Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Debt Investor Presentation (March 2019)
98 slides from Anz's debt investor presentation, Mar 31, 2019
Slide 1: 2019 Half Year Results – Debt Investor Update
2019 HALF YEAR RESULTS — HALF YEAR ENDED 31 MARCH 2019 D E BT I N V E S TO R U P D AT E AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 2: Important Information & Disclaimer
IMPORTANT INFORMATION & DISCLAIMER Confidential background information The material in this document is general background information about activities of the Australia and New Zealand Banking Group (the “Bank”). It is information given in summary form and does not purport to be complete. The inform
Slide 3: Contents
CONTENTS 2019 FIRST HALF DEBT INVESTOR UPDATE CEO Results Presentation 4 Financial Performance 9 Treasury 30 Risk Management 40 Housing Portfolio 55 Corporate Overview and Sustainability 70 Economics 82 All figures within this investor discussion pack are presented on Cash Profit (Continuing operati
Slide 4: A Simpler, Stronger, More Productive Bank
A SIMPLER, STRONGER, MORE PRODUCTIVE BANK 3 YEAR PROGRESS Absorbed inflation of ~$550m and reduced absolute costs by over $300m1 Sold 23 businesses, reduced Institutional RWAs by $50b, freed up ~$12b of capital Cut number of products in Australia by 1/3 Transferred 2 million customers to con
Slide 5: 1H19 Financial Performance
1H19 FINANCIAL PERFORMANCE Change Change 1H19 (v 2H18) (v 1H18) Statutory Profit ($m) 3,173 +3% -5% Cash Profit (continuing operations) ($m) 3,564 +19% +2% Earnings Per Share (cents) 124.8 +20% +5% Return on Equity 12.0% +193bps +13bps Dividend Per Share (cents) 80 Flat Flat CET1 Ratio (APRA) 11.5%
Slide 6: Business Performance
BUSINESS PERFORMANCE CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS RORWA Profit before 3 year 1H19 ($m) Revenue Expenses NPAT RORWA provisions change (1H19 v 1H16) New Zealand Division (NZD) 1,756 638 1,118 782 2.5% 1H19 v 1H18 1% 2% 1% 0% -1bps +28bps Institutional 2,705 1,313 1,392 1,017 1
Slide 7: Priorities
PRIORITIES FIVE PRIORITIES Facing into mistakes of the past Continuing to simplify & strengthen the bank Step up in re-positioning & re-tooling the Australian business Further work on costs Transforming skills, capabilities & talent for the future 7
Slide 8: Purpose
PURPOSE AN INTEGRAL PART OF OUR STRATEGY Helped guide our decision to provide relief to farmers impacted by natural disasters Informed our approach to sustainable and affordable housing Affordable, secure & sustainable homes ‘Healthy Home’ Loan Package Environmentally sustainable solutions Reb
Slide 9: Financial Performance
2019 HALF YEAR RESULTS — FINANCIAL PERFORMANCE AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 10: Financial Performance
FINANCIAL PERFORMANCE CONTINUING OPERATIONS CONTINUING OPERATIONS EX. LARGE / NOTABLE ITEMS $m $m Change Change Change Change 1H18 2H18 1H19 1H18 2H18 1H19 (v 2H18) (v 1H18) (v 2H18) (v 1H18) Income 9,870 9,497 9,746 3% -1% Income 9,510 9,561 9,553 0% 0% Net Interest Income 7,350 7,164 7,299 2% -1%
Slide 11: Financial Performance: Large / Notable Items
FINANCIAL PERFORMANCE CONTINUING OPERATIONS: IMPACT OF DIVESTMENTS & OTHER LARGE / NOTABLE ITEMS Large / Notable items within Cash Profit Cash Profit Cash Profit $m Divestments Restructuring Royal Customer Accelerated Total large/ Continuing ex large / Commission Remediation Software notable notable
Slide 12: Impact of Divestments & Other Large / Notable Items
FINANCIAL PERFORMANCE IMPACT OF DIVESTMENTS & OTHER LARGE / NOTABLE ITEMS FIRST HALF 2019 ($m) Gain/(Loss) Divested Pre-tax Post-tax on Sale Bus. Results 3,514 50 3,564 36 9 70 3,478 OPL NZ -197 -14 -201 Paymark -37 -4 TOTAL -234 -18 -201 1H19 Cash Discontinued 1H19 Divestments1 Restructuring Royal
Slide 13: Cash Profit Continuing Operations Excluding Large / Notable Items
FINANCIAL PERFORMANCE CASH PROFIT CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS 1H19 v 2H18 Group drivers $m 72 48 3,483 68 3,478 -80 -113 1% -3% -1% +40% 2H18 NII OOI Expenses Provisions Tax & NCI 1H19 Divisional contribution to Cash Profit $m 2H18 Australia Institutional ex Markets Markets
Slide 14: Customer Remediation
CUSTOMER REMEDIATION TOTAL PRE TAX IMPACT Financial impact $m -533 $175m ($123m post tax) charge in 1H19 $928m ($657m post tax) charges since 1H17 -175 $698m provisions on balance sheet at 31 March 2019 -102 -67 -51 1H17 2H17 1H18 2H18 1H19 Progress to date CONTINUING OPERATIONS DISCONTINUED O
Slide 15: Financial Performance
FINANCIAL PERFORMANCE CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS CASH PROFIT $m 48 3,483 68 3,478 3,407 -8 -113 0% -1% +40% 1H18 2H18 Revenue Expenses Provisions Tax & NCI 1H19 CASH PROFIT DIVISIONAL PERFORMANCE $m 3,483 63 3,478 1H19 v 2H18 Australia Institutional NZ (NZD) 63 31 -12 Reve
Slide 16: Balance Sheet Composition
BALANCE SHEET COMPOSITION NET LOANS & ADVANCES ($b) TOTAL GROUP AUSTRALIA DIVISION INSTITUTIONAL NEW ZEALAND DIVISION (NZD) 605 610 593 340 341 337 150 153 138 119 122 124 Mar-18 Sep-18 Mar-19 Mar-18 Sep-18 Mar-19 Mar-18 Sep-18 Mar-19 Mar-18 Sep-18 Mar-19 GROWTH (1H19 v 2H18) NLA Deposits1 NLA Depos
Slide 17: Net Interest Margin
NET INTEREST MARGIN CONTINUING OPERATIONS GROUP NET INTEREST MARGIN (NIM) bps 182 1 0 182 1 0 2 180 -2 -4 High return low margin flat -2bps 2H18 Asset & Funding cost Deposits Assets Treasury 1H19 Markets Customer 1H19 funding mix underlying1 Balance Sheet Remediation3 activities2 1. Excluding custom
Slide 18: Risk Adjusted Performance
RISK ADJUSTED PERFORMANCE CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS NET INTEREST INCOME / AVERAGE CREDIT RISK WEIGHTED ASSETS (%) GROUP TOTAL1 AUSTRALIA DIVISION INSTITUTIONAL1 NEW ZEALAND DIVISION 6.07 5.89 5.86 5.31 5.36 5.21 4.55 4.52 4.55 2.29 2.36 2.17 1H18 2H18 1H19 1H18 2H18 1H19
Slide 19: Expenses
EXPENSES CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS EXPENSE DRIVERS $m 78 39 -14 4,308 -69 4,260 -41 -41 -1% 2H18 FX Personnel Property Technology Marketing Other 1H19 (incl. D&A) FULL TIME EQUIVALENT STAFF (FTE) INVESTMENT SPEND1 # 000’s $m 39.7 642 37.9 37.4 576 578 65% 64% 72% Mar-18 S
Slide 20: Provisions
PROVISIONS CONTINUING OPERATIONS CREDIT IMPAIRMENT CHARGE COMPOSITION COLLECTIVE PROVISION BALANCE & MOVEMENT $m $m 1H19 charge: 13 1,400 813 29 69 72 14 3,378 1,038 1,200 918 2,523 -142 720 1,000 479 800 408 280 Sep-18 Transition FX Economic Change Volume Other Mar-19 0.36% 393 0.32% to outlook in
Slide 21: Balance Sheet Composition by Division
BALANCE SHEET COMPOSITION BY DIVISION NLA ($b) CUSTOMER DEPOSITS ($b) Divisional Contribution1 Segment Contribution Divisional Contribution1 Segment Contribution 605 610 605 610 493 493 592 592 487 487 3 1 3 1 473 473 3 2 150 153 150 153 138 138 206 205 206 205 191 191 111 119 97 97 98 111 15 14 14
Slide 22: FTE Composition & Capitalised Software
FTE COMPOSITION & CAPITALISED SOFTWARE FTE MOVEMENT BY DIVISION1 CAPITALISED SOFTWARE BALANCE FULL TIME EQUIVALENT STAFF $m 46,834 2.90 794 Avg. amortisation 44,169 period 4.9 yrs 5,318 786 4,637 39,655 759 37,364 1,172 640 1,096 12,303 2.25 11,268 2.20 10,986 10,520 1.92 6,570 1.86 6,417 6,319 Avg.
Slide 23: Australia Division
AUSTRALIA DIVISION CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS VOLUMES 1H19 1H19 v 1H19 v ($m) 2H18 1H18 $b 340 341 337 Income 4,769 -4% -6% 204 203 203 Net interest income 4,113 -2% -5% 6.07% 5.89% 5.86% Other operating income 656 -17% -12% Mar-18 Sep-18 Mar-19 Expenses 1,787 0% -2% Risk
Slide 24: Australia Division
AUSTRALIA DIVISION FINANCIAL PERFORMANCE: CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS Slower credit demand Absolute costs down Lower Volume growth Productivity offsetting inflation Provision charge remains low Profit and returns Reduced fee income Reduction in FTE Income ($m) Expenses ($m)
Slide 25: Institutional
INSTITUTIONAL CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS VOLUMES 1H19 1H19 v 1H19 v ($m) 2H18 1H18 $b 191 206 205 Income 2,705 6% 8% 138 150 153 Net interest income 1,579 4% 7% 2.17% 2.29% 2.36% Other operating income 1,126 8% 10% Mar-18 Sep-18 Mar-19 Expenses 1,313 -2% -4% Risk Adj. NIM3
Slide 26: Institutional
INSTITUTIONAL FINANCIAL PERFORMANCE: CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS Credit provisions remain low Returns continue to improve Continued momentum with Sixth consecutive half of reflecting continued benign driven by focus on profitable growth in customer revenue absolute cost red
Slide 27: Institutional - Income Performance
INSTITUTIONAL - INCOME PERFORMANCE CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS INSTITUTIONAL INCOME COMPOSITION1 MARKETS INCOME COMPOSITION2 $m $m 3,041 59 1,361 2,705 2,552 2,506 2,559 45 162 56 56 42 1,361 947 349 983 947 891 902 983 902 67 891 11 52 256 241 276 232 229 292 229 274 219 3
Slide 28: New Zealand Division
NEW ZEALAND DIVISION CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS VOLUMES 1H19 1H19 v 1H19 v (NZDm) 2H18 1H18 NZDb 119 122 124 Income 1,756 0% 1% 84 87 89 Net interest income 1,460 0% 3% 5.21% 5.31% 5.36% Other operating income 296 1% -4% Mar-18 Sep-18 Mar-19 Expenses 638 1% 2% Risk Adj. NI
Slide 29: New Zealand Division
NEW ZEALAND DIVISION FINANCIAL PERFORMANCE: CONTINUING OPERATIONS EXCLUDING LARGE / NOTABLE ITEMS Solid home lending growth Increased investment and Movement HOH reflects CP Consistent returns reflecting offset by customer preference inflation partially offset by release in prior half stable revenue
Slide 30: Treasury
2019 HALF YEAR RESULTS — TREASURY AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 31: Regulatory Capital
REGULATORY CAPITAL CAPITAL UPDATE APRA LEVEL 2 COMMON EQUITY TIER 1 (CET1) Capital Position % Net Organic Capital APRA Level 2 CET1 ratio of 11.5% (or 16.9% on an Internationally Comparable basis1), Generation +84bp which is in excess of APRA’s ‘unquestionably strong’ benchmark2, well ahead of the
Slide 32: Regulatory Capital Generation
REGULATORY CAPITAL GENERATION COMMON EQUITY TIER 1 GENERATION First half average Organic Capital Generation 1H19 (bp) 1H12-1H18 Net organic capital generation of +84bp for 1H19 is Cash NPAT1 96 86 stronger than historical averages by +13bp. RWA movement (12) 2 Excluding the halves with Instituti
Slide 33: Internationally Comparable Regulatory Capital Position
INTERNATIONALLY COMPARABLE1 REGULATORY CAPITAL POSITION APRA Level 2 CET1 – 31 March 2019 11.5% Corporate undrawn EAD and Australian ADI unsecured corporate lending LGDs and undrawn CCFs exceed those applied in many jurisdictions 1.7% unsecured LGD adjustments APRA requires 100% deduction from CET1
Slide 34: CET1 and Leverage in a Global Context
CET1 AND LEVERAGE IN A GLOBAL CONTEXT CET1 RATIOS1 LEVERAGE RATIOS1,2 5% 10% 15% 20% 2% 4% 6% 8% SEB UOB ABN Amro OCBC Swedbank DBS Svenska Handelsbanken Danske Bank Raiffeisen Bank International (RBI) Nordea BBVA Morgan Stanley Erste Bank ANZ Rabobank RBS Rabobank ANZ Groupe BPCE Intesa Sanpaolo Cr
Slide 35: TLAC
TLAC APRA PROPOSAL AND CONSULTATION: INCREASING LOSS ABSORBING CAPACITY OF ADIs APRA PROPOSAL RECENT CONSULTATION • The key element of APRA’s proposal for the 4 major banks is to increase • Following the release of APRA’s proposal in November 2018, APRA requested Total Capital requirements by 4-5% o
Slide 36: Balance Sheet Structure
BALANCE SHEET STRUCTURE FUNDED BALANCE SHEET COMPOSITION1 SOURCES AND USES OF FUNDS Sep 2018 to Mar 2019 $b (including FX impact) STRUCTURAL FUNDING POSITION SHORT TERM $1.1b increase to Structural funding $1.1b reduction in Short Short Term Wholesale Debt & position Term funding position Liquid and
Slide 37: Funding & Liquidity Metrics
FUNDING & LIQUIDITY METRICS1 NSFR COMPOSITION NSFR MOVEMENT Mar 2019 Sep 2018 v Mar 2019 $513b $446b 1.2% 1.7% 0.0% Wholesale Liquids 114.6% 115.0% Funding & Other2 -0.2% Non Financial and Other Assets3 -0.8% Corporates -1.5% Other Loans4 Retail/SME Residential Mortgages5,6 Capital <35% Available Re
Slide 38: Term Wholesale Funding Portfolio
TERM WHOLESALE FUNDING PORTFOLIO1 ISSUANCE MATURITIES $b 32 27 24 24 22 22 23 19 18 15 14 14 12 12 FY13 FY14 FY15 FY16 FY17 FY18 1H19 2H19 FY20 FY21 FY22 FY23 FY24 FY25+ Senior Unsecured Covered Bonds Tier 2 RMBS PORTFOLIO PORTFOLIO BY CURRENCY 7% 5% 1% 15% 23% Domestic (AUD, NZD) 35% Senior Unsecur
Slide 39: Impacts of Rate Movements
IMPACTS OF RATE MOVEMENTS BILLS/OIS SPREAD CAPITAL & REPLICATING DEPOSITS PORTFOLIO (AUSTRALIA) bp % 65 3.0 60 55 50 45 2.5 40 35 30 25 20 2.0 15 10 5 0 1.5 Oct- Jan- Apr- Jul- Oct- Jan- Mar- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Mar- 17 18 18 18 18 19 19 16 17 17 17 17 18 18 18 18 19 19
Slide 40: Risk Management
2019 HALF YEAR RESULTS — RISK MANAGEMENT AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 41: Key Risk Metrics
KEY RISK METRICS CREDIT IMPAIRMENT CHARGE ($m) INDIVIDUAL PROVISION (IP) CHARGE ($m) COLLECTIVE PROVISION (CP) BALANCE & COVERAGE ($m) 1,038 918 1,047 3,336 3,378 892 787 2,862 2,876 720 554 2,785 2,662 2,579 2,523 0.36% 430 343 0.32% 479 380 408 393 0.99% 0.98% 0.25% 0.86% 0.82% 0.81% 0.79% 280 0.7
Slide 42: Risk Management: Provisions
RISK MANAGEMENT PROVISIONS CREDIT IMPAIRMENT CHARGE ANZ HISTORICAL LOSS RATES $m bp 1,500 250 1,200 1,038 918 200 900 720 695 510 479 150 600 408 280 393 300 100 0 50 -300 0 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Mar 90 93 96 99 02 05 08 11 14 17 18
Slide 43: Collective Provision
COLLECTIVE PROVISION COLLECTIVE PROVISION (CP) BALANCE & MOVEMENT CP BALANCE TOTAL PROVISION BALANCE $m BY DIVISION ($m) BY AASB 9 STAGES ($m) 1H19 charge: $13m 4,269 813 29 69 72 14 3,378 3,336 3,378 -142 2,523 Further detail on 2,523 AASB 9 contained on following page 2H18 Transition FX Economic C
Slide 44: AASB 9 Provisions
AASB 9 PROVISIONS TRANSITIONED TO AASB9 ON 1 OCTOBER 2018 PORTFOLIO EXPOSURE BY STAGE Stages • Stage 1 - 12 months Expected Credit Loss (ECL) $b • On origination, Stage 1 for all facilities, remains unless significant increase in credit risk 900 • Stage 2 – Lifetime ECL 800 • Significant increase in
Slide 45: Impaired Assets
RISK MANAGEMENT IMPAIRED ASSETS CONTROL LIST GROSS IMPAIRED ASSETS BY DIVISION Index Sep 09 = 100 $m 150 3,173 2,883 2,940 3,000 2,708 2,719 100 2,384 2,034 2,013 2,022 2,000 50 1,000 0.55% 0.48% 0.47% 0.51% 0.51% 0 0.41% 0.34% 0.33% 0.33% Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Mar 0 09 10 11 12 13
Slide 46: Risk Weighted Assets
RISK MANAGEMENT RISK WEIGHTED ASSETS TOTAL RISK WEIGHTED ASSETS CRWA MOVEMENT $b $b 402 409 2.7 0.1 345.5 397 391 396 391 396 3.6 1.5 388 38 39 337.6 39 37 37 38 38 38 14 18 17 17 16 16 13 16 Sep-18 FX Impact Lending Data/Meth. Risk Mar-19 Mvmt. Review GROUP EAD & CRWA GROWTH MOVEMENT1,2 350 352 342
Slide 47: Improving Portfolio Risk Profile
IMPROVING PORTFOLIO RISK PROFILE ACTIONS TAKEN TO IMPROVE RISK PROFILE EXPOSURE AT DEFAULT BY ASSET CLASSES3 Sold Asia Retail & Wealth businesses (IEL 151bp)1 955.3 896.0 2 (IEL 100bp) 21% Sold Esanda Dealer Finance business 19% EXPOSURE AT DEFAULT (IEL 41bp) 1 (<5bp loss rate) Largely exited Emergi
Slide 48: Portfolio Composition
RISK MANAGEMENT PORTFOLIO COMPOSITION % of Portfolio in Non Portfolio Balance EXPOSURE AT DEFAULT (EAD) DISTRIBUTION Category % of Group EAD Performing in Non Performing Mar-18 Sep-18 Mar-19 Mar-18 Sep-18 Mar-19 Mar-19 TOTAL GROUP EAD (Mar-19) Consumer Lending 40.5% 39.7% 38.8% 0.1% 0.1% 0.1% $477 =
Slide 49: Group Resources Portfolio
RISK MANAGEMENT GROUP RESOURCES PORTFOLIO RESOURCES EXPOSURE AT DEFAULT (EAD) BY SECTOR ($b) THERMAL COAL EXPOSURE within ‘coal mining’ sector ($b) 2.0 1.70 TOTAL EAD (Mar-19): $15.6b (Resources exposures as a % of Group EAD: 1.6%) 1.5 1.18 0.94 9.4 1.0 0.81 0.75 8.6 7.2 7.8 7.0 7.6 7.4 7.3 0.5 Sep-
Slide 50: Commercial Property Portfolio
RISK MANAGEMENT COMMERCIAL PROPERTY PORTFOLIO COMMERCIAL PROPERTY OUTSTANDINGS BY REGION COMMERCIAL PROPERTY OUSTANDINGS BY SECTOR $b % % 42.4 100 40.2 12 80 2.8 38.4 37.9 37.7 37.4 37.5 37.5 37.6 2.9 11 60 3.9 3.6 2.7 2.4 3.0 40 4.5 4.7 10 10.7 9.8 20 9 8.8 9.5 9.5 9.7 9.7 8.3 8.4 8 Mar-17 Sep-17 M
Slide 51: Residential Development
RESIDENTIAL DEVELOPMENT OVERVIEW PROFILE (MAR 19) Total Residential Limits: $10.58b • Overall Apartment Development limits have increased by $0.2bn (4%) to $4.1bn as at 1H19 and account for 39% (prior half: 29% 39%) of total Residential limits. 22% Apartment Development Other Development1 • Inner Ci
Slide 52: Group Agriculture Portfolio
RISK MANAGEMENT GROUP AGRICULTURE PORTFOLIO AGRICULTURE EXPOSURE BY SECTOR (% EAD) GROUP AGRICULTURE EAD SPLITS1 Total EAD (Mar-19) As a % of Group EAD A$36.1b 3.7% 6.2% 2.8% 42.2% 14.8% 10.5% 98.9% 76.2% 57.5% 12.3% 36.4% 0.2% 1.1% <60% Secured Australia Productive 60 - <80% Secured New Zealand Imp
Slide 53: ANZ Institutional Portfolio
RISK MANAGEMENT ANZ INSTITUTIONAL PORTFOLIO (COUNTRY OF INCORPORATION1) INSTITUTIONAL PORTFOLIO SIZE & TENOR (EAD2) ANZ INSTITUTIONAL INDUSTRY COMPOSITION $b EAD (Mar-19): A$423b2 Finance (Banks and Central Banks) 400 Government Admin. 26% 31% Services to Fin. & Ins. 350 Property Services3 Basic Mat
Slide 54: ANZ Asian Institutional Portfolio
RISK MANAGEMENT ANZ ASIAN INSTITUTIONAL PORTFOLIO (COUNTRY OF INCORPORATION1) COUNTRY OF INCORPORATION1 ANZ ASIA INDUSTRY COMPOSITION EAD (Mar-19): A$106b2 EAD (Mar-19): A$106b2 Finance (Banks & Central Banks) 5% 19% Basic Material Wholesaling 3% 3% Machinery & Equip Mnfg 23% 3% Petroleum,Coal,Chem
Slide 55: Housing Portfolio
2019 HALF YEAR RESULTS — H O U S I N G P O RT F O L I O AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 56: Australia Home Loans: Portfolio Overview
AUSTRALIA HOME LOANS PORTFOLIO OVERVIEW Portfolio1 Flow2 Portfolio1 1H17 1H18 1H19 1H18 1H19 1H17 1H18 1H19 Number of Home Loan 992k 1,018k 1,000k 79k 64k3 Average LVR at Origination9,10,11 70% 68% 67% accounts1 Total FUM1 $256b $271b $269b $31b $21b Average Dynamic LVR10,11,12,13 55% 54% 55% Averag
Slide 57: Australia Home Loans: Portfolio Growth
AUSTRALIA HOME LOANS PORTFOLIO GROWTH HOME LOAN COMPOSITION1,2 LOAN BALANCE & LENDING FLOWS1 $b $b 256 264 271 272 269 10 9 9 8 8 16 31 37 43 37 49 271 -2 269 54 17 -53 22 29 33 52 38 49 44 Mar-18 New Sales Net OFI Refi Redraw & Repay / Other Mar-19 39 exc Refi-In Interest 33 ANZ MORTGAGE LENDING3 %
Slide 58: Australia Home Loans: Portfolio and Flow Composition
AUSTRALIA HOME LOANS PORTFOLIO1,2 & FLOW3 COMPOSITION BY PURPOSE BY ORIGINATION LVR4 Portfolio Flow Flow 4% 3% 3% 1% 21% 19% 17% 31% 26% 34% 32% 17% 15% 19% 65% 66% 73% 64% 68% 62% 60% Mar-17 Mar-18 Mar-19 1H19 1H17 1H18 1H19 Owner Occ Investor Equity <80% LVR 80% LVR >80% LVR BY LOCATION BY CHANNEL
Slide 59: Australia Division: Portfolio Dynamics
AUSTRALIA DIVISION PORTFOLIO DYNAMICS HOME LOANS REPAYMENT PROFILE1,2 HOME LOANS ON TIME & <1 MONTH AHEAD PROFILE1,2 71% of accounts ahead of repayments % composition of accounts (March 19) 25% 26% Investment:5 Interest payments may receive 38 37 negative gearing/tax benefits 17% 21 20 New Accounts:
Slide 60: Australia Division: Portfolio Performance
AUSTRALIA DIVISION PORTFOLIO PERFORMANCE PRODUCT 90+ DAY DELINQUENCIES1,2,3 HOME LOAN DELINQUENCIES1,2,5 % % 5.0 2.5 4.0 2.0 3.0 1.5 2.0 1.0 1.0 0.5 0.0 0.0 Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar 12 12 13 13 14 14 15 15
Slide 61: Australia Home Loans: Western Australia
AUSTRALIA HOME LOANS WESTERN AUSTRALIA • Exposure to WA has decreased since Mar-16 driven by the economic WA OUTSTANDING BALANCE environment and credit policy tightening (mining town lending, etc) $b • Currently WA comprises 13% of portfolio FUM (and is decreasing), 40 however it comprises 30% of 90
Slide 62: Australia Home Loans: New South Wales/ACT
AUSTRALIA HOME LOANS NEW SOUTH WALES/ACT Portfolio1 HOUSING PORTFOLIO2 HOUSING FLOW • NSW/ACT makes up 32% of the portfolio FUM and 23% of 90+ days past due. • 71% in advance of repayments which is the same as the total portfolio. $b $b 264 271 272 269 • 21% of the portfolio is Interest Only & reduc
Slide 63: Australia Home Loans: Interest Only
AUSTRALIA HOME LOANS INTEREST ONLY INTEREST ONLY FLOW COMPOSITION1 • Serviceability assessment is based on ability to repay principal & interest repayments calculated over the residual term of loan % • 84% of Interest Only customers have net income >$100k p.a. APRA’s 30% limit removed December 2018
Slide 64: Underwriting Practices and Policy Changes
AUSTRALIA HOME LOANS UNDERWRITING PRACTICES AND POLICY CHANGES1 Multiple checks during origination process • End-to-end home lending responsibility managed within ANZ Pre – application2 Income & Expenses • Effective hardship & collections processes • Full recourse lending Quality assurance, info ver
Slide 65: Underwriting Practices and Policy Changes June 2015 to March 2019
AUSTRALIA HOME LOANS UNDERWRITING PRACTICES AND POLICY CHANGES1 - JUNE 2015 TO MARCH 2019 ANZ LVR caps • LVR cap reduced to 70% in high risk mining towns in June 2015; reduced to 90% for investment loans July 2015. • Restricted new housing lending (new security to ANZ) to max. 80% LVR for all apartm
Slide 66: Stress Testing the Australian Mortgage Portfolio
AUSTRALIA HOME LOANS STRESS TESTING THE AUSTRALIAN MORTGAGE PORTFOLIO Assumptions Base1 Year 1 Year 2 Year 3 • ANZ conducts regular stress tests of its loan portfolios to meet risk management Unemployment 5.2% 6.3% 10.1% 10.6% objectives and satisfy regulatory requirements. rate • Stress tests are h
Slide 67: Lenders Mortgage Insurance
LENDERS MORTGAGE INSURANCE MARCH HALF YEAR 2019 RESULTS LMI & REINSURANCE STRUCTURE Australian Home Loan portfolio LMI and Reinsurance Structure at 31 Mar 19 (% New Business FUM Oct-18 to Mar-19) Gross Written Premium ($m) $43.4m LVR<80% Not LMI Insured Net Claims Paid ($m) $17.6m 86% Loss Rate (of
Slide 68: New Zealand Home Loans: Portfolio Overview
NEW ZEALAND HOME LOANS PORTFOLIO OVERVIEW1 Portfolio Flow Portfolio 1H17 1H18 1H19 1H18 1H19 1H17 1H18 1H19 Number of Home Loan Accounts 515k 523k 527k 31k 37k Average LVR at Origination2 59% 58% 57% Total FUM NZ$75b NZ$79b NZ$83b NZ$8b NZ$9b Average Dynamic LVR2 42% 42% 42% Average Loan Size2 NZ$14
Slide 69: New Zealand Division: Home Lending & Arrears Trends
NEW ZEALAND DIVISION HOME LENDING & ARREARS TRENDS1 NZ DIVISION 90+DAYS HOUSING FLOWS2 HOUSING PORTFOLIO DELINQUENCIES % 1.5 22% 20% 16% 1.0 34% 38% 41% 0.5 78% 80% 84% 66% 62% 59% 0.0 Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- 1H17 1H18 1H19 Mar-17 Mar-18 Mar-19 08 09 10 11 12 13 1
Slide 70: Corporate Profile & Sustainability
2019 HALF YEAR RESULTS — C O R P O R AT E P R O F I L E & S U S TA I N A B I L I T Y AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 71: ANZ Corporate Profile
ANZ CORPORATE PROFILE CORPORATE PROFILE OUR BUSINESSES • Top 5 listed corporate in Australia and the largest bank in HALF YEAR 2019 CASH PROFIT ($m)2 New Zealand by bank market share 66 OTHER • Market capitalisation of AU$74b1 Includes Wealth Australia, Pacific, TSO and Group Centre • Total Assets o
Slide 72: Creating Value for Our Stakeholders
CREATING VALUE FOR OUR STAKEHOLDERS CUSTOMERS EMPLOYEES COMMUNITY SHAREHOLDERS5 8.7m total retail, commercial 39,359 people employed $137m contributed in >500,000 Retail & Institutional and Institutional customers (FTE) community investment in FY183 shareholders ~150,000 net new customers 608 people
Slide 73: Sustainability: Our Approach
SUSTAINABILITY OUR APPROACH Our Sustainability Framework supports our business strategy. We seek to shape a world where people and communities thrive through our focus on fair and responsible banking and our priority issues of environmental sustainability, housing and financial wellbeing. Fair and r
Slide 74: Sustainability: Half Year Progress Snapshot
SUSTAINABILITY HALF YEAR PROGRESS SNAPSHOT Sustainability target (half year progress snapshot) Progress FAIR AND RESPONSIBLE BANKING • Reduced time to make customer remediation payments – in some Continue to allocate dedicated resources to customer remediation to improve our cases by more than 50% p
Slide 75: Responding to the Royal Commission
SUSTAINABILITY FAIR AND RESPONSIBLE BANKING RESPONDING TO THE ROYAL COMMISSION Central to our commitment to Fair and responsible banking is how we respond to the ‘spirit and the letter’ of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Following
Slide 76: Responding to the Royal Commission: Sixteen Actions
RESPONDING TO THE ROYAL COMMISSION ‘IDENTIFIED SIXTEEN ACTIONS THAT WE CAN TAKE NOW’ COMMITMENT On 20 February 2019, ANZ announced it would take immediate steps to implement the first phase of its response to the recommendations from the Royal Commission into Misconduct in the Banking, Superannuatio
Slide 77: Sixteen Actions – Table of Commitments
RESPONDING TO THE ROYAL COMMISSION SIXTEEN ACTIONS – TABLE OF COMMITMENTS & FY19 HALF YEAR UPDATE Commitment FY19 Half Year Update Retail customers 1. Make our products fairer and better matched to our customers by: 1.1 Removing overdrawn and dishonour fees on our ANZ has removed the Overdrawn Fee
Slide 78: Sixteen Actions – Table of Commitments
RESPONDING TO THE ROYAL COMMISSION SIXTEEN ACTIONS – TABLE OF COMMITMENTS & FY19 HALF YEAR UPDATE Commitment FY19 Half Year Update Retail customers 3. Help customers by: In March 2019 we established an ongoing process to contact credit card customers who are carrying persistent debt. We provide th
Slide 79: Sixteen Actions – Table of Commitments
RESPONDING TO THE ROYAL COMMISSION SIXTEEN ACTIONS – TABLE OF COMMITMENTS & FY19 HALF YEAR UPDATE Commitment FY19 Half Year Update Remuneration 5. Redesign how we manage and reward our people to better focus on the interests of our customers, the ANZ is working to launch a new approach to reward,
Slide 80: Sixteen Actions – Table of Commitments
RESPONDING TO THE ROYAL COMMISSION SIXTEEN ACTIONS – TABLE OF COMMITMENTS & FY19 HALF YEAR UPDATE Commitment FY19 Half Year Update Remediation 12. Publicly report on how we are fixing our significant failures, including the nature of the issues and our progress on paying customers back. This will in
Slide 81: We Measure What Matters
WE MEASURE WHAT MATTERS RECOGNITION Highest ranked Australian We achieved a CDP Member of the 2018-19 leader in Recognised as Australian bank on the Dow Jones climate disclosure score FTSE4Good Index workplace gender Workplace Equality Index Sustainability Index, scoring of A- in 2018 equality (LGBT
Slide 82: Economics
2019 HALF YEAR RESULTS — ECNOMICS AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 83: Economics: Australia Forecast Table
ECONOMICS AUSTRALIA FORECAST TABLE1 2015 2016 2017 2018 2019 2020F Australia – annual % growth GDP 2.5 2.8 2.4 2.8 2.1 2.6 Domestic final demand 1.2 1.8 2.9 3.0 2.0 2.0 Headline CPI 1.5 1.3 1.9 1.9 1.8 2.4 Core CPI 2.2 1.5 1.9 1.8 1.9 2.2 Employment 2.0 1.8 2.2 2.3 1.7 1.7 Wages 2.2 2.0 2.0 2.2 2.3
Slide 84: Australian Economy
AUSTRALIAN ECONOMY GDP GROWTH1 CONSUMER PRICE INFLATION1 CREDIT GROWTH BY SECTOR1 AUSTRALIAN GOVERNMENT BUDGET BALANCE2 (year ended) Per cent of nominal GDP 84 Sources: 1. RBA Chart Pack Apr 2019
Slide 85: Australian Economy and Population
AUSTRALIAN ECONOMY AND POPULATION POPULATION GROWTH1 – AUSTRALIA AND G7 CONSUMER SPENDING GROWTH4 % yoy 2.5% 2.0% Australia 1.5% 1.0% G7 weighted average 0.5% 0.0% 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 POPULATION GROWTH – MAJOR STATES3 STATE S
Slide 86: Australian Labour Market
AUSTRALIAN LABOUR MARKET UNEMPLOYMENT AND UNDEREMPLOYMENT1 JOB VACANCIES AND ADVERTISEMENTS1 WAGE PRICE INDEX GROWTH2 LABOUR COSTS AND INFLATION3 8 5.0 7 4.5 6 4.0 5 3.5 % change y/y % change y/y 4 3.0 3 2.5 2 2.0 1 1.5 0 1.0 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 NAB labour
Slide 87: Commodity Prices
COMMODITY PRICES1 RBA INDEX OF COMMODITY PRICES BASE METALS, RURAL, AND OIL PRICES SDR, 2016/17 Average = 100, log scale Weekly BULK COMMODITY PRICES TERMS OF TRADE* Free on board basis 2016/17 average = 100, log scale 87 1. RBA Chart Pack Apr 2019
Slide 88: Australian Economy – State by State
AUSTRALIAN ECONOMY – STATE BY STATE STATE FINAL DEMAND (STATE GDP)1 CHANGE IN EMPLOYMENT BY STATE2 % yoy 6.0 Past 3 years NT 4.0 Tas 2.0 ACT 0.0 -2.0 WA -4.0 NSW VIC TAS SA QLD WA SA -6.0 Qld -8.0 NSW -10.0 Vic 2014 2015 2016 2017 2018 0 50 100 150 200 250 300 350 '000 change in employment over 3yrs
Slide 89: Australian Economy – WA and QLD
AUSTRALIAN ECONOMY – WA AND QLD1 WA GDP HAS IMPROVED 6 MONTHS OF JOB GROWTH IN WA AND QLD NT ACT SA Tas WA Qld WA improved NSW Vic -20 0 20 40 60 80 100 120 140 160 '000 change in employment over year to Feb-19 WA EMPLOYMENT WA HOUSE PRICES 50 45 40 35 House prices (y/y % change) 30 25 20 15 10 5 0
Slide 90: Australian Economy – Service Exports
AUSTRALIAN ECONOMY – SERVICE EXPORTS SERVICE EXPORTS AND AUD1 INTERNATIONAL TOURIST VISA’S GRANTED2 49% growth 6 5 4 3 2 1 - 2013 2014 2015 2016 2017 2018 June 30 Visa's granted ('Millions) INTERNATIONAL STUDENT VISAS2 NUMBER OF INTERNATIONAL CITIES WITH CONNECTING FLIGHTS3 70 63 45.8% growth 400 37
Slide 91: Australian Housing Dynamics: A Cooling Market
AUSTRALIAN HOUSING DYNAMICS: A COOLING MARKET HOUSING PRICE FORECASTS BY STATE3 HOUSE PRICE GROWTH1 16 yoy % 5 yr Cumulative 2013-2018 5 yr Cumulative Mar 14-Mar 19 Total housing prices, y/y % change (calendar year) 12 All All All Mar 2019 Houses Units Houses Units Houses Units dwellings dwellings d
Slide 92: Rental Vacancy Rates Remain Low
RENTAL VACANCY RATES REMAIN LOW RENTAL VACANCY RATES1 VACANCY RATES BY STATE2,3 Quarterly, seasonally adjusted* 8 7 6 Vacancy rates, % 5 4 3 2 1 0 07 08 09 10 11 12 13 14 15 16 17 18 19 Australian capital cities Sydney Melbourne Brisbane Perth RENTS2,3 RENTS & VACANCY RATES2,3 15 4.5 0 4.0 1 10 3.5
Slide 93: Australian Housing Dynamics
AUSTRALIAN HOUSING DYNAMICS PRIVATE RESIDENTIAL BUILDING APPROVALS1 HIGH DENSITY APARTMENT COMPLETIONS2 Monthly 4+ Storey buildings, share of 2016 dwelling stock HOUSING LOAN APPROVALS1 HOUSING BALANCE3 Forecast 200 150 100 Dwellings ('000) Shortage 50 0 Surplus -50 -100 -150 86 88 90 92 94 96 98 00
Slide 94: Australian Housing: Household Debt and Income
AUSTRALIAN HOUSING HOUSEHOLD DEBT AND INCOME HOUSEHOLD DEBT AND DEPOSITS1 HOUSEHOLD DEBT-TO-INCOME RATIOS2 % of annual household disposable income HOUSING PRICE-TO-INCOME RATIO3 HOUSEHOLD MORTGAGE DEBT INDICATORS2 Sources: 1. ABS, RBA. Housing Debt refers to ratio of housing debt to annualised house
Slide 95: Australian Housing: Household Debt
AUSTRALIAN HOUSING HOUSEHOLD DEBT HOUSEHOLD DEBT1 HOUSEHOLD BALANCE SHEET2 Per cent of household disposable income Relative to disposable income Sources: 1. RBA Speech: "Property, Debt and Financial Stability", March 2019. 2. RBA Financial Stability Review, April 2019 95
Slide 96: Australian Housing: Low Levels of High LVR Lending
AUSTRALIAN HOUSING LOW LEVELS OF HIGH LVR LENDING - ISOLATED NEGATIVE EQUITY1 ADIs’ HIGH LVR LOANS LOANS IN NEGATIVE EQUITY Share of new loan approvals Share of balances, February 2019 CURRENT DYNAMIC LVR DISTRIBUTION Share of balances, February 2019 Sources: 1. RBA. Financial Stability Review, Apri
Slide 97: Australian Mortgage Stability
AUSTRALIAN MORTGAGE STABILITY OFFSET BALANCES AND SMALL SHADOW BANKING SECTOR HOUSEHOLD MORTAGE BUFFERS1 NON-BANK HOUSING CREDIT AND RMBS ISSUANCE1 • Aggregate buffers of 16.5% of outstanding mortgage balance or 2.5 years scheduled payments (at current interest rates) • Of those with <1 month buffer
Slide 98: Further Information
FURTHER INFORMATION Key contacts Adrian Went Scott Gifford John Needham Group Treasurer Head of Debt Investor Relations Head of Capital and Secured Funding +61 3 8654 5532 +61 3 8655 5683 +61 2 8037 0670 +61 412 027 151 +61 434 076 876 +61 411 149 158 Adrian.went@anz.com scott.gifford@anz.com John.N
Australia and New Zealand Banking Group — Debt Investor Presentation (March 2019) on 6ix