2001 Interim ResultsAustralia and New Zealand Banking Group Limited
26 April 2001
Page 2
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)
2001 Interim ResultsAustralia and New Zealand Banking Group Limited
26 April 2001
Peter MarriottChief Financial Officer
Page 4
Strong income growth, with 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)
895907
Discontinued(12)
2001 1H Continuing
Eftpos NZ acquisition and GST ($26m)
$m
Page 5
“Unusual” items – St George profit offset by write downs in investments
• 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
Page 6
Income drivers*
%
3.22
3.683.56
3.35 3.23
2.622.81
3.12
3.48 3.45
1.911.901.901.731.64
1
2
3
4
Mar-99 Mar-00 Mar-01
PFSInternationalCFS
351 372
496560
14017344
32126143
1H 2000 1H 2001
Lending Fees
Other Fees
FX
Trading
Other
Margins stabilised in first half
Non-interest income 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
Page 7
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
70ExpensesIncomeCTI
Cost-income ratio on track to meet target of mid 40’s
• Reduction in Cost Income ratio driven by revenue growth and cost control
• Approximately $65m of restructuring provision used
– two year program, with benefits principally 2002 and beyond
• eTransformation will continue to drive costs down
$m CTISale of Grindlays
Page 8
0
20
40
60
80
100
120
140
160
180
200
Wealth
Pacific
Cap
ital Markets
Asia
Investm
ent M
gm
t
Foreig
n E
xchan
ge
Asset Fin
ance
Sm
all Busin
ess
Tran
saction S
ervices
Card
s
Corp
orate
Stru
ctured
Finan
ce
Institu
tional
Mortg
ages
Gen
eral Ban
king
Good profit growth across most businessesMar 00 v Mar 01
Personal
Corporate
International and subsidiaries
$m
Page 9
80% of businesses delivered revenue growth greater than expense growth
10
15
20
25
30
35
40
45
50
-10
-15
5
-5
-10-15-20-25 -5 10 15 20 25 30
5General Banking
Pacific
Small Business Wealth
GCM
Corporate
Mortgages
Cards
GFX
Asia
Asset Finance
Investment Management
expense growth
%*
revenue growth
%*top third
middle third
bottom third
ROE
Institutional
GTS
*based on pcp
Page 10
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 Breakdown
Mort27%
Cards14%
Wealth3%
Region18%
Metro27%
Small Bus11%
250
450
650
850
1050
1250
Sep-99 Mar-00 Sep-00 Mar-01
Interest Income
Other Income
Expenses
$m
Page 11
Corporate portfolio – fee income driving profit growth
• 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 Breakdown
GTS15%
GCM7%
Corp18%
GSF24%
GFX11%
Inst25%
250
300
350
400
450
500
550
600
Sep-99 Mar-00 Sep-00 Mar-01
Interest Income
Other Income
Expenses
$m
Page 12
International & 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 Breakdown
Asset Finance35%
Asia23%
Pacific16%
Inv Mgmt26%
11.1
20.4
12.710.0
14.1
24.4
26.0
28.843.8
52.0
13.75.0
15.5
3.03.0
7.4
4.05.1
Sep-99 Sep-00 'March-01
AAA to BBB+
BB+ to BB
BB-
B to CCC
Non-accrual
BBB to BBB-
Asian Credit Quality
Page 13
Total non-accrual loans continue to fall, but increase in Australia
1662
1543
13911295
872
727699657
900
428
0
300
600
900
1200
1500
1800
1997 1998 1999 2000 2001 1H0.0%
0.5%
1.0%
1.5%
2.0%Gross Non-Accrual Loans (LHS)
Net Non-Accrual Loans (LHS)
$mNon-Accrual Loans/Loans & advances (RHS)
Historic
858
59
749
8972
495
651681
457
0
200
400
600
800
1000 Mar-00
Sep-00
Mar-01
Aust InterNZ
GeographicGross Non-Accrual Loans
$m
Page 14
Current provisioning in line with expectations
-40
-20
0
20
40
60
80
100
120
140
Mar-00
Sep-00 Mar-01 Mar-00 Sep-00 Mar-01 Mar-00 Sep-00 Mar-01
Personal Corporate Int & Sub.
Actual SP v ELP charge
ELP chargeSP 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
Page 15
Arrears analysis indicates no systemic deterioration
% personal lending assets over 60 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-013.00
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
Page 16
Corporate book holding up well, despite a few one off “issues”
Risk actively managed
• 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
Page 17
Group risk grade profile continues to improve
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
Page 18
Credit quality is sound in some 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-010.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep-98 Mar-010.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep-98 Mar-010.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep-98 Mar-010.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep-98 Mar-010.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep-98 Mar-010.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Real Estate Operators & Dev. Manufacturing Retail Trade
Agriculture Accomm. Cafes & Restaurants
Construction
% in CCR 9-10 (RHS scale)x
Page 19
Provisioning levels remain 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
Surplus448
1.06
0.97
1.02
0.98
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
ANZMar-01
CBADec-00
NABJun-00
WBCJun-00
GP/Lending Assets*%
* includes acceptances
represents 3 years
expected losses
Page 20
Capital management will continue
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
Mar-99 Mar-00 Mar-01100
110
120
130
140
Tier 1Inner Tier 1RWA's
% $b
7.77.9
7.5
7.4
6.7 6.96.5
6.4Progress• $413m in share buybacks in the
half year• New framework for allocating
capital for operating risk implemented
• Capping of DRP/BOP
Capital ManagementPhilosophy:• Maintain capital consistent with
ANZ’s AA status and peer group ratings
– Tier 1 (6.5 - 7.0%)– Inner Tier 1 (6.0%)7.3
6.2
2001 Interim ResultsAustralia and New Zealand Banking Group Limited
26 April 2001
John McFarlaneChief Executive Officer
Page 22
We are performing well and on track to deliver on our 3 year commitments
Measure
EPS growth
ROE
Cost-income ratio
Inner Tier 1
Credit rating
3 Year Commitment
> 10%
> 20%
mid 40’s
6%
maintain AA category
Achievement
13%
19.6%
49.4%
6.2%
maintained
• We have also committed to improving customer satisfaction, and will publicly report our progress
Page 23
• Specialisation
– 16 Business Units within 3 portfolios, plus corporate centre
– Separate financial reporting for each Business Unit
• eTransformation - the eBank with a human face
– Leading internet banking penetration
– Highest profit per employee
• Perform Grow and Breakout
– Active resource allocation - Expenses, Capital, Balance Sheet, Talent
– Investment focused on lower risk, higher growth activities
Implementation of our strategy is progressing well
Page 24
New strategy delivering value -majority of businesses with double digit earnings
growth
Business Unit
MortgagesCardsInstitutionalAsiaStructured FinanceGeneral BankingCapital MarketsForeign ExchangeTransaction ServicesCorporate BankingSmall BusinessAsset FinancePacificWealth ManagementInvestment Management
1H 2001$m
11258883185191244054654847211134
1H2000$m
5834671169181163246614546221543
Change$m
542421201610888431-1-4-9
Change%
937131181236502517772-5-27-21
Page 25
We are developing a track record for building growth businesses
-100
0
100
200
300
400
500
600
700
Mar-00 Jun-00 Sep-00 Dec-00 Mar-018
10
12
14
16
10
11
12
13
14
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 0096 97 9998 01 95 0096 97 9998 01
Page 26
Most businesses expected to grow above market over next 2-3 years
High
Medium
Low
Below Market
At Market Above Market
Market Growth
BU Growth
Mortgages
Cards
Small BusinessMetro
Banking
Wealth Management
Corporate
Institutional
GCM
GFX
GSF
GTS
Asset Finance
Investment Management
Pacific
Asia
Note: Size of bubble approximates relative profitcontribution
Regional Banking
Corporate
Personal
Int. & Subsidiaries
Page 27
45
47
49
51
53
55
57
59
61
63
65
1997 1998 1999 2000 1H 2001
NAB
CBA
WBCANZ
Cost management delivers competitive advantage and funds to invest in growth businesses
Clear leadership on Cost Income ratio
Target
Mid 40’s
eTransformation
lower costs/AVAhigher productivity
• competitive advantage
• capacity to invest in growth
Page 28
eTransformation - enhancing the customer experience
39.1
32.0
23.5
13.7
0
5
10
15
20
25
30
35
40
45
ANZ WBC 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
Page 29
eTransformation – examples of real, tangible benefits internally
Project Benefits
“Manage my leave” 95% reduction in processing costs
Web enablement - rollout of IP network to all points of representation
Cost neutral, but 100 times capability increase
Common Administration SystemEstimated benefits ~$40m
eTrain - online trainingProvides staff with online access to training courses, including an eMBA
Page 30
We continue to actively manage and reduce risk
0%
20%
40%
60%
80%
100%
ANZ1991
ANZ1996
ANZ2001
CBA NAB WBC
Lending Profile by Asset Type*
business
consumer
• Exiting higher risk businesses
• More emphasis on lower risk businesses
• Corporate balance sheet deliberately constrained –focus on fee income
• Risk based approach embedded through EVA
* CBA as at 31/12/00, NAB & WBC as at 30/9/00
Page 31
Being the eBank with a human 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
Page 32
Our breakout approach is differentiating us
Strategy
Staff
Customers
eTransformation
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
Page 33
New customer and community 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
Page 34
The economy - signals are mixed….
0
1
2
3
4
5
6
7
Sep-
97
Sep-
98
Sep-
99
Sep-
00
5000
6000
7000
8000
9000
10000
11000
12000
13000
87 89 91 93 95 97 99 01
House approvals
15
17
19
21
2325
27
29
31
33
Jun-97
Jun-98
Jun-99
Jun-00
Newspaper 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
wee
k
Mth
ly %
ch.
Year ended
Year ended, excluding dwellings and Olympics
Real GDP Growth incl. and excl. housing and Olympics (est)
%
We are starting to see a rebound in housing
approvals
ANZ job ads series suggests unemployment levels approaching 7.5%
Page 35
…. but we are cautiously optimistic
• Sharp slowdown in H2 2000– overstates weakness of underlying economic activity - we continue
to expect a solid cyclical rebound in 2001-02
• Fundamentals remain healthy– usual preconditions for recession in Australia (rising inflation and
interest rates) notably absent
• Risks remain– weakened global growth, rising inventory levels, subdued business
sentiment and falling job advertisements
• But monetary and fiscal conditions remain supportive– after slowing to only 2% in 2000-01, growth forecast to rebound to
3.2% in 2001-02
Page 36
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
Page 37
Summary
• We are performing well
• Cost management momentum –eTransformation has just begun…
• Risk reduction continues
• Our new strategy is creating value and better positioning us for growth
• We are differentiating ourselves through our Breakout program
We are on trackto achieve our goals
Page 38
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.comor contact
Philip GentryHead of Investor Relations
ph: (613) 9273 4185 fax: (613) 9273 4091 e-mail: [email protected]
Page 39
Copy of presentation available on
www.anz.com
Page 40
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
International & 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 BBBB-> B
11.2% 8.8% 6.7%8.3%
>B = B, B-, CCC& non-accrual
Page 41
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
International
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
Page 42
ELP Charge= Loan Amount xProbability 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
Economic 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
Page 43
System credit growth forecasts
-10
-5
0
5
10
15
20
25
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Business
Housing
Personal
Total
Page 44
Summary 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