Performance and Growth - delivering on our commitments

Australia and New Zealand Banking Group Limited November 2000

John McFarlaneChief Executive Officer

Page 2

ANZ

One of the ‘Big Four” Australian banks. Provider of full range of financial services in Australia (since 1835) and New Zealand (since 1840) with leadership in Corporate Banking, Credit Cards and Mortgages, an emerging strong e-Commerce position and an offshore network in Asia and Pacific.

• Assets A$172b

• Market Cap A$21b

• Profit (pre abnormals) A$1,703m

• Staff 23,134

• Credit Ratings AA-/Aa3

ANZ Headquarters100 Queen StreetMelbourne

Page 3

Highlights

Earnings growth of 15% (13.3% compound)

Return on equity 18.3% (17.2%)

Cost income ratio 51.7% (54.5%)

Grindlays sold, realising net profit after tax of $404m after related provisions

Income up 6%, costs flat, ELP down 4bp’s to 39bp’s

$2bn returned to shareholders in the form of dividends and share buyback

Dividends returned to 100% franking

Restructuring charge to accelerate transformation program

Page 4

Our commitments to shareholders three years ago:

• Achieve superior financial performance

– Deliver double-digit earnings growth

– Improve return on equity

– Bring down our cost income ratio to 53%

• Re-balance our portfolio

– Increase proportion of Personal business

– Enhance leadership position of Corporate

– Simplify and focus our International business

– Build momentum in eCommerce

• Reduce risk

Page 5

We have delivered superior financial performance

1171 1175

1480

1703

400

600

800

1000

1200

1400

1600

1800

1997 1998 1999 2000

$m NPAT

CAGR 13.3%

18.3

16.915.5

17.2

10

12

14

16

18

20

1997 1998 1999 2000

% ROE

51.7

54.5

60.963.1

45

50

55

60

65

1997 1998 1999 2000

Cost Income Ratio

100

100

84

135

020406080

100120140160

1997 1998 1999 2000

Total Shareholder Return

Page 6

Good progress across the board

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

$1,900

1480

1999 20002000

Net interest income

146

Lending fee 48

Other fee 111

Other income

47

Debt provisioning

8

Costs (14) Tax & outside

interests(123)

Profit before abnormals

1703

Abnormals44

Net profit after

abnormals1747

Page 7

We have re-balanced our portfolio

302

772

547

647251

149

1997 2000

NPAT Loans & Advances

PFS

CFS

International

41577

65264

46861

456847966

5930

1997 2000

27%

50%

23%

49%

41%

10%

56%

39%

5%

43%

49%

8%

• Includes Grindlays

• Excludes Group

Page 8

We continue to reduce risk

43

3936

20

25

30

35

40

45

AN

Z 1

999

AN

Z 2

000

AN

Z 2

000

- ex

Gri

ndla

ys

ELP Factors

bp’s

1997 1998 1999 2000

Market Risk (Av. VaR)

A$m2323

5.4 4.4

• Beta reducing towards 1.0, in line with peer average

Page 9

We didn’t get everything right – firm action taken

• Personal loan portfolio

• International provisioning from historical book

• Panin writedown to market

• Took action to put historical Grindlays issues behind us

Page 10

Overall book continues to improve

18 16

1615

49 53

14 13

3 30%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1999 2000

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

Australian Lending Asset Profile

28.4 31.7 36.2 40.6

41.843.6

45.548.4

0

10

20

30

40

50

60

70

80

90

100

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

Other

Mortgages

$b

Australian Loans & Advances

• Investment grade 66% of book

• Diversified portfolio

• Minimal exposure to media/telco’s

• Mortgages now represent 46% of book, up from 40% in March 1999

Page 11

Specific provisions: Corporate offsets personal loans problem

0

50

100

150

200

250

300

123

96

171

201

221

125

214

41

134

254

84

140Daewoo

Personal Loans

ELP NSP

Personal Financial Services

Corporate Financial Services

International

1999 2000 1999 2000 1999 2000

A single “B” exit account

Sold Businesses

Page 12

PFS specific provisions were driven by personal loans and credit cards

Credit Cards

40

63

2.1

2.8

0

10

20

30

40

50

60

70

1999 20001.5

1.8

2.1

2.4

2.7

3 • Loss rate 2.3%

• Average margin >5%

SP $m

Av Volume

$b

76

18

1.20.8

01020304050607080

1999 20000.0

0.5

1.0

1.5

2.0

Personal Loans • Loss rate approximately 6% against expected loss rate 3.5%

• Average margin 5-6% (excludes fees which cover approval costs)

• Loss on product ~ $15m after tax

• Hence specific provisions largely offset by margin but product design and controls upgraded to bring losses back in line with expectations

SP $m

Av Volume

$b

Page 13

Asian credit quality improves significantly despite two large specific provisions

77

56

25

0

10

20

30

40

50

60

70

80

90

13.7 11.1

15.5

7.4

20.4

12.7

14.1

24.4

28.8

43.8

3.05.1

1999 2000

Asian Specific Provisions Risk Grade Profile

• Specific Provisions relate to two unusual losses

• ‘B’ exposures now only $130m

• Investment grade 68% of book

• Expected losses declined significantly from 1.4% to 0.5%

AAA to BBB+

BB+ to BB

BB-

B to CCC

Non-accrual

BBB to BBB-

$m

Daewoo

A single ‘B’ exit account

$2.9b $4.3b

Page 14

Provisioning levels strengthen

500

700

900

1100

1300

1500

1700

1900

2100

2.7

3.1

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

1999 2000

1395

502 (383)

(51)(90)

1373

967

1999 2000 APRA Guideline

s

ELP charge

Net SP transfer

FX impact

Sale of Grindlays

ELP - Economic Loss Provision

SP - Specific Provision

General ProvisionELP charge*

* ex Grindlays for 2000

Times$m

Surplus406

Page 15

Active capital management a priority

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

Mar-99 Sep-99 Mar-00 Sep-00100

105

110

115

120

125

130

135

140

Tier 1

Inner Tier 1

RWA's

% $b

7.77.9

7.5

7.4

6.76.9

6.56.4

Progress• $1014m of buyback• Capping of DRP/BOP to reduce

dilution• Remaining $500m buyback in

progress• Restructure more EPS accretive

than buyback

Capital ManagementPhilosophy:• Capital scarce resource to be

managed effectively and efficiently• Maintain capital consistent with

ANZ’s AA status and peer group ratings

– Tier 1 (6.5 - 7.0%)– Inner Tier 1 (6.0%)

Page 16

Accelerating our transformation program

• Standardisation and rationalisation of IT and processing platforms

• Rationalisation and upgrading of EFTPOS network

• Transformation of Branch Network

• Improving efficiency in Asia/Pacific by rationalising IT platforms and centralising back office processing

• Establishing new business platform for Esanda

35 Initiatives across our portfolio of businesses including:

Expected cost reduction

$300m

Page 17

Building for the future - recap on our strategy

Proposition

• Specialists will win over conglomerates

• Corporations need to embrace new technologies

• Value depends on performance and growth

Strategy

• Reconfigure ANZ as a portfolio of 21 specialist businesses

• An e-Bank with a human face

• Drive results whilst investing in growth businesses

Perform and Grow

e-Transform

Specialise

Implications

• Specialist approach to customer and product businesses

• Transform the way we do business by using IP technology

• Meet expectations, fund growth by cost reduction

Page 18

Portfolio breakdown - indicative

International

PersonalCorporate

Other

0

100

Cards

Wealth Mgmt

Mortgages

Funds Mgmt

General Banking

Small Business

Corporate

Foreign Exchange

Asset Finance

Capital Markets

Institutional

ANZIB Financial Services

Transaction Services

0 100AsiaPacific

%

* Excluding Grindlays ($127m)

$1,703m*

40m*

$772m $647m

International CustomerBusinesses

100

0

%

Personal Corporate

Page 19

e-Payments

Gen Banking

Corporate

FM

Mortgages

GSF

Esanda

Wealth

FXInstitutional

Different businesses need different strategies

Low

Low

High

High

Invest for rapid growth

• Defend position and return

• Grow selectively

Create new businesses

• Optimise performance• Identify new growth products

ROE

MarketGrowth

Business size by NPAT

Small BusCap Mkts

Cardse-Asia

GTS

Page 20

Portfolio strategy should reflect degree of globalisation and leverage real capabilities

Imp

act

of

glo

balis

ati

on

ANZ’s capability

FX

Institutional Banking

Mid Corporate

GSF

Custody

Capital MarketsTrade

Esanda

B2B

General Banking

Small Business

Mortgages

CardsB2C

now

Late

rN

ot

yet

Less developed

At par Local leader

Regionally distinctive

Globally distinctive

Soon

Wealth Management

Funds Management

Page 21

We are delivering consistent growth

12.0

13.0

14.0

15.0

16.0

17.0

18.0S

ep-9

7

Dec-

97

Mar-

98

Jun

-98

Sep-9

8

Dec-

98

Mar-

99

Jun

-99

Sep-9

9

Dec-

99

Mar-

00

Jun

-00

ANZ

CBA

NAB

WBC

220

616

772

647

40

472466

176

562

0100200300400500600700800900

PFS CFS Int.

1998

1999

2000

• Growth has been strong, particularly in mortgages and cards

• Consistently increased market share, without material acquisitions

• Declining profits in International offset by substantial growth in PFS

• Profits in PFS less volatile, giving us a strong base

*

* Excludes Grindlays for 2000

$m% Australian market share - assets

NPAT

Page 22

Share of Credit Card Spend

15

20

25

30

Jun-94 May-96 Apr-98 Mar-00

Momentum in Personal Financial Services

%

10

11

12

13

14

15

Jun-94 Jun-96 Jun-98

Mortgages Market Share

%

Apr-00

Page 23

Balancing the autonomy of each business with strong leadership from the centre

• Prime accountability for profit and value

• Freedom to pursue opportunities within agreed boundaries

• Operate using agreed set of platforms, systems and shared services

• Transfer pricing based on market - no cross subsidisation

• Drive group strategic direction and set policy

• Portfolio management and resource allocation

• Cross-Business Unit synergies

• Control and oversight of risk, brands and technology

Business Unit Corporate Centre

Page 24

Personal Financial ServicesPeter Hawkins

General Banking

Wealth Management

Small Business

Mortgages CardsFunds

Management

Drive sales and efficiency

Invest to grow

Aggressively rebuild

Maintain profitable

growth

Accelerate growth

Reinvigorate and grow

• Advanced marketing/ segmentation

• Straight through processing

• Lower cost to serve

• Expert advice

• Open architecture

• “Wrap” facility

• Seamless access

• Build profitable market share

• Relationship based proposition

• Redesign end to end process

• Maintain distribution strength

• Straight through processing

• “Best of breed” delivery platform

• Data mining

• Exploit growth opportunities

• Leverage distribution channels

• Optimise products/ capabilities

• Double FUM by 2003

Th

em

eP

riori

ties

Systems CRM SSP Brand Risk Management

AccountabilitiesPFS 50%Group 50%

• Make the numbers• Achieve on-line targets

• Deliver new value to other Bus• Strengthen ANZ e.commerce leadership

Page 25

The Group has delivered compound EVA growth of 20% pa

EVA* Growth (1995-2000)

0

200

400

600

800

1,000

1,200

1995 1996 1997 1998 1999 2000

EVA ($m)

CAGR ~ 20%pa

EVA Management Philosophy

The Group is being managed to outperform peers in terms of EVA growth over time

Internal stretch EVA performance targets are established for businesses based on peer and market expectations

Business units develop strategies that are expected to deliver against mid-term EVA targets

Business unit performance managed against stretch EVA targets

Compensation tied to performance against EVA targets

* EVA = PAT adjusted for economic credit costs, the value of imputation credits, the cost of equity (at 11%) and one off items

Page 26

• EVATM based - creating a direct link to shareholder value;

• Benchmarked to market levels

• ensures rewards are contained at fair and reasonable levels;

• Emphasises ’at risk’ incentives

• limits fixed pay and increases variable, performance-based pay;

• Variable payments comprise significant deferral and possible

relinquishment.

• Bonuses comprise one third cash, one-third shares deferred for one year and

one-third shares deferred for three years (toughest relative to peers);

• Two levels of hurdles in the LTI component

• one based on individual performance

• one based on Group performance relative to peers.

ANZ Remuneration - a framework to drive performance

Page 27

ANZ in the medium term

• Material reallocation of resources

• Substantial e-transformation reducing costs and focused service

• Performance optimised– EPS, ROE, investment– capital management

• Transformational cultural change

• Substantial portfolio shifts

• Narrower, more focused portfolio with leading positions

• Increased investment in high growth business

• Modern performance culture

• Higher stock rating

ANZ in 1 - 2 years ANZ in 3 - 7 years

Page 28

Goals going forward

• EPS growth above peer average (target 10+%)

• ROE over 20%

• Cost-income ratio comfortably in the 40’s

• Inner Tier 1: 6%

• Maintain AA category credit rating

Page 29

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

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

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

appropriate.

For further information visit

www.anz.com

or contact

Philip GentryHead of Investor Relations

ph: (613) 9273 4185 fax: (613) 9273 4091 email: gentryp@anz.com

Page 30

Copy of presentation available on

www.anz.com