Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — H1 2005 Earnings Presentation
63 slides from Anz's earnings presentation, Apr 28, 2005
Slide 1: 2005 Interim Results
Slide 2: A solid first half for ANZ
A solid first half for ANZ pep Bch Cash EPS* 85.9¢ # 8.9% ‘ 4.6% NPAT* $1,492m % 13.7% % 5.1% Interim dividend sic T 8.5% Net non-accruals $326m § 37% y 28% Net specific provisions $151m } 23% § 39%
Slide 3: Good growth in major divisions and Australia
Good growth in major divisions and Australia Mar-05v = Mar-05v NPAT Division Sep 04 (%) | Mar-04 (%) ($m) Personal Banking 6 is 442 Institutional 4 7 455 New ZealandBus ,, 5 , 14° , Corporate 6 11 Esanda & UDC 4 12 7 I NPAT increase 7 IE NPAT decrease 4 Asia Pacific (20) (6) iS Bh tr-08 neat ING JV
Slide 4: Results Review
Results Review Peter Marriott Chief Financial Officer
Slide 5: A solid result, driven by strong interest income growth
A solid result, driven by strong interest income growth Scorecard Interest Income Expenses Volume Growth 108 (72) Tax — ¥ || 8) aagze Interest Margin Non- —— sd interest || Non Int. Income 1,419 income Provisions , 10 35 Expenses v Provisions LY Tax v Cash EPS vaya Sep - 04 Mar - 05 v= Ahead of expe
Slide 6: Strong volume growth reflected in market share gains
Strong volume growth reflected in market share gains Lending Growth Deposit Growth Personal Institutional 10%, —— 15% New Zealand Businesses (nzs) Corporate fo 6% 11% Esanda Asia Pacific 13% 0% 5% «10% 15% 20% += 0% == 5% «10% ©—«15% 20% [DDI sept 04 to Mar 05 (hoh) [DDI Mar 04 to mar 05 (pep)
Slide 7: First half margin decline driven by increased competition
First half margin decline driven by increased competition Margin decline a mix of Structural impacts and Competition 253.4 (8.0) bps 245.4 (1.2) (9 6) asset mix ff Funding mix [i oS 8 competnion [i s 2s others | § Mar-04 —-Sep-04 Mar-05 (Sbps) ———> (13bps)._ | > ‘Competition impact greatest in Insti
Slide 8: Impact of competition also reflected in non-interest income
Impact of competition also reflected in non-interest income Non interest income impacted by a number of one-offs and increased competition 4.2% Personal Institutional New Zealand Corporate
Slide 9: Continued focus on operational efficiency to offset pressure on revenues
Continued focus on operational efficiency to offset pressure on revenues... Controlled underlying expense growth Growth Other sia. season (3) 2,475 movement FX impact, =a 201 2,103 8 ME uneeriying Compliance 24 IBN: ae 902 : | 1% underlying expense growth (hoh) Mar -04 Sep -04 Mar -05 Growth investm
Slide 10: ..and provide capacity to fund significant investments in frontline capabilities
..and provide capacity to fund significant Additional Headcount Weighted to Front Line (1HOS FTE movement) 400 300 Personal NZ Corporate Institutional oTss Other investments in frontline capab les Productivity of new staff expected to increase over time ‘000 32,000 160 30,000 4077) 784 a 28,000 155
Slide 11: Risk reduction journey is delivering
Risk reduction journey is delivering Non Accrual Loans $m continue to reduce 900 0.7% S00 0.6% 700 0.5% 600 500 0.4% 400 0.3% 300 0.2% 200 100 0.1% 0 0.0% Mar- Sep- Mar- Sep- Mar- Sep- Mar- 02 02 03 03 04 04 05 mmm Net Non Accrual Loans (LHS) Net Non Accrual Loans / NLAs (RHS) Delinquencies rem: (60
Slide 12: Improved risk profile driving lower ELP charge
Improved risk profile driving lower ELP charge e in ELP rate driven by proved risk profile bps 30 (2) | a) go BM os) mm (0.5) ne MELP Top-Up Normalised ELP Material improved Inst. ignment of ELP in NBNZ risk profile* |Lower allowance for offshore risk ELP charge exceeded SP requirements by 88% in 1H
Slide 13: Good growth in key customer divisions
Good growth in key customer divisions Mar-05 Sep-04 Change (sm) ($m) (%) NPAT ($m) Institutional 455 436 4 Personal Banking 442.417 6 New Zealand 306-291 5 Nz0 2 Corporate 182172 6 Esanda & UDC 7 74 4 Asia Pacific 48 60 (20) NPAT ING JV 63 61 3 BE NPAT Increase I NPAT decrease Treasury 9 16 (large)
Slide 14: Divisional outlook for FY05
Divisional outlook for FYO5 Division Outlook | Drivers Personal ot’ Continued strong FUM growth, stable margins at Divisional Banking level, ongoing investment. + Strong volume growth in Institutional Banking (easing in 2HO5) and TTS, offset by competitive margin pressure in IB and runoff of NZ stru
Slide 15: Other financial issues
Other financial issues > Capital position slightly above target range, impact of IFRS/APRA uncertain > $350m buyback to be completed in 2HO5 > Dividend growth in line with cash EPS growth, expect full franking for the foreseeable future > IFRS and Basel II programs on track > Possibility of a modest
Slide 16: Summary
Summary > Solid earnings for the half, above target > Australia very strong, Personal a standout > Very strong asset growth, but margins under pressure > Risk reduction journey delivering bottom-line results, provisions and non-accruals down substantially > NZ regulatory/integration now well in hand
Slide 17: The face of ANZ is changing
The face of ANZ is changing......... > Increasing market share across our Personal and Corporate businesses; dominant in NZ, progress in Asia- Pacific > Best-regarded major bank for retail customers > Highest staff engagement of major Australian companies > Strong support for innovative community pr
Slide 18: Slide 18
Slide 19: Divisional Performance
Divisional Performance
Slide 20: Focus on the customer is closing the market share gap
Focus on the customer is closing the market share gap Customer Satisfaction* with Market share of “traditional banking” 85 Main Financial Institution % financial services increasing” 18 80 ad eS rs uy f t 5.8% Closing the gap 4.1% 12 ¥v 70 [9.4 65 é 60 s Closest 4 55 major —anz = —Peer average peer
Slide 21: Strong ANZ channels driving Mortgages momentum
Strong ANZ channels driving Mortgages momentum Significant housing market share gains* (Mar04- Feb0S) 0.4% 0.4% ANZ CBA 0.8% Significant growth in ANZ Direct* referrals ($b) sr es os 06 Increased ANZ channel sales 80% ) 76% 73% 73% 73% 71% 70% 64% a 59% 60% se 50% 1HO32HO3.-«1HO4—«2HO4.— «HOS, — % l
Slide 22: Banking Products and Consumer Finance performing well
Banking Products and Consumer Finance performing well Good growth in new transaction Continued growth in new credit card accounts (000s) and savings accounts ('000s) Increased cross sell results (avg product/cust - all Products) Gross account ‘acquisition as up 259% 19 287 | | 2403 1HOs 203. 1Ho4 24
Slide 23: Institutional: building a foundation for growth
Institutional: building a foundation for growth This half has seen good progress in building a foundation for growth ~ increasing efficiency, sustainability and strategic clarity ‘+ Markets integration has organised the business more closely around customers and provides a leaner operating mode ‘+ C
Slide 24: Earnings impacted by intense competition and falling credit spreads
Earnings impacted by intense competition and falling credit spreads ‘+ Anumber of external factors have impacted performance = reducing credit spreads adversely impacting margins ~ Institutional market remains extremely competitive ‘+ Asset quality continues to improve: = Investment grade assets now
Slide 25: Corporate: solid performance despite increasing competition
Corporate: solid performance despite increasing competition Corporate Banking - solid Strong growth in Wall Street Balance Sheet growth to Main Street transactions te 4 of transactions Assets (m) 1 2H03 w Ho4 16 150 9 2H08 w 2Hos 120 90 60 30 ° Deposits Lending with continued growth new Business Ban
Slide 26: We are well positioned for future growth
We are well positioned for future growth Our Business Banking relationship ..driving leading customer proposition focuses on customer needs’... ‘satisfaction® (runsasoissn) 50%. (drivers of satisfaction) 100%. 40% 20% i me ae 20% We 60%. —— = a eA sin oe 2 ed Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-0
Slide 27: New Zealand: good volume growth offset by competitive impacts
New Zealand: good volume growth offset by competitive impacts Businesses performing as expected ~ ANZ Retail rebuilding continues, forecast customer attrition impacting Institutional (hoh NPAT growth NZ$) Prot divers aan =e 12.2% |? Seca 1 inpct of mortgage pie waren margins fees, + margin contracti
Slide 28: Market share trends are encouraging
Market share trends are encouraging i * agapining share in Mortpages™ Stable share of household deposits** i on a oe Fe ‘i a Vike he denn one COLI SEO PED EELS ANZ customer attrition stabilising; Improving Customer Service Rating for 000 NBNZ showing growth ‘ANZ; NBNZ maintains leadership* 1,000 1 (
Slide 29: NBNZ integration to be completed by end of 2005
NBN2Z integration to be completed by end of 2005 (lixely to be NZ$m 2004 2005 2006 2007 ‘approximately + 10% costs Total Integration costs 49 153 18 Ly. Sees Incremental Integration costs 29 —— covered by i tur Cost synergies _ 6 33 53 63 So Revenue synergies 1 24 39 47 |» Tov-2006 Attrition 20 32 3
Slide 30: Asian businesses showing positive growth
Asian businesses showing positive growth ANZ Asian Network ‘NPAT grew by 12% excluding Treasury ‘+ Investments in Trade Finance and leveraging growth in trade flows has resulted in 47% NPAT ‘growth from corresponding period ‘= Balance sheet remains flat as we focus on maintaining a high standard of
Slide 31: Pacific - solid momentum impacted by structural changes in economies
Pacific - solid momentum impacted by structural changes in economies «NPAT grew 81% on 1HO4. Property sales in 2H04 and Earnings impacted by drop in PNG structural changes in PNG resulting in a 6% fall in NPAT (A$m) Treasury bill rates (10.9% to 4.9%) caused NPAT to be down 4% half on half 3s a 39 =
Slide 32: Esanda: benefiting from reshaping our business
Esanda: benefiting from reshaping our business Over the past 3 years, Esanda & UDC businesses have been reshaped; ‘+ Increasing focus on lower risk / higher growth ROE markets via ‘+ additional front line staff in growth areas ‘+ restructuring the UDC business structure from franchisees to relations
Slide 33: Improving INGA returns from strong insurance income
Improving INGA returns from strong insurance income NPAT increased 5% driven by: ‘+ Funds management income decreased by 5%, with higher fee income offset largely by an Increase in distribution costs ‘+ Risk income up 99% due to favourable claims experience together with increased sales of life Insu
Slide 34: Financial Information
Financial Information
Slide 35: Solid growth in low yield assets continues to impact margins
Solid growth in low yield assets continues to impact margins Increased Institutional and Mortgages growth driving asset mix impact Approx Asset Mix NIM Impact Margin (HOS v 2H04) (bps) Non Lending Low Assets Institutional (0.6) Mortgages (0.8) Corporate Non Lending 4,4 Assets % of % of Growth Growth
Slide 36: Composition of other in the high level margin analysis
Composition of “other” in the high level margin analysis Other Items (0.6 basis points hoh) 1.6 (1.8) Brokerage FX Revenue Capital Markets Impact Hedging Derivatives + NIM increased resulting from reduced funding costs associated with unrealised gains (offset in P&L on Trading Securities) * The foll
Slide 37: Capital position above target range
Capital position above target range Drivers of the ACE ratio * Currently above target range % Farnings* * Continue to 6.00 0.79 generate surplus capital 5.75 * Uncertainty Buy Back regarding ACE 5.50 (0.06) sie impact of IFRS ae Dwidende impact + $350m buy-back 5.09 (0.47) 0.10 5.08 ongoing = = — an
Slide 38: APRA changes to Hybrid rules could reduce organic funding capacity
APRA changes to Hybrid rules could reduce organic funding capacity Capital Generation & Usage % of RWA Cast Capital ratio Earnings Dividend 1.59% (1.0%) RWA | ACE mid 15% ieee 0.63% 0.70% 0.77% 0.84% 0.91% Boy ee eae oreo Oeterten NOR T™% | 9: 0.68% pani 11%) Fun 00 es om | oo. 10% ). 1% 12% 13% .e
Slide 39: Ideal capital structure versus organic generation
Ideal capital structure versus organic generation Organic generation ‘0% Hybrids Ideal structure * Should APRA constrain the issuance of Hybrids, we may be unable to return surplus ACE to shareholders. Regulatory Tier 1 capital may be increasingly funded by Hybrids ACE capital. * Currently ANZ has $
Slide 40: Dividend growth in line with cash EPS growth
Dividend growth in line with cash EPS growth oC Payout ratio slightly above long jend growth in line with term sustainable ratio cash EPS growth % Offshore earnings 100 90 one-off ‘80. items ina particular 70 veer = 60 2 Prima face Core franking franking position capac Based on current payout policy
Slide 41: New Zealand structured finance transactions
New Zealand structured finance transactions * IRD audit focused on so called “conduit” transactions * Notices of Proposed Adjustment and assessments received as expected * Net potential liability on all similar transactions $NZ268m* * Legislative change to ‘thin cap’ rules in NZ will make these tran
Slide 42: New Zealand currency risk substantially hedged
New Zealand currency hedged + Revenue hedging undertaken when currency is believed to be outside 130 its normal trading range and inconsistent with their value 1.25 1.20 145 1.10 1.05 1.00 Revenue from FX hedges is reported as Interest Income within the Group Centre risk substantially Attractive rat
Slide 43: Australia and NZ remain attractive markets over the medium to long term
Australia and NZ remain attractive markets over the medium to long term Average Real GDP growth 4% 3% 2% 1% | 0% ‘Aust. Japan 1995-2004 (a) = 2005-2010 o * Medium term outlook for Australia and NZ economies is to outperform major global markets * Australia and NZ continue to provide attractive, low
Slide 44: Short term mismatch income driven by cash to day spread
Short term mismatch income driven by cash to 90 day spread * ANZ Group is subject to a mismatch between the 3 month rate and the cash rate Rolling average rates (%) Cash 90Day Spread 2HO3 4.75 4.74 +0.01 1HO4 5.12 5.21 -0.09 2H04 5.25 5.48 -0.23 1HO5 5.29 5.42 -0.13 * All variable rate mortgages rep
Slide 45: Long term mismatch income impacted by flat yield curves
Long term mismatch income impacted by flat yield curves ‘+ We seek to adopt a conservative approach to Balance Sheet Management by * avoiding proprietary trading * seeking good opportunities for low risk earnings ‘+ Treasury's income is expected to vary as the economic cycle changes and the shape of
Slide 46: Credit Quality
Credit Quality
Slide 47: Improvement in risk profile reflected in lower loss and default rates
Improvement in risk profile reflected in lower loss and default rates New Non Accruals reducing $m 900 1.4% Net Specific Provision 824 by size 508, 1.2% ‘stom - $25m 700 596 1.0% 600 579 2 500 2 479 0.8% 409 387 400 0.6% 300 0.4% 200 100 ad <s5m ° 0.0% Mar- Sep- Mar- Sep» Mar Sep Mar- 02 02 03 03 04
Slide 48: New Specific Provisions down 25% on 2H04
New Specific Provisions down 25% on 2H04 Geographic Specific Provisions Mar- Sep- Mar- Sep- Mar- Sep- Mar- 02 02 «03 03 04 04 05 Aust @NZ MUK/US mAsia m Other Inter 120) Specific Provisions by Source 14 68 68 29 ~ 24 Ed 2 6 10 Sopot a-05 § Domestic Corporate Ml AssetFinance ‘tl Consumer Finance WOth
Slide 49: Group risk grade profile
Group risk grade profile AAA to BBB BBB- BB+ to BB BB- >BB- B+ to CCC Non Accrual $1490n, ANZ Group - Outstandings $1580 $1650 $207bn $2220 ‘$235bn * Total investment grade as at Mar 05 - $163bn or 69.2% of the portfolio + 80% of lending growth has been investment grade
Slide 50: Geographic risk grade profiles
Geographic risk grade profiles Australia & New Zealand International sisson $198bn_$212bn $2270 $10bn $900, ‘$10bn $900) BB+ to BB BB B+ to cee 20% 17% 10% 17% 61% 40% 24% 19% Non Accrual 0.4% 04% 03% 02% 4% 33% 29% 15%
Slide 51: Institutional risk grade profile
Institutional risk grade profile Institutional - Outstandings ‘$43bn ‘$43bn ‘$45bn ‘$49bn AAA to BBB Total investment grade as at Mar 05: ppe- $34bn or 70.6% of the portfolio, up from $31bn or 68.5% BB+ to BB BB- >BB- 4 =: Mar03 Sep-03.—Mar.04 = Sep-04 Mar B+ to ccc 3.0% 32% 1.9% 1.8% 0.7% Non Accru
Slide 52: ANZ's provision levels remain strong
ANZ’s provision levels remain strong Specific Provision/Non- | General Accrual Loans | Provision/RWAs 49% | 0.99% 0.94% 43% | ti | Lied 0.74% 20% ANZ Mar 05 CBADecO4 NABSepOs WAC SepO4 i ANZ Mar05 CBADecOt NABSep0s WBC Sep04
Slide 53: Continued strong growth in Mortgages
Continued strong growth in Mortgages * LVR at origination consistent with 12 months ago ‘+ Improved Dynamic LVR compared to March 2004 with strong residential asset appreciation ‘+ Some up-tick in 60+ day delinquencies although portfolio credit quality remains sound * The product mix remained stable
Slide 54: Inner City lending improving
Inner City lending improving + There has been a gradual shift toward Owner . Occupied, although Investment loans remain Inner City Accounts & Exposure more popular + Inner City exposure represents 4% of the 1 # Accounts Mortgages Australia total portfolio Exposure + There is only one delinquent acco
Slide 55: Industry exposures - Australia & New Zealand
Industry exposures —- Australia & New Zealand B= Lending Assets (auD) + oF Portfolio (RHS scale) Sb in High Risk (RHS scale) 9b In Non Accrual (RHS scale) Haaith & Connmunity Cuitiral . Regrestional Forestry & Fishing 20bn ic 10.0% 20bn es 10.0% 206m 10.0% 1500 70% 3500 707% 1560 70% soon 405 3000 4
Slide 56: Industry exposures - Australia & New Zealand
Industry exposures — Australia & New Zealand 1800 1000 — == ~_ Lending Assets (AUD) 96 of Portfolio (RHS scale) 6 in High Risk (RHS scale) 96 in Non Accrual (RHS scale) Finance - Other Transport & Storage Utilities 10.0% 2000 10.0% 2060 10.0% 70% 1560 70% 1500 70% 40% 1000 + 4.0% 106m 0% : — 1.0% So
Slide 57: Industry exposures - Australia & New Zealand
Industry exposures — Australia & New Zealand B= Lending Assets (AUD) —+— —_%oF Portfolio (RHS scale) —*— 9} in High Risk (RHS scale) x. .% in Non Accrual (RHS scale) Real Estate Operators & Dev. Retail Trade Agriculture te wan 15bn Pa 7.0% —15bn FO ioe 7.0% 10bn 4.0% — 10bn S31 4.0% —t0bn. 4.0% ST)
Slide 58: Other Information
Other Information
Slide 59: Building a competitive advantage through our people
Building a competitive advantage through our people High Staff Engagement ‘Aust’n Banking & Finance Ave. 40% 54% 60% ANZ New Zealand & Cad Personal Banking _ High Aust. Performance/ Best Employer Zone Focus on improving engagement... «while building upon a great employment brand «Full census conduct
Slide 60: ANZ Community Investment
ANZ Community Investment ‘+ Financial literacy and matched savings program for low income families wv [ANZ donates $2 for every $1 saved for children’s educational needs saverpfus + In 2004, $240,500 was saved by the 257 participants - ANZ contributed $481,000 + 2005 target is to support a further 5
Slide 61: Update on Basel II and IFRS
Update on Basel II and IFRS IFRS Project RED rot enact * Estimated project cost pate > cuntety torn ~$20m os” Results * Work effort is structured around specific streams @ corciee sep Dec Mar Jun Sep ‘Dec —-Mar_—<dun’”—«sSep_—~Dee Basel II Project "APRA Prodental Standard lsued rat IL Fa * ANZ aimin
Slide 62: Delivering value to shareholders
Delivering value to shareholders sm NPAT growth 1H99 1HOO 1HO1 1HO2 1HO3 1HO4 1HOS Total Shareholder Return CAGR% a 2 5 Year 10 Year MANZ NCBA NAB WBC * 85.9 cents cash EPS a good first half result * Focus and discipline again delivered strong performance * Shareholders rewarded - ANZ has outperform
Slide 63: Searchable text section of graphics shown above
Searchable text section of graphics shown above 2005 Int erim Results Australia and New Zealand Banking Group Limited April 2005 A sol id first half for ANZ pcp pch Cash EPS * 85.9c 8.9 % 4.6 % NPAT * $ 1,492 m 13.7 % 5.1 % Interim dividend c 8.5 % Net non-accruals $ m % % Net specific provisions $
Australia and New Zealand Banking Group — H1 2005 Earnings Presentation on 6ix