a strategic overview presentation to csfb australian financial services conference melbourne, 27...

A Strategic Overview

Presentation toCSFB Australian Financial Services Conference

Melbourne, 27 September 2001

John McFarlaneChief Executive Officer

Australia and New Zealand Banking Group Limited

Five key factors are driving ANZ’s current and future performance

1. Improving sustainability of earnings

2. Revenue growth

3. Productivity enhancements

4. Risk reduction

5. Perform Grow Breakout program

• Return on Equity – target 20%+

• Earnings per share – target 10%+

Improved financial outcomes:

1. Sustainability of earnings continues to improve

0%

20%

40%

60%

80%

100%

ANZ1991

ANZ1996

ANZ2001

CBA NAB WBC

Lending Profile

Business Consumer

• Investment and emphasis on Personal Financial Services

– lower risk– more sustainable– higher growth

• Corporate balance sheet growth restricted

– Focus on fee income– Higher quality corporate book

Focus on lower risk, more sustainable activities

4958 50665478

5877

3139

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

1997 1998 1999 2000 2001

2. Significant revenue growth over five years

• Revenue CAGR for

• PFS ~ 8.8%,

• CFS ~ 10.7%,

• International and subsidiaries ~ 0.2%

• Interest income CAGR over the five year period is ~ 5.7% and ~ 8.2% for non interest income

CAGR ~ 6.7%

Revenue growth

$m

H2estimate

3. Productivity improvement is providing scope to invest for growth

45

47

49

51

53

55

57

59

61

63

65

1997 1998 1999 2000 2001

NAB

CBA

WBC

ANZ

Clear leadership on Cost Income ratio

Target

Mid 40’s

%

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1997 1998 1999 2000 Mar-01

Return on Assets%

4. We have a continuing focus on reducing risk

• emerging markets trading

• retail stockbroking

• Latin America

• Grindlays

• Emerging markets corporate lending

• greater portfolio diversification

• commercial property down from 24% in early 90’s to 8% today

• early introduction of EVA/NIACC methodologies

• significantly enhanced sophistication of credit, market and operating risk management

• more open/transparent disclosure

Implementation of a range of measures which have reduced risk

Exited higher risk activities

Risk profile of the corporate book is within expectations and remains sound

11.7% 12.3% 11.7%

18.2% 19.1% 19.4% 20.3%

26.7% 26.9% 27.4%

37.9%

5.3% 4.1%4.0% 3.6%

9.3%

26.4%

38.4% 38.9%38.4%

Sep-99 Mar-00 Sep-00 Mar-01

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

Corporate risk grade profile

>B = B, B-, CCC& non-accrual

Risk actively managed

• Quarterly strategy reports prepared for all high risk accounts

• All BB rated & high risk accounts reviewed regularly

• Single customer concentration limits lowered

Consumer portfolio has improved

• improved collections activity

• low interest rates and

• stable employment conditions (up to August)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Mar-01

Apr-01

May-01

J un-01

J ul-01

Aug-01

Small Business

Mortgages

Cards

PFS - Overall

Arrears > 60 days%

Delinquency levels have improved, driven by:

Closely monitoring in light of recent events

-40

-20

0

20

40

60

80

100

120

1H 98 2H 98 1H 99 2H 99 1H 00 2H 00 1H 01

Provisioning is in line with expectations

• Slowing domestic economy will increase specific provisions for 2H01

• ELP is a function of volume (on and off balance sheet), risk grade profile, and level of security

• Specific Provisions tend to be less volatile in Personal businesses and track more closely to ELP

Actual SP v ELP charge

- Corporate Financial Services

ELP charge SP charge

$m

10.4

10.29.8

10.7 10.7

6.6

7.2

7.9

7.4 7.3

6.2

6.96.6

6.6

6.4

4

5

6

7

8

9

10

11

12

1997 1998 1999 2000 Mar-01

Total Capital

Tier 1

Inner Tier 1

Group’s capital adequacy ratio is strong at 10.4%

• Inner Tier 1 and Tier 1 ratios for September 2001 expected to be broadly in line with September 2000

• Ratios were managed down in first half by $1bn buy back (completed in May)

• No AASB 1038 Appraisal Value accounting

• Target Inner Tier 1 is 6.0%

Capital Ratios%

5. Building for the future - a distinctive strategy

Proposition

• Entrepreneurial specialists create more value

• Corporations must embrace new technologies

• Value depends on performance, growth and breaking out

Strategy

• ANZ as a portfolio of 16 specialist businesses

• An e-Bank with a human face

• Drive results, invest in growth businesses and create new paradigms/culture

Perform Grow& Breakout

e-Transform

Specialise

Implications

• Specialist approach to customer and product businesses

• Transform the way we do business with IP technology

• Meet expectations, fund growth by cost reduction, transform

Transforming ANZ through Perform, Grow and Breakout

Breakout

Grow

Perform

• Focus: corporate transformation

• Benchmark: global industry/players

• Looking for: dramatic change

• Horizon: 3-10 years

• Success: dramatic market cap increase

• Focus: specialisation and out-growing the market

• Benchmark: competitors in each business

• Looking for: breakout moves in key businesses (eg QTV, TPMO’s)


• Success: 4-5 moves taking share andworth ~AUD1bn+ market

cap each

• Focus: performance

• Benchmark: market expectations

• Looking for: six monthly delivery


• Success: meet/exceed expectations

consistently

Looking forward we are targeting further improvement in each key factor

Improving earnings sustainability

• asset growth biased towards consumer and small business

• corporate focus on increasing ROA

• annual investment in growth businesses• revenue growth at least equal to nominal GDP

growth

• targeting mid 40’s by 2003• consistent improvement half on half

• reductions in single customer limits• portfolio risk management approach

• breakout cultural change program• values based leadership

Revenue growth

Perform Grow Breakout program

Risk reduction

Lower cost-income

We are performing well and on track to deliver on our commitments

Measure

EPS growth

ROE

Cost-income ratio

Inner Tier 1

Credit rating

2003 Commitments

> 10%

> 20%

mid 40’s

6%

maintain AA category

As at Mar-01

13%

19.6%

49.4%

6.2%

maintained

Outlook – 2001

• Specific provisions should be marginally above ELP

• Earnings expected to be towards the top end of analyst forecasts

The material in this presentation is general background information about the Bank’s activities current at the date of the presentation. It is information given in summary

form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment

objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is

appropriate.

For further information visit

www.anz.com

or contact

Philip GentryHead of Investor Relations

ph: (613) 9273 4185 fax: (613) 9273 4091 e-mail: [email protected]

a strategic overview presentation to csfb australian financial services conference melbourne, 27...

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