investor discussion pack - rns submit · investor discussion pack. 1 snapshot • proud banking...
TRANSCRIPT
Mike Smith – Chief Executive Officer
November 2009
Investor Discussion Pack
1
Snapshot
• Proud banking heritage spanning 170 years
• A top 10 listed company on the ASX (market cap ˜A$60b), with ˜390,000 shareholders
• Largest listed company in New Zealand, largest Australian bank in Asia and a leading bank
in the Pacific
• AA rated bank on S&P long term ratings
• Well capitalised with a strong liquidity position
• Over 200 years of banking experience on the management board
• ~37,000 Full Time Equivalent employees (FTE)
Progress report on “Our journey to becoming a Super Regional bank”
2
• Institutional back to system
• Restore “jaws” –increase revenue faster than costs
• Drive Asia profit
• Capture existing opportunities
• Strategic cost management
RESTORE
OUT PERFORM
TRANSFORM
• Quality on par with global leaders in our markets
• Best of breed customer experience
• In-fill mergers and acquisitions in Asia (core geographies)
• Unlock the value of our franchise
Create a leading Super Regional bank
Global quality, regional focus
1 to 2 years 2 to 5 years 5+ years
3
1. Post restructure September 2009 Asia/Pacific also includes Europe & America 2. Excludes group centre, 2% in 2007
Where our profits will come from …Stronger Asia-Pacific1 contribution will result in more balanced profit profile
ANZ20072
ANZStrategic Direction
Australia 69% of all ANZ profit
Australia ~60% of all ANZ profit
NZ22%
NZ~20%
Asia/Pacific1
~20%
Asia/Pacific7%
What will drive growth
• Australia – opportunity to deepen customer
relationships (improving cross sell), both retail
and commercial
• New Zealand – maintaining existing strong
position, better harness cost synergies
• Asia Pacific - Main focus is on organic growth supplemented with in-fill mergers and acquisitions
• Institutional – restructure is driving improved results, focussing on core strengths in traditional banking
Super Regional strategy will drive increased earnings diversification
4
Focused approach to the Asia region
Strategic Imperative
Top 4 foreign bank
• Greater China
• India
Franchise Significant
Major bank (top 4)• Vietnam, Malaysia, Indonesia
Network Enhancement
Network clients, product and
liquidity hubs
• Singapore, Tokyo, Hong Kong
Next WaveHold position in short-term
• Cambodia, Laos,
Philippines, Korea, Thailand
Customer Deposits by geography (A$b)
Sep 08 Mar 09 Sep 09 Sep 08 Mar 09 Sep 09 Sep 08 Mar 09 Sep 09 Sep 08 Mar 09 Sep 09
133147 153
50 49 49
2330
30
205
226233
Retail Commercial Institutional Wealth
5
Australia New Zealand Asia Pacific, Europe & America
Total Group
15.7%
4.1%
(0.7%)
(0.4%) 35.3%
2.9%
13.9%
3.0%
Net loans and advances1 by geography (A$b)
Sep 08 Mar 09 Sep 09 Sep 08 Mar 09 Sep 09 Sep 08 Mar 09 Sep 09 Sep 08 Mar 09 Sep 09
246 252 247
82 82 80
21 23 19
350 357 346
Retail Commercial Institutional Other
6
Australia New Zealand Asia Pacific, Europe & America
Total Group
0.3%
(2.1%)
(2.9%)
(2.5%)(11.3%)
(16.2%)
(1.2%)
(3.1%)
1. Includes acceptances
Net Loans and Advances by product line (A$b)
Sep 2009
144
185
17
Cards & Other
Mortgages
Commercial
Australia NZ & Offshore
142
43
13
4
Mortgages Cards & Other
7
Group Net loans and advances1 (A$b) Retail NLA‟s1 (A$b)
Commercial / Institutional NLA‟s1 (A$b)
346155
47
Australia NZ & Offshore
4921
18
14
1511
16
Institutional / Large Corporate Commercial (incl. SME)
Asset Finance Rural / Regional Commercial
93
51
1. Includes acceptances. 2. Includes Wealth.
2
The Balance Sheet –Capital, Funding, Liquidity,
Provision coverage
Funding composition improved
Sep 07 Mar 08 Sep 08 Mar 09 Sep 09
0.73%0.94%
1.13%1.06%
1.31%
• Tier 1 Capital ratio increased to 10.6% (pro forma post RBS assets and ING is 9.5%)
• Pro forma Core Tier-1 capital ratio increased to 7.9% (10.3% FSA)
• Total Provision coverage of 1.97% of Credit RWAs
• Customer funding increased to 55%
• Short term wholesale funding further reduced to 17%
• Raised $26bn of new wholesale term funding
• Prime Liquidity portfolio maintained >$60bn, provides in excess of 12 months cover for offshore wholesale debt
• ANZ‟s strong credit ratings (AA, S&P/Aa1 Moody‟s) maintained throughout the GFC.
Strong Balance Sheet
Sep-08 Mar-09 Sep-09 Sep 09
pro
forma
FSA Sep
09 pro
forma
5.9% 6.4%9.0% 7.9%
10.3%1.8% 1.8%
1.6%1.6%
1.6%
Core Tier 1Hybrid Tier 1
9
Strong Collective Provision balance
Strong capital position
Category Funding composition
Volume change
Sep 08 Sep 09 AUD bn
Customer 50% 55% 27
Term w‟sale 21% 20% (2)
Equity & hybrids 7% 8% 5
Short term w‟sale 22% 17% (20)
7.7%
11.9%
9.5%10.6%
8.2%
11
1. Includes acquisition of RBS assets and INGA & ING (NZ) Joint venture
Capital position has been significantly strengthened throughout the year notwithstanding recent M&A activities
10
Capital Management Agenda
Maintain strong capital profile and buffers:
• Future business opportunities
• Risk of economic shocks despite improving global economic outlook
• Developing global regulatory environment requiring higher quantity and improved quality of capital
Modest reliance on hybrid capital (~15% Tier-1) provides scope to raise hybrid capital in a cost effective manner
Target operating range
Sep-08 Mar-09 Sep-09 Sep-09 pro forma1
FSA Sep-09 pro forma1
OSFI Sep-09 pro forma1
Core Tier 12 6.0% - 6.5% 5.9% 6.4% 9.0% 7.9% 10.3% 10.1%
Tier 1 7.5% - 8.0% 7.7% 8.2% 10.6% 9.5% 11.9% 11.8%
Total Capital 10.5%+ 11.1% 11.0% 13.7% 12.4% 14.6% 14.8%
Strengthening capital position
Capital positioned has been strengthened via:
• 3 ordinary equity raisings totalling $5.7bn:
• Institutional Share Placement $2.5bn
• Share Purchase Plan $2.2bn
• Final 2008 DRP underwrite $1.0bn
• Organic capital generation of $1.3bn
• RWA reduction
Even after capital committed to the RBS assets and the INGJV, capital position remains strong
1. Includes acquisition of RBS assets and INGA & ING (NZ) Joint venture. 2 ‘Core Tier 1’ = Tier 1 excluding hybrid Tier 1 instruments
Sep-08 NPAT Dividend/DRP
RWA movement
Other Ord Share Issuance
Prudential changes
Hybrid Call Sep-09 RBS acquisition
ING JV acquisition
Sep-09 Pro-forma
Sep-09 FSA Pro-forma
7.71
10.56
9.46
11.9
1.06 (0.59)0.54 (0.30)
2.070.29 (0.22)
(0.34)(0.76)
Strong Tier-1 position, ANZ well placed for growth opportunities
11
Capital Position (Tier-1 Ratio)
285bp
1. Includes Associates, Net Deferred Tax Assets, Pensions, Capitalised Costs, MTM gains on own name included in profit, FX, non-credit RWA growth
Tier-1 management target range 7.5 and 8.0
175bp
1
Portfolio growth & mix: 36bp increaseRisk migration: 34bp reduction Portfolio data review: 52bp increase
Sep-08 NPAT Dividend/DRP
RWA movement
Other Ord Share Issuance
Prudential changes
Sep-09 RBS acquisition
ING JV acquisition
Sep-09 Pro-forma
Sep-09 FSA Pro-forma
5.91
8.96
7.91
10.3
1.06 (0.59)0.45 (0.23)
2.070.29 (0.29)
(0.76)
Core Tier-1 position also strong
12
Capital Position (Core Tier-1 Ratio)
305bp
1. includes Associates, Net Deferred Tax Assets, Pensions, Capitalised Costs, MTM gains on own name included in profit, FX, non-credit RWA growth
Core Tier-1 operating range between 6.0 and 6.5
200bp
1
Portfolio growth & mix: 31bp increaseRisk migration: 30bp reduction Portfolio data review: 44bp increase
Strategic approach to increasing capital throughout the Global Financial Crisis
13
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
1H08 2H08 1H09 2H09 2H09 Total
Core
DRP1
DRP1
DRP1
Hybrid
Hybrid net issue
Hybrid conversion
Hybrid redemption
Share purchase
plan
Institutionalplacement
1. Underwritten DRP
Capital Raisings 2008-2009A$b
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
APRA
FSA
Tier 1 and Core Tier 1 ratios are higher under the FSA calculation
Capital differences arise principally because FSA:
Requires no deduction for net accrued dividends
Requires no deduction for certain capitalised expenses and deferred tax assets
Calculates expected loss vs provisions on a gross basis before tax
Has a more favourable treatment for Associate investments (including ING JV), and insurance and funds management subsidiaries
RWA differences arise principally due to:
APRA setting a 20% floor on the downturn LGD for mortgages (as compared with the 10% minimum set by the FSA)
FSA not requiring Interest Rate Risk in the Banking Book to be a Pillar I requirement
Differences in the treatment of specialised property lending, equity and margin lending products
14
Capital
RWA
Tier 1 Ratio
15
Reconciliation of ANZ‟s capital position to FSA Basel II guidelines (based upon INGJV as a subsidiary)
APRA regulations are more conservative than current FSA regulations, in that APRA requires:
• A 20% Loss Given Default floor for mortgages (FSA: 10% floor)
• Interest Rate Risk in the Banking Book (IRRBB) to be included in Pillar I risks (FSA: Pillar II)
• Capital deductions for investments in funds management subsidiaries (FSA: RWA assets)
• Insurance subsidiaries to be a mixture of Tier 1 and Tier 2 deductions (FSA: transitional regulations permit Total Capital deductions under certain circumstances)
• Expected dividend payments (net of dividend reinvestments) to be deducted from Tier-1 (FSA: no deduction)
• Collective Provision to be net of tax when calculating EL v CP deduction (FSA: tax effect difference between EL and CP on gross basis)
• Associates to be a mixture of Tier-1 and Tier-2 deduction (FSA: permits proportional consolidation under certain circumstances)
Core Tier-1 (%) Tier-1 (%) Total Capital (%)
Sep-09 pro forma2 under APRA standards 7.9 9.5 12.4
RWA (Mortgages, IRRBB) 0.8 1.0 1.2
ING Funds Management and Life Co businesses 0.4 0.4 0.1
Final dividend accrued net of DRP & BOP 0.4 0.4 0.4
Expected Losses v Collective Provision 0.2 0.2 0.2
Insurance subsidiaries 0.2 0.2 -
Investment in Associates 0.2 0.2 0.2
Other1 0.2 0.0 0.1
Total adjustments 2.4 2.4 2.2
Sep-09 pro forma2 FSA equivalent ratio 10.3 11.9 14.6
1. Other includes Net Deferred Tax Assets, Capitalised Expenses, Deferred Income and roundings 2. Includes acquisition of RBS assets and INGA & ING (NZ) Joint venture
0
5
10
15
20
25
FY10 FY11 FY12 FY13 FY14 >FY14
Senior Term Subordinated
Govt. Guaranteed
Improved funding metrics although term funding costs remain elevated
Sep-08 Mar-09 Sep-09
7% 7% 8%
50% 54% 55%
14% 15% 15%7% 6% 5%22% 18% 17%
Hybrids & SHE Total customer fundingTerm debt residual >1yr Term debt residual <1yrShort term wholesale
Funding composition improved
Term debt maturity profile ($bn)
Customer deposit
volumes increasing
Short-term wholesale
funding reducing
● Reliance on short term wholesale funding further reduced to 17%
● Funding from equity, customer and wholesale debt (with remaining maturity >1yr) increased to 78% of all funded assets
2
● ~$26bn of wholesale term debt issued in FY09
● Maintained access to all major global funding markets
● Average tenor of new term issuance in FY09 was 3.9 years
● Funding costs remain elevated by historical standards
● Majority of FY09 issuance was in Government Guaranteed (GG) format. Going forward we expect most new issuance to be non-guaranteed
● Forward maturities and required issuance volumes consistent with 2009 and remain manageable
● ANZ continues to build and maintain strong, long-term relationships with global wholesale debt investors
1. Represents funding issued by Australia or New Zealand in offshore wholesale markets 2: including all liquid assets
Only 3% of total funding is sourced from offshore1
short term markets
16
Mar-08 Sep-08 Mar-09 Sep-09
21.534.7
60.1 60.20.8
3.2
7.4 7.8
Prime Liquidity Portfolio Other eligible securitiesOther cash & liquid assets
● Prime liquid asset portfolio maintained at $60bn
● Covers >12mth offshore w‟sale funding maturities
● Prime Liquidity Portfolio and „other eligible securities‟ are cash deposits, and securities eligible for repo, with a major central bank
● Strong credit quality, 99% portfolio AA- or better
● Well diversified by geography & counterparty
● Additional liquid assets in the form of cash at banks, interbank lending & securities in trading and investment portfolios (not included in the prime liquidity portfolio)
Long Term Counterparty Credit
Rating1
Market Value2
AUD $bn
Cumulative % of
portfolioNo. of parties
AAA 43.8 73% 51
AA+ 3 78% 4
AA 10.8 96% 11
AA- 1.9 99% 9
A+ 0.3 99% 5
A 0.3 100% 4
Total 60.2 84
Liquidity position strengthened further
31% 41%
15%
3%
3%
2%
5%
Australia
Internal RMBS (Aus)
New Zealand
Internal RMBS (NZ)
Asia
United States
UK
17
Liquid asset position remains strong ($bn) Portfolio diversified by geography
Strong liquidity portfolio credit quality (Sep-09)
1. Where available, based on Standard & Poor’s long-term credit ratings 2. Market Value net of the repo discount (initial margin) applied by the relevant central bank
Mar 09 & Sep 09 positions support >12 months offshore wholesale funding maturities
Managing the Group‟s earnings denominated in non-AUD currencies
● NZD is currently the most significant single currency revenue exposure
● USD and Asian local currency revenues are increasing as a proportion of total group revenue
● FY09 revenues have been translated at an average AUD/USD rate of 0.73
● The majority of ANZ‟s non-NZD foreign currency revenue streams have a high correlation to AUD/USD
● A combination of macro and specific currency hedges against the risk of adverse currency movements may be considered appropriate, however aside from New Zealand no hedges are currently in place
● AUD strength against the USD presents a significant headwind for future earnings growth; potential FY10 negative EPS impact of 4-5% (based on current exchange rates)
68%
15%
17%
AUD NZD USD & Others
● FY09 NZD earnings were hedged at 1.19
● Future year hedges cover anticipated revenue streams.
● Partial hedges in place for FY10 & FY11 @ 1.19 to 1.20
18
FY09 reported profit before tax by currency
NZD currency hedging position
AUSTRALIA, NZ & ASIA –ECONOMIC TRENDS
20
Source - ANZ economics team estimates. Based on 30 September bank year.
Australia New Zealand
2008 2009 2010 2011 2008 2009 2010 2011
GDP 3.2 0.6 2.6 3.1 1.5 -2.0 1.9 2.9
Inflation 4.2 2.1 2.21 2.32 5.1 1.7 2.1 3.1
Unemployment 4.2 5.8 6.6 5.4 4.3 6.3 7.0 6.7
Current A/C (% GDP) -5.7 -3.4 -4.4 -4.4 -8.6 -4.2 -5.5 -5.4
Cash rate 7.00 3.00 4.00 4.75 7.50 2.50 3.00 5.50
10 year bonds 5.40 5.37 5.45 5.80 5.7 5.6 6.0 6.6
AUD/USD 0.79 0.88 0.92 0.81 N/A N/A N/A N/A
AUD/NZD 1.18 1.22 1.296 1.246 N/A N/A N/A N/A
Credit 10.3 2.0 4.2 5.3 10.9 3.6 2.9 5.3
- Housing 8.9 7.5 6.5 5.6 7.6 3.6 3.0 5.1
- Business 13.9 -3.6 0.6 4.9 16.5 4.0 2.8 5.9
- Other 2.0 -5.6 6.4 5.7 8.9 -1.5 2.0 5.1
Summary of forecasts: Australia and New Zealand
Australia one of very few developed economies to avoid recession
Australia has had a much softer landing than our developed economy counterparts
• The domestic economy/financial system well placed pre-downturn
• Significant, pre-emptive & effective policy action
• Strong population growth
• China rebound/commodities
Recent data encouraging, but short-term headwinds
• Household income expected to fall in 09/10 as stimulus wanes
• Drag from earlier commodity price bust
• Rising interest rates
• Housing – transition from first home buyers, rising interest rates?
• Commercial property – prices falling, potential for vacancies to rise
• Rising unemployment albeit much lower levels than anticipated
21
22
Retail trade
Recent data flow has been encouraging
17.5
18.0
18.5
19.0
19.5
20.0
20.5
Jan-08 Jul-08 Jan-09 Jul-09
$bn, sa
Consumer sentiment
Housing finance (ex-refin.)
Business confidence
150160170180190200210220230
Jan-08 Jul-08 Jan-09 Jul-09
$ billion
annualised
80859095
100105110115120125
Jan-08 Jul-08 Jan-09 Jul-09
index
-35-30-25-20-15-10-505
101520
Jan-08 Jul-08 Jan-09 Jul-09
index
23
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
08 09 10
quarterly % change
Household consumption
Business Investment
Dwelling investment
Real GDP
Sources: Bloomberg, Datastream and ANZ
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
08 09 10
quarterly % change
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
07 08 09 10
quarterly % change
-1.0
-0.5
0.0
0.5
1.0
1.5
08 09 10
quarterly % change
But economy to slow again before renewed life later in 2010
24
Australian growth likely to return to trend growth by 2011
GDP growth
Sources: ABS and ANZ
Unemployment rate
-2
-1
0
1
2
3
4
5
6
91 93 95 97 99 01 03 05 07 09 11
% annual change Forecasts
Trend
3
4
5
6
7
8
9
10
11
12
92 95 98 01 04 07 10 13
% Forecasts
25
Sources: ABS, ANZ
The labour market experience through the downturn has been comparatively mild so far
Employment through cyclical downturns - Total employment indexed to „peak‟
90
92
94
96
98
100
102
104
106
1 4 7 10 13 16 19 22 25 28 31 34
Months from 'peak'
Index
Early 1980s (Jan-82)
Early 1990s (Jul-90)
Early 2000s (Aug-00)
Current (Oct-08)
4.0
4.5
5.0
5.5
6.0
-10
-5
0
5
10
15
20
25
30
35
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09
Monthly change (trend, 000s) %Unemployment rate
26
-10
-5
0
5
10
15
20
25
30
35
40
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09
Monthly change (trend, 000s) Labour force and Employment
Unemployment
Labour force
Employment
Encouraging signs in labour market
27
…but hours worked has fallen as employers resist layoffs, therefore employment rebound could be muted
Employment vs. hours worked
Sources: ANZ, ABS
-4
-2
0
2
4
6
86 87 89 90 91 93 94 95 97 98 99 01 02 03 05 06 07 09
YoY % change
Employment - persons
hours worked
New Zealand economy has emerged from recession and is now gaining forward momentum
● The New Zealand economy is underpinned by a sound macroeconomic framework
An independent inflation targeting central bank, freely floating exchange rate and a transparent fiscal policy set over a medium term timeframe are the main pillars of the framework
● The recession experienced since early 2008 was the longest since the 1970s, reflecting:
The build up of structural imbalances during the previous expansion phase
A correction to the housing market, which started in 2007 and intensified over 2008 and early 2009
Drought conditions, which led to reduced agriculture production in early 2008
A deep global downturn across our major trading partners
● The economy emerged from recession in the second quarter. Forward momentum is building with economic activity set to expand at a modest pace.
● Close attention is now being paid to the composition of growth as the economy rebalances. For a sustained and durable recovery to take hold, it has to be export led. The need for households to rebuild their balance sheet means consumption growth will be subdued.
● New Zealand‟s future is fundamentally linked to the Asian region. Excluding Japan, Asia now accounts for 28 percent of NZ‟s exports. China is now our 3rd largest trading partner, and five of NZ‟s top 10 export destinations are from the region.
28
29
Sources: RBNZ; IMF October 2008 Global Financial Stability Report; RBA; Central Bank of Ireland: ANZ
The New Zealand banking system is sound
0
2
4
6
8
10
12
14
95 97 99 01 03 05 07 09
% of Risk Weighted Assets
Tier 1 capital ratio
Tier 2 capital ratio
Total capital ratio
0
100
200
300
400
500
600
700
800
Latin A
merica
Afr
ica
Mid
dle
East
United S
tate
sFin
land
Port
ugal
Asia
Sw
eden
World
Gre
ece
Austr
iaIt
aly
Japan
Canada
New
Zeala
nd
Germ
any
Austr
alia
Spain
Euro
are
aN
eth
erlands
Fra
nce
Denm
ark
United K
ingdom
Belg
ium
Irela
nd
Icela
nd
Bank debt as % of GDP
New Zealand banks well capitalised Banking sector not highly leveraged compared to other countries
Solid support factors remain and longer-term prospects for New Zealand are good
30
Sources: Statistics NZ, NZ Treasury, Bloomberg, OECD, ANZ
Commodity prices have corrected, but are starting to rebound
Infrastructure spending is also increasing
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
96 97 98 99 00 01 02 03 04 05 06 07 08
NZ Capital stock to NZ GDP
800
900
1,000
1,100
1,200
1,300
86 88 90 92 94 96 98 00 02 04 06 08
50
100
150
200
250IndexIndex
Terms of trade (LHS)
ANZ World Commodity Price Index
Well capitalised banking system
A healthy government balance sheet despite deficits
0
40
80
120
160
200
Austr
alia
Luxem
bourg
New
Zeala
nd
Icela
nd
Denm
ark
K
ore
aIr
ela
nd
Fin
land
Spain
S
weden
Norw
ay
Sw
itzerl
and
Pola
nd
Neth
erl
ands
United K
ingdom
Austr
iaC
anada
Germ
any
Euro
are
aPort
ugal
Hungary
Fra
nce
United S
tate
s
Tota
l O
EC
D
Belg
ium
Gre
ece
Italy
Japan
Gross public debt as % of GDP (2008)
0
2
4
6
8
10
12
14
98 00 02 04 06 08
% of risk weighted assest
Total capital
ratio
Tier 1 capital
Tier 2 capital
ratio
ASEAN 9.9%
Australia 22.4%
UK 4.1%
China 8.1%
Japan 7.8%
US 11.0%
Euro-zone 8.1%
Other 28.7%
New Zealand maintains a diversified export sector, weighted towards agriculture
31
Sources: Statistics NZ, ANZ
Finance &
Business
21.4%
Government
4.9%Electricity,
Gas & Water
1.8%
Wholesale
7.4%
Manufacturing
13.5%
Personal
Services
12.3%
Agriculture
4.8%
Fishing,
Forestry &
Mining 2.2%
Communicatio
n 6.3%
Retail 7.5%
Construction
4.7%
Transport
4.7%
…and by country
GDP composition
Exports ≈ 32% of GDP
Dairy 16.6%
Meat 8.0%
Other Food
7.7%
Forestry & Wood
9.0%
Services 21.9%
Crude 2.7%
Manufacturing
23.2%
Ag & Seafood
8.1%
Exports are diversified by product…
Addressing internal structural imbalances
32
Sources: Statistics NZ, RBNZ, Bloomberg, OECD, ANZ
Large current account deficit High household debt
0
40
80
120
160
200
91 93 95 97 99 01 03 05 07 09
% of disposible income
Household debt to
disposable income
Poor household savings
-16
-12
-8
-4
0
4
8
87 89 91 93 95 97 99 01 03 05 07 09
% of disposible income
Quarterly household
savings rate
-20
-10
0
10
20Ic
ela
nd
Gre
ece
Port
ugal
Spain
New
Zeala
nd
Turk
ey
Irela
nd
Hungary
Pola
nd
Austr
alia
Slo
vak R
epublic
United S
tate
s
Belg
ium
Italy
Czech R
epublic
United K
ingdom
Fra
nce
Tota
l O
ECD
Mexic
o
Kore
a
Euro
are
a
Canada
Denm
ark
Fin
land
Austr
ia
Japan
Germ
any
Sw
eden
Luxem
bourg
Neth
erlands
Sw
itzerl
and
Norw
ay
% of GDP
2008
Excessive reliance on housing
50
60
70
80
79818385878991 9395979901030507
% of total h/hold assets
Housing as a % of total
household assets
40
50
60
70
80
90 92 94 96 98 00 02 04 06 08
Index
NZ TWI
The New Zealand economy is being supported by policy stimulus
33
Sources: Statistics NZ, RBNZ, NZ Treasury, Reuters, ANZ
The Official Cash Rate has been slashed…
0
2
4
6
8
10
00 02 04 06 08 10 12
%
90-day bank bill
Our projections
…and this has flowed though into mortgage rates
20
30
40
50
60
70
-300
-200
-100
0
100
200
300
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09
Basis points
2-yr mortgage rate compared with 2 years prior (LHS)
Fixed mortgages with less than 12-mths until reset (RHS)
NZ$b
The fiscal purse has been opened
-4
-2
0
2
4
97 99 01 03 05 07 09 11 13
% of GDP
Fiscal impulseExpansionary
ContractionaryBudget 2009
forecasts
But a rebounding NZD is still somewhat problematic
The New Zealand economy is now stabilising. Cyclical sectors, such as housing, are strengthening
34
Sources: Statistics NZ, REINZ, ANZ
-40
-20
0
20
40
60
80
88 90 92 94 96 98 00 02 04 06 08
Net %
NBBO own
activity
Confidence picking up Bungy cord for the housing market
2
4
6
8
10
12
91 93 95 97 99 01 03 05 07 09
'000 (s.a.)REINZ house
sales
Financial conditions loosening Less NZ‟ers leaving
-4
-2
0
2
4
6
8
10
90 92 94 96 98 00 02 04 06 08
'000
DeparturesArrivals
Net migration
-4
-2
0
2
4
6
8
96 98 00 02 04 06 08 10
97.8
98.2
98.6
99.0
99.4
99.8
100.2
Annual % change
GDP (LHS)
FCI (adv 10 months,
inverted, RHS)
Index
35
Sources: Statistics NZ, www.interest.co.nz, ANZ
With stabilisation, attention now turns to the quality and durability of the rebound
Need to improve external deficits
-110
-100
-90
-80
-70
-60
-50
-40
-10
-8
-6
-4
-2
0
92 94 96 98 00 02 04 06 08
% of GDP
Annual current account (LHS)
Net International Investment Position (RHS)
% of GDP
Productivity performance needs to arrest its trend decline
0.0
0.5
1.0
1.5
2.0
2.5
3.0
'80-'95 '85-'90 '90-'95 '95-'00 '00-'05 '05-'08
Compound annual growth rate (%)
Labour productivity
A switch in the “mix” of growth is required
80
100
120
140
160
180
200
87 89 91 93 95 97 99 01 03 05 07 09
Index (Jun-87=100)
Non-tradable
sector
Tradable
sector
2
3
4
5
6
7
0 1 2 3 4 5
Interest rate (%) Top retail deposit rate
(across major banks)
Wholesale curve
Years to maturity
Deposit rates highlight the de-leveraging backdrop
36
“Change” is now a key buzzword across the economy
● Developments on a number of fronts include:
A new RBNZ liquidity requirement for NZ registered banks that effectively requires banks to fund 75
percent of their balance sheet from retail deposits or wholesale funding with terms in excess of 1 year.
This is aimed at reducing the vulnerability of the NZ financial system to global shocks.
New rules have been put in place for Non-Bank Deposit Takers that see them come under the greater
prudential focus of the RBNZ.
A Tax Working Group has been set up and is identifying issues that need to be considered when setting
medium-term tax policy. Some of the topics to be considered include: the structure of personal income
tax, GST and capital gains tax.
A review of the Resource Management Act (RMA). The RMA has been singled out as a reason for the lack
of investment in key infrastructure needs across the country due to the time and costs involved.
2025 taskforce has been set up (chaired by former RBNZ Governor Don Brash) to look at the ways and
initiatives that can be put in place to see the economy “catch-up” to Australia by 2025.
Overseas investment rules have been simplified, and the business migration scheme has been revamped
to make investing and attracting business and entrepreneurial migrants easier.
Steps taken to unlock NZ‟s natural resource endowments.
● All of these developments will take time to deliver real-time benefits but the process is underway.
37
Sources: Statistics NZ, Bloomberg, ANZ
Structural rebalancing for NZ is very much linked to the Asia region
0
2
4
6
8
10
89 91 93 95 97 99 01 03 05 07 09
% of total
Merchandise
exports to China
China is already growing in importance as an export market
30
40
50
60
78 82 86 90 94 98 02 06
% of GDP (nominal)
Household
consumption
China has significant room to grow its domestic economy
50
100
150
200
250
00 01 02 03 04 05 06 07 08 09
Index (2000=100)
The rest
Asia (ex
Japan)
Exports to Asia growing fastest
38
Sources: CEIC, ANZ Economics
2007 2008 2009 2010 2011 2012
China 13.0 9.1 8.3 9.5 9.6 9.8
India 9.3 7.5 6.2 7.7 8.4 8.5
NIE's
Hong Kong 6.4 2.6 -2.9 5.1 5.7 5.7
Korea 5.1 2.4 0.0 4.7 3.6 4.3
Singapore 7.8 1.2 -2.0 6.9 4.8 5.1
Taiwan 5.7 0.3 -3.8 4.0 4.3 5.2
ASEAN
Indonesia 6.3 6.1 4.4 5.9 6.0 6.6
Malaysia 6.2 4.7 -2.9 4.4 5.1 6.0
Philippines 7.1 3.9 1.2 4.1 4.6 4.8
Thailand 4.9 2.7 -2.3 4.8 3.6 4.4
Vietnam 8.4 6.3 4.5 6.8 7.1 7.3
Total 10.1 7.0 5.3 7.7 7.9 8.1
Total (ex China & India) 5.9 3.2 -0.2 5.0 4.7 5.3
Asian region - expected to perform better than much of the developed world
• Recovery depends on consumers in the US and Europe
• Asia‟s “supply side,” including the overall health of the banks, is largely intact
39
Fiscal and monetary policy stimulus has gained traction in China
Sources: Bloomberg, Datastream.
0.30
0.55
0.80
1.05
1.30
05 05 06 06 07 07 08 08 09 09
Million Units
Motor vehicle sales
10
20
30
40
50
60
00 01 02 03 04 05 06 07 08 09
0
5
10
15
20
25
30
Steel production (lhs)
Imports of Australianiron ore (rhs)
MT/mt
h
MT/mt
h
Steel production and Australian iron ore imports
40
China is on a very rapid growth path…
Source: BHP
China‟s tiered city structure (2003 and 2025)
2003:
45 tier 1-3 cities
2025:
147 tier 1-3 cities
20 large economic zones
358 cities in total
11 cities ~ 15 million
18 cities ~ 10 million
41
Ongoing urbanisation will be a key driver of growth
30
40
50
60
70
80
90
Europe C & SAmerica
NorthAmerica
Oceania Asia China
2005
2030%
% of population in urban areas
0
100
200
300
400
500
600
700
800
900
1000
1965
1985
2005
2025
0
10
20
30
40
50
60
70
80
90
100Urban Population (LHS)
% Urban (RHS)
million people % urban of total
China‟s projected urban growth
Source: UN, ANZ Economics & Markets Research
42
Korea Japan
India
Australia
China
0
1
2
3
4
5
6
7
8
9
0 5 10 15 20 25 30 35
Tonnes of oil
equivalent
Real GDP (at PPP) per capita (1990 US$)
Prim
ary
energ
y c
onsum
ption p
er
capita
US$000
United States
This will continue to have a profound impact on demand across all commodities
Sources: Groningen Growth and Development Centre Total Economy Database; BP Statistical Review of World Energy (2006); Economics@ANZ.
Primary energy consumption and GDP per capita, 1965-2005
China 2017
AUSTRALIA & NEW ZEALAND MORTGAGE MARKET DATA
44
100
125
150
175
200
225
100
150
200
250
300
350
400
450
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Population growth vs dwelling completions
Annual dwelling completions (RHS)
Annual population gain (LHS)
Population accelerating to record highs while home building slumps towards record lows
„000 „000
Sources: ABS, ANZ Economics and Markets Research
2.4
2.5
2.6
2.7
2.8
90 92 94 96 98 00 02 04 06 08 10 12 14
Number persons per household
assuming constant headship rates
by age
45
Demographic pressure to reduce persons per household
Persons per household
Sources: ABS, ANZ Economics and Markets Research
2012 – 9.1 million houses
2012 – would require 375K extra homes to meet demographic demand
46
Housing market balance: Australia
Shortage
Underlying demand
Surplus
Completions
Housing demand/supply imbalance remains
„000
Sources: ABS, ANZ Economics and Markets Research
-100
-50
0
50
100
150
200
250
300
350
400
450
500
550
600
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
47
SA WA Tas
0
5
10
15
20
25
30
35
40
45
50
55
60
65
NSW Vic Qld
Pent-up demand is rising in all states, most significant in New South Wales
Pent-up housing demand by state
Sources: ABS, ANZ Economics and Markets Research
monthsproduction
2009
2011
2009
2011
2009
2011
20092011 2009
2011
2009
2011
48
Sources: Economics@ANZ; REIA
4.6
4.2
4.2
3.9
4.1
5.1
6
4.9
6.9
5.4
6.7
3.6
0 5 10 15 20
Hobart
Brisbane
Adelaide
Perth
Melbourne
Sydney
ABSaveragerents
Residex"Advertised" rents
%p.a.0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
80 84 88 92 96 00 04 08
%; 4 qtr ma
National rental vacancy rate House rents
The supply imbalance has prompted the rental market to tighten and rents to rise sharply
49
Prerequisites for a solid housing upturn are in place
• Critical housing shortage
• Improved buyer sentiment
• Rising prices
• Rising rents
Tight rental markets pushing rents sharply higher
Inadequate building will place further upward pressure on rents
Good affordability conditions
But
• Rising mortgage rates from early 2010 will create significant headwinds…
• …as will the exit of first homebuyers
• Substantial roadblocks to supply
Real rents
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
90 92 94 96 98 00 02 04 06 08
annual % change
Sources: ABS, ANZ Economics and Markets Research
50
100
150
200
250
300
350
400
450
500
550
600
650
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
$000 Sydney
(5.9%*)
Melb.
(8.4%*)
Bris.
(5.6%*)
Perth
(4.4%*)
Hobart
(5.4%*)
Adel.(3.7%*)
50
Sources: ABS, ANZ Economics; *year to Sep 2009
Australia - median house price by city
House prices softened but did not fall appreciably
51
Recovery in dwelling prices has been broadly-based
Sources: RP Data, Economics@ANZ
Australian dwelling prices
90
92
94
96
98
100
102
104
106
08 09
index Jan 2007=100
Top 20%
(+8.2%)
Bottom 20%
(+7.5%)
Middle 60%
(+8.2%)*
* year to date
52
Sources: ABS, ANZ Economics
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
02 03 04 05 06 07 08 09
no./month
Housing finance commitments (excl. refin.)
First homebuyer
20,000
22,000
24,000
26,000
28,000
30,000
32,000
34,000
36,000
38,000
02 03 04 05 06 07 08 09
no./month
Non-first homebuyer
Significant inflows of first homebuyers and upgraders with investors becoming more active now
53
Sources: ABS, ANZ Economics
First-home buyers were the catalyst to price rises
0
5
10
15
20
25
30
35
40
45
07 08 09
% of total annualised
Upgraders
First-home buyers
Refinancing
Investors
Housing finance commitments
0
5
10
15
20
25
30
35
40
02 03 04 05 06 07 08 09
'000
Upgraders (excluding
refinancing)
First-home buyers
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Zero < 4 < 8 < 12 < 16 < 20 < 24 < 28 < 32 > 32
0 - 54 years old
Over 55 years old
Debt servicing ratio“the lending boom was
concentrated on existing homeowners who traded
up to bigger and better houses and bought
investment properties.Many of these were people
in the 40s and 50s who previously had low levels
of debt.”
Deputy Governor of Reserve Bank of Australia
Ric Battellino
70% of homes with
less than a 4%
servicing ratio
million households
The household sector was well placed to accumulate debt with two-thirds having little or no debt
Debt servicing ratio
54
55
Mortgage rates have reduced substantially, providing cash flow relief to households
4
5
6
7
8
9
10
11
12
97 98 99 00 01 02 03 04 05 06 07 08 09
Floating rates
2-year fixed
%
5-year fixed
Sources: REINZ, ANZ *12 months to September 2009 using REINZ Stratified House Price Index
50
100
150
200
250
300
350
400
450
500
550
92 94 96 98 00 02 04 06 08
$'000
NZ (+5.3%*)
Auckland (+9.0%*)
Wellington
(+8.7%*)
Other South Island
(+1.5%*)
Canturbury (+10.2%*)
Stratified Median NZ House prices
In New Zealand property markets have recovered off lows and house prices are starting to rise
56
57
While floating mortgage rates remain at 40 year lows, longer term fixed mortgage rates have started to rise
4
5
6
7
8
9
10
11
12
97 98 99 00 01 02 03 04 05 06 07 08 09
Floating rates
2-year fixed
%
5-year fixed
Sources: RBNZ, ANZ
Credit Quality
RWA reduction from reducing EAD1 and portfolio refinement, partly offset by portfolio deterioration, significantly impacting expected loss
Sep-08 Portfolio
growth & mix
Risk
Migration
Portfolio
Data Review
FX impacts Sep-09
250.8
229.8
(9.4)
6.3 (13.7)
(4.2)
Th
ou
san
ds
59
Movement in Credit Risk Weighted Assets ($b)
Regulatory Expected Loss movements
($m)
Sep 08 Mar 09
250.8 2.2 6.2 (5.7) 4.3 257.8
Mar 09 Sep 09
257.8 (13.3) 1.0 (7.8) (7.9) 229.8
Sep-08 Portfolio
growth & mix
Risk
Migration
IP Portfolio
Data Review
FX impacts Sep-09
3,051
4529
(84)
714
746121 (19)
Sep 08 Mar 09
3,051 59 468 657 (65) 10 4,180
Mar 09 Sep 09
4,180 (230) 350 88 170 (29) 4,529
1:Exposure at Default is also referred to as Regulatory Credit Exposure
Data refinement in Slotting
Corporate, Retail and Standardised
Basel II Asset Classes
Impacted by 5.5% reduction in EAD
Impacted by portfolio
deterioration, primarily Corporate
/ SME
NB – HOH changes do not add to YOY due to changes in mix
0
100
200
300
400
500
600
Sep-08 Dec-08 Mar-09 Jun-09 Sep-09
Corp/Corp SME Bank & Sovereign Residential Mortgage QRR & Other Retail
Specialised Lending Other CRWAs Standardised
(2.6%)
EAD reduction impacted by derivatives, reduction in off balance sheet exposures, portfolio management, exchange rates and data refinement
60
EAD($bn) EAD Basel II Asset class movements Sep 09 vs Sep 08
$bn (7.7%)
555.0582.6 567.8
538.4524.3
-17%
-4%
8%
-3%
-14%
-30%
4%
-15%
-18%
3%
-4%
-1%
-19%
-13%
Sep 09 vs Mar 09
(5.5%)
Largest reduction in absolute terms down $33.1b (16.9%) Sep 09 vsSep 08
0
50
100
150
200
250
300
Sep-08 Dec-08 Mar-09 Jun-09 Sep-09
Corp/Corp SME Bank & Sovereign Residential Mortgage QRR & Other Retail
Specialised Lending Other CRWAs Standardised
(4.8%)
Credit Risk Weighted Asset reduction primarily from declining asset volumes, exchange rate movements and data refinement
61
Credit Risk Weighted Assets ($bn) Credit RWA Basel II Asset class movements Sep 09 vs Sep 08
$bn
(10.9%)
250.8260.7 257.8
241.3229.8
-9%
-52%
9%5%
-20%
-8%
4%
-15%
-41%
2% 1%
-4% -6%
-13%
Sep 09 vs Mar 09
(8.4%)
Largest reduction in absolute terms, down 11.2bn (8.8%) Sep 09 vsSep 08
IP charge by Region and Segment: Increased impact from New Zealand and Middle Market
2H07 1H08 2H08 1H09 2H09
Australia New Zealand APEA
2H07 1H08 2H08 1H09 2H09
Consumer Commercial Institutional
2H07 1H08 2H08 1H09 2H09
Australia New Zealand APEA
62
Total IP Charge Segment IP charge by region1
63 81
137
201
289
267378
894
1,5311,283
267 378
894
1,531
1,283
2H07 1H08 2H08 1H09 2H09
Australia New Zealand APEA
173 167236
347
431
1: Note: Institutional IP not shown: 87% in Australia (FY08), 96% in Australia (FY09)
Commercial IP by regionBy Region
Consumer IP by regionBy Segment
Lending Risk Impacts
Cycle & Concentration
Mix
(2) 251 (1) (13)
17
Breakdown of FY09 collective provision charge
63
(144)
171
146
62APEA
(ex Insto.) & Group
Australia Division
New Zealand Division
Institutional
-50
0
50
100
150
(3)
3611 1
-500
50100150
59 8330
(26)
-500
50100150
(2)
55124
(6)
-200
-100
0
100
(56)
77
(183)
18
$235m
$m
Group Centre
Group Total
Collective Provision: Group remains well provisioned
1H08 2H08 1H09 2H09
249.2 250.8 257.8229.8
64
Collective Provision balance / Credit RWA‟s (%)
Total Provision balance ($m)
Credit Risk Weighted Assets ($b)
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
Sep 07 Mar 08 Sep 08 Mar 09 Sep 09
0.72%
0.94%
1.13%1.06%
1.31%
Sep 07 Mar 08 Sep 08 Mar 09 Sep 09
0.96% 1.36% 1.39% 1.58% 1.97%
Provision Coverage
Total provision balance / Credit RWAs
Sep 07 Mar 08 Sep 08 Mar 09 Sep 09
1,992 2,340 2,821 2,742 3,000270
316
6751,341
1,526
CP Balance IP Balance
2,2622,656
3,4964,083
4,526
90 Days Past Due: Rate of growth has slowed
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0.30%
0.35%
0.40%
0.45%
0.50%
2H07 1H08 2H08 1H09 2H09
0.18%0.21%
0.30%
0.44%0.46%
0.00%
0.50%
1.00%
1.50%
2.00%
Sep-07 Mar-08 Sep-08 Mar-09 Sep-09
Retail Mortgages Consumer Cards
65
90 Days Past Due as a % of Gross Lending Assets less Non Performing
Loans
Australian Consumer Portfolio
90 days past due / GLA (%)
New Zealand Consumer Portfolio
90 days past due / GLA (%)
Well Secured
Not well secured
0.00%
0.50%
1.00%
1.50%
2.00%
Sep-07 Mar-08 Sep-08 Mar-09 Sep-09
Retail Mortgages Consumer Cards
Reduction partially reflects greater migration of loans to impaired
0
300
600
900
1200
1H08 2H08 1H09 2H09
Australia New Zealand APEA NPCCD Restructured
0
1000
2000
3000
4000
1H08 2H08 1H09 2H09
Impaired facilities: moving through the cycle, Institutional slowing, greater impact in middle market and NZ consumer
> $100m
$50m -$99m
$20m -$49m
$10m -$19m
$5m - $9m
<$5m
Institutional
66
Commercial impaired facilities by Region ($m)
Non Performing Loans (by single names)
Consumer impaired facilities by Region ($m)
Impaired Loans (Top 5 industries)
Commercial
Bus. ServicesHealth & CS
Manufacturing
Finance &Insurance
Property Services
Manufacturing
Finance &Insurance
Agriculture
W‟sale Trade
Construction
Institutional impaired facilities by Region
($m)
0
300
600
900
1200
1H08 2H08 1H09 2H09
NPCCD: Net Non Performing Commitments & Contingencies
Watch & Control lists: Control list stabilising, new names onto the watch list slowing in second half
Agriculture, Forestry &
Fishing30%
Property Services
15%
Wholesale
Trade14%9%
Retail Trade
7%
Transport &
Storage4%
Business Services
4%
Other17%
67
Watch1 & Control List by limits (indexed) Watch list by industry
Number of Groups (%)
Watch List Limits Control List Limits
14 3 2 1 2 3 40
Sep 08
Oct 08
Nov 08
Dec 08
Jan 09
Feb 09
Mar 09
Apr 09
May 09
Jun 09
Jul 09
Aug 09
Sep 09
Manufacturing
Watch list1
An alert report of customers with characteristics identified which could result in requirement for closer credit attention
Watch list reduced since March 2009 from easing risk concerns, debt reductions, equity raising and improved trading results
Control ListA report of high risk accounts which may or may not have defaulted
The number of new names on the control list has stabilised over the past 6 months
1. Watch list parameters have changed to watch lists disclosed in previous publications. Current watch list has been restated back to September 2008 for direct comparability purposes
Sep 08 Mar 09 Sep-09
15% 16% 12%
8% 8%7%
6% 7%6%
5% 5%5%
4% 4%3%
Finance & Insurance Property Services
Manufacturing Agri. Forest Fishing
Wholesale Trade
Sep 08 Mar 09 Sep-09
64% 61% 61%
16% 17% 17%12% 12% 12%6% 5% 5%23% 5% 5%
AAA to BBB BBB- BB+ to BB BB- >BB-
Risk Grade Profiles and large industry exposures
Sep-08 Mar-09 Sep-09
59.5% 58.6% 58.9%
13.6% 13.8% 13.4%
13.5% 13.0% 12.6%
9.0% 8.9% 8.8%
4.4% 5.7% 6.3%
AAA to BBB BBB- BB+ to BB BB- >BB-
68
Group risk grade profile by Exposure at Default
Institutional risk grade profile by Exposure at Default
Top 5 industries by EAD (% of total portfolio)
Australian Mortgage portfolio well diversified with good underwriting standards
20
26
26
716
1 2 2
QLD VIC
NSW SA
WA NT
TAS ACT
● Consumer lending represents 58% of gross loans and advances for the group
● 75% of the portfolio in Australia and balance primarily in New Zealand
● 95% of portfolio is residential mortgages with an average loan size of $205k
● No sub prime exposures
69
Australian mortgage portfolio
0-60% 61-75% 76-80% 81-90% 91%+
LVR at origination Sep 08 LVR at origination Sep 09
Current LVR Sep 08 Current LVR Sep 09
Mortgages Australia Loan to Valuation profile
83% of owner occupied and 88% of investment loans have a dynamic LVR of 80% or less
1H08 2H08 1H09 2H09 Sep 09
37% 45% 46% 37% 38%
45% 38% 37% 44% 46%
19% 17% 17% 19% 16%
Broker Network Specialist / other
Diversified mortgage flows across channels
FLOWS FUM
0.00%
0.50%
1.00%
1.50%
2.00%
Sep-06 Sep-07 Sep-08 Sep-09
ACT NSW QLD
SA TAS VIC WA
Australia - consumer lending delinquencies have remained at manageable levels
70
Australia Mortgages 90 day delinquencies by State (% of GLA)
0.00%
0.50%
1.00%
1.50%
2.00%
Sep-06 Sep-07 Sep-08 Sep-09
Low Rate Loyalty Proprietary
Consumer Cards 90+ day
(% of outstandings)
Australia Retail – credit card portfolio tracking inside prior year trends
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Mar-06 Dec-06 Sep-07 Jun-08 Mar-09
Low Rate Commercial Loyalty
Proprietary Portfolio
0
20
40
60
80
100
120
1 3 5 7 9 11 13 15 17
Index
2005 2006 2007 2008 2009
71
Consumer Cards Utilisation (% of limit)Consumer Cards 30+ Day Arrears Month
on books (Indexed as at FY05)1
Reflects tighter credit
standards
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
$b
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
$b
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
$b
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
$b
$b
Commercial industry exposures
72
Agriculture, Forestry & Fishing Mining
Manufacturing Electricity, Gas & Water Supply
Wholesale trade Retail trade
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
$b
Exposure at default EAD (LHS) % of Group portfolio (RHS) % in high risk (RHS)1% in non performing (RHS)1
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
1. Percentage of the industry portfolio Exposure at Default
0%
5%
10%
15%
20%
0
20
40
60
80
100
Sep-08 Mar-09 Sep-09
$b
0%
5%
10%
15%
20%
0
20
40
60
80
100
Sep-08 Mar-09 Sep-09
$b
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
$b
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
$b
$b
Commercial industry exposures
73
Commercial property Property and business services2
Construction Transport and storage
Finance and insurance Other
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
$b
Exposure at default EAD (LHS) % of Group portfolio (RHS) % in high risk (RHS)1% in non performing (RHS)1
0%
5%
10%
15%
0
10
20
30
40
Sep-08 Mar-09 Sep-09
1. Percentage of the industry portfolio Exposure at Default, 2. excludes Commercial property – see separate category, 3. Includes Education, Accommodation, Cafes & Restaurants, Communication Services, Government Administration & Defence, Health & Community Services, Cultural & Recreational Services, Personal & Other services, Unknown and Non-classified
Commercial Property Exposure
Australia
Offices
Retail
Residential - land subdivision
Industrial
Tourism and Leisure
Other
● Commercial property exposure of $26.2bn, a decrease of 8% on prior year
● Portfolio remains at 8% of total Gross Lending Assets
● This is well inside 10% cap ANZ has imposed on commercial property lending in Australia and New Zealand
● The offices sector makes up 25% of total commercial property exposure
74
Commercial Property ExposureGLA by Region
Commercial Property Exposure by Sector
New Zealand
Offices
Retail
Residential - land subdivision
Industrial
Tourism and Leisure
Other
1H08 2H08 1H09 2H09
19.9 21.3 22.7 19.9
6.6 6.1 6.15.2
0.7 0.8 0.81.0
Australia New Zealand APEA
27.1 28.3 29.6
26.1
75
Source: Jones Lang LaSalle
1990s commercial property downturn characterised by significant oversupply vs other downturns with the exception of WA & QLD
Supply Pipeline as a % of Total Stock Australian CBD Office Market
0%
5%
10%
15%
20%
25%
30%
35%
40%
Sydney Melbourne Brisbane Perth Adelaide
1982 Recession 1991 Recession 2001 Slowdown 2009 Recession
-200
0
200
400
600
800
1H07 2H07 1H08 2H08 1H09 2H09
New IP Recoveries CP
New Zealand: Provisioning levels increasing as the impacts of recession percolate through the economy
-50
0
50
100
150
200
250
300
20
112
271Scenario
Volume
Risk
FY07 FY08 FY09
● The NZ economy experienced 5 quarters of recession before recording 0.1% economic growth in the June 2009 quarter.
● This recession has been the most severe NZ has seen since the mid 1970s.
● Provisioning has increased significantly as impacts of credit cycle move through the economy.
● While provisioning has risen, write-offs remain relatively low. Workouts are taking longer to finalise in the absence of refinancing options.
● Asset values (particularly housing) have stabilised.
● Collective provisions increased NZ$159 to ensure appropriate coverage for potential losses across the portfolio.
Category IP Charge Net Write-off
NZDm bps NZDm Bps
Personal Housing 135 39 22 6
SME 68 44 28 18
Rural 52 28 19 10
Commercial/Insto. 273 103 101 39
Unsecured 90 386 88 383
Total 618 63 258 26
76
Provisions have grown from low levels NZ Geography (NZDm)
Contribution to Collective Provision Charge (NZ$m)
Individual Provision Charge Analysis
-300
-250
-200
-150
-100
-50
0
50
100
150
200
Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09
Spread between 2 year fixed mortgage rate and corresponding rate 2 years prior
Mortgages with <1y to rate reset
0
25
50
75
New Zealand mortgage portfolio beginning to stabilise
0
20
40
60
80
100
120
140
160
Jun-07 Dec-07 Jun-08 Dec-08 Jun-09
PLA Issued (LHS)
Mortgagee Sale Concluded
(RHS)
77
Number of PLA Notices issued1 and mortgagee sales concluded
Interest rate reductions benefiting consumers switching from fixed to floating rates
0
5
10
15
20
25
30
35
40
45
50
1. PLA notice = property law action notice. Customer has 45 days to repay arrears owing after which bank can proceed to mortgagee sale. NZ has no equivalent to the Australian mortgagee in possession process.
Forecast
„000‟s
0
200
400
600
800
1000
1200
1H07 2H07 1H08 2H08 1H09 2H09
Non-Performing Loans (LHS) % of GLA (RHS)
0.00%
0.50%
1.00%
1.50%
2.00%
New Zealand: Impaired Assets have increased however arrears have reduced
● Non-performing loans (NPL‟s) have increased across all portfolios.
● Rural segments, particularly dairy farmers, are now a more significant proportion of new NPL‟s.
● Given the high proportion of NPL‟s secured by property and the lack of refinancing options, recovery or rehabilitation involves a considerable work-out period.
● Arrears have reduced across most portfolios over the last quarter particularly in consumer and personal mortgages.
● Initiatives in customer credit education and early intervention strategies are having a beneficial impact on Retail arrears volumes and values.
78
90 Days Past Due largely secured Non-performing loans
Well diversified and well secured book
Gross Loans and Advances
Commercial & Corporate
UDC
Institutional
Retail & Wealth
Rural
Fully Secured75%
80-100%Secured
9%
60-80%Secured
3%
40-60%Secured
2%
<40%Secured
3%
Unsecured8%
NZ$445mPersonal Housing
Business
Rural
SME
Unsecured
92% has security coverage
<50%
50-65%
65-80%
80%+
New Zealand: Commercial credit quality holding up but rural showing deterioration. Rural portfolio remains very well secured.
Average Commercial Customer Credit Rating
Mar 08
Jun 08
Sep 08
Dec08
Mar 09
Jun09
Sep09
Rural 5.26 5.17 5.10 5.10 5.22 5.34 5.62
C&CB1 5.24 5.27 5.30 5.40 5.44 5.45 5.44
UDC 5.38 5.49 5.66 5.80 5.73 5.72 6.01
● Rural credit quality has reduced over the last year however a recent lift in dairy payouts is expected to provide some stability.
● Strength of the NZ dollar represents a continued headwind to the sector.
● Commercial segments also experiencing tough domestic conditions with single product and single market customers vulnerable to financial stress.
● Economic conditions are expected to remain difficult over the next year.
● Commercial property values are softening however tenancy levels remain relatively strong.
79
Commercial credit quality maintained despite poor economic conditions
Rural portfolio remains well secured
1. Commercial and Corporate Banking.
Loan to Valuation
Ratio
92% of portfolio has an LVR<80%
At fair market (current) value 74% of the portfolio has an LVR of 65% or better.
8%
18%
46%
28%
Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09
1,576 1,609
2,113 2,265 2,277 2,358
CCR 7 - 10 CCR 6 CCR 5 CCR 4 CCR 1 - 3
Property Credit quality shows decline in CCR 1-4 with increase in CCR 7-10
(NZ$b)
2009 Full Year Results
Overview of the 2009 result
81
Full Year 2009 ($m)
Growth 2009 vs 2008
Underlying Profit1 3,772 10%
Revenue1 14,367 17%
Expenses1 (6,068) 12%
Provisions1 (3,056) 46%
Statutory Net Profit After Tax 2,943 (11%)
EPS1 168.3 cents (4%)
Full Year Franked Dividend (interim 46cps, final 56cps)
102 cents (25%)
Customer Deposits 233,141 14%
Net Loans and Advances incl. Acceptances 345,769 (1%)
1. All figures other than NPAT and full year dividend are underlying.
Geographic performance - Highlights
82
Australia
● Strong contributions from both Retail and Institutional
Asia Pacific, Europe & America
● Partnerships and the Institutional business the major contributors
New Zealand
● Challenging domestic economic conditions impacted results
Institutional division
● Institutional revenue up 37% driven by both customer flows and trading revenue
1. Asia Pacific, Europe & America. 2. Institutional is a global line of business and is also included within Australia, New Zealand and APEA regions.
Institutional
division
New Zealand
APEA
Australia
1
2,560Up 13%
699 Up 81%
513 Down 32%
1,401Up 82%
Underlying Profit by geography2 ($m)
2
Solid underlying business performance, timing of costs and higher provisions impacting second half
83
Sep 2008 Reported
Non Core Sep 2008 Underlying
NII Other Income
Operating Expenses
Provisions Income Tax, OEI
Sep 2009 Underlying
Non Core Sep 2009 Reported
3,319 3,4263,772
2,943107
1,955 117 (662)(966)
(98) (829)
Group Underlying Profit FY09 vs FY08 ($m)
Mar 09 reported
Non Core
Mar 09 underlying
NII Other income
Operating expenses
Provisions Income tax &
minorities
Sep 09 underlying
Non core Sep 09 reported
1,417 491 1,908 3% 5% 6% 13% (5%) 1,864 (338) 1,526
Group Underlying Profit 2H09 vs 1H09 ($m)
Underlying profit up 10%
17% 12% 46% 7%
2H09 1H09 FY09 FY08YOY
Growth
Profit ($m) 1,526 1,417 2,943 3,319 (11%)
Adjustments to Statutory Profit
- Top up of NZ conduits tax provision (196) - (196) -
- Economic Hedging – fair value gains/losses (709) 461 (248) 243
- Other 2 2 4 47
Cash Profit 2,429 954 3,383 3,029 12%
Other Non Core Items
- One ANZ restructure (4) (79) (83) -
- ING New Zealand settlement (24) (97) (121) -
- Credit Intermediation Trades 595 (664) (69) (371)
- Non Continuing businesses / Other (2) (114) (116) (26)
Underlying Profit 1,864 1,908 3,772 3,426 10%
Statutory profit reconciliation
84
Both impacted by credit spreads
New Zealand
APEA
Australia
1,115up 70%
1,456up 5%
5,728up 18%
New Zealand
APEA
Australia 2,560Up 13%
699up 81%
513down 34%
Geographic businesses delivering solid performance in Australia and significant growth in Asia Pacific, NZ impacted by difficult conditions
85
2009 Pre Provisions Profit ($m) 2009 Net Profit After Tax ($m)
1. Asia Pacific, Europe & America. 2. New Zealand 2009 PBP NZD 1,783m; 2H09 vs 1H09 PBP down 20%.3. New Zealand 2009 NPAT NZD 628m; 2H09 vs 1H09 NPAT down 73%
1 1 2008 profit
2009 increase
2009 decrease
2H09 Performance (vs 1H09)
2H09 Pre Provision profit
2H09 NPAT
Australia 17% 36%
APEA 25% 31%
New Zealand 23% 75%
2 3
68%
18%14%
69%
21%10%
Australia New Zealand APEA
Global Markets and Asia Pacific key contributors to increase in total income
86
Total Income ($m) Markets Income (including NII) ($m)
1H07 2H07 1H08 2H08 1H09 2H09
414 442581 660
1,066 1,125
Markets sales Markets trading
1H08 2H08 1H09 2H09
4,329 4,544
1,6451,658
1,0661,125
Net Interest (ex Markets)Other Income (ex Markets)Markets income
5,9806,315
7,0407,32712,295
14,36717%
Growth in Asia offsetting lower New Zealand income (Total income %)
2008 2009
46% of FY09 growth
FY09 growth: 77%
Excluding markets FY09 up 10%
Asia Partnerships a key contributor to growth in other income
-500
0
500
1000
1500
2000
2500
1H08 2H08 1H09 2H09
Fee income FX earnings
Trading securities Other
FX Impact
87
Underlying other income ($m) Composition of “Other”
4,5574,440
2,3392,2182,2412,199
0
50
100
150
200
250
300
350
1H08 2H08 1H09 2H09
Asia Partnerships
INGA / NZ
Other
$m$m
Flat growth 2009 vs2008
71% increase 2009 vs2008
Refer Markets comments
200.9
213.2
229.5
12.33.5 (12.2)
(27.9)
44.8
5.0 4.5 (1.4)
222.3 216.4 5.9 5.6 8.4 4.2 (3.7) 236.8
Second Half 2009
Margins moving back to pre crisis levels
100
120
140
160
180
200
220
240
260
280
2H06 2H07 2H08 2H09Group NIM
Group risk adjusted NIM
Basis points
88
Net Interest Margin (NIM) Full Year 2009 (bp)
NIM excluding “Accounting noise”
2008
Accounting n
ois
e
Asset
& fundin
g m
ix
2008 adjusted
Fundin
g c
osts
Deposits
Assets
Mark
ets
Oth
er
2009Re-pricing impacts
16bp
Equity M
ix
Strong deposit growth and subdued lending position a result of environmental drivers, strategic and portfolio initiatives
89
1. Includes Institutional APEA under Matrix reporting
Average Net Loans
up 9%
(18%)
23%
(11%)
35%
(1%)
1%
7%
16%
(1%)
14%
Customer deposit and lending growth (2009 vs 2008) (%)
0
10
20
30
40
50
60
70
80
90
1H07 2H07 1H08 2H08 1H09 2H09
58.1
66.1
80.685.8 85.1
70.4
Th
ou
san
ds
Institutional Lending growth returning to more normalised levels
(NLA incl Acceptances $b)
TotalGroup
AustraliaDivision
NZ Division
(NZD)
APEADivision
1
GlobalInstit.
Net Loans and Advances including acceptances
Customer Deposits
$b29% CAGR
8% CAGR
Revenue growth
Cost growth
“Jaws”
32% 30% 2%
29% 20% 9%
9% 4% 5%
- +$71m -
(4%) 2% (6%)
Expense growth directed to growth markets and to drive superior returns, costs contained in New Zealand and Australia division
1. Asia Pacific, Europe & America, including Institutional. 2. Excluding Asia Pacific, Europe & America.
1.3%0.3%
1.3%
2.1%
3.5%
3.8%
Contribution to 2009 cost growth
APEA1
Institutional2
Australia Division
Group Centre
FX Impact
NZ Division
12.3%
Investment in network, support functions
and staff to deliver growth agenda
2H09 expense growth exceeded first half, impacted by timing of performance based payments
Investment in “rebuild and refocus”
program, remuneration increases
Front line staff and systems, salary inflation
Costs well contained
Infrastructure & transformation spending
FX Adjusted
FX Adjusted
FX Adjusted
90
1H07 2H07 1H08 2H08 1H09 2H09
1,072 981
241 486
122
154
Australia New Zealand APEA
Provision charge composition changing with the credit cycle -moved towards middle market, significant increase in New Zealand
1H07 2H07 1H08 2H08 1H09 2H09
330
103
653
460
201
290
142
187
205
243
Wholesale > 100m
Wholesale < 100m
Commercial
Consumer secured
Consumer unsecured
91
Total Provision Charge ($m) Individual Provision Charge ($m)
1,283
1,531
894
378
267172
77% 119% 88% 5% 13%
1,621
1,4351,364
726
331
187
FY06 FY07 FY08 FY09
Lending Growth Risk Profile
Portfolio Mix Other
Economic Cycle Concentration
No net release from
Concentration /Economic Cycle
provisions across year
Collective Provision Balance / Credit RWAs (%)
Sep 07 Mar 08 Sep 08 Mar 09 Sep 09
0.73%
0.94%
1.13%1.06%
1.31%
Sep 07 Mar 08 Sep 08 Mar 09 Sep 09
0.83% 1.07% 1.39% 1.58% 1.97%
Total Provision Coverage
Total Provision Balance / Credit RWAs
Balance sheet well positioned for the current economic environment
92
Collective Provision Charge returning towards a more normalised level ($m)
83
818
242
69
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
This presentation may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to ANZ‟s business and operations, market conditions, results of operations and financial condition, capital adequacy,
specific provisions and risk management practices. When used in this presentation, the words “estimate”, “project”, “intend”,“anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to ANZ and its management, are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such statements constitute “forward-looking statements” for the purposes of the United States Private
Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.
For further information visit
www.anz.com
or contact
Jill Craig, GGM Investor Relations,
ph: (613) 9273 4185 fax: (613) 9273 4899 e-mail: [email protected]
Disclaimer