Transcript No Slide Title

Specialisation,
eTransformation and Growth
John McFarlane
Chief Executive Officer
18 July 2000
ANZ has now built a solid foundation
Historic view of ANZ
• Higher risk
– significant presence in
developing countries
– larger corporate book
– higher trading activity
– surprises
• Lower efficiency
• Ability to deliver doubted
Current position
• Competitive cost structure – cost to
income ratio at low 50s
• Demonstrated ability to make bold
portfolio moves (Grindlays sold, ANZIB
reconfigured, retail stockbroking sold)
• Demonstrated ability to execute fast
against important imperatives (cost &
risk positions transformed over 2 years)
• Most businesses displaying strong
underlying momentum
• High calibre, committed, dynamic
management team
Growth
eTransformation
Specialisation
Group strategic direction built on specialisation,
eTransformation and growth
Proposition
Strategy
1
Integrated financial services firms
will lose to specialists over time
1
Reconceive and develop ANZ as a
portfolio of specialist businesses
2
The rise of specialists and new
technologies will deliver superior
customer value and erode margins
2
Become an “eBank with a human
face”
3
For ANZ more value will be created
through focus and leverage of
intangible assets than traditional
concentration plays
3
Create a portfolio of high growth
businesses which leverage
capabilities and brands
We are experiencing very profound change
Globalisation
Old
economy
Internet
Global
new
economy
Technology is driving costs down
As the capacity of chips rises…
Millions of transistors/chips
100
10
Moore’s Law
1996, $
300
250
DRAM
memory
CAGR = 39%
200
1
150
0.1
100
Intel microprocessors
CAGR = 38%
0.01
50
0.001
1971
75
80
85
90
Cost of a 3-minute telephone call
from New York to London
1995
Index, 1980=100
0
1930
1940
1950
1960
1970
1980
Interaction costs
100
Elapsed time for 100kb transfer
10
50%
1
0.1
1980 1985 1990 1995 2000 2005
1995
2005
1990
2000
The basis of success is changing
Incumbents’ historic advantages
. . . Neutralised in some/most cases
Privileged access to customers,
technology, labour, and capital –
hard for others to compete
Access available to everyone –
easier for new competitors to enter
and for customers to compare and
switch
Familiarity with local
ways of doing business
needed
Regional/global standards and
protocols become common – local
familiarity becoming less important
Vertical integration the
best model
No real need for integration within
the company – can be accomplished
with external parties
Protection from
capital market
pressure
Capital market rewards the strong
and punishes the weak
A disaggregated approach is required
EDS
IBM
Product
Manufacturing
Yodlee
Quicken
Distribution Channels Sales &
& Processing
Marketing
Customer
Need
Countrywide
AHL
House
Purchase
MBNA
NextCard
Credit
Card
Egg
ING
Cash
Deposit
Fidelity
Schwab
Wealth
Mgmt
Proposition 1: Specialists will win in the
future
Globalisation and the impact of the internet will give rise to
specialist players who are very customer focused
Global niche players will increase their penetration of the domestic
markets through time
Over time, this will lead to the disaggregation of traditional
integrated financial services players
To succeed in this environment, winners must specialise in the
businesses where they have real capability and can compete long
term
Strategy 1: Reconceive ANZ as portfolio
of specialist businesses
• Make each of our 21 businesses a specialist in its own right
• Establish three new stand alone customer businesses - Wealth
Management, Small Business and General Banking
• Accelerate the growth of our strong product monoline
businesses
• Move towards open architecture, selectively over time
• Manage the portfolio and brands actively from the centre
Our portfolio comprises 21 distinct
businesses
Customer Segments
Products
Personal
• Wealth Management
• Small Business
• General Banking
• Mortgages
• Credit cards
Corporate
• Institutional
• Corporate
• Foreign Exchange
• Capital Markets
• GSF
• Asia
• Pacific
• ePortfolio
• Asia
• Australia/NZ
• Utility
• Payments
International/
eCommerce
Internal
• ANZFM
• B2C eCommerce
• Asset Finance
• GTS
• B2B eCommerce
• Technology
We have mostly leading or competitive
market positions
Leader
Competitive
Weaker
Personal
Cards
B2C eCommerce
Wealth Management
Mortgages
General Banking
Small Business
Funds Management
Corporate
Corporate
Structured Finance
Foreign Exchange
Asset Finance
B2B eCommerce
Capital Markets
Institutional
Transaction Services
International/
eCommerce
Pacific
Asia
Contribution balanced between personal
and corporate, and product and customer
738m*
368m
100
%
311m
Other
Small Business
100%
Institutional
General Banking
Personal
Wealth Mgmt
Corporate
Transaction Services
Asset Finance
Mortgages
International
Funds Mgmt
Foreign Exchange
0
37m*
Personal
0
* Excluding Grindlays
Capital Markets
Structured Finance
Cards
0
Corporate
Corporate
100
International
Customer
Businesses
A balanced portfolio of higher & lower
capital businesses
Contribution
to Group Profit=
General Banking
Profit
Contribution
Mortgages
Funds Management
Institutional
Corporate
Wealth
Small Cards
Bus
GFX
GSF
Asset Finance
GTS
GCM
Pacific
Asia
Percentage of Group Economic Capital
Proportion of Group
Economic Capital
A bias towards high return, low risk
RAROC
Higher
Global
FX
Global
Trans
Wealth
General
Banking
GCM
Fin.
Products
Pacific
Mortgage
Small
Bus. Cards
Funds
Manag
Corporate
GSF
Lower
Asset
Finance
Institutional
Asia
Economic Capital
Strategy 1: Reconceive ANZ as portfolio
of specialist businesses
• Make each of our 21 businesses a specialist in its own right
• Establish three new stand alone customer businesses - Wealth
Management, Small Business and General Banking
• Accelerate the growth of our strong product monoline
businesses
• Move towards open architecture, selectively over time
• Manage the portfolio and brands actively from the centre
Group strategic direction built on
specialisation, eTransformation and growth
Proposition
Strategy
1
Integrated financial services firms
will lose to specialists over time
1
Reconceive and develop ANZ as a
portfolio of specialist businesses
2
The rise of specialists and new
technologies will offer superior
customer value and will erode
margins
2
Become an “eBank with a human
face”
3
For ANZ more value will be created
through focus and leverage of
intangible assets than traditional
concentration plays
3
Create a portfolio of high growth
business which leverage
capabilities and brands
We have no choice but to transform our economics
%FUM
2
1.8
Operating Costs
Ratio Schwab to ANZ Retail
6
Retail
Branch
1.2
4
1
Other
Operating
Costs
0.6
2
Other
Salaries
0
0
%NIM
Internet Bank
5
Halifax
Egg
Launched
Lloyds/TSB
1
Supermarkets
0
Egg
-2
96
97
Staff
15
~30% margin
compression
10
5
-1
95
Branches
20
3
2
Sales
Example: Entry of US Monolines into UK
Credit Card Market
%NIM
UK Interest Margins
4
Customers
Internet Bank (at
s cale)
Net interest
margin
Headline Net Interest
Margin
Traditional Retail
Bank
98
99
0
91
93
95
MBNA, Capital One
97
99
Technology transforms what customers
expect
Time required to find a high rate certificate of deposit
Minutes
Telephone
25
10
WWW
-60%
WWW +
agent
1
-90%
Schwab demonstrates the power of “Clicks
and Mortar”
“I see the Internet as the single most empowering force for the individual investor.
It allows people complete access to the world of information, giving them the
ability to analyse their choices, make decisions and transact business”
Charles Schwab
Chairman and Co-CEO
“At the same time, we’re in the business of building trust. Because we’re dealing
with people’s money, we need to make sure that they feel secure. The human
contact that our customers get in the branches and on the phone is all about
building trust. So it’s that marriage of technology and people that we think is so
important. The Internet is at the heart of our strategy, but it’s a partnership with
people that makes that strategy successful”
David Pottruck
President and Co-CEO
Source: www.schwab.com
Proposition 2: Winners will offer
value at lower cost
The rise of specialists and the internet puts power into the hands
of the customer
Greater choice will enable customers to select the highest value
service from each provider
Rising customer expectations will demand greater personalisation
Specialists and the internet will drive out cross subsidisation and
reduce costs
Customers will require multi-channel interaction, including face to
face contact and will expect low cost
Strategy 2: Become an “eBank with a
human face”
•
Provide our customers with a multichannel, personalised experience through
seamless channel integration, web enablement and CRM technology
•
Create robust and flexible infrastructure by rationalising core systems and
platforms, standardising desktops and servers and creating a single IP
network across ANZ
•
Build strong eCommerce capabilities through our eCommerce centre of
excellence, ANZ Ventures disciplines and changing the way business and IT
work together
•
Continue aggressive cost reduction through using technology to improve
productivity and eliminate activity in payments, processing and internal
administration
•
Differentiate by out-innovating and out-executing the competition
Group strategic direction built on
specialisation, eTransformation and growth
Proposition
Strategy
1
Integrated financial services firms
will lose to specialists over time
1
Reconceive and develop ANZ as a
portfolio of specialist businesses
2
The rise of specialists and new
technologies will offer superior
customer value and will erode
margins
2
Become an “eBank with a human
face”
3
For ANZ more value will be created
through focus and leverage of
intangible assets than traditional
concentration plays
3
Create a portfolio of high growth
business which leverage
capabilities and brands
Many Australian institutions focused
on consolidation stage
Fragmentation . . . to
consolidation
USA
EUROPE
AUSTRALIA
ASIA
. . . and
specialisation
Leading
leading
toto
globalisation
globalisation
Given our position, our growth will come through
leveraging capabilities rather than consolidation
Global Mega Players
Specialists
Market/Book
Ratio
4
Geographic
incumbents
Geographic
integrators
1
20
Book Equity
50
Given our position, our growth will come through
leveraging capabilities rather than consolidation
Schwab
MBNA
Lloyds TSB
Specialists
Amex
Santander
Market/Book
Ratio
Global Mega Players
Citigroup
4
Bank of America
Geographic
incumbents
Geographic
integrators
1
20
Book Equity
50
Given our position, our growth will come through
leveraging capabilities rather than consolidation
Schwab
MBNA
Lloyds TSB
Specialists
Amex
Santander
Macquarie
Market/Book
Ratio
4
CBA
WBC
ANZ
StGeorge
NAB
Geographic
incumbents
Global Mega Players
Citigroup
Bank of America
Geographic
integrators
1
20
Book Equity
50
ANZ has strong growth prospects
across time
Earnings
• Asia
• eAsia
International
• Pacific
• GTS
• Capital Markets
• Authentication
• B2B payments
• eProcurement
• eAuto
Corporate
• Asset Finance
• GSF
• Foreign Exchange
• Institutional
• Corporate
• Wealth Management
• Cards
• Funds Management
Personal
• Mortgages
• General Banking
• Small Business
• E-trade
• ANZ Bizsite
• E wealth
Timeframe
Proposition 3: High growth companies
with global capabilities will differentiate
themselves
Market premium will increasingly be a function of higher than
system growth
Growth companies are more likely to be specialists focused on fast
growing segments than geographic integrators
Winners will be high growth companies which leverage intangible
assets such as capabilities and brands
Australian financial institutions will need to develop leading
positions internationally to grow
Strategy 3: Create growth businesses
•
Build from our strong corporate franchise by creating new businesses
in corporate ePayments and eProcurement
•
Strengthen our consumer proposition through building on our early
eCommerce momentum, creating strong core offers and new
businesses
•
Extend our leadership in the Pacific by replicating our model in new
countries
•
Leverage our consumer and corporate eCommerce and Cards
capabilities by partnering to build new businesses in Asia
•
Build a small number of regional and/or global niches which leverage
our capabilities
•
Be very selective about acquisitions, considering only those which add
strategically to individual businesses or enhance capabilities and create
value
Group strategic direction built on specialisation,
eTransformation and growth
Proposition
Strategy
1
Integrated financial services firms
will lose to specialists over time
1
Reconceive and develop ANZ as a
portfolio of specialist businesses
2
The rise of specialists and new
technologies will offer superior
customer value and will erode
margins
2
Become an “eBank with a human
face”
3
Winners will be high growth
specialists that successfully
leverage their real capabilities
3
Create a portfolio of new high
growth businesses which leverage
capabilities and brands
Management changes
•
In Personal, create 3 new customer businesses which integrate Banking
Products:
–
–
–
General Banking
Larry Crawford
Small Business
Graham Hodges
Wealth Management TBA
•
New Growth Portfolio to be overseen by Elmer Funke Kupper in addition
to his existing International responsibility
•
Global Transaction Services will be headed by Kathryn Fagg
John McFarlane
CEO
Peter Marriott
CFO
Peter Hawkins
Personal
Roger Davis
Corporate
David Boyles
CIO
Elmer Funke Kupper
International/Growth
Personal
Executive Committee
Group executive
Graham Hodges
Small Business
TBA
Wealth Mgmt
Satyendra Chelvendra Brian Hartzer
Personal eCommerce Cards
Greg Camm James MacKenzie
Mortgages Funds Management
Group
Corporate
Larry Crawford
General Banking
Bob Edgar
Corporate &
Institutional
Banking
Grahame Miller
Investment
Banking
Peter McMahon
Asset Finance
Kathryn Fagg
Global Transaction
Services
Elizabeth Proust
Corporate Affairs
& Human
Resources
Alison Watkins Mark Lawrence Murray Horn
New Zealand
Strategy &
Risk
Brand
Management
Management
ANZ in the mid game (3-5 years)
•
Leading positions in a number of specialist businesses in Australia,
New Zealand and Asia
•
Portfolio of businesses likely to be narrower and more focused
•
A performance orientated driver of individual businesses
•
Portfolio actively re-shaped by the corporate centre
•
Multiple strategic alliances
•
A range of growth businesses and options
•
A leader in eCommerce
•
Higher market to book ratio