Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Debt Investor Presentation (November 2012)
67 slides from Anz's debt investor presentation, November 2012
Slide 1: ANZ Investor Update
ANZ Investor Update November 2012 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Luke Davidson, Head of Group Funding David Goode, Head of Debt IR
Slide 2: Super Regional Strategy based on trade, migration and capital flows
Super Regional Strategy based on trade, migration and capital flows across ANZ’s three core geographic regions APEA Intra Asia Trade4 USD4.4trn NEW ZEALAND FY12 Earnings contribution 1 16% FY12 Earnings contribution 18% 2017 earnings target1 25-30% Net loans & advances 77b Net loans & advances1 45b
Slide 3: Overview of 2012 Full Year financial performance
Overview of 2012 Full Year financial performance 2012 $M % Underlying Profit1, 2, 3 6,011 +6% Operating Income 17,579 +5% Expenses 8,022 +4% Provisions 1,246 +3% Statutory Net Profit After Tax 5,661 +6% EPS (cents) 225.3 +3% Dividend per Share (cents) 145 +4% Net Interest Margin 2.31% -11bps Custome
Slide 4: Continuing to execute on our super regional strategy
Continuing to execute on our super regional strategy Income Growth Return on Equity Operating Expense Growth Dividend 4
Slide 5: Net Interest Margin trends
Net Interest Margin trends Net Interest Income 2H12 v 1H12 Net Interest Margin Group Ex-Markets Australia Division Down 7bps Up 4 bps ANZ Group ex-markets 4.9% 4.2% Australia Division 1.8% NZ Businesses IIB Division ex-Markets 3.50% -2.5% Volume Margin Volume Margin 3.00% New Zealand IIB Ex-Markets
Slide 6: Provision charge largely stable although mix has changed
Provision charge largely stable although mix has changed Provision Charge Trends 6
Slide 7: Credit quality tracking in line with expectations
Credit quality tracking in line with expectations Management Overlay Balance Movement Gross Impaired Assets by Size of Exposure 2H12 v 1H12 6,561 6,561 6,221 5,581 5,343 5,196 7
Slide 8: Deposit growth continues to fund lending growth
Deposit growth continues to fund lending growth Net Loans & Advances (incl. Acceptances) Customer Deposits Loan/Deposit 5% CAGR 12% CAGR Ratio Loan-Deposit Gap Australia APEA New Zealand Group Sep 11 v Sep 12 (10) 9 1 0 Sep 08 v Sep 12 3 34 8 45 8
Slide 9: APEA provides higher growth prospects and continues to strengthen group balance sheet
APEA provides higher growth prospects and continues to strengthen group balance sheet IIB Customer Deposits & Lending IIB Deposit Movement 2H12 v 1H12 Customer Deposits Customer Lending Loan to Deposit Ratio 75% 15% CAGR 142.7 132.8 129.7 18% CAGR 108.5 107.6 97.2 102.2 Institutional 77.7 IIB Lendin
Slide 10: Lower structural funding gap provides funding flexibility
Lower structural funding gap provides funding flexibility ANZ Westpac NAB CBA Loan – Deposit Ratio (%) 130% 158% 152% 141% Loan – Deposit Gap ($b) 100 186 165 156 Australia Household Funding Gap ($b) 112 193 124 171 ANZ funds less through offshore Australian Household Funding Gap benchmarks1 than pe
Slide 11: Balance Sheet strengthening has been a consistent focus
Balance Sheet strengthening has been a consistent focus Strong Capital Position Increased Liquid Assets AUDb 115 9.5% 9.8% 10.0% 75 38 7.5% 7.8% 8.0% Sep 11 Mar 12 Sep 12 Sep 08 Sep 10 Sep 12 APRA Basel 3 Internationally Harmonised Basel 3 Strengthened Funding Profile Diversified Term Debt Portfolio
Slide 12: FY13 term funding well progressed, already 1/3rd complete
FY13 term funding well progressed, already 1/3rd complete Consistent term wholesale funding Term Debt Outstandings AUDb requirement 30 Issuance Maturities 25 Indicative annual issuance volumes 10% 12% 13% 13% 13% 20 18% 21% 30% 26% 41% 15 35% 31% 30% 33% 10 23% 5 34% 35% 26% 28% 28% 0 Sep 08 Sep 09
Slide 13: ANZ is in a strong capital position
ANZ is in a strong capital position $11bn of shareholders’ equity Capital levels are well positioned used to strengthen capital ratios (CET1) AUDb 40 Basel 3 Minimum 9.8% 10.0% Capital Capital 9.5% 11 9.3% Requirement Strengthening Business Capital 8 Growth 2.5% Conservation 21 Buffer 7.5% 7.8% 8.0%
Slide 14: Liquid assets of $115b provides a high level of coverage
Liquid assets of $115b provides a high level of coverage and significantly exceeds total offshore debt outstanding AUDb 115 Liquidity portfolio exceeds total FY13 wholesale debt maturities and entire 91 38 offshore debt portfolio 81 75 75 31 15 19 31 13 9 62 62 47 35 Sep 10 Sep 11 Sep 12 Wholesale D
Slide 15: ANZ Economic forecasts
ANZ Economic forecasts Australia New Zealand 2011 2012 2013 2014 2011 2012 2013 2014 GDP 2.8 3.6 2.8 2.8 1.3 2.3 2.5 2.6 2 Inflation 3.4 1.6 3.21 2.5 4.6 1.1 2.5 2.7 Unemployment 5.2 5.3 5.7 5.7 6.6 6.7 6.3 6.0 Cash rate 4.25 3.0 3.0 3.0 2.5 2.5 2.5 3.0 AUD/USD 0.97 1.02 1.07 0.98 Credit 3.3 3.8 3.7
Slide 16: Appendices
Appendices :
Slide 17: Appendices
Appendices 1. 2012 Full Year Results 2. Asset quality 3. Australian mortgage portfolio 4. Covered bonds 5. Australian Economy 6. China – a medium term perspective 17
Slide 18: 2012 Full Year results
2012 Full Year results (released 25th October 2012)
Slide 19: Australia Division
Australia Division Underlying profit growth FY12 v FY11 Australia Division 4% Underlying Net Profit after Tax Traditional Banking Market Share1 ANZ Peer 1 Peer 2 Peer 3 23 22 21 Aug-12 Cost to Income Ratio (%) 1. Source: Roy Morgan Research: Aust Pop’n aged 14+, rolling 12 months, Trad Banking Consu
Slide 20: Australia Division – Outlook
Australia Division – Outlook Revenue growth Revenue • Above system growth in mortgages in FY12 provides good balance sheet momentum leading into FY13 • Targeting to grow lending at or above system in FY13 • Disciplined management of margins in FY12 to continue in FY13 to minimise downside from fundi
Slide 21: International and Institutional Banking (IIB) Division
International and Institutional Banking (IIB) Division Underlying profit growth (AUDm) FY12 v FY11 IIB Division 3% Net profit after Tax Income Growth FY12 v FY11 1 2,301 2,372 2,047 1. Includes Relationship & Infrastructure Australia / New Zealand 21
Slide 22: Increasing geographic diversity and increasing contribution of value added and flow products
Increasing geographic diversity and increasing contribution of value added and flow products Income Mix by Product Income Mix by Geography Deposit Mix by Geography Transaction Banking & Markets Sales 2012 2012 2012 2010 2010 2010 Traditional Lending 22
Slide 23: Global Markets
Global Markets • APEA continued to show strong growth with total Global Markets Income by Activity income up 26% YOY and now represents 40% of Markets income • Sales income was up 9% YOY due to a broadening of our client base with Capital Markets up 6%, Investor Sales up 23% and Wealth Sales up 33%
Slide 24: New Zealand Businesses
New Zealand Businesses Underlying profit growth (NZDm) FY12 v FY11 New Zealand Businesses 11% Underlying profit Cost to Income Ratio NZDm NZDm 24
Slide 25: The New Zealand simplification strategy is delivering
The New Zealand simplification strategy is delivering Most convenient Change in Customer Satisfaction • We have the most branches and the most ATM’s. 7 new 6% 5% branches opened in growth areas since the simplification 4% programme began 1% 1% 2% 0% -1% • Increasing the number of wealth, commercial
Slide 26: Global Wealth and Private Banking Division
Global Wealth and Private Banking Division Underlying profit growth FY12 v FY11 Global Wealth and Private Banking Division -1% Underlying profit Insurance annual in-force premiums Cost to income ratio 26
Slide 27: Asset Quality
Asset Quality
Slide 28: Balance Sheet – Composition by Geography
Balance Sheet – Composition by Geography Customer Lending1 by Geography Customer Deposits by Geography APEA APEA APEA Commercial Australia Retail & Wealth Retail & Wealth & Institutional Institutional APEA Commercial & Institutional Australia Commercial Australia Institutional APEA APEA New Zealand
Slide 29: Impaired Assets by Division
Impaired Assets by Division New Impaired Assets Net Impaired Assets $m $m 3,126 4,969 4,685 4,504 2,436 2,319 2,335 3,884 3,629 3,423 1,824 1847 29
Slide 30: Individual Provision Charge
Individual Provision Charge Individual Provision Charge Individual Provision Charge by Segment composition 1,062 762 609 717 1,062 594 912 762 717 594 609 Individual Provision Charge by Region 1,062 912 762 717 594 609 30
Slide 31: Collective Provision Charge
Collective Provision Charge Collective Provision Charge by Source (96) 331 36 (40) 65 (58) (152) (226) 31
Slide 32: Collective Provision Balance
Collective Provision Balance Management overlay balance movement Collective Provision Balance ($m) 2H12 v 1H12 ($m) 32
Slide 33: Total lending exposures by Industry Sector
Total lending exposures by Industry Sector Exposure at default (EAD) % in Non as a % of group total Category EAD Performing Sep-11 Sep-12 Sep-11 Sep-12 Consumer Lending 43.6% 41.0% 0.3% 0.3% Finance, Investment & 14.5% 14.9% 0.3% 0.5% Insurance Property Services 7.1% 7.5% 1.9% 1.6% Manufacturing 5.9
Slide 34: Commercial Property Credit Exposure
Commercial Property Credit Exposure Commercial Property Exposure Commercial Property Exposure GLA by Region by Sector: Australia $b 30.0 30.0 29.3 28.2 27.8 26.1 Exposure to REITs, Listed Property Companies and/or their subsidiaries Exposure to REITs, listed Other property Commercial companies Prope
Slide 35: Australia 90+ day delinquencies
Australia 90+ day delinquencies Owner Occupied vs. Investment Loans 90+ Australia Retail 90+ day delinquencies DPD (%) Australia Commercial 90+ day delinquencies 35
Slide 36: Well diversified and high quality assets in APEA
Well diversified and high quality assets in APEA Institutional APEA Risk Grade profile Institutional APEA Asset Composition by Exposure at Default Total External Assets Sep 2012 AUD95b Due from Other Financial Liquid Institutions Assets AAA-BBB Derivatives BBB- BB+~BB- Money Market BB- Trade Securit
Slide 37: New Zealand Businesses
New Zealand Businesses Net impaired assets Total provision charge 351 165 98 119 102 89 90+ Days arrears 1 1. Spikes in 2012 Commercial 90 day delinquencies are primarily due to internal classifications rather than any deterioration in underlying credit quality. 37
Slide 38: ANZ’s Australian Mortgage Portfolio
ANZ’s Australian Mortgage Portfolio
Slide 39: The structure of the Australian mortgage market has resulted in very low losses
The structure of the Australian mortgage market has resulted in very low losses through various cycles Full • All mortgage lending is full recourse Recourse • Investment loans are also secured by mortgage over primary residence Variable • Most mortgage lending in variable rate rate format (ANZ ~85%)
Slide 40: Australia Division – Mortgages
Australia Division – Mortgages Dynamic Loan to Valuation Ratio Portfolio Statistics Total Number of Mortgage Accounts 848k Portfolio >90% LVR = 5% (Sep-12) Total Mortgage FUM $182b % of Total Australia Region Lending 60% % of Total Group Lending 43% Owner Occupied Loans - % of Portfolio 63% Average
Slide 41: House price growth since the mid 1980s is explained by income growth
House price growth since the mid 1980s is explained by income growth and the structural decline in interest rates $700,000 Interest rate contribution to simulated house price** Income growth contribution to simulated house price*** Actual house prices $600,000 $547,861 $500,000 $400,000 $300,000 $20
Slide 42: House prices appear to be stablising after recent weakness
House prices appear to be stablising after recent weakness Median Australian house prices International housing prices 190 index Dec 2004=100 230 index Dec 2005=100 Per. Singapore 180 210 (-7.7%)* Hong 170 190 Kong 160 Melb. 170 (-7.3%)* 150 Adel. 150 China (-3.3%)* 140 130 Canada Australia Bris. 13
Slide 43: Covered Bonds
Covered Bonds
Slide 44: Australian Covered Bonds have a number of elements of structural support
Australian Covered Bonds have a number of elements of structural support Legislative framework Illustration of Structure Dual recourse Supporting No time subordination for investors Collateral Portfolio ~$185 Residential mortgage collateral Underlying Indexed for price movements Mortgaged
Slide 45: ANZ’s Covered Bond Strategy
ANZ’s Covered Bond Strategy Diversification of investor base • Access to AAA investor base - timely to assist in redemption of Rationale Government Guaranteed debt maturing from 2012 to 2014 • Reduces requirements for senior unsecured debt in offshore markets Lengthen funding profile in a cost effec
Slide 46: Australian Covered Bond Legislation
Australian Covered Bond Legislation Structure • Enabling legislation (to amend the Banking Act 1959) passed the Australian Federal Parliament and became law in October 2011 • ADIs to be covered bond issuer, with dual recourse to issuer and cover pool • Guarantee provided by an SPV, used for segregat
Slide 47: Programme Structural Enhancements
Programme Structural Enhancements • Monthly Asset Coverage Test (ACT) to ensure cover pool is sufficient to secure Over the outstanding covered bonds per minimum contractual OC Collateral- • Maximum Asset Percentage 95% isation • Asset Percentage (as at September 2012) was 86% • OC is the inverse of
Slide 48: Issuer Event of Default and Covered Bond Guarantee
Issuer Event of Default and Covered Bond Guarantee Include: • Default in principal or interest for 7 days Issuer • Fail to perform obligations for 30 days Events of • Winding up, encumbrancer takes possession of all assets Default • Bankruptcy proceedings • An uncured breach of ACT • Service of an I
Slide 49: Programme Structure
Programme Structure ANZBGL ANZBGL ANZBGL Contingent Covered Interest Rate Swap Ccy and Interest Rate Bond Swap Provider Provider Swap Provider Mortgages and Demand Loan and Intercompany ANZ Residential Related Security ANZBGL Loan Covered Bond ANZBGL Issuer Trust Seller Covered Bond Guarantor Consid
Slide 50: Cover Pool - Composition and qualifying criteria
Cover Pool - Composition and qualifying criteria September 2012 Weighted Average LVR (%) Portfolio Summary at 20 September 2012 Covered Bond Pool $11,224m Covered Bonds on issue $8,803m Average loan size $279,617 Weighted Ave Current LVR 64% Weighted Ave Indexed LVR 65% Weighted Ave Seasoning 16 mon
Slide 51: Australian Economy
Australian Economy
Slide 52: The Australian economy has performed relatively well in aggregate
The Australian economy has performed relatively well in aggregate 52
Slide 53: The Terms of Trade has driven the economy and resulted in strong income growth
The Terms of Trade has driven the economy and resulted in strong income growth Terms of trade since 1960 Income growth is continuing 140 120 Australia 130 US 110 New Zealand 120 100 110 000's (A$, US$, NZ$ 90 100 Index Forecasts 80 90 70 80 70 60 60 50 50 40 60 70 80 90 00 10 00 01 02 03 04 05 06 07
Slide 54: Strong investment growth driving the economy
Strong investment growth driving the economy Business investment vs. consumption 62 22 Forecasts 60 20 58 18 56 16 % of GDP % of GDP 54 14 52 12 50 10 48 8 90 92 94 96 98 00 02 04 06 08 10 12 Household consumption (left) Business investment (right) Sources: ABS and ANZ 54
Slide 55: Investment is concentrated in the mining, energy and infrastructure sectors
Investment is concentrated in the mining, energy and infrastructure sectors Major infrastructure projects by industry 140 Communications Hospitals Forecasts WaterSupply & Sewerage 120 Manufacturing Electricity Gas Pipeline 100 Energy Airports Rail Ports 80 Roads Mining A$bn 60 40 20 0 2008 2009 2010
Slide 56: Downside risks to the investment pipeline have emerged
Downside risks to the investment pipeline (post 2014) have emerged due to lower prices and rising costs. 160 Major infrastructure projects by stage 140 Investment pipeline (excluding recent cancellations and "at risk" coal projects) 120 100 A$bn 80 60 40 20 0 2011 2012 2013 2014 2015 2016 Under Cons
Slide 57: The Australian economy is grappling with the structural change of a 2 speed economy
The Australian economy is grappling with the structural change associated with this 2 speed economy Employment growth by industry, 12 months to Feb 2012 Hospitality Transport & post Net employment change, Retail Trade 12 months to February 2012: Wholesale Trade +22k Manufacturing Arts & Recreation A
Slide 58: Employment is growing only very slowly
Employment is growing only very slowly. The unemployment rate remains low but should drift a little higher. Key labour market indicators 160 6.0 140 5.7 Unemployment rate (RHS) 120 5.4 100 5.1 '000s per month 80 4.8 Per cent Trend 60 4.5 40 4.2 20 3.9 0 3.6 -20 3.3 Employment growth (000s, LHS) -40
Slide 59: Ongoing caution in the Household sector has seen an improvement
Ongoing caution in the Household sector has seen an improvement across most ratios Household Debt Service Ratio Household Debt to Income Ratio % of household disposable income % of household disposable income Household Savings Ratio • As a result of lower interest rates, the % of household disposabl
Slide 60: Financial flexibility: Australia remains in a very strong fiscal position
Financial flexibility : Australia remains in a very strong fiscal position Fiscal & Debt position 160 Greece 140 Japan 120 Italy 100 Singapore Belgium Portugal US Net Debt % GDP, 2012f 80 Ireland France UK India 60 Spain Germany Taiwan 40 Canada Hong Kong China 20 Indonesia Australia NZ Denmark 0 -2
Slide 61: Financial flexibility: two other key policy adjustments to offset global shocks
Financial flexibility : the Australian economy has two other key policy adjustments to offset global shocks Australian Dollar & RBA Cash Rate 1.4 10 1997 2001 2007-08 2009-12 Asian Crisis Sept 11, GFC, Lehmans European 1.2 Twin towers fails Sovereign (A$ record low) Debt Crisis 8 1.0 6 0.8 0.6 4 0.4
Slide 62: China: A medium term perspective
China : A medium term perspective
Slide 63: Policy focus is now to boost consumption and reduce reliance on investment
Policy focus is now to boost consumption and gradually reduce the importance of investment in boosting growth China - GDP Composition 2011 China - Contribution to GDP Growth 16 (ppt) Tert: Other 14 19% Primary Tert: Real 12 10% Estate 10 6% 8 Tert: Banking & Insurance 6 5% Secondary: 4 Total Manufac
Slide 64: Urbanisation in China will continue to drive investment over the medium term
Urbanisation in China will continue to drive investment over the medium term China’s rapid growth in large cities 2003 : China - Urbanisation 45 tier 1 – 3 cities 1,200 100 2025: 147 tier 1-3 cities 1,000 80 11 cities ~ 15 m 800 18 cities ~ 10 m 60 600 40 400 China’s high speed rail network by 2020
Slide 65: What does a slowdown in China mean for Australia?
What does a slowdown in China mean for Australia ? Case 1 : China shock • While a hard landing is not ANZ’s base case, it is Real GDP worth considering what would happen in the event Australia of a hard landing in China. Emerging Asia • The IMF has published research into various China slowdown scen
Slide 66: Key Contacts
Key Contacts Australia and New Zealand Banking Group Limited Level 9, 833 Collins Street Docklands VIC 3008 Australia Group Treasurer Head of Debt Investor Relations Rick Moscati David Goode Phone : +61 (3) 8654 5404 Phone: +61 (3) 8654 5357 Mobile: + 61 (0) 412 809 814 Mobile: +61 (0) 410 495 399 E
Slide 67: Disclaimer
Disclaimer • 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
Australia and New Zealand Banking Group — Debt Investor Presentation (November 2012) on 6ix