Download - Australia and New Zealand Banking Group Limited Background Briefing on New Zealand Tracking Stock
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Australia and New Zealand Banking Group Limited
Background Briefing on New Zealand Tracking Stock
David WardGeneral Manager
Office of the Chief Executive Officer
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Presentation
Strategic Direction Business Strategies Current Performance Proposed Tracking Stock Issue
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ANZ: Financial Parameters
Assets A$149 billion Shareholder Equity A$9.2 billion Return on Equity 17.3% 30,000 staff Return on Risk Weighted Assets 1.2% Top 100 bank globally on Assets, profits and capital Market Capitalisation of A$16 billion (Eighth largest
company in Australia)
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ANZ Profile
$100B assets Full service 14% market share 4th largest bank 3 m customers Leader in Business Banking, Asset Finance,
Credit Cards Bank of the Year - 1997 and 1998
$20B assets Full service 18% market share 4th largest bank 1 m customers Leader in Business Banking, Asset Finance
$30B assets Niche commercial banking Widest Represented Australian Bank Leading foreign Bank in South Asia/Middle East
(Grindlays)
Australia
New Zealand
International
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Span of International Operations
Australia • Since 1835
• 67% of profit
UK & Europe• 3% of profit
Asia Pacific• Pacific Since 1880
• Asia Since 1970• 5% of profit
New Zealand• Since 1840
• 14% of profit
South Asia/Middle East
ANZ Grindlays• Since 1854• 7% of profit
Americas• 4% of profit
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Business Unit Parameters
Profit Assets $m $b
Personal* 288 60
Corporate* 244 64
International 115 19
Centre 69 6___ ___
Total 716 148
* Retail Asset Finance in Personal March 1999
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Strategic Direction
Rebalance business mix largely organically
Focus on four strategic businesses accelerate growth in personal build on strong position in corporate simplify and focus International build leading presence in e-Commerce
Transform management process to ensure execution and delivery
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Optimising the Business MixReturn
Risk
FX
Retail FM
Personal Banking
Major Corporate
Capital Markets
Proprietary Trading
Trade
Institutional Stockbroking
International Corporate
Target
Target
Business BankingAsset Finance
International Consumer
Structured Finance
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Business Strategies
Accelerate growth in personal financial services particularly in funds management by harnessing our distribution power
Build on our strength in the corporate sector, by growing services business, whilst reducing risk and improving return on assets
Simplify our international network to improve return, by focusing on Asia and the Pacific, by reducing risk and by investing in growth franchises
Swiftly build a leading e-Commerce presence, creating the banking platform of the future using internet technology
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Total Market Share
Gains in Market Share
Share of Credit Cards
10
12
14
16
18
20 %
ANZ
NABCBA
WBC
10
11
12
13
14
Jun-94 Feb-96 Oct-97 Jun-99
Share of Housing Lending%
10
12
14
16
18
20
Jun-94 Feb-96 Oct-97 Jun-99
% Share of Business Lending %
19931988 1998
15
20
25
30
Jun-94 Feb-96 Oct-97 Jun-99
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ANZ Has a High Quality Personal Customer Base
0 10 20 30 40 50 60 70 80 90 100
Industry Ave
ANZ
20 100 200 500 100060
Total Relationships (%)
Wealth Bands
Source: Roy Morgan 1998
Other
$(000)
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The Opportunity with Australian Customers
Source: Roy Morgan 98
All ANZ Customers
High Value to ANZ
High Value to Industry
but limited ANZ business
True Retail Market
CustomerBase 2.7m
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Banking Makes up Roughly Half of Financial Services
Estimated Value of An Australian Retail Customer (A$ Present Value)
Risk/Wealth Protection
Traditional Banking
$6000 - 7000
Investment
General Insurance & Traditional Life
Non-traditional products
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A New Dedicated Business for Premier Customers
Premier Financial Package Dedicated Managers Premier Suites Dedicated Service Officers
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Build on Leading Corporate Position to Improve Returns
Market Leader in Business Banking Auto Finance Foreign Exchange
Investment Banking restructured Need to
Diversify Revenue Sources Reduce Risk Improve EVA Improve ROA
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Business Banking Australia: Risks reduced Shareholder Value Increased
Risk Profile(% of Lending Assets)
Risk Level
1996 1999 1H
High
Low
EVA by customer decile
1997 1999
Cus
tom
er D
ecile
s
0 100-50 50
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Investment Banking Activities Restructured
FX Money Trading Revenues( $m)
Only 1 negative week
050
100150200250300350
1-Apr-97 1-Aug-97 1-Dec-97 1-Apr-98 1-Aug-98 1-Dec-98 1-Apr-99
Cum
ulat
ive
No1 in FX in Australia (2nd year, BRW)Top 5 Asian FX house (Asia Money)
Restructured to focus on domestic markets and core productsWithdrawn from non core activities such as London Capital MarketsReduction in risk levels and costs
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Simplify and Focus International
Grindlays Leading foreign bank
• 114 branches• 1-10% market share Asia
•11 “footprint” branches•Trade and corporate
•negligible market share
Pacific Islands Leading bank• 36 branches• 20-60%share
Latin AmericaRepresntativeOffices Closed
New YorkMoney Centre
UK EuropeMoney Centre & Private Banking
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Simplify and Focus International
Re-balance business mix towards consumerMaintain strong lending policies
Target Top 2-3 foreign or Top 5 local positionLeverage strong positions and global
capabilitiesDeal with minor positions
Develop Asia-Pacific, e.g. IndonesiaPursue acquisitions only where it creates a
desired position, and can be managed
Continue to Reduce Risk
Target Fewer, Deeper
Positions
Create Future Growth
Platforms
Imperatives for International
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Strategies To build a strong e-financial
services capability with rapid growth in registered users, on-line sales and site traffic
To create a powerful set of new customer acquisition channels
To develop new e-Commerce businesses, such as the E*Trade alliance, Auto Group
Building a Leading e-Commerce Position
Internet Banking Registrations
0
10000
20000
30000
40000
Oct Nov Dec Jan Feb Mar Apr May Jun Jul
50000
60000
Aug
70000
1998 1999
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Transform to new business• Personalised• Holistic• Lifestyle aggregated
Customer Value
Visitor
“Sticky” Customer
Entry Level AdvancedFunctional Richness
Transact• Account Transfer• Applications• Transactions
Interact•Interactivity•EnquiryInform
• Basic presence• Brochureware
Building a Leading e-Commerce Position
ANZ
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Execution is the Key
Difficult to differentiate strategically Aggressive targets to stimulate innovation Organic emphasis for the next 2/3 years New performance management discipline Real differentiation is through execution
Shareholder Performance Customer Experience Building Talent
Out-delivering the competition is fundamental to
success
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Organising to Deliver
Group Functions
Finance Peter
Marriott
StrategyAlison
Watkins
PeopleElizabeth
Proust
Business Groups
PersonalPeter Hawkins
CorporateRoger Davis
InternationalElmer Funke
Kupper
TechnologyDavid Boyles
CEOJohn McFarlane
GovernanceActivities
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Presentation
Strategic Direction Business Strategies Current Performance Proposed Tracking Stock Issue
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Momentum Evident in First Half
625550
716
Australia
New Zealand
International
$M
373446 480
70
97102182
134
0
100
200
300
400
500
600
700
800
Mar-98 Sep-98 Mar-99
Profit after Tax
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Cost Income Ratio
50
55
60
65
70
75
90 93 96 1H99
%
11.5
6.15.8
Mar-99Sept-98Sep-97
US$b
FX
Interest
Equities
A$m
Mar-99Sept-98Mar-98
Risk and Costs ReducedUS$b
Asian Exposure
Market Risk (Var)
A$m
6
10
26
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Relative Share Price Performance
60708090
100110120130140150160
01-Oct-98 22-Dec-98 18-Mar-99 10-Jun-99
ANZ
NAB
WBC
CBA
Index 100 - 1 October 1998
31-Aug-99
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Second Half 1999
Second half broadly in line with market expectations Income up
flat net interest income growth in non-interest income
Costs stable Provisioning stable Cost income ratio down
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Analyst’s Comments Alastair Hunter, J B Were
Post FY98 ResultGlobal concerns overshadow a strong domestic performance... The reduction in the risk profile will add value to the shareholders...
Post HY99 ResultFor further share price appreciation we will need to see:continued improvement in sentiment towards Asia, positive revisions to earnings forecasts, implementation of the strategic plan, improved confidence in management and a regeared balance sheet.
Post Strategy SeminarANZ has a clear vision and strategy in place. The key issue for investors now becomes confidence in management to execute the strategy. We are warming to the execution capability of ANZ….
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Analyst’s CommentsMike Macrow, Merrill Lynch
Post FY98 ResultOur reduction in opinion reflects the higher asset quality risk inherent in a morecommercially oriented bank
Post HY99 ResultThe underlying result of $1.3b achieved our expectations. While ANZ has partially recovered from a chronic oversold position, some work is required to take the next step upwards.
Post Strategy SeminarANZ share price has underperformed CBA share price 30% and NAB by 15%since December 1996. Cost cutting and rationalisation of below hurdle activitiessuggest a price catch up is likely.
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ANZ Vision
ANZ is a vibrant financial services company that delivers:
Superior performance and value for our shareholders
An experience which delights our customers
An environment where our people excel
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Presentation
Strategic Direction Business Strategies Current Performance Proposed Tracking Stock Issue
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ANZ Capital Management Principles
Rating Agenciesie, AA Status
Reduce Cost of Capital
Manage ThroughThe Cycle
Economic CapitalInner Tier 1
Equals Economic Capital
Risk Adjusted Tier 1 RatioComparable to PeersCapital
Structure
Peers
CycleShareholders
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Align shareholder base with location of assets/profits Increase ANZ Brand awareness Cost Efficient form of high “Equity Credit” Capital Diversify Shareholder Base/Reduce Cost of Capital Opportunity for Customers and Staff to own their Bank Increases ANZ weighting in the NZSE 40
Rationale for Tracking Stock
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ANZ New Zealand Tracking Stock
An Investment in ANZ Group• Denominated in NZ$• Dividends in NZ$ equal to
ANZ’s dividend• Imputation Credits
Attached
• Ability to exchange to ANZ Shares
• Mandatory Exchange after 30 years
• Non Voting
Main Features
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Exchange Mechanism
Both parties have the ability to trigger exchange at any time after initial period
Slight discount applies if initiated by investor Investors can buy or sell the securities at any stage on the NZSE
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An Investment in ANZ Group Key Differences Between This Security and ANZ Ordinary
Shares Is a Hybrid Security Expect New Zealand Investors to Receive Imputation Credits
The Exchange Mechanism plus same Dividend Yield ensures price will track ANZ head shares
Increases ANZ weighting in NZSE 40
ANZ New Zealand Tracking Stock
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New Zealand Tracking Stock
Timing : Q1 2000, subject to regulatory approvals
Access : Via Lead Managers, Usual Broker or ANZ Network
Size : Sufficient to ensure liquidity
Regulatory Approvals: Proceeding well
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Questions