Transcript 1998 Final Results Presentation Analysts

Delivering for Shareholders
Australia and New Zealand Banking Group Limited
David Ward
General Manager
Office of the Chief Executive
February 2000
-1-
Briefing Outline

Review of ANZ’s 1999 Results
- Financial Perspective
- Business Perspective

Outline Group Strategy with particular focus on Personal
Financial Services strategy.
-2-
1999 - A Good Year for ANZ

EPS 90.6c up 17%. TSR up 19.6%

NPAT $1,480 million up underlying 18%

Return on Equity up to 17.2% (15.5%). ROA 1.0% (0.8%)

Costs down 4%. Cost income ratio down to 55.0% (60.9%)

Risks reduced. Gross non-accruals down 7%, net down 27%

$500 million share buyback

No abnormals. No Surprises.
-3-
Significant Improvement Achieved
Cost Income Ratio %
ROE %
18.3
1996
65.8
16.9
15.5
1997
1998
17.2
1999
0.90
1997
60.9
1998
55.0
1999
Gross and Net Non-Accruals
$m 1,662
1,543
ROA %
0.90
1996
63.1
1.0
0.80
1,225
501
762
886
872
444
900
724
428
1996
1997
1998
657
1999
1996
1997
1998
1999
-4-
Good Progress Across the Board
$m
Software
Capitalisation
61
1700
1600
Growth in
Other
Income
42
1500
Lending Fee
Growth
87
Other Fee
Growth
93
1400
1300
Abnorm
al Items
1,175
69
1200
1100
1000
1,106
Lower
Costs
83
Increased Tax
(136)
Higher
Provisions
(23)
1,480
Net Interest
Income
Growth
98
900
Post
Pre
Abnormals Abnormals
1998
1998
1999
-5-
Drivers of Performance
ROA
ROE
15.5
0.8
Net Interest
Assets
2.37
2.46
Other Income
Assets
1.4
1.57
NII/Interest
Earning Assets
2.97
3.05
1.0
17.2
Cost/Income
60.9
2.29
1998
55
2.22
Cost
Assets
1999
Leverage
Risk
Provisions/NLA
Provisions
Assets
0.32
Business Mix
0.34
0.45
0.43
-6-
Delivering on Cost Reduction
Cost Income Ratios %
70
60
WBC
CBA
ANZ
NAB
50
1993
1994
1995
1996
1997
1998
1999
-7-
Reducing Risk
US$b
11.5
Asian
Exposure
6.1
Australian Lending
Asset Profile
%
5.6
100
$65b
$90b
AAA-BBB+
80
1997
A$m
23
1998
1999
Market Risk (VaR - Ave)
23
Equities
60
BBB
40
BB
20
Interest
BB<B+
7
0
1996
FX
1997
1998
1999
1999
-8-
Non-Accrual Loans
$m
3000
2500
Gross Non-Accrual Loans
2000
Net Non-Accrual Loans
1500
As at 30 September $m
Gross
Australia
623
New Zealand
50
International
870
Net
345
30
282
Cover
44%
40%
65%
1000
500
0
1994 1995 1996 1997 1998 1999
-9-
Provisioning: ELP > SP at Group
Level
$m
2100
510
1800
1500
1200
482
FX Impact
1395
1401
ELP Net SP
Charge Transfer
900
967
Surplus over APRA
Guideline
600
300
0
Sep 98
Sep 99 APRA
Guideline
ELP - Economic Loss Provision
SP - Specific Provision
- 10 -
Capital Strategy
%
Capital Adequacy Ratio
12
10.7
10

8
7.9

6
4


2

0
1996
1997
1998
Inner Tier 1
Active capital management
Maintain AA status and peer ratings
 Tier 1 (6.5 - 7.0%)
 Inner Tier 1 (6.0% - 6.5%)
$500 million on-market buyback
Major international acquisitions
unlikely
NZ Tracking Stock Issue in May
1999
Hybrid
- 11 -
Economic Value Added (EVA)
$ million
Net Income
5,966
Operating Expenses
(3,294)
ELP Charge
(510)
Tax
(676)
Franking & Other Adjustments
352
Adjust Profit
1,838
Cost of Capital* @ 11%
(1,004)
EVA
834
* Hurdle of 15% used in internal models
- 12 -
Business on Track

Strategic re-positioning on track in all segments

Good earnings growth in Australia and New Zealand

Business mix substantially improved. High risk businesses
exited

Domestic market share up notwithstanding cost focus

140,000 Internet banking customers (8000). ANZ E*Trade
launched

Major technology projects completed on time, on budget
- 13 -
Business Mix Improved
Business Segment Profit After Tax
$m
1500
Other
Down
20%
Business Segment Proportion
International
International
1000
Other
Personal
Corporate
Up 17%
500
Personal
Up 33%
Corporate
0
1998
1999
- 14 -
Gains in Australian Market Share
20
%
Total Market Share
18
14
NAB
CBA
16
ANZ
WBC
12
20
13
12
14
10
% Share of Housing Lending
11
1998
10
Jun-94
% Share of Business Lending
%
1988
1993
30
Apr-96
Feb-98
Aug99
Share of Credit Cards
18
25
16
14
20
12
10
Jun-94
Apr-96
Feb-98
Aug99
15
Jun-94
Apr-96
Feb-98
Aug99
- 15 -
Overall Strategic Direction in Place

Balance business mix towards consumer and low risk





Personal offers greatest growth and earnings potential
Leading position in corporate to be leveraged
International to be simplified and focused
A leading presence in e-Commerce to be established
Transform management process to deliver EVA





Withdraw from high-risk and non core segments
Improve performance in suboptimal businesses
Invest in high growth revenue streams
Hold costs flat
Optimise capital efficiency
- 16 -
Strategy for Personal

Aggressively build market position in all consumer segments

An intergrated financial services approach

Special focus on insurance and retail funds management

Differentiated service propositions by customer segment

Build strong product businesses

Continue intense focus on cost management

Build a leading consumer e-Commerce capability
- 17 -
Integrated Personal Financial
Services
Estimated Value of An Australian
Retail Customer (A$ Present Value)
$6000 - 7000
Household Financial Assets
$b
General Insurance
& Traditional Life
3000
Risk/Wealth Protection
Investment
2000
Traditional Banking
1000
Managed
Funds
Banks/NFI
1989
1997
2005
- 18 -
ANZ Has a High Quality Personal
Customer Base
Wealth Bands
$(000)
20
60
100
200
70
80
500
1000
ANZ
Other
Industry
Ave
0
10
20
30
40
50
60
90
100
Total Relationships (%)
Source: Roy Morgan Research 1998
- 19 -
The Opportunity with Australian
Consumers
Customer
Base
2.7m
All ANZ
Customers
High Value
to ANZ
High Value
to
Industry
but limited
ANZ
business
True Retail
Market
Source: Roy Morgan Research 1998
- 20 -
A New Dedicated Business for
Premier Customers




Premier Financial Package
Dedicated Managers
Premier Suites
Dedicated Service Officers
- 21 -
Segmented Customer Service
Propositions will now Drive Delivery
Segmented Customer Service Approach
Customer Revenue curve
New Segmented
approach
Traditional uniform cost to serve
High Value
Customers
Low Value
Customers
A fundamental shift to a customer-centric strategy
- 22 -
Leveraging Technology: anz.com
Market share
(% of Australian internet banking users)
Customer takeup rate *
(% of customer base)
45%
30%
WBC
CBA
ANZ
St George
NAB
15%
9.5
8.5
7.5
5.2
3.1
0%
Apr-99
Jun-99
Aug-99
Oct-99
Dec-99
ANZ
St George Westpac
* Number of internet banking users (Ord Minnett 12/99) / number of main banking relationships
(based on Ray Morgan 8/99 data) Source: Ord Minnett, Roy Morgan Research
NAB
CBA
- 23 -
International - Simplify and Focus
Continue to
Reduce Risk
Target Fewer,
Deeper
Positions
Create Future
Growth
Platforms
Re-balance business mix towards
consumer
 Reduce cross border risk




Target Top 2-3 foreign or Top 5 local position
Leverage strong positions/ global capabilities
Deal with minor positions
Develop Asia-Pacific, e.g. Indonesia
 Pursue acquisitions only where it creates
a desired position - likelihood of our
making a major international acquisition
this year is low

New
Lending
Policies
Latin American
Offices Closed
25% Interest in
Panin, Cards
acquisition
- 24 -
Continue to Deliver in 2000







Increase ROE towards 20% target
Target flat costs. Achieve 53% cost income ratio
Improve asset quality, particularly International
Progress towards target capital range
Set stretch performance targets and linked incentives
Target highest increase in e-Commerce customers
No surprises
- 25 -
Outlook

Positive view on world economy

Australian economy strong but slowing slightly

Business tracking close to our expectations,
comfortable with “Street” expectations

Abnormal writedown of FITB of $60m from tax changes
– will be partially offset by abnormal gains
- 26 -
Rationale for Tracking Stock






Align shareholder base with location of assets/profits
Increase ANZ Brand awareness
Cost Efficient form of high “Equity Credit” Capital
Diversify Shareholder Base/Reduce Cost of Capital
Opportunity for Customers and Staff to own their Bank
Increases ANZ weighting in the NZSE 40
- 27 -
ANZ New Zealand Tracking Stock
Main Features
An Investment in ANZ Group





NZD>500m
Denominated in NZ$
Dividends in NZ$ equal to
ANZ’s dividend
Imputation Credits Attached
Ability to exchange to ANZ
Shares after three years



Mandatory Exchange after
30 years
Non Voting
Timing now May (after
Interim Results on 1 May)
- 28 -
The Proposed Exchange Formula

ANZ initiated exchange will be on a 1:1 basis, ie 1 tracking unit for 1 ANZ
share

Investor initiated exchange:
A/B x .98 expressed as a decimal rounded to 2 decimal places, where A/B
cannot be less than .97 or greater than 1.02
A = the A$ equivalent of the tracking stock price calculated as the
weighted average price over the next 10 trading days
B = the weighted average ANZ share price over the next 10 trading
days. This means that the exchange ratio will effectively have a cap
of 1:1 and a floor of 0.95:1

The period of non-exchangeability (other than in certain events such as
takeover, liquidation) remain at 3 years.

Exchange should remain being able to be triggered at any time (but issues
of shares processed fortnightly to reduce administrative burden).
- 29 -
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
David Ward
General Manager Office of the Chief Executive
ph (613) 9273 4185 fax (613)9273 4091 email [email protected]
- 30 -
Profit & Loss
A$M
Net Interest Income
Fees
FX
Trading Securities
Other
Non Interest Income
Net Income
Personnel
Expenses
Premises
Computer
Other
Restructuring Costs
Total Expenses
Profit Before Provisions
Doubtful Debts
Tax
NPAT Before Abnormal Items
Abnormal Items
NPAT and Abnormal Items
Sep-97
3,437
1,459
237
182
232
2,110
5,547
1,949
362
330
771
90
3,502
2,045
400
466
1,171
<147>
1,024
Sep-98
3,547
1,574
373
<83>
235
2,099
5,646
1,854
347
341
776
120
3,438
2,208
487
537
1,175
<69>
1,106
Sep-99
3,645
1,754
340
89
138
2,321
5,966
1,732
314
344
813
91
3,294
2,672
510
676
1,480
1,480
- 31 -
Profit & Loss
A$M
Net Interest Income
Fees
FX
Trading Securities
Other
Non Interest Income
Net Income
Personnel
Expenses
Premises
Computer
Other
Sub Total
Restructuring Costs
Total Expenses
Profit Before Provisions
Doubtful Debts
Tax
NPAT Before Abnormal Items
Abnormal Items
NPAT and Abnormal Items
Mar-97
1,718
693
111
80
116
1,000
2,718
954
184
173
383
1,694
1,694
1,024
197
243
580
<31>
549
Sep-97
1,719
766
126
102
116
1,110
2,829
995
178
157
388
1,718
90
1,808
1,021
203
223
591
<116>
475
Mar-98
1,773
774
196
62
96
1,128
2,901
972
172
168
385
1,697
40
1,737
1,164
237
298
625
625
Sep-98
1,774
800
177
<145>
139
971
2,745
882
175
173
391
1,621
80
1,701
1,044
250
239
550
<69>
481
Mar-99
1,811
850
180
44
60
1,134
2,945
860
157
186
391
1,594
49
1,643
1,302
258
324
716
716
Sep-99
1,834
904
160
45
78
1,187
3,021
872
157
158
422
1,609
42
1,651
1,370
252
352
764
764
- 32 -
Management Team
















John McFarlane
David Boyles
Roger Davis
Peter Hawkins
Peter Marriott
Greg Camm
Larry Crawford
Bob Edgar
Kathryn Fagg
Brian Hartzer
Elmer Funke Kupper
Mark Lawrence
Peter McMahon
Grahame Miller
Elizabeth Proust
Alison Watkins
CEO
CIO
Corporate
Personal
CFO
Mortgages
Distribution
Business Bank
Banking Products
Cards
International
Risk
Asset Finance
ANZIB
People
Strategy
Citibank, Standard Chartered
AMEX, BOA
Citibank
ANZ
ANZ, KPMG
ANZ
First Bank Systems, Wells Fargo
ANZ
McKinsey & Co
First Manhattan
McKinsey & Co
Soc Gen New York
ANZ, Costain
ANZ
Victoria Public Service
McKinsey & Co
- 33 -