................6
References and Bibliography:..........................................................................................................8

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1. Description of the Company:
Commonwealth Bank is considered to be one of the major financial institutions in
Australia, where the company provides services such as Global wealth management, Private
equity, Mortgages, Corporate banking, Investment banking, Investment management, Credit
cards, Finance Consumer banking and Insurance. The operations of Commonwealth Bank reach
countries like Australia, New Zealand, Asia, the United States and the United Kingdom, where
all the relevant financial services are provided to the customers. The company was mainly
formed in 1911 as a government bank, where during 1991 it was changed to public company and
was listed in the capital market of Australia. the headquarters of Commonwealth Bank is in
Darling Harbour, Sydney, Australia from where it monitors different subsidiaries such as
Sovereign Limited, Commonwealth Securities, CommInsure, Bankwest, ASB Bank, and
Colonial First State Banks for delivering the financial services to different customers
(Commbank.com.au, 2019). The organisation has been the main promoters of financial service in
Australia, where they maintain different divisions such as Retail Banking Services, International
Financial Services, Business Banking, Private Banking, Institutional Banking, and Wealth
Management.
2. Identifying the company in terms of ownership-governance structure:
The analysis of the annual report has mainly indicated that only HSBC Custody
Nominees has a substantial shareholding of 22.38% in Commonwealth bank, while no other
companies or individuals own a shareholding pattern of more than 20%. The analysis has also
indicated that the no family member of the organisation holds any shares, as the company was
owned by government and then listed as public company. The organisations like J P Morgan
Nominees Australia and Citicorp Nominees Pty Limited owns shares of Commonwealth Bank

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for more than 5% of the total outstanding shares, which makes it a non-family company
(Commbank.com.au, 2019).
The board combination of Commonwealth bank does not comprise of family member,
which is depicted as follows.
 Executive Director (Matt Comyn)
 Independent Non-Executive Director (Professor Genevieve Bell)
 Independent Non-Executive Director (Paul O'Malley)
 Independent Non-Executive Director (Wendy Stops)
 Independent Non-Executive Director (Rob Whitfield)
 Independent Non-Executive Director (Chairman) (Catherine Livingstone AO)
 Independent Non-Executive Director (Shirish Apte)
 Independent Non-Executive Director (Sir David Higgins)
 Independent Non-Executive Director (Mary Padbury)
 Independent Non-Executive Director (Anne Templeman-Jones)

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3. Providing graphs with description of the results:
10/1/2017
11/1/2017
12/1/2017
1/1/2018
2/1/2018
3/1/2018
4/1/2018
5/1/2018
6/1/2018
7/1/2018
8/1/2018
9/1/2018
10/1/2018
11/1/2018
12/1/2018
1/1/2019
2/1/2019
3/1/2019
4/1/2019
5/1/2019
6/1/2019
7/1/2019
8/1/2019
9/1/2019
60
65
70
75
80
85
0
1000
2000
3000
4000
5000
6000
7000
8000
Price trend of CBA and AORD
CBA AORD
11/1/2017
12/1/2017
1/1/2018
2/1/2018
3/1/2018
4/1/2018
5/1/2018
6/1/2018
7/1/2018
8/1/2018
9/1/2018
10/1/2018
11/1/2018
12/1/2018
1/1/2019
2/1/2019
3/1/2019
4/1/2019
5/1/2019
6/1/2019
7/1/2019
8/1/2019
9/1/2019
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
Return of CBA and AORD
CBA AORD
The above figure mainly helps in detecting the level of price changes and return of
Commonwealth Bank and All Ordinary Index for the period of last two years. The return
generation capability of Commonwealth Bank is at par with the All Ordinary Index, as seen in
the above graph. The analysis has mainly indicated that the performance of the organisation has

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mainly increased from the levels of 77.63 to 81.54 in two-year time frame. However, the analysis
of All Ordinary Index has also indicated an increment in the value of capital market over the
period of two years. The correlation calculation has mainly indicated that a link of 0.4758
between the returns of Commonwealth Bank and ALL Ordinary Index. Thus, it could be detected
that the overall performance of the organisation is at the same levels with the All Ordinary Index,
as it both the returns movements have similar pattern. The overall analysis has also portrayed
that the overall returns of the ALL Ordinary Index was higher than the Commonwealth Bank in
forms. The total price increment of 13.54% was witnessed by All Ordinary Index, while
Commonwealth Bank only achieved an increment of 5.04% during the past two years
(Au.finance.yahoo.com, 2019).
4. Identifying any significance factors that influences share price of the organisation:
The analysis of the Commonwealth Bank financial conditions directly indicates about the
security that would be provided by the organisation to the investors. The organisation made a
profit of around $8.5 billion, which is relevantly higher and would need plenty of economic pain
in Australia to hurt the revenues and make the profit level of the organisation to $0. The
performance of CBA during the past two years have been volatility, as there were reports from
the Royal Commission, which negatively impact major financial services in the country.
However, the negative impact of Royal Commission did not last for Commonwealth Bank, as its
shares started to increase after the declaration of the report, where investors were convinced
regarding its financial position (Au.finance.yahoo.com, 2019). Thus, it could be estimated that
the performance of CBA would increase over time, as the fundamental financial backup of the
organisation is strong, which will help in backing the organisation growth in times of turmoil.

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Therefore, growth in the company’s shares is seen, which could help in generating higher income
for the investors in the long run.
5. Performing scenario analysis:
The above calculations have indicated about the base case, best case and worst-case
scenario of the proposed project for the organisation. The analysis has mainly indicated that with
the inclusion of the project the organisation will obtain high level of income in the long run, as

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the project in the worst-case scenario is also delivering high level of returns to the investment
(Qiu, Shaukat & Tharyan, 2016). The calculation has mainly stated that investment in the new
project will mainly generate enormous income for the organisation in the long run, where a total
income from the investment mainly ranges from $1,387,808,131.33 to $3,301,763,448.61, which
higher than the initial investment of $5,500,000 required for the project.
6. Providing the letter of recommendation:
To,
The Client
Subject: Recommendation for including Commonwealth Bank
Sir/Madam,
After a thorough analysis of Commonwealth Bank’s financial condition and future scope, we
recommend to add the stock in your existing portfolio. The financial statement of the company
in 2019 has indicated a drastic improvement, where a net profit of $8 billion was achieved and
adequate dividends are being declared. The company has outperformed even being under the
scrutiny of Royal Commission, which negatively impacted the financial services of Australia.
In addition, the two-year share price movement has also indicated a growth of 5.04% instead
of a decline in the financial industry in Australia. This mainly portrays the financial strength
and strength in fundamental assets of the company, which could positively benefit your
portfolio, while increasing capital gains from share growth and dividend income.
Regards
Portfolio Manager

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References and Bibliography:
Asx.com.au. (2019). Asx.com.au. Retrieved 28 September 2019, from
https://www.asx.com.au/asx/share-price-research/company/CBA
Au.finance.yahoo.com. (2019). Au.finance.yahoo.com. Retrieved 28 September 2019, from
https://au.finance.yahoo.com/quote/CBA.AX?p=CBA.AX
Au.finance.yahoo.com. (2019). Au.finance.yahoo.com. Retrieved 28 September 2019, from
https://au.finance.yahoo.com/news/cba-share-price-buy-033406185.html
Au.finance.yahoo.com. (2019). Au.finance.yahoo.com. Retrieved 28 September 2019, from
https://au.finance.yahoo.com/news/cba-share-price-buy-7-042027673.html
Commbank.com.au. (2019). Commbank.com.au. Retrieved 28 September 2019, from
https://www.commbank.com.au/about-us/shareholders/corporate-profile/corporate-
governance.html
Commbank.com.au. (2019). Commbank.com.au. Retrieved 28 September 2019, from
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/
corporate-profile/corporate-governance/corporate-governance-statement.pdf
Commbank.com.au. (2019). Commbank.com.au. Retrieved 28 September 2019, from
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/
annual-reports/CBA-2019-Annual-Report.pdf
Edwards, D. (2014). The link between company environmental and financial performance
(Routledge Revivals). Routledge.

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Epstein, M. J., Buhovac, A. R., & Yuthas, K. (2015). Managing social, environmental and
financial performance simultaneously. Long range planning, 48(1), 35-45.
Flammer, C. (2015). Does corporate social responsibility lead to superior financial performance?
A regression discontinuity approach. Management Science, 61(11), 2549-2568.
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: aggregated evidence
from more than 2000 empirical studies. Journal of Sustainable Finance &
Investment, 5(4), 210-233.
Lee, C. C., Hsieh, M. F., & Yang, S. J. (2014). The relationship between revenue diversification
and bank performance: Do financial structures and financial reforms matter?. Japan and
the World Economy, 29, 18-35.
Post, C., & Byron, K. (2015). Women on boards and firm financial performance: A meta-
analysis. Academy of Management Journal, 58(5), 1546-1571.
Qiu, Y., Shaukat, A., & Tharyan, R. (2016). Environmental and social disclosures: Link with
corporate financial performance. The British Accounting Review, 48(1), 102-116.
Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, S. A. (2015). How does corporate
social responsibility contribute to firm financial performance? The mediating role of
competitive advantage, reputation, and customer satisfaction. Journal of business
research, 68(2), 341-350.
Wang, Q., Dou, J., & Jia, S. (2016). A meta-analytic review of corporate social responsibility
and corporate financial performance: The moderating effect of contextual
factors. Business & Society, 55(8), 1083-1121.