Small to Medium Business

1
Small to Medium Business

• Graham Hodges
• Managing Director
• Australia and New Zealand Banking Group Limited
  24 August 2001

2
A revitalized business with significant upside

• The business today
• Financial performance
• Conservative risk management
• Re-building our capabilities
• Growth agenda
• Goals for Small to Medium Business

3
Small to Medium Business

• Metro-based business customers with turnover up
  to 10m
• All customers relationship managed
• 35,000 customers in Australia New Zealand
• Responsible for end-to-end delivery
• Operations centre - e commerce channels
• Centralised credit function - product management
• Balance sheet management (assets liabilities)
• Matching customer value with cost to serve

4
Financial performance is strengthening
Profit After Tax
Operating Income
m
m
Mar-00
Sep-00
Mar-01
Mar-01
Mar-00
Sep-00
FTE

Cost Income
Mar-00
Sep-00
Mar-01
Mar-00
Sep-00
Mar-01
5
Risk profile and management stance remains
conservative

• High risk loans are 2 of book
• Of the 5.6 of the book rated B or lower, only
  1 lt fully secured
• Over 80 of our total lending is fully secured
• Behavioural scoring model used to identify early
  signs of risk deterioration

6
Leading indicators of potential credit issues are
stable
0.25
0.8

• Some evidence of cash flow strains in early 2001
• Contributors included
• Economy slowing
• Tax payable from 1999/2000
• PAYG / BAS

0.7
0.20
0.6
0.5
0.15
0.4
of portfolio in excess
of loan portfolio in arrears
0.10
0.3
0.2
0.05
0.1
0.00
0
Aug-00
Oct-00
Dec-00
Feb-01
Apr-01
Jun-01
Excesses (gt30 Days)
Loans in arrears (gt30 Days)
7
Weak market position highlights our considerable
opportunity

• Lack of strategic focus has resulted in
• Manual front-line and operations processes
• Over-engineered credit process
• Inadequate business MIS
• Insufficient investment in staff
• Insufficient customer focus

Revenue Opportunity
Increase Share of wallet
Increase in mkt share
Revenue
Current revenue
Source Greenwich Associates 2000
8
Re-positioning well underway

• Beneficiary of specialist business strategy
• Re-defined our customer propositions
• E-transforming business processes
• Delivered critical management MIS (NIACC EVA
  based customer profitability)
• Simplified credit processes
• Shift in mind-set underway
• Primarily customer focussed

Outcome Clarity Capability Confidence Performanc
e
9
eTransformation needed to achieve both cost to
serve and customer advocacy
STP origination a/c mgt Behavioural credit scoring ANZ Impact Runningmybusiness
Business productivity
Customer experience
Business growth
Key Projects
Objective
Distinctive

10
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11
Using this foundation to accelerate growth

• 10m new investment in growth initiatives
• Phasing spend to maintain profit momentum
• Focus in 2001/02 will be on footprint, SoW
  specialisation

Sept 04
Key geographic opportunities
Sept 03
High
Sept 02
Bolt on business services
Sept 01
Industry sector specialisation
VIC metro
SA metro
VALUE
Primary market share
Increase footprint
QLD metro
WA metro
Low
Increase share of wallet
NSW metro
Build a distinctive service proposition
Small
Large
Total profit pool
TIME
12
Why we will succeed

• Specialist business model works
• Getting the basics right
• Successful role model (within ANZ) to help us
• Customers are receptive to a distinctive
  relationship proposition
• Strong leadership and team with management
  disciplines in place

13
Summary

• We are revitalizing the business
• Key planks for early and on-going success are in
  place
• We are committing new investment to hasten growth
  in customer numbers and share of wallet
• Focus on a distinctive customer proposition will
  drive new revenues and higher customer value

• Goals
• Average earnings growth of 15 to 2005
• Profit growth less in 2001/2 given investment
• Lift customer and staff satisfaction to 80 level
  (2004)
• Performing loans remain at 99 of total book