Transcript 1998 Final Results Presentation Analysts

1999 Annual Results
Australia and New Zealand Banking Group Limited
3 November 1999
Shareholder Highlights

Earnings per ordinary share 90.6c (77.2c) up 17%

Dividend 56 cents, up 8%

Franking increased to 75% interim, 80% final (60%)

Total shareholder return 19.6% (-15.6%)

$500 million share buy-back
Financial Highlights

NPAT $1,480 million versus $1,106m ($1,175 before abnormals)

Income up 6%, costs down 4%, ELP up 5% (SP down 6%)

Return on Equity 17.2% (15.5%)

Cost income ratio 55.0% (60.9%)

ROA 1.0% (0.8%)

Risks reduced. Gross non-accruals down 7%, net down 27%

Earnings quality improved. No Abnormals. No Surprises
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
ROA %
0.90
1996
63.1
1,662
1.0
0.80
1,225
501
1,543
762
886
872
444
900
724
428
1996
1997
1998
657
1999
1996
1997
1998
1999
Business Highlights

Strategic re-positioning on track in all segments

Good earnings growth in Australia and NZ

Business mix substantially improved. High risk businesses exited

Domestic market share up notwithstanding cost focus

105,000 internet banking customers (8,000). ANZ E*TRADE launched

Major technology projects completed on time
Improving Business Mix
Business Segment Profit After Tax
Other
Down
20%
Business Segment Proportion
International
International
1998
Up 17%
Corporate
Up 33%
Personal
1999
Other
Corporate
Personal
Leveraging Technology: anz.com
Registrations
120000

80000

40000

0
Oct
Jan
Apr
Jul
Oct

Days Required to Add 10,000 Customers
40


30

20

10
0

May Jun Jul Aug Sep Oct
Online application for all major
products
ePos service for merchants
New Edify Internet Banking
platform
Alliances with Excite & Yahoo
ANZ e*TRADE alliance
Esanda 10% stake in Autogroup
“Pay Anyone” open payments
eGate business payments
platform
Internet Banking launched in NZ
Business Strategy
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
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Achieve growth in Personal and Business Banking
Enhance focus on Premier, Small Business, Retail Funds
Improve asset mix and return in Corporate
Complete re-positioning of International, turn around suboptimum businesses
Build anz.com market position to domestic leadership
Continue to Deliver in 2000
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

Increase ROE. Add RORWA to EVA as key measure
Target flat costs. Lower cost income ratio
Improve asset quality, particularly International
Achieve an optimal capital structure
Set stretch performance targets and linked incentives
Successfully manage the Y2K transition
Target highest increase in e-Commerce customers
No surprises
Drivers of Performance
Net Interest
Assets
ROA
ROE
15.5
0.8
2.37
2.46
1.4
1.57
NII/Interest Earning
Assets
2.97
1.0
17.2
Other Income
Assets
Cost/Income
60.9
2.29
1998
3.05
55
2.22
Cost
Assets
1999
Leverage
Risk
Provisions/NLA
Provisions
Assets
0.32
Business Mix
0.34
0.45
0.43
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
Abnormal
Items
1,175
69
1200
1100
1,106
1000
Lower Costs
83
Increased Tax
(136)
Higher
Provisions
(23)
1,480
Net Interest
Income
Growth
98
900
Post
Abnormals
1998
Pre
Abnormals
1998
1999
Margins Stable as Balance Sheet Re-positioned
Australia
%
$b
3
Average Interest Earning Assets
150
1.5
100
0
Net Interest Average Margins
4.5
80
40
0
1999
New Zealand
20
0
50
1998
1998
1999
International
40
0
1996
1997
1998
1999
20
0
1998
1999
Non Interest Income
Steady Growth, Better Quality
Trading
Other
FX
Other Fees
Lending Fees
44
91
45
78
102
116
62
96
*
126
196
177
418
471
488
494
517
558
275
295
286
306
333
346
Mar-97
Sep-97
Mar-98
Sep-98
Mar-99
Sep-99
80
116
111
180
160
* Sept 98 trading loss of 145m, Other income of 139m
Costs and Cost Income Ratio Lowered
Cost Income Ratios %
70
60
WBC
ANZ
CBA
NAB
50
1993
1994
1995
1996
1997
1998
1999
*NAB & WBC first half
Improving Business Mix
A$m
Geographic Profit After Tax
1600
1400
1200
1000
800
189
Overseas
200
New Zealand
Balance Sheet Assets
150
149
35.4
25.5
167
77.6
600
400
238
A$b
1042
819
80.7
Other Domestic
Australia
Mortgages
200
36.8
42.8
1998
1999
0
1998
Overseas
1999
Gains in Australian Market Share
20
%
Total Market Share
18
14
NAB
CBA
16
ANZ
WBC
12
20
Share of Housing Lending
13
12
14
10
%
1988
%
1993
11
10
Jun-94
1998
Share of Business Lending
%
30
Apr-96
Feb-98
Aug-99
Share of Credit Cards
18
25
16
14
20
12
10
Jun-94
Apr-96
Feb-98
Aug-99
15
Jun-94
Apr-96
Feb-98
Aug-99
Reducing Risk
Asian
Exposure
US$b
11.5
Australian Lending
Asset Profile
%
6.1
5.6
100
$65b
$90b
AAA-BBB+
80
A$m 23
Equities
1997
1998
1999
Market Risk (VaR - Ave)
2
3
60
BBB
40
BB
20
Interest
BB<B+
7
0
1996
FX
1997
1998
1999
1999
Non-Accrual Loans
$m
3000
2500
Gross Non-Accrual Loans
2000
Net Non-Accrual Loans
1500
1000
500
0
1994 1995 1996 1997 1998 1999
As at 30 September $m
Gross
Australia
623
New Zealand
50
International
870
Net
345
30
282
Cover
44%
40%
65%
Provisioning: Personal & Corporate
Offset International
350
$m
301
300
247
250
219
217
200
150
100
155
103
110
79
96
154
111
109
50
0
1998
1999
Personal
Financial
Services
1998
1999
Corporate
Financial
Services
ELP
1998
1999
International
SP
Specific Provisions by Region
1998
$512m
South Asia UK/Europe
Middle East
1999
$482m
Australia & NZ
South Asia
UK/Europe
Middle East
Asia
Asia
Australia & NZ
Provisioning: ELP > SP at Group Level
$m
2100
510
1800
1500
482
FX Impact
1395
1401
ELP Net SP
Charge Transfer
1200
900
967
600
300
0
Sep 98
Sep 99 APRA
Guideline
ELP - Economic Loss Provision
SP - Specific Provision
Buyback to Reduce Capital Surplus
%
Capital Adequacy Ratio
Capital Management Philosophy:
12

10.7
10

8
7.9
6
4

2
0
1996
1997
1998
1999
APRA minima
Hybrid
Tier 1
Capital scarce resource to be managed
effectively and efficiently
Maintain capital consistent with ANZ’s
AA status and peer group ratings
 Tier 1 (6.5 - 7.0%)
 Inner Tier 1 (6.0% - 6.5%) aligned
to Economic Capital
$500 million buyback
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
* Hurdle of 15% used in internal models
834
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]
Profit & Loss
A$M
Net Interest Income
Fees
FX
Trading Securities
Other
Non Interest Income
Net Income
Personnel
Expenses
Premises
Computer
Other
Restructuring Costs
Total Expenses
Profit Before Provisions
Doubtful Debts
Tax
NPAT Before Abnormal Items
Abnormal Items
NPAT and Abnormal Items
Sep-97
3,437
1,459
237
182
232
2,110
5,547
1,949
362
330
771
90
3,502
2,045
400
466
1,171
<147>
1,024
Sep-98
3,547
1,574
373
<83>
235
2,099
5,646
1,854
347
341
776
120
3,438
2,208
487
537
1,175
<69>
1,106
Sep-99
3,645
1,754
340
89
138
2,321
5,966
1,732
314
344
813
91
3,294
2,672
510
676
1,480
1,480
Profit & Loss
A$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
Strong Management Team
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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