2 0 0 1 I nterim Results Australia and New Zealand Banking Group - - PowerPoint PPT Presentation

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2 0 0 1 I nterim Results Australia and New Zealand Banking Group - - PowerPoint PPT Presentation

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2 0 0 1 I nterim Results Australia and New Zealand Banking Group Limited 26 April 2001 Results highlights NPAT from continuing operations $907m - up 18% EPS up 13% to 55.8 cents ROE of 19.6% , up from 17.8% Costs flat -

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2 0 0 1 I nterim Results

Australia and New Zealand Banking Group Limited 26 April 2001

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Results highlights

  • NPAT from continuing operations $907m - up 18%
  • EPS up 13% to 55.8 cents
  • ROE of 19.6% , up from 17.8%
  • Costs flat - cost income ratio down to 49.4%
  • Credit quality sound:

– ELP charge down to 35 bp’s – Total non-accruals down – Specific provisions flat

  • 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

Note: Comparisons are against half year ended March 2000 (including Grindlays)

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2 0 0 1 I nterim Results

Australia and New Zealand Banking Group Limited 26 April 2001

Peter Marriott

Chief Financial Officer

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Strong incom e grow th, w ith good progress across the board

700 800 900 1,000 1,100

930 2H 2000 2001 1H 2H 2000 Continuing Abnormal/ Discontinued Items 104 826 Interest Income 84 Non- Interest Income 76 Profit on sale of St George 65 Provisioning (14) Write downs (84) Expenses (34) Tax (12) 895 907 Discontinued (12) 2001 1H Continuing Eftpos NZ acquisition and GST ($26m) $m

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“Unusual” item s – St George profit

  • ffset by w rite dow ns in investm ents
  • St George - $99m profit ($65m after tax)

– regulatory issues

  • not critical to strategy

– attractive price

80 130 180 230 280 Oct -00 Dec-00 Feb-01 Apr-01

  • Panin - $43m writedown#

– long term growth prospects remain positive

  • E* Trade - $21m writedown#

– online broking service provides core customer offering

  • Other - $20m writedown#

– a number of small eCommerce related investments

Panin

Share Price

0.30 0.80 1.30 1.80 2.30 Oct -00 Dec-00 Feb-01 Apr-01

E* Trade

Share Price # - no tax relief on these writedowns $ IDR

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I ncom e drivers*

%

3.22 3.68 3.56 3.35 3.23 2.62 2.81 3.12 3.48 3.45 1.91 1.90 1.90 1.73 1.64 1 2 3 4 Mar-99 Mar-00 Mar-01

PFS International CFS

351 372 496 560 140 173

44 32

126 143

1H 2000 1H 2001

Lending Fees Other Fees FX Trading Other

Margins stabilised in first half Non-interest incom e continues to grow

  • Benefit from differential

between 90d BBSY and cash rate

  • Greater focus on improving

margins

  • Driven by higher non-lending

fee income

  • FX profits higher, reflecting

AUD volatility

* For continuing businesses

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1000 1500 2000 2500 3000 3500 Sep- 97 Mar- 98 Sep- 98 Mar- 99 Sep- 99 Mar- 00 Sep- 00 Mar- 01 45 50 55 60 65 70 Expenses Income CTI

Cost-incom e ratio on track to m eet target of m id 4 0 ’s

  • Reduction in Cost

Income ratio driven by revenue growth and cost control

  • Approximately $65m
  • f restructuring

provision used

– two year program, with benefits principally 2002 and beyond

  • eTransformation will

continue to drive costs down

$m CTI

Sale of Grindlays

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20 40 60 80 100 120 140 160 180 200 Wealth Pacific Capital Markets Asia Investm ent Mgm t Foreign Exchange Asset Finance Sm all Business Transaction Services Cards Corporate Structured Finance Institutional Mortgages General Banking

Good profit grow th across m ost businesses

Mar 0 0 v Mar 0 1

Personal Corporate International and subsidiaries

$m

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8 0 % of businesses delivered revenue grow th greater than expense grow th

10 15 20 25 30 35 40 45 50

  • 10
  • 15

5

  • 5
  • 10
  • 15
  • 20
  • 25
  • 5

10 15 20 25 30 5

General Banking Pacific Small Business Wealth GCM Corporate Mortgages Cards GFX Asia Asset Finance Investment Management expense grow th % * revenue grow th % *

top third middle third bottom third ROE

Institutional GTS

* based on pcp

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Personal portfolio

  • Mortgages and Cards

reinforce value of our specialisation strategy

  • Clear opportunities for

customer businesses to replicate success of product businesses

  • Significant market share

growth opportunities remain

– creation of Metrobanking and Regionalbanking – a 1% increase in market share for customer businesses worth $100m+ revenue Profit Breakdow n

Mort 27% Cards 14% Wealth 3% Region 18% Metro 27% Small Bus 11%

250 450 650 850 1050 1250 Sep-99 Mar-00 Sep-00 Mar-01

Int erest Income Ot her Income Expenses

$m

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Corporate portfolio – fee incom e driving profit grow th

  • Five of six businesses

delivered profit growth greater than 10%

  • “Non-traditional” income

for Corporate Banking grew 40% + on annualised basis, largely by executing Wall St to Main St strategy

Profit Breakdow n

GTS 15% GCM 7% Corp 18% GSF 24% GFX 11% I nst 25%

250 300 350 400 450 500 550 600

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

Int erest Income Ot her Income Expenses $m

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I nternational & Subsidiaries – risk reducing, profits up

  • Asset Finance

reconfiguring back office platform to deliver substantial efficiencies

  • Negative profit growth

for Investment Management due to tax changes and increased growth spend

  • Asia showing positive

signs, on track to record significant profit growth for the full year

Profit Breakdow n

Asset Finance 35% Asia 23% Pacific 16% Inv Mgm t 26%

11.1 20.4 12.7 10.0 14.1 24.4 26.0 28.8 43.8 52.0 13.7 5.0 15.5 3.0 3.0 7.4 4.0 5.1 Sep- 99 Sep- 00 'March- 01 AAA to BBB+ BB+ to BB BB- B to CCC Non-accrual BBB to BBB-

Asian Credit Quality

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

1662 1543 1391 1295 872 727 699 657 900 428 300 600 900 1200 1500 1800 1997 1998 1999 2000 2001 1H 0.0% 0.5% 1.0% 1.5% 2.0%

Gross Non-Accrual Loans (LHS) Net Non-Accrual Loans (LHS)

$m

Non-Accrual Loans/ Loans & advances (RHS)

Historic

858 59 749 89 72 495 651 681 457 200 400 600 800 1000

Mar- 00 Sep- 00 Mar- 01

Aust Inter NZ

Geographic

Gross Non-Accrual Loans $m

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Current provisioning in line w ith expectations

  • 40
  • 20

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 I nt & Sub.

Actual SP v ELP charge

ELP charge SP charge $m

  • 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

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Arrears analysis indicates no system ic deterioration

% personal lending assets over 6 0 days in arrears

0.00 0.50 1.00 1.50 2.00 2.50

Mar-00 Sep-00 Dec-00 Jan-01 Feb-01 Mar-01

3.00 3.50 4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50

Mar-00 Sep-00 Dec-00 Jan-01 Feb-01 Mar-01

Business FDAs Housing Loans RILs* Overdrafts Credit Cards Personal Loans % %

  • Small upturn in arrears in Jan-Feb

largely reversed during March

  • Arrears broadly in line with same

period last year

  • Increase in credit card arrears

reflects seasonal influences

  • Personal loan arrears continue to

increase in % terms due to reducing book

* Residential Investment Loans

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Corporate book holding up w ell, despite a few one off “issues”

Risk actively m anaged

  • Quarterly strategy reports prepared

for all high risk accounts

  • June to October 2000 - all BB rated

accounts within Corporate reviewed in expectation of downturn

  • New accounts > $3m to be referred

“one level higher”

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

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Group risk grade profile continues to im prove

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% 14.8% 16.2% 16.9%

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)

  • Risk grade profiles by division and

geography in appendix

45 43 38 35

7.2% 5.4% 3.9% 3.8% > B = B, B-, CCC & non-accrual

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Credit quality is sound in som e of our larger industry exposures - Australia

Lending Assets (AUDm) % of Portfolio (RHS scale) % in CCR 7D-8G (RHS scale) 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Mar- 01 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

0bn 2bn 4bn 6bn 8bn 10bn Sep-98 Mar-01 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Mar- 01 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Mar- 01 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Mar- 01 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Mar- 01 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

Real Estate Operators & Dev. Manufacturing Retail Trade Agriculture Accom m . Cafes & Restaurants Construction

% in CCR 9-10 (RHS scale)

x

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Provisioning levels rem ain strong

500 700 900 1100 1300 1500 1700

1373 241 (181) 27 1460 1012 2000 1H 2001 APRA Guidelines ELP charge Net SP transfer FX impact ELP - Economic Loss Provision SP - Specific Provision $m Surplus 448 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 ANZ Mar-01 CBA Dec-00 NAB Jun-00 W BC Jun-00

GP/ Lending Assets*

%

* includes acceptances

represents 3 years expected losses

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Capital m anagem ent w ill continue

5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 Mar-99 Mar-00 Mar-01 100 110 120 130 140 Tier 1 I nner Tier 1 RWA's % $b 7.7 7.9 7.5 7.4 6.7 6.9 6.5 6.4

Progress

  • $413m in share buybacks in the

half year

  • New framework for allocating

capital for operating risk implemented

  • Capping of DRP/ BOP

Capital Managem ent Philosophy:

  • Maintain capital consistent with

ANZ’s AA status and peer group ratings – Tier 1 (6.5 - 7.0% ) – Inner Tier 1 (6.0% )

7.3 6.2

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2 0 0 1 I nterim Results

Australia and New Zealand Banking Group Limited 26 April 2001

John McFarlane

Chief Executive Officer

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W e are perform ing w ell and on track to deliver on our 3 year com m itm ents

Measure

EPS growth ROE Cost-income ratio Inner Tier 1 Credit rating

3 Year Com m itm ent

> 1 0 % > 2 0 % m id 4 0 ’s 6 % m aintain AA category

Achievem ent

1 3 % 1 9 .6 % 4 9 .4 % 6 .2 % m aintained

  • We have also committed to improving customer satisfaction,

and will publicly report our progress

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  • Specialisation

– 16 Business Units within 3 portfolios, plus corporate centre – Separate financial reporting for each Business Unit

  • eTransform ation - the eBank with a human face

– Leading internet banking penetration – Highest profit per employee

  • Perform Grow and Breakout

– Active resource allocation - Expenses, Capital, Balance Sheet, Talent – Investment focused on lower risk, higher growth activities

I m plem entation of our strategy is progressing w ell

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New strategy delivering value -

m ajority of businesses w ith double digit earnings grow th

Business Unit

Mortgages Cards Institutional Asia Structured Finance General Banking Capital Markets Foreign Exchange Transaction Services Corporate Banking Small Business Asset Finance Pacific Wealth Management Investment Management 1 H 2 0 0 1 $ m 112 58 88 31 85 191 24 40 54 65 48 47 21 11 34 1 H2 0 0 0 $ m 58 34 67 11 69 181 16 32 46 61 45 46 22 15 43 Change $ m 54 24 21 20 16 10 8 8 8 4 3 1

  • 1
  • 4
  • 9

Change % 93 71 31 181 23 6 50 25 17 7 7 2

  • 5
  • 27
  • 21
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W e are developing a track record for building grow th businesses

  • 100

100 200 300 400 500 600 700 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 8 10 12 14 16 10 11 12 13 14 15

Mortgage 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 00 96 97 99 98 01 95 00 96 97 99 98 01

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Most businesses expected to grow above m arket over next 2 -3 years

High Medium Low Below Market At Market Above Market Market Grow th BU Grow th

Mortgages Cards Sm all Business Metro Banking W ealth Managem ent Corporate I nstitutional GCM GFX GSF GTS Asset Finance I nvestm ent Managem ent Pacific Asia

Note: Size of bubble approximates relative profit contribution

Regional Banking

Corporate Personal

  • Int. & Subsidiaries
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45 47 49 51 53 55 57 59 61 63 65 1997 1998 1999 2000 1H 2001 NAB CBA W BC ANZ

Cost m anagem ent delivers com petitive advantage and funds to invest in grow th businesses

Clear leadership on Cost I ncom e ratio

Target Mid 40’s

eTransform ation low er costs/ AVA higher productivity

  • com petitive

advantage

  • capacity to

invest in grow th

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eTransform ation - enhancing the custom er experience

39.1 32.0 23.5 13.7 5 10 15 20 25 30 35 40 45 ANZ W BC NAB CBA

8% 11% 8% 10% 9% 9% 11% 14% 25% 24% 24% 8% 24% 13% 2%

Oct -96 Mar-01 Branch Withdrawals Branch Deposits Credit Card Direct Entry Phone/ Internet Banking Cheques EFTPOS ATM

Internet banking users as % of main relationships

%

Transaction activity

Source: JP Morgan & Roy Morgan Research

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eTransform ation – exam ples of real, tangible benefits internally

Project Benefits

“Manage m y leave” 95% reduction in processing costs W eb enablem ent - rollout of I P netw ork to all points of representation Cost neutral, but 100 times capability increase Com m on Adm inistration System Estimated benefits ~ $40m eTrain - online training Provides staff with online access to training courses, including an eMBA

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W e continue to actively m anage and reduce risk

0% 20% 40% 60% 80% 100% ANZ 1991 ANZ 1996 ANZ 2001 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

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Being the eBank w ith a hum an face

  • Put our customers first with an experience that delights
  • Focus on creating value for our shareholders
  • Lead and inspire our people
  • Breakout, be bold and have the courage to be different
  • Earn the trust of our people and the community
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Our breakout approach is differentiating us

Strategy Staff Custom ers eTransform ation Risk

  • Specialised businesses
  • First class execution (no surprises)
  • 86% of managers on individual contracts
  • 12% rise in staff satisfaction
  • 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
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New custom er and com m unity initiatives

  • Fee free, over-the-counter services for older customers

(aged 60+ )

  • A new Customer Charter setting out clear service standards

effective from 1 October 2001. A key feature of the Charter will be a financial donation payable by ANZ to a charity of the customer’s choice if ANZ does not meet its complaint resolution standards

  • Appointment of a senior Customer Advocate to ensure the

satisfactory resolution of customer issues and complaints.

  • Improvements and greater funding for ANZ’s community

relations program

  • Paid leave for staff who volunteer for community service
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The econom y - signals are m ixed….

1 2 3 4 5 6 7 S e p

  • 9

7 S e p

  • 9

8 S e p

  • 9

9 S e p

  • 5000

6000 7000 8000 9000 10000 11000 12000 13000 87 89 91 93 95 97 99 01

House approvals

15 17 19 21 23 25 27 29 31 33 Jun- 97 Jun- 98 Jun- 99 Jun- 00

New spaper Job Ads

  • 0.5

0.0 0.5 1.0 1.5 2.0 2.5 98 99 00 01

Retail Sales

Starting to show signs of life 000’s per week Mthly % ch. Year ended Year ended, excluding dwellings and Olympics

Real GDP Grow th incl. and excl. housing and Olym pics ( est)

% We are starting to see a rebound in housing approvals ANZ job ads series suggests unemployment levels approaching 7.5%

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…. but w e are cautiously optim istic

  • Sharp slow dow n in H2 2 0 0 0

–

  • verstates weakness of underlying economic activity -

we continue to expect a solid cyclical rebound in 2001-02

  • Fundam entals rem ain healthy

– usual preconditions for recession in Australia (rising inflation and interest rates) notably absent

  • Risks rem ain

– weakened global growth, rising inventory levels, subdued business sentiment and falling job advertisements

  • But m onetary and fiscal conditions rem ain supportive

– after slowing to only 2% in 2000-01, growth forecast to rebound to 3.2% in 2001-02

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Outlook

  • System credit growth forecasts*

– housing 12.4% – personal 11.1% – business 6.5%

  • Personal to exceed system credit growth
  • Corporate credit growth - continuing higher quality focus
  • Margin compression will continue
  • Costs flat
  • Challenges ahead, however we are well placed to

continue to perform well, and achieve our targets over the medium term

* forecast for year ending 30 September

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Sum m ary

  • We are perform ing w ell
  • Cost m anagem ent momentum –

eTransform ation has just begun…

  • Risk reduction continues
  • Our new strategy is creating

value and better positioning us for grow th

  • We are differentiating ourselves

through our Breakout program

We are

  • n track

to achieve

  • ur goals
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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

w w w .anz.com

  • r contact

Philip Gentry Head of Investor Relations ph: (613) 9273 4185 fax: (613) 9273 4091 e-mail: gentryp@anz.com

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Copy of presentation available on w w w .anz.com

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Risk grade profile by division

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 4.0% 3.6% 9.3% 26.4% 38.4% 38.9% 38.4%

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

Corporate

AAA to BBB+ BBB to BBB- BB + to BB BB- > B

36.6% 36.9% 40.9% 32.1% 30.2% 29.1% 28.4% 10.7% 9.4% 10.1% 13.4% 38.9% 10.4% 9.7% 15.9% 12.3%

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

I nternational & Subsidiaries

AAA to BBB+ BBB to BBB- BB + to BB BB- > B

12.7% 12.7% 12.0% 7.6% 7.1% 7.1% 6.9% 77.0% 77.8% 78.5% 3.8% 2.9% 3.0% 2.9% 11.5% 75.7% 0.16% 0.20% 0.24% 0.20%

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

Personal

AAA to BBB+ BBB to BBB- BB + to BB BB- > B

11.2% 8.8% 6.7% 8.3%

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

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Risk grade profile by geography*

14.7% 10.6% 15.2% 17.8% 17.0% 18.4% 19.8% 43.6% 10.1% 9.6% 7.1% 5.5% 37.0% 23.0% 50.6%

Sep-99 Sep-00 Mar-01

I nternational

AAA to BBB+ BBB to BBB- BB + to BB BB- > B

29.8% 29.7% 29.1% 18.2% 21.3% 21.1% 14.5% 15.3% 9.3% 4.3% 4.6% 17.9% 30.2% 24.8% 29.9%

Sep-99 Sep-00 Mar-01

New Zealand

AAA to BBB+ BBB to BBB- BB + to BB BB- > B

28.0% 26.8% 25.8% 24.6% 24.2% 25.1% 23.5% 24.6% 20.9% 5.2% 4.6% 4.7% 21.1% 21.1% 19.8%

Sep-99 Sep-00 Mar-01

Australia

AAA to BBB+ BBB to BBB- BB + to BB BB- > B

* Excludes housing

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

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ELP Charge = Loan Amount x Probability loss x Loss Given default

Plus

ELP charge will vary from year to year based on:

  • changes in lending volumes
  • change in risk grade profile
  • security levels
  • product and geographic mix

Econom ic Loss Provisioning

An adjustment to ensure the GP balance is sufficient to cover:

  • Volatility around

expected loss (using statistically quantified variance)

  • Remaining term of loan

portfolio

  • Balance sheet growth

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

GP % net lending assets

General Provision balance P&L Charge Actual SP’s

Actual Losses are funded from the General Provision

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System credit grow th forecasts

  • 10
  • 5

5 10 15 20 25 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Business Housing Personal Tot al

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Sum m ary of forecasts - Australia

Real GDP growth 4.7 3.7 2 3¾ Inflation 1.5 4.5 3¾ 1½ Unemployment (Dec) 7.0 6.6 7½ 6½ Current account deficit (%GDP)

  • 5.8
  • 4.0
  • 2.3 -3.3

Housing starts (‘000) 157 148 116 136 90-day bill yield (% pa, Dec) 5.48 6.20 4.75 5.1 10-year bond yield (% pa, Dec) 6.64 5.50 5.4 6.1 1999 2000 2001 2002 Calendar years

Sources: ABS; RBA; Economics@ANZ.

A$ (US cents, Dec) 65.8 55.8 52.0 60.0