Transcript John McFarlane

A Strategic Overview
Presentation to
CSFB Australian Financial Services Conference
Melbourne, 27 September 2001
John McFarlane
Chief Executive Officer
Australia and New Zealand Banking Group Limited
Five key factors are driving ANZ’s
current and future performance
1. Improving
sustainability of
earnings
Improved financial
outcomes:
2. Revenue growth
• Return on Equity
– target 20%+
3. Productivity
enhancements
• Earnings per share
– target 10%+
4. Risk reduction
5. Perform Grow
Breakout program
Page 2
1. Sustainability of earnings continues
to improve
Lending Profile
Focus on lower risk, more
sustainable activities
100%
80%
• Investment and emphasis on
Personal Financial Services
60%
– lower risk
– more sustainable
– higher growth
40%
• Corporate balance sheet growth
restricted
20%
– Focus on fee income
– Higher quality corporate book
0%
ANZ ANZ ANZ CBA
1991 1996 2001
Business
NAB WBC
Consumer
Page 3
2. Significant revenue growth over five
years
$m
$7,000
Revenue growth
$6,000
• Revenue CAGR for
CAGR ~ 6.7%
H2
estimate
$5,000
$4,000
$3,000
4958
5066
5478
5877
3139
$1,000
$0
1998
1999
2000
• CFS ~ 10.7%,
• International and
subsidiaries ~
0.2%
$2,000
1997
• PFS ~ 8.8%,
2001
Page 4
• Interest income
CAGR over the five
year period is ~
5.7% and ~ 8.2% for
non interest income
3. Productivity improvement is
providing scope to invest for growth
Clear leadership on
Cost Income ratio
%
Return on Assets
%
1.20
65
63
NAB
CBA
WBC
61
59
1.10
ANZ
1.00
57
0.90
55
53
0.80
51
49
0.70
Target
47
Mid 40’s
0.60
45
1997
1998
1999
2000
2001
Page 5
1997
1998
1999
2000
Mar-01
4. We have a continuing focus on
reducing risk
Exited higher risk
activities
• emerging markets trading
• retail stockbroking
Implementation of a range
of measures which have
reduced risk
• greater portfolio diversification
• commercial property down from
24% in early 90’s to 8% today
• Latin America
• Grindlays
• Emerging markets
corporate lending
• early introduction of EVA/NIACC
methodologies
• significantly enhanced
sophistication of credit, market
and operating risk management
• more open/transparent disclosure
Page 6
Risk profile of the corporate book is
within expectations and remains sound
Corporate risk grade profile
Risk actively managed
AAA to
BBB+
BBB to
BBB-
38.4%
26.4%
38.4%
37.9%
26.7%
• Quarterly strategy reports
prepared for all high risk
accounts
38.9%
26.9%
27.4%
• All BB rated & high risk
accounts reviewed
regularly
• Single customer
concentration limits
lowered
BB + to
BB
18.2%
19.1%
19.4%
20.3%
BB-
11.7%
12.3%
11.7%
9.3%
>B
5.3%
4.0%
Sep-99
Mar-00
3.6%
Sep-00
4.1%
Mar-01
>B = B, B-, CCC
& non-accrual
Page 7
Consumer portfolio has improved
%
Arrears > 60 days
3.50
Delinquency levels
have improved,
driven by:
3.00
2.50
• improved collections
activity
Small Business
2.00
Mortgages
• low interest rates and
Cards
1.50
PFS - Overall
• stable employment
conditions (up to
August)
1.00
0.50
Closely monitoring in
light of recent events
0.00
Mar- Apr- May- Jun- Jul- Aug01
01
01
01
01
01
Page 8
Provisioning is in line with expectations
$m
120
Actual SP v ELP charge
- Corporate Financial Services
• Slowing domestic
economy will increase
specific provisions for
2H01
100
80
60
• ELP is a function of
volume (on and off
balance sheet), risk
grade profile, and level
of security
40
20
0
1H 98 2H 98 1H 99 2H 99 1H 00 2H 00 1H 01
-20
-40
ELP charge
SP charge
Page 9
• Specific Provisions tend
to be less volatile in
Personal businesses and
track more closely to ELP
Group’s capital adequacy ratio is
strong at 10.4%
%
12
Capital Ratios
10.7
11
10.7
• Inner Tier 1 and Tier
1 ratios for
September 2001
expected to be
broadly in line with
September 2000
10.4
10
10.2
9.8
9
7
• Ratios were managed
down in first half by
$1bn buy back
(completed in May)
7.9
8
7.4
7.2
7.3
6.6
6.6
6.6
6.9
6.4
6
• No AASB 1038
Appraisal Value
accounting
6.2
Total Capital
5
Tier 1
• Target Inner Tier 1 is
6.0%
Inner Tier 1
4
1997
1998
1999
2000
Mar01
Page 10
5. Building for the future - a
distinctive strategy
Proposition
Specialise
e-Transform
Perform Grow
& Breakout
Strategy
Implications
• Entrepreneurial
specialists create
more value
• ANZ as a portfolio
of 16 specialist
businesses
• Specialist
approach to
customer and
product
businesses
• Corporations
must embrace
new technologies
• An e-Bank with a
human face
• Transform the
way we do
business with IP
technology
• Value depends on
performance,
growth and
breaking out
• Drive results,
invest in growth
businesses and
create new
paradigms/culture
• Meet
expectations,
fund growth by
cost reduction,
transform
Page 11
Transforming ANZ through Perform,
Grow and Breakout
Break
out
Grow
Perform
Page 12
• Focus:
corporate transformation
• Benchmark:
global industry/players
• Looking for:
dramatic change
• Horizon:
3-10 years
• Success:
dramatic market cap increase
• Focus:
specialisation and out-growing
the market
• Benchmark:
competitors in each business
• Looking for:
breakout moves in key
businesses (eg QTV, TPMO’s)
• Horizon:
2-5 years
• Success:
4-5 moves taking share and
worth ~AUD1bn+ market cap
each
• Focus:
performance
• Benchmark:
market expectations
• Looking for:
six monthly delivery
• Horizon:
1-3 years
• Success:
meet/exceed expectations
consistently
Looking forward we are targeting
further improvement in each key
factor
Improving earnings
sustainability
• asset growth biased towards consumer and
small business
• corporate focus on increasing ROA
Revenue growth
• annual investment in growth businesses
• revenue growth at least equal to nominal GDP
growth
Lower cost-income
• targeting mid 40’s by 2003
• consistent improvement half on half
Risk reduction
• reductions in single customer limits
• portfolio risk management approach
Perform Grow
Breakout program
• breakout cultural change program
• values based leadership
Page 13
We are performing well and on track to
deliver on our commitments
Measure
2003 Commitments
As at Mar-01
EPS growth
> 10%
13%
ROE
> 20%
19.6%
Cost-income ratio
mid 40’s
49.4%
Inner Tier 1
6%
Credit rating
maintain AA category
6.2%
maintained
Outlook – 2001
•
Specific provisions should be marginally above ELP
•
Earnings expected to be towards the top end of analyst
forecasts
Page 14
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 Gentry
Head of Investor Relations
ph: (613) 9273 4185
fax: (613) 9273 4091
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e-mail: [email protected]