Performance and Growth - delivering on our commitments

1
Performance and Growth - delivering on our
commitments

• Australia and New Zealand Banking Group Limited
  November 2000
• John McFarlane
• Chief Executive Officer

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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 A172b
• Market Cap A21b
• Profit (pre abnormals) A1,703m
• Staff 23,134
• Credit Ratings AA-/Aa3

ANZ Headquarters 100 Queen Street Melbourne
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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 4bps to
  39bps
• 2bn returned to shareholders in the form of
  dividends and share buyback
• Dividends returned to 100 franking
• Restructuring charge to accelerate transformation
  program

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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

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We have delivered superior financial performance

ROE
m
NPAT
CAGR 13.3
Total Shareholder Return
Cost Income Ratio
6
We have re-balanced our portfolio
Loans Advances
NPAT
10
5
8
39
41
23
49
50
56
49
43
27
PFS CFS International

• Includes Grindlays
• Excludes Group

7
We continue to reduce risk
ELP Factors
Market Risk (Av. VaR)
bps
Am
23
23
5.4
4.4

• Beta reducing towards 1.0, in line with peer
  average

8
Overall book continues to improve
Australian Loans Advances
Australian Lending Asset Profile
b
AAA to BBB
BBB to BBB-
BB to BB
BB-
gt B

• Investment grade 66 of book
• Diversified portfolio
• Minimal exposure to media/telcos

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

9
Asian credit quality improves significantly
despite two large specific provisions
Asian Specific Provisions
Risk Grade Profile
2.9b
4.3b
m
AAA to BBB
A single B exit account
BBB to BBB-
BB to BB
BB-
Daewoo
B to CCC
Non-accrual

• B exposures now only 130m
• Investment grade 68 of book
• Expected losses declined significantly from 1.4
  to 0.5

• Specific Provisions relate to two unusual losses

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Provisioning levels strengthen
General Provision ELP charge
m
Times
502
(383)
FX impact
(51)
(90)
1373
1395
Net SP transfer
Sale of Grindlays
ELP charge
Surplus406
967
1999
2000
APRA Guidelines
ELP - Economic Loss Provision SP - Specific
Provision
ex Grindlays for 2000
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Accelerating our transformation program
35 Initiatives across our portfolio of businesses
including

• 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

Expected cost reduction 300m
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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

• 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

Specialise
e-Transform
Perform and Grow
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Portfolio breakdown - indicative
772m
647m
1,703m


100
Small Business
Other
Institutional
Corporate
Corporate
General Banking
Personal
Transaction Services
Asset Finance
Wealth Mgmt
Capital Markets
International
Mortgages
Foreign Exchange
Funds Mgmt
ANZIB Financial Services
Cards
40m
0
Personal
Corporate
Asia
Pacific
Excluding Grindlays (127m)
International
Customer Businesses
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Different businesses need different strategies
Business size by NPAT
Invest for rapid growth
Create new businesses
e-Payments
FM
GSF
High
e-Asia
Wealth
Cards
GTS
Market Growth
FX
Institutional
Cap Mkts
Corporate
Small Bus
Low

• Defend position and return
• Grow selectively

Gen Banking

• Optimise performance
• Identify new growth products

Esanda
Mortgages
Low
High
ROE
15
Portfolio strategy should reflect degree of
globalisation and leverage real capabilities
now
FX
Institutional Banking
GSF
Funds Management
Trade
Soon
B2B
Capital Markets
Esanda
Custody
Cards
Impact of globalisation
B2C
Mortgages
Later
Wealth Management
Mid Corporate
General Banking
Not yet
Small Business
Less developed
At par
Local leader
Regionally distinctive
Globally distinctive
ANZs capability
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We are delivering consistent growth
m
Australian market share - assets

NPAT

• 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
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Balancing the autonomy of each business with
strong leadership from the centre
Business Unit
Corporate 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

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Personal Financial Services Peter Hawkins
Accountabilities PFS 50 Group 50
General Banking
Wealth Management
Small Business
Mortgages
Cards
Funds Management
Drive sales and efficiency
Invest to grow
Aggressively rebuild
Maintain profitable growth
Accelerate growth
Reinvigorate and grow
Theme

• 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

Priorities

• Make the numbers
• Achieve on-line targets

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

Systems CRM SSP Brand Risk Management
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The Group has delivered compound EVA growth of
20 pa
EVA Growth (1995-2000)
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 (m)
1,200
1,000
800
600
CAGR 20pa
400
200
0
1995
1996
1997
1998
1999
2000
EVA PAT adjusted for economic credit costs,
the value of imputation credits, the cost of
equity (at 11) and one off items
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ANZ in the medium term
ANZ in 1 - 2 years
ANZ in 3 - 7 years

• 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

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Goals going forward

• EPS growth above peer average (target 10)
• ROE over 20
• Cost-income ratio comfortably in the 40s
• Maintain AA category credit rating
• Inner Tier 1 6

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Active capital management a priority

• Capital Management
• Philosophy
• Capital scarce resource to be managed effectively
  and efficiently
• Maintain capital consistent with ANZs AA status
  and peer group ratings
• Tier 1 (6.5 - 7.0)
• Inner Tier 1 (6.0)

b

7.9
7.7
7.5
7.4
6.9
6.5
6.7
6.4

• Progress
• 1014m of buyback
• Capping of DRP/BOP to reduce dilution
• Remaining 500m buyback in progress
• Restructure more EPS accretive than buyback

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Wholesale term funding 1999/2000 achievements

• Issued A5.9 billion term wholesale debt
• Sourced
• 11 Domestic market
• 80 Euro markets
• 9 US markets
• Domestic Market
• Increased 10/2002 series by 300 million
• Added new series - 500 million 9/2004
• Extended yield curve
• Outstandings now A1.75 billion
• Major Banks trading within 1bp

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Wholesale term funding - strategy for 2000/2001

• Pursue diversification - by investors and markets
• Maintain prudent approach to liability maturity
  management
• spread of maturities from 1 to 5 years with an
  objective to achieve a weighted average term of 3
  years
• maintain yield curve out to a maximum of 5 years
  in both domestic and euro markets
• Funding requirement 6 billion subject to amount
  of securitisation undertaken
• Sourced
• 20 domestically
• 80 offshore

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The material in this presentation is general
background information about the Banks
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
Gentry Head of Investor Relations ph (613) 9273
4185 fax [phone] email
gentryp_at_anz.com
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Copy of presentation available on www.anz.com