breakout perform grow and breakout presentation to deutsche bank asia pacific financial institutions...

Perform Grow and BreakoutBreakout

Presentation toDeutsche Bank Asia Pacific Financial Institutions Conference

London, 9-10 July 2001

Peter MarriottChief Financial Officer

Australia and New Zealand Banking Group Limited

ANZ - who we are• One of the ‘Big Four” Australian banks. • Provider of full range of financial services in

Australia (since 1835) and New Zealand (since 1840)

• Leadership in Corporate Banking, Credit Cards and Mortgage origination, a strong eCommerce position and an offshore network in Asia and Pacific.

• Assets A$181b (US$ 95b)

• Market Cap A$24.5b (US$ 12.7b)

• Profit (half year) A$895m (US$ 470m)

• Staff 22,815

• Credit Ratings AA-/Aa3

ANZ Headquarters100 Queen StreetMelbourne Note: figures as at 31/3/01, with exception of

market cap which is as at 28/6/01

We are on track to deliver on our 3 year commitments

Measure

EPS growth

ROE

Cost-income ratio

Inner Tier 1

Credit rating

2003 Commitment

> 10%

> 20%

mid 40’s

6%

maintain AA category

Achievement

13%

19.1%

49.4%

6.2%

maintained

• We have also committed to improving customer satisfaction, and will publicly report our progress

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

• Reconfigure 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& Break out

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: long term ‘destiny’

• Benchmark: global industry/players

• Looking for: transforming moves

• Horizon: 5-10 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, Origin)


• 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

We are performing well - interim results

• NPAT from continuing operations $907m - up 18%

• EPS up 13% to 55.8 cents

• ROE of 19.1%, up from 17.8%

• Cost Income ratio down to 49.4%

• Continuing operations revenue up 10%, costs flat

• Credit quality sound:– ELP charge down to 35 bp’s – Total non-accruals down– Specific provisions flat - down overseas and up

domestically

• Profit on sale of holding in St George $99m ($65m after tax), offset by write downs in investments ($84m)

• Improved disclosure - financial information provided for each business unit

Building a strong track record

625 717 817 895

930481 763

0200400600800

100012001400160018002000

1998 1999 2000 200112

13

14

15

16

17

18

19

20NPAT $m

NPAT/ROE

ROE %

1000

1500

2000

2500

3000

3500

Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-0146

48

50

52

54

56

58

60

62

64Expenses

Income

CTI

39.1

32.0

23.5

13.7

05

1015202530354045

ANZ WBC NAB CBA

Internet banking users as % of main relationships

Source: JP Morgan & Roy Morgan Research

0

300

600

900

1200

1500

1800

1998 1999 2000 2001 1H0.0%

0.5%

1.0%

1.5%

2.0%

Gross Non AccrualsNet Non AccrualsNon Accruals/Loans

Non-accrual loans

Cost to Income$m %

$m%

0

20

40

60

80

100

120

140

Private Clien

ts

Pacific

Cap

ital Markets

Asia

Investm

ent M

gm

t

Foreig

n E

xchan

ge

Asset Fin

ance

Sm

all Busin

ess

Tran

saction S

ervices

Card

s

Corp

orate B

ankin

g

Reg

ional B

ankin

g

Stru

ctured

Finan

ce

Institu

tional

Mortg

ages

Metro

Ban

king

Good profit growth across a diversified portfolio Mar 00 v Mar 01

Personal

Corporate

International and subsidiaries

$m

A strong performance culture

EVA focus

• Rigorous Risk v Reward discipline

• Driver based capital allocation

• Integrated model

Value Aspirations

Strategies

EVA targets

EVA performance

Rewards

Business Unit

Customer

Cost Control

• Part of culture

• Allocation of a scarce resource

• Ongoing re-engineering

• eTransformation

• Activity Value Analysis (AVA)

Leading Cost Income Ratio

We continue to actively manage and reduce risk

0%

20%

40%

60%

80%

100%

ANZ1991

ANZ1996

ANZ2001

CBA NAB WBC

Lending Profile by Asset Type*

business

consumer

• Exiting higher risk businesses

• More emphasis on lower risk businesses

• Corporate balance sheet deliberately constrained – focus on fee income

• Risk based approach embedded through EVA

* CBA as at 31/12/00, NAB & WBC as at 30/9/00

Total non-accrual loans continue to fall, but increase in Australia

1662

1543

13911295

872

727699657

900

428

0

300

600

900

1200

1500

1800

1997 1998 1999 2000 2001 1H0.0%

0.5%

1.0%

1.5%

2.0%Gross Non-Accrual Loans (LHS)

Net Non-Accrual Loans (LHS)

$mNon-Accrual Loans/Loans & advances (RHS)

Historic

858

59

749

8972

495

651681

457

0

200

400

600

800

1000 Mar-00

Sep-00

Mar-01

Aust InterNZ

Geographic

Gross Non-Accrual Loans$m

Group risk grade profile continues to improve - but some signs of turning domestically

17.3% 17.3% 15.6%

19.2%15.8%

14.6%

41.5%45.3% 49.7%

16.2%

14.1%

14.7%

50.5%

16.9%16.2%14.8%

Sep 1998 Sep 1999 Sep-2000 Mar-01

$114.6bn $141.0bn$134.9bn$126.5bn

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

ELP (bp’s) 45 43 38 35

7.2%

5.4%3.9%

3.8%

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

Provisioning in line with expectations

-40

-20

0

20

40

60

80

100

120

140

Mar-00

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

Personal Corporate International & Subsidiaries

Actual SP v ELP charge ELP charge

SP charge

$m

• Slowing domestic economy likely to increase specific provisions

• 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

….but increasing in Australia and New Zealand

Provisioning levels remain strong

500

700

900

1100

1300

1500

1700

1373

241

(181)

27 1460

1012

2000 1H 2001 APRA Guideline

s

ELP charge

Net SP transfer

FX impact

ELP - Economic Loss Provision

SP - Specific Provision

$m

Surplus448

1.06

0.97

1.02

0.98

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

ANZMar-01

CBADec-00

NABJun-00

WBCJun-00

GP/Lending Assets*%

* includes acceptances

represents 3 years

expected losses

We are developing a track record for building growth businesses

-100

0

100

200

300

400

500

600

700

Mar-00 Jun-00 Sep-00 Dec-00 Mar-018

10

12

14

16

10

11

12

13

14

15Mortgage market

share

FM inflows (LHS)

Deposit

market share (RHS)

15

20

25

30 Share of credit card spend

3.4

3.6

3.8

4.0

4.2

Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00

Personal customers - Australia

%%

%m

$m

95 0096 97 9998 01 95 0096 97 9998 01

Growing FM inflows

Most businesses’ targeting revenue growth well in excess of expense growth

Plan Operating Expense Growth 01-03 CAGR

Pla

n R

evenue G

row

th 0

1-0

3 c

agr

Note: Bubble size approx. in proportion to 2001 forecast NPAT

Mortgages

GCM

Metro & Reg Banking

Inst. Bank

Private Clients

ANZ Investments

GSF

GFX

GTS

Asia

Pacific

Corporate

Small Bus

Asset Fin

NominalGDPGrowth

Low

High

Low High

Cost:Income falling

CardsCorporate

Personal

Int. & Subsidiaries

ILLUSTRATIVE

We are developing a strong CRM capability

INFRASTRUCTURE CAPABILITIES

• Enterprise Customer Data Mart (ECDM)

• Tran$act database

• Customer scoring and decision engine

• Behavioural credit scoring systems

• Campaign Management System

• Interim front line screen delivery

• Full account and customer EVA

• Segmentation markers and profiles

• Propensity-to-buy scores

• Application/behavioural scores

• Multiple campaign management

• Call centre, ATM, and SSP integration

• anz.com integration

• Multi-product decisioning

• Full front line screen delivery

• Attrition scores by customer

• Recovery scores

• Automated, event-based campaigns

• Automated prospect list delivery (“My Sales”)

• “Optimal” strategy selection by customer (longer term)

In Pilot/Develop-

ment

In Pilot/Develop-

ment

In PlaceIn Place

Substantial growth opportunities in Personal

Existing revenue $2.6b

10

0

Customer #’s (m)

40% 50%*

Peer Average

Share of Customer Wallet

Potential revenue $650m

* Average share of wallet for CBA, NAB, SGB, WBC - source: Roy Morgan Research

System Growth

• Underlying credit growth ~ 8-10% pa

Market Share

• Product businesses growing customer numbers and market share

• Customer #’s increasing by 1.0m - translates to $650m in additional revenue pa

Increase Wallet

• Customer businesses deepening wallet share

• $650m revenue gain by matching our peers

– Created customer businesses

- Sales programs- CRM

4

5

Potential revenue $650m

Total potential revenue growth - $1.5b

7.3

Increased wallet on higher share

$160m

In Corporate, our main focus is on growing total wallet share

Grow wallet share

• New high value products

• New delivery mechanisms

• Improved cross-sell

• Increased sale of 3rd party products

FY 2000 revenue $1.7b

~5,000

0

# Customers

~20%* ~35%

Share of Customer Wallet

Potentialrevenue ~$1.3b

Focus on deeperpenetration of existing

CFS customer base

Total walletof ANZ customer

base ~$8.5b

* source: internal estimate

Our breakout approach is differentiating us

Strategy

Staff

Customers

eTransformation

Risk

• Specialised businesses - open architecture• First class execution (no surprises)

• 91% of managers on individual contracts• 12% rise in staff satisfaction• Breakout cultural change program

• Establishment of Customer Charter, Customer Advocate and distinctive customer and community initiatives

• Leading cost income ratio• Highest internet banking penetration

• Leading financial disclosure & transparency• EVA embedded in culture

Developing a breakout performance culture

Average

SuperiorDistinctive

* Benchmark - 33 Australasian companies surveyed over 1999-2000

Coordination and control

Distinctive (Top 10%)

Superior (Top 25%)

Average

Motivation+

where we are where we want to be

Targets/goals

Consequencemanagement

Mission/aspiration

Organisationalapproach

BU Performance feedback

Financial OperationalPeople Rewards &recognition

Opport-unities

Values

ANZ’s aspiration

A high performing company, exceeding expectations• Revenue growth• Cost leadership • Risk mitigation• EPS• ROE

Positioned in growth markets

• Actively managed portfolio

• Annual investment in growth ideas

• Higher than peer revenue growth

More dynamic than competitors• High P/E rating• Performance culture• Lean and agile• The e-bank with a human face• A breakout mentality

Grow

Breakout

AND

Perform

Summary

• We are performing well

• Cost management momentum – eTransformation has just begun…

• Risk reduction continues

• Our new strategy is creating value and better positioning us for growth

• We are differentiating ourselves through our Breakout program

We are on track

to achieve

our goals

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]

Economic outlook - cautiously optimistic

0

1

2

3

4

5

6

7

Year ended, excluding dwellings and Olympics

Real GDP Growth incl. and excl. housing and Olympics (est)

%

-1.4-1.2-1.0-0.8-0.6-0.4-0.20.00.20.40.60.81.01.21.4

90 91 92 93 94 95 96 97 98 99 00 01

Index

Australia

US

Financial conditions in Australia more expansionary than US

Contractionary

Expansionary

• Retail sales continue to rebound

• Housing recovery continues

• But unemployment is still rising

• Forecast GDP growth for 2001 calendar year - 2%, rising to 4% in 2002

• Unlike the US, Australia did not experience contractionary financial conditions

• With domestic growth indicators strengthening, and early signs of rising inflation, the interest rate cycle has likely bottomed

Copy of presentation available on

www.anz.com

breakout perform grow and breakout presentation to deutsche bank asia pacific financial institutions...

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