Purpose of Issue Shares

Purpose of issuing shares

Commonwealth Bank.

The issue of Commonwealth Bank PERLS forms part of the Bank’s continual capital management program. The proceeds from the issue will be used to buy-back some Ordinary Shares to achieve a more efficient capital structure.

The proposed buy-back of Ordinary Shares and the issue of Commonwealth Bank PERLS are expected to improve the Bank’s earnings per share and return on equity over time while maintaining capital ratios. The precise effect of the buy-back on earnings per share and return on equity cannot be determined at present because the buy-back price and the number of Ordinary Shares to be bought back will not be known until after completion of the buy-back. Although the proposed issue of Commonwealth Bank PERLS and the proposed buy-back, taken together, are expected to have minimal impact on the current year’s earnings per share, these actions are expected to result in an increase in earnings per share in the first year after implementation.

The table below sets out the capital ratios of group as at 31 December 2000 on an actual and a proformat (post the buy-back and the proposed issue of Commonwealth Bank PERLS) basis. The buy-back will result in a reduction in the Group’s level of Tier 1 Capital but, following the issue of Commonwealth Bank PERLS, Tier 1 Capital is expected to be at the same level as before the buy-back

| As at 31/12/00 | Proforma as at 31/12/00 (including buy-back Issue) | Proforma as at 31/12/00 (including buy-back & PERLS |

Tier 1 Ratio | 6.71% | 6.19% | 6.70% |

Capital Adequacy Ratio | 9.37% | 8.58% | 9.35% |

(Source form:

The Australian Prudential Regulation Authority requires a minimum capital adequacy ratio of 8%, of which the Tier 1 Ratio must be 4%. Banks generally maintain capital adequacy ratios in excess of 8% as a buffer for contingencies and to support credit ratings. The Bank targets a minimum capital adequacy ratio of 9%. The Bank believes that following...