National Australia Bank Limited · ASX:NAB
National Australia Bank — Investor Day (September 2005)
108 slides from National Australia Bank's investor day presentation, Sep 29, 2005
Slide 1: Australian Region Market Update
National Australia Bank Australian Region Market Update 28 September 2005 Victory Room Telstra Dome, Melbourne {National Australia Bank
Slide 2: Agenda
Agenda 9:30am 9:40am 10:15am 10:50am 11:15am 11:30am 11:35am. 12:00pm 12:20pm. 12:45pm. 1:35pm 1:45pm From 2:15pm 2:45pm 3:15pm, Page 2 Welcome Organisation & Strategy Business & Private Banking Q8A Break / Tea / Coffee Introduction to Section Retail Banking Product & Service Wealth Management Q8A C
Slide 3: Welcome
Welcome John Stewart Group Managing Director and CEO {National Australia Bank
Slide 4: The Australian Region Update
The Australian Region Update Ahmed Fahour Executive Director and CEO Australia {National Australia Bank
Slide 5: A turnaround plan was developed in 2004
A turnaround plan was developed in 2004 Truly Stabilise Re-build Competitive 2005 “ss. 2006 2007 2008 ’ a + Leadership team rragiented + Earnings declining * Costs growing * Margins declining + Stakeholders unhappy + Customer satisfaction declining Pages {National Australia Bank
Slide 6: New Australian Region...customer focus and simplicity
New Australian Region...customer focus and simplicity Three Silos New Australian Model CIB FSA MLC Pegeo {National Australia Bank
Slide 7: Australian Executive Team
Australian Executive Team George Frazis Business & Private Banking Andrew Thorbum Retail Banking Matt Lawler “ely Financial Planning SB) & Third Party Distribution * Page? Business Products & Services Jeremy Dean Consumer Products & Services Steve Tucker ‘Wealth Management Services {National Austral
Slide 8: Our leaders are clear about their accountabilities
Our leaders are clear about their accountabilities + Revenue Growth + Profit After Tax Growth ||+ Cost Efficiency + Gross Margin + Return on + Speed + Market Share/Share of Equity/Return on + Product/Distribution Wallet Economic Capital Satisfaction + Risk Profile/Business * Market Share + MI Qualit
Slide 9: Customer numbers and satisfaction are growing again
Customer numbers and satisfaction are growing again Customer Movements (Feb 2004 — July 2005)* Customer Satisfaction (August 2005*) % of each institutions’ customers who are satisfied** Major Bank 1 73.2% Major Bank 2 62.2% +0.9% N. 43.4% Major Bank 3 +2.2% Total of the Four Major Banks +2.0% Total
Slide 10: Overall, we have stabilised market share
Overall, we have stabilised market share Market Share Movement *® Market = NAB (Sept 2004 — July 2005, basis points) Rank® Value*& Business Lending (inc billls*)* 180 1 $73bn Total Lending 50 2 $191bn Housing [jj20 2 $98bn Individual Risk | 0 1 $0.5bn Retail / Household Deposits 3 $34.4bn Retail Fun
Slide 11: With non-Retail Asset Quality remaining high and flat
With non-Retail Asset Quality remaining high and flat for the last 2 years Australian Bank Risk Indicators Sept 2003 Sept 2004 March 2005, July 2005 CRS 6.0 6.0 5.9 5.9 % of loans secured 72.1% 76.5 % 76.2% 75.8% (Cat AB) Source: Inemal— Exclus heusng and prsonalfoans CRS" t=lomectrek, 16= highest s
Slide 12: Stabilisation of our Cost Structure
Stabilisation of our Cost Structure Stabilisation Initiatives + Integration Personnel De-layering + First half provision $121m 1,000 FTEs taken + Stabilisation initiatives will Cancel projects deliver $80m of savings in Technology Rationalise duplication 2006 Write-off and reduce + 2° half $300m fla
Slide 13: Cultural change is taking hold in Australia...
Cultural change is taking hold in Australia... it is along journey Corporate principles widely adopted Very high levels of customer focus + Above 90% employee satisfaction score vs low 70% in 2003 on recent EOS Survey Satisfaction and engagement scores flat over last 2 years - 74% overall satisfacti
Slide 14: Significant progress has been made in stabilising the business
Significant progress has been made in stabilising the business Culture and People External Stakeholders + Refresh Leadership team + Delivering on enforceable undertakings * Build an integrated regional model + Embed a Compliance Gateway organised around the customer + Make significant effort against
Slide 15: A turnaround plan was developed in 2004
A turnaround plan was developed in 2004 Truly Stabilise Re-build Competitive 2005 \ 2006 2007» 2008 \ yw \ ’ \ ’ ’ * Re-igniting the organisation * Manage the business units + Become cost competitive + Rebuild critical infrastructure Page 15 {National Australia Bank
Slide 16: Re-igniting the organisation
Re-igniting the organisation A Clear Purpose « One common agenda focused around helping our customers fulfill their aspirations Freeing up our people to succeed + Simplify our business « Empower our people Re-investment in our people and brand + Incapability « In processes and systems « Incustomer e
Slide 17: Managing the business units
Managing the business units Stabilise Rebuild Business | & Private Lead the market, grow through innovation Retail ie —- Improve Retail customer experience through a focus on people Wealth Improve returns and leverage bank channels Truly Competitive Page 17 {National Australia Bank
Slide 18: Becoming cost competitive
Becoming cost competitive Personnel Technology Real Estate Other Costs/ Discretionary Page 18 Stabilisation Initiation + Integration + De-layering 1,000 FTEs + Cancel projects * Rationalise duplication + Write-off and reduce depreciation & amortisation + Resource planning + Network planning + Facili
Slide 19: Our cost reduction efforts will more than offset normal cost growth
Our cost reduction efforts will more than offset normal cost growth Cost Movement from 2006 — 2008* Nominal cost Volume escalation || related costs Cost savings eg Labour Outsourced Rent contracts Supplies Commissions *Inccatve, notte scale age 9 {National Australia Bank
Slide 20: Reinvesting in our business
Reinvesting in our business « Significant investment in rebuilding our business - $1.8bn over three years for Australia which is 70% of our Group forecast of around $2.5bn « Re-investment already built into our plans « Profile/mix of investment is changing + Compliance/regulatory « Product and servi
Slide 21: Becoming cost competitive in a sustainable way
Becoming cost competitive in a sustainable way. .. while investing in critical infrastructure Cost Movement from 2006 — 2008* Net underlying cost growth under 3% pa over next three years Nominal cost |/ Volume escalation || related costs Eg Labour Outsourced Rent contracts Supplies Commissions * inc
Slide 22: Summary
Summary This is a turnaround plan, problems understood Right people in right place - focused on the right things Significant progress in stabilising the business Future built on strong customer franchise and executing well Four key priorities in rebuilding the business - Re-igniting organisation « M
Slide 23: Business and Private Banking
Business and Private Banking George Frazis Executive General Manager, Business & Private Banking {National Australia Bank
Slide 24: Business and Private Banking — major franchise
Business and Private Banking — major franchise Stabilise Rebuild Truly Competitive Business i & Private Lead the market, grow through innovation Retail | A Improve Retail customer experience through a focus on people Wealth | - Improve returns and leverage bank channels Page 24 + #1 position, 234% b
Slide 25: Situation at start of year — core franchise was in trouble
Situation at start of year — core franchise was in trouble « Largest business bank, but with declining market share Revenue had slowed, margins falling « Cost growth faster than revenue growth Organisation was siloed with poor product accountability ug Needed to stabilise the business Page 25 {Natio
Slide 26: Strong growth — Business and Private Banking driving lending growth
Strong growth — Business and Private Banking driving both business and home lending growth Growth July YTD Annualised Market (RBA, July 2005) Volumes Business & ($bn)* Private* Business Lending $64.3 19.8% 11.9% Home Lending $33.8 18.0% 13.6% Deposits $46.4 8.6% 11.1% Funds Under Management $4.8 31.
Slide 27: We are gaining share — organically adding more than BankWest's business lending
We are gaining share — organically adding more than BankWest’s business lending** Business Lending Growth YTD APRA July 2005 average’ jiatatan 4 soe System Multiple of System | 1.88 | 1.21 ost 0.38 127 0.95 ost Market Share 234% | 191% | 149% | 129% | 4.7% 44% 3.2% Change in Market | 182bps| 38ps |
Slide 28: Forward outlook is positive — number one in our core SME segment
Forward outlook is positive — number one in our core SME segment Forward Borrowing Intentions of National’s Customers (% of customers who intend to borrow from the National) Business & NAB Private Position re = Banking Aug-04 Feb-05 Aug-05 borrowing Lending intentions (% of Balances) Corporates 8.8
Slide 29: Key indicators are positive — well managed, profitable growth
Key indicators are positive — well managed, profitable growth 2 =) 0 Number of Customer Relationships _|Revenue / Customer Relationship '|Return on Economic Capital ROA {Revenue / FTE Cost-to-income Number of People Avg. CRS (Customer Risk Rating) _|% Bus. Lending secured by Property Margin $s) tee
Slide 30: Credit risk managed — growth through doing good business
Credit risk managed — growth through doing good business with existing customers CRS & Lending Category Comparison 6.25 6.20 ‘Aprit oS 615 oe B 0s > 6 = 6.00 5.95 | 5.90 | July 08 5.85 222 224 226 228 «230-232 2.84 Average Security Category* Client Risk (CRS) stable, slight increase in cash fow lend
Slide 31: Structured plan implemented achieving quick performance improvement
Structured plan implemented achieving quick performance improvement 15 eh Structure, People 100 Initiatives and Culture Implemented * Performance and * Stretch target customer focus * Quick decisions @ leiganisediatclind * Monthly incentives customers + Decentralised credit, “-|nnoyative products in
Slide 32: Our challenges
Our challenges 4. Competitor reaction, niche players 2. From lending to including transaction/deposit and insurance/wealth 3. Process improvement 4. Cultural journey — providing the environment for people to excel Page 32, {National Australia Bank
Slide 33: Growth built on real advantage...
Growth built on real advantage... 4. Continue leading in distribution, best bankers, more bankers in more places 2. Quick decisions, decentralised, connected to customers 3. Clear link between sales performance and reward good opportunities for further profitable growth 4. Innovative products, quick
Slide 34: Building businesses — industry specialisation
Building businesses — industry specialisation — - Universities/ Emerging [EGaiuecaites Page 24 {National Australia Bank
Slide 35: Initial focus on business and home lending
Initial focus on business and home lending Home Loan Leasing age 28 {National Australia Bank
Slide 36: "Go National" — helping our customers fulfill their aspirations
“Go National” — helping our customers fulfill their aspirations ated Litestyle ‘Succession .e Fronchiso "9" anning | BMA Bills Income Home Oe Employees (in/out) SS Short/ Long Funding Tex Overt Le Team Loan Foreign Exchange Retirement Investments Borrowings igs — Leasing — Education Company Superann
Slide 37: Transaction Banking
Transaction Banking Bruce Munro Executive General Manager, Business Products & Services {National Australia Bank
Slide 38: Why transaction banking?
Why transaction banking? % Of Primary Corporate Banking Relationships 30 | 20 0 10 20 30 40 % Of Primary TB Relationships + Strong positive correlation between being a transaction bank and being regarded as the “primary bank” + Being a transaction bank extends life of relationship by at least 30% So
Slide 39: Lending vs Transactional Banking Share of SME Relationships
Lending vs Transactional Banking Share of SME Relationships: 2005 (% of principal supplier relationships) Transaction Banking 30 » R nV 8 a 3S 10 20 30 Term Lending ‘Source: Eas and Partners (SME lorcing share), RBA (lencing shares) 2009. Page 39 {National Australia Bank
Slide 40: How have we performed over last years?
How have we performed over last 3 years? Transaction Banking Market Share Primary Relationships 20% 5% 0% 15% 10% 5 0% Corporate Commercial Micro Top 500 $20-$340 milion sean ina $1-$5 million Leader @NAB Sounce: East & Patines 2008, Camovate (lay 2005), Commercial (august 2005), SUE (Aes 2009), Aro
Slide 41: "Top 5" Commercial Market Share by State
“Top 5” Commercial Market Share by State No. of Primary Relationships Cross sell New business ‘opportunities f isan opportunities 10 Nsw wie ow WA SA Total (N) ‘Soutee: Eas & Patets 2005, Paget {National Australia Bank
Slide 42: What we are doing?
What we are doing? New business model — end-to-end accountability « The best people « Banker — Specialist engagement New products and technology re-investment Page 42 {National Australia Bank
Slide 43: Summary
Summary « Major franchise back on growth path + Volumes increasing Revenue increasing, margins stabilising + Cost and FTEs reduced, improved productivity « Underlying profit increasing Credit risk stable + Growth based on a differentiated approach and sustainable + Further profitable growth prospect
Slide 44: Q&A Presenter's Panel
Q&A Presenter’s Panel {National Australia Bank
Slide 45: Australian Region Market Update
National Australia Bank Australian Region Market Update 28 September 2005 Victory Room Telstra Dome, Melbourne {National Australia Bank
Slide 46: Retail Banking
Retail Banking Andrew Thorburn Executive General Manager, Retail Banking {National Australia Bank
Slide 47: Agenda
Agenda + Outline the situation in 2004 + Outline the actions we have taken to stabilise the business and the results « Present our longer-term plans to grow the business Page 47 {National Australia Bank
Slide 48: Our Retail Bank
Our Retail Bank ing Business Stabilise Rebuild Truly Competitive Business | RUSE EneeEEUEtES _ ee + 813 branches i + 130 Financial Private Lead the market, Services Centres grow through innovation + 7600 people + Main bank share Retail — | dd tesa Improve Retail Scie customer experience Sona through
Slide 49: Business situation at the end of 2004
Business situation at the end of 2004 Customer satisfaction below the average of the four majors « Declining customer numbers + Personal customer numbers declined over 2004 Market share declining in key segments — home loans and retail deposits Stalled revenue growth + No growth in revenue in 2004 P
Slide 50: The root causes of our problems were substantive, but are fixable
The root causes of our problems were substantive, but are fixable Low sales capability in branches Lack of focus on people capability + Limited incentives for performance + Lack of core training for frontline staff Underinvestment in physical network + Property refresh cycle of 19 years + Outdated T
Slide 51: But we have some key business strengths
But we have some key business strengths People and Culture « Our company purpose « Customer-focused people Revenue and Relationship Platform Good level of brand recognition Comprehensive product range, especially in lending relationships Well-developed CRM Footprint Extensive branch network, especia
Slide 52: We focused on a number of key actions to stabilise the business
We focused on a number of key actions to stabilise the business People and Structure « Appointed right leaders within the right business model « Re-connected with and energised front-line staff Sales and Service « Reinforced basic sales and service disciplines across network Launched new recognition
Slide 53: And these changes have delivered some good results
And these changes have delivered some good results « Uplift in customer satisfaction from 63% in October 04 to 65% in August 05 Sales improvement (June Qtr 2005 from June Qtr 2004) « 34% uplift in wealth referrals + 27% uplift in personal loan volumes Profitable deposit growth + 6.0% annualised grow
Slide 54: We have a clear plan to build a truly competitive Retail business
We have a clear plan in order to build a truly competitive Retail business Local business model People capability Product innovation and platform strength Page {National Australia Bank
Slide 55: Our new local business model will empower the front line
Our new local business model will empower the front line to better respond to opportunities Team Leadership Success Remuneration Structure Style Measures Mix Current Memibtiags Fragmented | Reactive Volume High fixed Local Business in elei ce) Influential Model High Variable 70 local businesses esta
Slide 56: Improving people capability across the network
To support our local business model, we are also improving people capability across the network Hiring service-orientated people Renewing our emphasis on product knowledge and service skills during induction program Clearer roadmap over first 12 months Recruitment and Induction Re-launching sales an
Slide 57: Investing in the branch experience
We are also investing in the branch experience, to drive better service and more sales + Sales staff into key branches + Steady rollout over 2006 and 2007 + Brand enhancement « Enhanced branch design and layout « Improved branch merchandising + Corporate wardrobe + New PC teller platform + Automated
Slide 58: Key messages
Key messages « Wehave substantive issues, but they are fixable « We have implemented an action plan to stabilise the business and this has delivered good results « Our longer term plan is simple and clear and is focused on + Local business model « People capability « Improved branch experience « Pro
Slide 59: Product and Service
Product and Service Jeremy Dean Executive General Manager, Consumer Products & Services {National Australia Bank
Slide 60: Key design principles
Key design principles « Restore product and process focus and accountability « Align product, service and manufacturing to customer delivery « Bring all of this closer to our customers Page 60 {National Australia Bank
Slide 61: Product and Service
roduct and Serv Mortgages Household Consumer Deposits Finance Operations and Process Manufacturing Process Investing in Improvement Infrastructure Expertise National Australia Bank Page 61
Slide 62: Managing the Mortgage portfolio for yield and growth
We are managing the Mortgage portfolio for yield and growth Share of Banking System — Housing Lending (Inc. Securitisation) || » Above system growth 17.00% + Market share stabilised 18.95% 16.90% + Enhanced retention 16.25% 18.80% 18.75% 18.70% 18.65% 16.60% 18.55% 18.50% Feb.05, + Limited margin de
Slide 63: With Household Deposits, we're holding our own in a difficult market
With Household Deposits, we’re holding our own ina difficult market ‘Share of Banking System — Household Deposits + Maintained market share bias + Defended margin 13.40% despite competitive 13.35% environment 13.30% + Launch of i-Saver- ia, latest product response 13.20% : aGe + Sales effectiveness
Slide 64: In Consumer Finance, balancing a mature cards portfolio with growth
In Consumer Finance, we are balancing a mature cards portfolio with other growth opportunities Cards - Maturing Increased market saturation Structural change in market economics focussing on revolvers Low rate offers increasingly commonplace Consumer Finance/Personal Loans - Growth opportunities Str
Slide 65: Summary — Product
Summary — Product « We're recovering market share where it makes sense « Our product margins are moving at industry levels of performance, we're not buying volume « Wehave not compromised our credit or risk settings for growth Page 65 {National Australia Bank
Slide 66: Driving efficiency through Operations and Process
Driving efficiency through Operations and Process a 2 a Manufacturing Process Investing in Expertise Improvement Infrastructure « Bring the ‘back office’ closer to the customer Pages {National Australia Bank
Slide 67: Driving efficiency through Operations and Process
Driving efficiency through Operations and Process 1. 2. 3. Manufacturing Process Investing in Expertise Improvement Infrastructure « Recruiting and developing manufacturing and operations expertise « Embedding Active Operations Management in our Operations units + Absorbing volume increases within f
Slide 68: Driving efficiency through Operations and Process
Driving efficiency through Operations and Process Ay 2. 3. Manufacturing Process Investing in Expertise Improvement Infrastructure « Build Quality capability based on customer ‘critical to quality’ standards brings back-office closer to customers « Re-engineering lending process around ‘Time to Yes’
Slide 69: Driving efficiency through Operations and Process
Driving efficiency through Operations and Process 1 2. L 3. Manufacturing Process Investing in Expertise Improvement Infrastructure + Channel investment and development « Implementation of supply chain management in Collections « Investment of $20m in consumer lending fulfilment systems and technolo
Slide 70: Summary — Platform
Summary — Platform Manufacturing Expertise « Building organisational skills « Delivering cost and productivity improvement Process Improvement « Absorbing business volumes and reducing total cost « Improving customer experience Investing in Infrastructure « Step change in cost « Step change in perfo
Slide 71: Wealth Management
Wealth Management Steve Tucker Executive General Manager, Wealth Management {National Australia Bank
Slide 72: Our Wealth Management business
Our Wealth Management business Stabilise Rebuild Truly Competitive Business | = & Private Lead the market, grow through innovation Retail imbicl Retail customer experience through a focus on people Wealth ar Improve returns and leverage bank channels Page? {National Australia Bank
Slide 73: Overview
Overview Internal focus has set us up for growth « Integration will deliver results « Positioned for profitable growth in retail investments Capitalise on popularity of Manager of Managers style Accelerate sustainable growth in insurance Page 73 {National Australia Bank
Slide 74: Internal focus has put our business in shape
Internal focus has put our business in shape Activity External Focus Unit Pricing Restructure & Integration a ROE Focus Internal _,] Focus Cost Reduction Simplification Enhance Culture Risk Management Loss of Tax Relief 2003-2004 2005-2006 2007 & Beyond Page 74 {National Australia Bank
Slide 75: We are maintaining margins via efficiency gains
We are maintaining margins via efficiency gains Our cost reductions are ahead of price declines Controllable Sept02 Sept03 Sept04 Sept0S Sept06 Sept 07 Source Intemat pages {National Australia Bank
Slide 76: Embracing the opportunities of the Regional Model
Embracing the opportunities of the Regional Model Fin Planning a Corporates & & Third Party Institutional Insti nal Business () Markets & Services age {National Australia Bank
Slide 77: Embracing the opportunities of the Regional Model
Embracing the opportunities of the Regional Model ‘ Fin Planning a Corporates & SLMS Ee Insttutional Insti nal Business () Markets & Services page {National Australia Bank
Slide 78: With early evidence of success
With early evidence of success Re-engineered bank financial planning 2500 1600 Investment SalesWeek 500 Average No. of Referrals/Week bo investment Sales per Week —+Referrals per Week ‘Source: Item pages {National Australia Bank
Slide 79: Super will drive Retail FUM and we are well positioned
Super will drive Retail FUM and we are well positioned Retail Share of Total Market Market Share “Top 5 Players” — Retail Super (incl. Rollovers) TO% '$1330bn) 55% (gie3en) Retirement 80,0% 2003 2013 2001 2005 ‘Source. Plan For Lie, Actuaries & Researchers chine 208 QDS Report {National Australia Ba
Slide 80: We are focused on profitable growth in platforms
We are focused on profitable growth in platforms Gross Margin Ranges of Platforms 120 @ 100 Fa a ‘= 80 2 g 60 3 40 iS s 3 20 C4 0 Retail Corporate- Corporate-Retail- Full Retail - Mini Administrator Large Small Our Focus: x v v v v % Yo’ Y aa aa Our Share/Rank: 0% 18% / #1 17% 1 #1 ‘Source: Item Ana
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Slide 108: Searchable text section of graphics shown above
Searchable text section of graphics shown above Na tional Australia Bank Australian Region Market Update 28 September 2005 Victory Room Telstra Dome, Melbourne [LOGO] Ag enda 9:30am Welcome John Stewart 9:40am Organisation & Strategy Ahmed Fahour 10:15am Business & Private Banking George Frazis join
National Australia Bank — Investor Day (September 2005) on 6ix