Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Credit Suisse conference Hong Kong (March 2011)
104 slides from Anz's conference presentation, March 2011
Slide 1: Investor Discussion Pack
Investor Discussion Pack Graham Hodges Deputy CEO Philip Chronican CEO Australia AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011
Slide 2: ANZ has established a strong business foundation
ANZ has established a strong business foundation A clear company wide focus on our super regional strategy: • Organised our business around three key geographies and our customers p. 2-18 • Market Update - Three months to 31 December 2010 p. 19-23 • Maintaining strong businesses in our home markets:
Slide 3: Overview and strategy
I Investor t Discussion Di i Pack P k AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011 Overview and strategy
Slide 4: ANZ is structured by Geography & Segment
ANZ is structured by Geography & Segment A i P Asia Pacific, ifi Europe E & America A i (APEA) Retail Commercial (including Wealth Institutional (emerging) partnerships) Australia Retail Wealth Commercial Institutional New Zealand Retail Wealth Commercial Institutional Institutional is a global busi
Slide 5: Super Regional - driving long term growth and differentiated returns
Super Regional - driving long term growth and diff differentiated ti t d returns t Denotes two way merchandise trade flow 3 Forecast GDP growth1 (% p.a, 2011-14) FDI inward flow2 (USDb, 2009) (2009) KR EU 6 4.0% 4 0% US 1.6% JP UK 12 2.7% 1.6% 2.3% TW Asia-US CN 3 78 5.1% Trade: US$0.8trn 8.7% HK 48
Slide 6: Coherent strategy – driving competitive advantage
Coherent strategy gy – driving g competitive p advantage g Geographic opportunity • Footprint - exposure to Asia’s more rapid growth • Growing financial services requirements • Regional connectivity • Strong domestic markets and businesses Building Super Regional capabilities • Bench strength/intern
Slide 7: Delivering Super Regional performance momentum
Delivering Super Regional performance momentum OUTPERFORM AND TRANSFORM OUTPERFORM Realise full 9 Move from a presence to a potential of Super real business in Asia – 14% of Group Earnings Regional aspiration – Beachhead in Greater China, RESTORE SE Asia, India, Mekong 9 Maintain M i i strong d dome
Slide 8: Realising the full potential of Super Regional
Realising the full potential of Super Regional 2017 APEA sourced revenue to drive Aspiration 25% - 30% of Group profit Expanded view of • The more mature our business, the greater our opportunities opportunity in • Increasing our footprint, customers and access to trade, liquidity APEA and investmen
Slide 9: Realising the full potential of Super Regional
Realising the full potential of Super Regional 2017 APEA sourced revenue to drive Aspiration 25% - 30% of Group profit • Continue to build depth in international management and banking experience People p • Well defined succession planning • Remuneration and incentives aligned to delivery of strateg
Slide 10: Continued Focus on Organic Growth
Growth levers - organic, organic partnerships and M&A Continued Focus on Organic Growth Leveraging Super Regional connectivity Increasing productivity Focus on core customers Managing the value of ANZ’s Selective M&A opportunities Partnerships • Delivering g access to attractive markets// segments •
Slide 11: Building a genuinely pan regional business - connectivity provides a competitive advantage
Building a genuinely pan regional business - connectivity provides a competitive advantage Growth in trade and capital flows between Asia Linked through flows of trade, and Australia are tracking 17% to 25% pa capital and population Surplus savings Key focus is to bridge gaps across There is approxi
Slide 12: Strategy is supported by a disciplined approach to M&A – RBS Asia
Strategy is supported by a disciplined approach to M&A – RBS Asia A i acquisition i iti • Acquired RBS¹ businesses in six countries, Country Business Branches Customers Deposits aligned with current strategy: Taiwan Retail 21 ~1.3m ~US $2.5b ¾ Retail, l wealth l h & commerciall Commercial & 16 busin
Slide 13: Strategy is supported by a disciplined approach to M&A - ING Australia
Strategy is supported by a disciplined approach to M&A - ING Australia A t li and d New N Zealand Z l d Joint J i t Ventures V t • Acquired ING Groep’s (ING) 51% interest in ING Australia and ING NZ (the JVs) for $1,760m1 Australia ¾ ~11x 11x multiple of normalised 2008 earnings2 Acquiredd ING's G'
Slide 14: Strategy is supported by a disciplined approach to M&A - Landmark
Strategy is supported by a disciplined approach to M&A - Landmark L d kL Loan and dDDeposit it b book k Overview of transaction Overview of Landmark • Acquisition of Landmark Financial Services • Leading Australian agribusiness company, (LFS) loan and deposit book from f AWB’s rural offering ff merc
Slide 15: ANZ has continued to invest for growth notwithstanding recent tougher economic conditions
ANZ has continued to invest for growth notwithstanding recentt ttougher h economic i conditions diti Revenue and Expenses Net Profit by region 17% P Pro Forma F Basis1 12% 12% 9% 10% 8% 6% 8% 7% 8% FY06 FY07 FY08 FY09 FY10 Revenue Expenses Provision charges Net Profit after tax2 1. Pro forma basis a
Slide 16: Group loans and deposits
Group loans and deposits Group Customer Deposits (A$b) Group Net Loans and Advances (including acceptances) (A$b) Loan to Deposit Ratio Sep S 2010 20 0 – 140% 0% Loan to Deposit Ratio Sep 2006 – 171% 1 1 1. Includes Wealth and Other Overview & Strategy 15
Slide 17: Net loans and advances by geography
Net loans and advances1 by geography Australia New Zealand (NZD) APEA (USD) FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 Growth 13% 15% (1%) 6% 13% 11% (1%) (1%) 31% 99% (14%) 45% A$b 2 1. NLAs include acceptances 2. Retail includes Wealth and Group Centre Overview & Strategy 16
Slide 18: Customer deposits by geography
Customer deposits by geography Australia New Zealand (NZD) APEA (USD) FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 Growth 20% 12% 14% 7% 7% 5% 2% 0% 26% 69% 31% 72% A$b 1 1. Retail includes Wealth and Other Overview & Strategy 17
Slide 19: Diversified lending portfolio, weighted to secured mortgage portfolio
Diversified lending portfolio, weighted to secured mortgage portfolio Net Loans and Advances (including acceptances) by product line (A$b) $ 361 1 (A$b) 172 1 47 (A$b) 90 52 1. Includes Wealth. Overview & Strategy 18
Slide 20: Market Update
I Investor t Discussion Di i Pack P k AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011 Market Update Three months to 31 December 2010
Slide 21: Market update – Three months to December 2010: Profit & Loss
Market update – Three months to 31 December 2010 P fit & Loss Profit L • Unaudited underlying profit after tax1 for the three months to 31 December 2010 of approximately $1.4 billion, 27% above the prior corresponding period (PCP) • Profit before provisions (PBP) grew 7% PCP to $2.3 billion - up 1%
Slide 22: Market update – Balance Sheet & Asset Quality
Market update – Three months to 31 December 2010 B l Balance Sh Sheett & A Assett Q Quality lit • Group lending grew 2% QOQ (2% FX adjusted) driven by growth in Australia, in both Retail and Institutional, and in APEA across all business lines • Group deposit volumes rose 3% QOQ (4% FX adjusted) pri
Slide 23: Market update – Business Update
Market update – Three months to 31 December 2010 B i Business Update U d t 1 Australia • Retail deposits grew above system (up 3% versus system growth of 2.3%) • Lending growth was dominated by Retail (up 2.5%) and Institutional (up 3.5%) with Commercial lending flat • Mortgage lending grew at aroun
Slide 24: Market update – Business Update
Market update – Three months to 31 December 2010 B i Business Update U d t 1 New Zealand • Lending was flat while deposits grew 4.2%2 • Pricing benefits from the roll roll-off off of fixed rate loans and switching to variable rate loans continues to flow through, however the margin benefit has been
Slide 25: Australia Division
I Investor t Discussion Di i Pack P k AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011 Australia Division
Slide 26: Australia Division – high value strategy has delivered
Australia Division – high value strategy has delivered Pro Forma Basis2 Australia Division Revenue & Expense growth1 Profit Before Provisions g growth Pro Forma Basis2 Provisions Net Profit after tax 1. 2005 to 2008 based on “Personal Division” structure, 2009 and 2010 based on “Australia Division”
Slide 27: Clear principles - focus, alignment and discipline
Clear principles - focus, focus alignment and discipline Future-proof business • Build for the long-term 1 architecture Investment selection, • Invest in strategies, not projects 2 prioritisation and governance p g • Combine people, process, data and Customer proposition and technology to deliver ‘U
Slide 28: Retail – positioned for continued growth
Retail – positioned for continued growth Award winning distribution … driving customer preference network1 … (%) Future trial intention, non-bank customers 814 Branches 2,528 ATMs 20 6 types of specialists across our network 16 24/7 Contact Centre Innovative digital and 12 mobile channels2 Peer 1 8
Slide 29: Customer experience and regional networks underpin competitive advantage
Customer experience and regional networks underpin competitive advantage Strategic priorities • Continue to acquire q more affluent customers via Target higher-value targeted, relevant propositions (e.g. Visa Signature; 1 A-Z Reviews) customers • Affluent market share +0.9% 12 mths to Dec 2010 • Del
Slide 30: Success will deliver consistent profitable market share growth over the long term
Success will deliver consistent profitable market share growth over the long term Sustained organic share growth … … through peer leading customer advocacy Traditional banking market share (Index, Jan 2008=100) Net promoter score 120 115 110 105 100 95 90 2008 2009 2010 2008 2009 2010 … and above we
Slide 31: Case study: Leveraging regional retail connectivity through ANZ Migrant Banking channel
Case study: Leveraging regional retail connectivity th through h ANZ Migrant Mi tBBanking ki channel h l By 2015 15% of the Australian population will be of Asian origin and represent over 22% of the acquirable pool of new to bank customers • Significant acquisition opportunities exist in pre-arriva
Slide 32: Wealth – Integrating the portfolio
Wealth – Integrating the portfolio Over 2.5m customers Over 2,200 O 2 200 Financial Fi i l Pl Planners Insurance nationwide, through owned and aligned dealer group network Superannuation & Investments 10 Private Banking suites Private Bank Market share position 2010 Individual Risk Insurance #3 S Su
Slide 33: Large upside and diversified income streams
Large upside and diversified income streams ANZ has the second largest adviser … with strong momentum in key footprint … business lines Financial Planner Footprint Individual Risk Inflows (% share of Planners) (%; New Annual Premiums / Inforce Premiums) 30 30 25 25 28 ANZ 20 16 16 26 15 13 P Peer 4
Slide 34: Setting the foundations for future growth
Setting the foundations for future growth Strategic priorities • Embed wealth offerings into ANZ customer Step p change g in ANZ propositions and channels 1 customer base penetration • Develop simple superannuation and insurance products Capitalise on • Continue to capture Superannuation Guarantee (
Slide 35: A differentiated Commercial Banking proposition
A differentiated Commercial Banking proposition Customer segments range from … regional presence enables transactional to high-touch … ‘easy’ connection for customers Pan-Asian a s a countries cou t es with t an a ANZ Commercial Co e c a presence p ese ce Customer segments Turnover $0 $5m $40m Small
Slide 36: Consistent customer growth and advocacy
Consistent customer growth and advocacy Customer Satisfaction1 Trial Intention (%) (‘000s; Main Bank consideration) 7.5 32 30 Peer 1 Peer 3 28 ANZ 7 ANZ Peer 1 26 Peer 2 Peer 3 Peer 2 24 6.5 22 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Customer Acquistion1 FY11 momentum (
Slide 37: Case study: Building regional connectivity
Case study: Building regional connectivity ANZ’s regional capability connects customers and creates revenue opportunities. The following is one example out of the 169 referrals made in the first quarter: ANZ Indonesia refers connects client li t with ith a Relationship R l ti hi Business B i Banking
Slide 38: The Asia Pacific Europe & America Division
I Investor t Discussion Di i Pack P k AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011 The Asia Pacific Europe & America Division
Slide 39: Deep onshore presence and strong network model delivers connectivity to clients
Deep onshore presence and strong network model delivers connectivity to clients Franchise Franchise Markets Network Core markets for Institutional, Institutional Commercial, Commercial Retail & Wealth Hubs • Greater China • Greater Mekong1 • India • Indonesia • Malaysia • Pacific Regional Business H
Slide 40: Since 2008, we have prioritised our build out, enabling us to become a credible competitor
Since 2008, we have prioritised our build out, enabling t become us to b dibl competitor a credible tit 1H 2008 Today • Institutional network • Pan regional Institutional/commercial business Pan-regional • Formed partnership with • Top 4 foreign bank in Indonesia AmBank South and • Largest foreign b
Slide 41: APEA: Balance sheet momentum
APEA: Balance sheet momentum1 APEA loans & deposits (US$b) 2010 loan and deposit growth by RBS2 Dep. Loans region 2H10 50 5.0 28 2.8 1H10 1.5 0.4 APEA Asia Pacific Europe & America APEA Current & Saving accounts 2010 loan & deposit growth by segment (CASA) (US$b) Includes accounts from RBS acquisiti
Slide 42: Business strategy allows for efficient use of APEA's liquidity surplus
Business strategy allows for efficient use of APEA's li idit surplus liquidity l • Focus on affluent and emerging affluent client segments Business • Building a substantive DCM and Cash Management Strategy capability and investor client base This focus allows us to: • Fund our own regional growth in
Slide 43: Becoming a top four Institutional bank in Asia Pacific
Becoming a top four Institutional bank in Asia Pacific Customer Segments Value Proposition • Be a core wholesale bank to our clients Institutional • Leveraging our strengths: MNC / Regional Corporate – Regional network and connectivity – AA rating Commercial – Deep insights – geographic, industry, c
Slide 44: We are delivering for Institutional and our clients across Asia and the Pacific
We are delivering for Institutional and our clients A i and across Asia d th P ifi the Pacific Regional Connectivity Examples • Mandated Lead Arrangers with BNP and European and US Multinational HSBC companies accessing Asia • US$411m (2.7x launch size)-maiden Asian syndication bond • Raised R i d U
Slide 45: Our Retail & Wealth and Private Bank will deliver local and regional banking
Our Retail & Wealth and Private Bank will deliver local d regional and i l banking b ki t the to th affluent ffl t iin each h market k t • HNW, Affluent & Emerging Affluent Customer segments • Owners, Owners management and staff of our institutional and commercial clients Position and Value Proposit
Slide 46: Five key partnerships expand our organic agenda
Five key partnerships expand our organic agenda 9 Double play in high growth, high return market Partnership Model 9 Focus on our key segments (Commercial, Affluent & Emerging Affluent) • Significant influence 9 Scale (Number 5 by assets & deposits) in a closed market • Exposure to growth markets an
Slide 47: Organic growth a key driver of strategy
Organic growth a key driver of strategy 2008 2009 2010 2011 2012+ Develop strategy and Continue organic Extend and deepen build business model growth with bolt-ons franchise • Build substantive Institutional • Organic growth anchored by • Deepen organic growth in business Institutional / Commercial
Slide 48: The New Zealand Division
I Investor t Discussion Di i Pack P k AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011 The New Zealand Division
Slide 49: Our strategy is to fully leverage ANZ’s leading market position to deliver superior growth and returns
Our strategy is to fully leverage ANZ’s leading market position to deliver superior growth and returns Leveraging leading market share Two strong banking brands with a positions1 powerful market presence Market share1 39% 39% 33% Well diversified portfolio, weighted to Residential Property Net Loans
Slide 50: New Zealand - Retail & Wealth
New Zealand - Retail & Wealth Pro Forma Basis2 Retail Wealth Revenue growth • Asset growth flat, system growth • Wealth profitability favourably rates subdued impacted p by y ING NZ full ownership p • Income impacted by removal of • $1.5 billion KiwiSaver FUM with exception fees, margins improving,
Slide 51: New Zealand - Commercial
New Zealand - Commercial Pro Forma Basis1 Commercial Rural • Leveraged Shanghai Expo as an • Higher Rural incomes with Fonterra Revenue growth opportunity to connect customers to forecasting the third highest dairy payout Asia and demonstrate regional on record capabilities • ANZ continues to suppor
Slide 52: New Zealand - Institutional
New Zealand - Institutional Pro Forma Basis2 • ANZ continues to dominate the Institutional NZ NZ institutional segment 2010 Financial Performance Revenue growth • Second half expense growth Trading revenue d driven b investment in by down 161m payments systems • Connecting customers to Asia and demo
Slide 53: The Institutional Business
I Investor t Discussion Di i Pack P k AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011 The Institutional Business
Slide 54: Global Institutional business focus redefined
Global Institutional business focus redefined Foundations laid Revenue Contribution by Product • Strengthened the Institutional Leadership Team, additional team members with Team international experience • Starting to execute the technology and operations roadmap • Improving p g capital p discipline
Slide 55: Increased focus on core customers and geographies
Increased focus on core customers and geographies Over 3,500 active Institutional and Corporate A single global team services customer customers supported by over 5,000 staff needs across the network • Corporate C t bbanking ki customers: t t/over t/ $40-400m $40 400 • Global representation supports
Slide 56: Regional networks, superior insights & service underpin the competitive advantage
Regional networks, superior insights & service underpin the competitive advantage Competing globally requires Regionally g Networked Model superior insights and service • A lead regional bank servicing clients with pan regional needs • A strong regional branch • Building platforms offers viable alte
Slide 57: Global Institutional – a focus on growing core customer relationships
Global Institutional – a focus on growing core customer relationships l ti hi supporting ti income i performance f Customer Growth Customer Income1 Cross Border Income >1,100 new relationship managed Super Regional strategy increasingly customers ex-acquisitions capturing cross border revenue flows
Slide 58: Global Markets
Global Markets Global Markets Income Product Contribution Sales & Trading Mix (A$m)1 % Total Income 2,062 1,816 49% 1,225 43% 857 36% 29% 51% 57% 71% 64% Whilst lower than 2009, 2009 market • Capital Markets growth underlines the benefits of volatility evident in 2010 Asian network expansion, ensuri
Slide 59: Global Institutional P&L drivers
Global Institutional P&L drivers Underlying Performance1 Business Segment Performance1 YOY Movement (FY10 vs. FY09) A$m YOY Movement (FY10 vs. FY09) A$m large 14% (22%) large 2 2% 14% (46%) 23% Geographic Performance1 YOY Movement (FY10 vs. FY09) A$m Up 29% 2H10 vs 3% 10% ((29%)) 2% 13% 1H10 1. Pro
Slide 60: Investing across the business in systems and people
Investing across the business in systems and people Expense Growth1 Asia Pacific, Europe & America • Continued investment in growing the Asia franchise YOY HOH and driving customer acquisition • Investment in support infrastructure to underpin revenue growth 31% 13% Australia • Investment in frontli
Slide 61: Predicated on disciplined execution
Predicated on disciplined execution Implementation priorities Significant growth opportunities Estimated addressable Cash Management Sustained customer growth R Revenue pools l • Deepening relationships with existing 3500 active clients ($b) • Targeting a significant number of new 17% customer relat
Slide 62: Priority segments – Natural resources & Agriculture
Priority segments – Natural resources & Agriculture Natural resources Agriculture • Well positioned to develop a super regional • Growing soft commodity demand from Asia natural resources business linking g Australian producers with Asian processors • Well positioned for Australian and NZ and consum
Slide 63: Priority segments – Infrastructure
Priority segments – Infrastructure • Goal to become a leading commercial Addressable revenue in APAC Infrastructure Bank in the Asia Pacific Infrastructure market set to grow to R i Region $5 5b $5.5b Debt Markets • Maintain dominant position in Australia and NZ and invest selectively in Asia (A$m)
Slide 64: Priority products – Cash Management & Trade
Priority products – Cash Management & Trade Cash Management Trade • Vision to be a lead provider of pan-regional cash • Support trade flows between our core managementt solutions l ti via i a single i l ttransactional ti l operating geographies interface • Build on strong market position in Australi
Slide 65: Priority products – Regional Rates and FX; Commodities and Debt Capital Markets
Priority products – Regional Rates and FX; Commodities and Debt Capital Markets Commodities Regional Rates and FX • Commodity revenue split: • Largest domestic markets business ¾ Hedging exposures of commodity producers and consumers ~ 60% of revenue • FX revenues growing at 40% pa since 2007, 2007
Slide 66: Customer centricity is delivering business outcomes in Institutional
Customercentricity is delivering business outcomes in Institutional Debt Capital Markets Project, Asset & Export Financing USD 600mn SGD 1bn AUD 1.75bn USD 600mn USD 263.7mn AUD 1.179bn Senior Unsecured Bonds Senior Unsecured Bonds Acquisition of CSR Limited’s Term Facilities to refinance Hope Finan
Slide 67: Treasury
I Investor t Discussion Di i Pack P k AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011 Treasury
Slide 68: ANZ’s strong capital ratios are fully reflected when measured consistently across various jurisdictions
ANZ’s strong capital ratios are fully reflected when measuredd consistently i t tl across variousi jurisdictions j i di ti Sep 09 Sep 10 Dec 10 FSA Dec 10 Core Tier 1(1) 9.0% 8.0% 8.3% 11.3% Tier 1 10.6% 10.1% 10.3% 13.6% Total Capital 13.7% 11.9% 11.9% 14.9% p Capital Update: p Capital Agenda: • AN
Slide 69: Core Tier-1 level remains strong and well positioned
Core Tier Tier-1 1 level remains strong and well positioned Capital Position (Core Tier-1 Ratio) 11.30 1 99 1.99 0.80 8.96 0.39 0.46 8.30 8.05 Portfolio growth & mix 19bp decrease 1.25 Risk migration 3bp increase Portfolio data review 4bp increase Non credit RWA 27bp decrease ING 79bp decrease RBS 2
Slide 70: Tier-1 position reduced during FY10 due to acquisitions partially offset by Hybrid issuance
Tier-1 position reduced during FY10 due to acquisitions partially ti ll offset ff t by b Hybrid H b id issuance i Capital Position (Tier-1 Ratio) 13.6 1.99 0.63 10.56 0.80 0.48 10.10 10.3 0 49 0.49 1.31 Portfolio growth & mix 23bp decrease Risk migration 4bp increase Portfolio data review 5bp increa
Slide 71: Reconciliation of ANZ’s capital position to FSA Basel 2 guidelines
Reconciliation of ANZ’s capital position to FSA Basel 2 guidelines APRA regulations are more conservative than current FSA regulations, in that APRA requires: • A 20% Loss Given Default floor for mortgages (FSA: 10% floor) • Interest Rate Risk in the Banking Book (IRRBB) included in Pillar I risks (
Slide 72: Basel 3 & APRA Regulatory reform - Capital
Basel 3 & APRA Regulatory reform - Capital Basel Committee Announcements What remains outstanding under B3? To date, the Basel Committee has announced: • Methodology for determining countercyclical buffer • New capital targets and buffers • Final requirements for Tier-1 & 2 instruments • Timetable a
Slide 73: Improved funding profile achieved, stable term debt issuance
Improved funding profile achieved, stable term debt iissuance Stable term funding profile Funding Composition Improved Subordinated Debt Short Term Wholesale Funding G Government G Guaranteed d Term Debt < 1 year Residual Maturity Senior Debt Term Debt > 1 year Residual Maturity 30.0 Issuance Maturi
Slide 74: ANZ’s sources of term funding have been further diversified over recent years
ANZ’s sources of term funding have been further di diversified ifi d over recentt years FY07 Proposed Domestic AUD / NZD 10% North America 26% USD / CAD 25% 30% UK & Europe 20% EUR / GBP / CHF 5% Japan 5% JPY 20% 39% Private 20% Placements Multi-currency APEA Deposit Repatriation Multi-currency Offs
Slide 75: Strong Liquidity Position leading into proposed B3 changes
Strong Liquidity Position leading into proposed B3 changes h Maintaining post GFC liquidity Basel III Liquidity Developments position ($b) • Reduction in required core funding of mortgages from 100% to 65% • Improved treatment of ‘Retail’ and ‘SME’ deposits • Allowance for high grade corporate and c
Slide 76: Risk Management
I Investor t Discussion Di i Pack P k AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011 Risk Management
Slide 77: Credit Risk Weighted Assets
Credit Risk Weighted Assets Total Credit Risk Weighted Assets Credit RWA Movement FY10 vs. FY09 A$b A$b $b Acquisitions Impact: RBS $4.6b Landmark $2.3b Risk 76
Slide 78: Impaired Asset balance has reduced ex-acquisitions
Impaired Asset balance has reduced ex ex-acquisitions acquisitions Gross Impaired Assets Gross Impaired Assets By type By size of exposure A$m A$m New Impaired p Assets A$m By Segment NPCCD – Non Performing Credit Commitments and Contingencies Risk 77
Slide 79: Watch & Control Lists and Risk Grade Profiles
Watch & Control Lists and Risk Grade Profiles Watch & Control List by limits Group Risk Grade profile by (Mar 2009 Watch List index =100) Exposure at Default Index Top 5 Watch List Industries By Exposure By No. Groups Agriculture Forestry & Fishing Agriculture, Agriculture Forestry & Fishing Agricul
Slide 80: 90+ days past due Australia
90+ days past due Australia Australia Mortgages Australia Cards 90+ day delinquencies 90+ day delinquencies Australia Commercial 90+ day delinquencies Risk 79
Slide 81: Australia Mortgages
Australia Mortgages Portfolio Statistics Dynamic Loan to Valuation Ratio • All lending is on a full recourse basis Sep 2010 - 84% 12% 4% • Approvals require demonstrated serviceability • ~830,000 830 000 loans l on book b k • 65% of portfolio owner occupied lending • Average loan size at origination
Slide 82: New Zealand – Risk Performance
New Zealand – Risk Performance Total Impaired Assets and as % Gross Total Provision Charge Lending Assets (NZ$m) (NZ$m) 90+ Days Arrears Risk 81
Slide 83: Commercial Property Credit Exposure
Commercial Property Credit Exposure Commercial Property Exposure Commercial Property Exposure GLA by Region (A$b) by Sector 7.5% of Group GLA’s 29.6 28.2 27.2 26.7 27.7 26.1 Risk 82
Slide 84: Economics
I Investor t Discussion Di i Pack P k AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED March 2011 Economics
Slide 85: Exceptionally strong investment outlook over next few years
Exceptionally strong investment outlook over next few years ea s $bn 80 Communication sub-total Uncertainty U a y Water & sewerage Sub-total 70 Manufacturing SubSub-total total Gas Pipeline sub-total Electricity Sub-total Mining Sub-total 60 Energy Sub-total Airports Sub-total Rail sub-total P t sub
Slide 86: The outlook for mining investment has rarely been stronger
The outlook for mining investment has rarely been stronger t ABARE Advanced Mining Projects, June 2010 Sources: ABARE Economics 85
Slide 87: Building activity will slump in 2011 – despite Qld flood rebuild
Building activity will slump in 2011 – despite Qld flood rebuild b ild New residential Non-residential building (excl. eng. con.) 11 $bn/qtr (real) $bn/qtr (real) 14 work done 13 10 12 11 work done 9 10 9 8 8 7 Approvals 7 6 5 Approvals 6 4 3 5 2 9900 01 02 03 04 05 06 07 08 09 10 11 9900 01 02 03 0
Slide 88: Australia heading towards above trend growth and unemployment will continue to fall
Australia heading towards above trend growth and unemployment will continue to fall GDP growth Unemployment rate 9 ann. % change Gross 11 % Forecasts domestic 8 income 10 7 potential economic 6 growth 9 5 8 4 3 7 2 Gross 6 1 domestic 0 product 5 -1 4 -2 -3 3 3 01 02 03 04 05 06 07 08 09 10 11 12 13
Slide 89: Record population growth coupled with undersupply
Record population growth coupled with undersupply Population growth vs. dwelling completions 225,000 450 000 450,000 Annual population 400,000 gain (lhs) 200,000 350,000 175,000 300,000 250,000 150,000 200,000 125,000 150,000 Annual dwelling completions (rhs) 100,000 , 100,000 , 76 78 80 82 84 86 88
Slide 90: The housing shortage has already reached unprecedented levels – and will get much worse!
The housing shortage has already reached unprecedented levels – and will get much worse! Housing market balance ‘000 400 360 320 280 240 Underlying demand 200 160 120 Completions 80 Shortage 40 0 -40 -80 80 Surplus Su p us 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Slide 91: Recovery in dwelling prices has been broadly-based
Recovery in dwelling prices has been broadly-based Australian dwelling prices Price Index 125 Bottom 20% Middle 60% Top 20% 120 115 110 105 100 95 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 Source: RP Data Rismark Economics 90
Slide 92: Most of the growth in house prices since mid-1980s is accounted for by rising incomes & lower interest rates
Most of the growth in house prices since mid-1980s is accounted t d for f by b rising i i iincomes & lower l interest i t t rates t 600 $'000 Actual house prices $559k 500 13% $483k Simulated house prices if only 48% 400 incomes growth and interest rates 300 mattered $289k 200 Simulated house prices
Slide 93: Changing composition in those seeking finance approvals
Changing composition in those seeking finance approvals Housing finance approvals (trend value) $Bn - Annual Rolling Sum 120 First Home Buyers Upgraders Investors 100 80 60 40 20 - 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Sources: ABS, RBA, ANZ Economics and Markets Research Economic
Slide 94: Distribution of debt rather than the aggregate debt is a key factor…
Distribution of debt rather than the aggregate debt is a key factor… factor Increased household debt has been And has been taken up by higher directed towards residential income households with the capacity property, not personal consumption to service Source: RBA paper “Aspects of Australia’s finan
Slide 95: Complexion of household debt
Complexion of household debt • Household debt up but also total assets held by y households • Debt largely used to acquire assets • Financial assets (i.e. ex housing) now equivalent to 2 2.75 75 years of income up from 1.75 years of income in the early 1990’s • Increased debt mostly taken on by hous
Slide 96: Vacancies tight (despite FHOB) and will tighten further in years ahead
Vacancies tight (despite FHOB) and will tighten further i years ahead in h d % Residential vacancy rate 6 Melb. 5 Long-term 4 average 3 2 Adel Syd Syd. 1 Temporary rise due to FHOB and GFC 0 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Source: REIA, ANZ Economics 95
Slide 97: Australian house prices
Australian house prices Fundamentals are sound • Nominal house prices and ratio to income elevated • House price to income ratio ignores interest rates / debt servicing • Fundamentals are currently very supportive • Housing shortage worsening • Cyclical upturn underpinned by resources boom and autho
Slide 98: Conservative lending, supportive policy and strong economy has meant a very resilient housing market
Conservative lending, supportive policy and strong economy has h meantt a very resilient ili t housing h i market k t Source: RBA Economics 97
Slide 99: Australian house prices have broadly tracked incomes since 2004
Australian house prices have broadly tracked incomes since i 2004 (incomes (i rising i i strongly t l due d to t terms t off trade) t d ) House price to income ratio Index 7 Australia US 6 UK New Zealand 5 4 3 2 1 0 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 Sources: RP Data-Rismark, RBA, ANZ Econ
Slide 100: A structural lowering (halving) of mortgage rates has significantly improved debt serviceability
A structural lowering (halving) of mortgage rates has significantly improved debt serviceability Mortgage interest rates % 20 Australia US 18 UK NZ 16 14 12 10 8 6 4 On average, mortgage rates have halved 2 justifying a near doubling of house price to 0 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 S
Slide 101: Increase in house price to income ratio almost fully accounted for by the halving of mortgage rate
Increase in house price to income ratio almost fully accounted t d for f b by th the halving h l i off mortgage t rate t Median house Average household Mortgage rate House price to price income income $000's $000 s $000's $000 s % ratio 600 120 16 6 14 500 100 5 12 400 80 4 10 300 60 8 3 6 200 40 2
Slide 102: Household incomes and consumption
Household incomes and consumption % Household disposable income & consumption 12 Gross disposable income Consumption spending Savings rate 10 8 6 4 2 0 90 92 94 96 98 00 02 04 06 08 10 12 -2 2 Forecasts Source: ANZ, RBA, ABS Economics 101
Slide 103: Australia has run a current account deficit for most of the past 150 years
Australia has run a current account deficit for most of the past 150 years Current account deficit ● The current account deficit is the gap between national saving and national investment ● That Australia has run a deficit for such a long period suggests the country has more investment opportunities
Slide 104: www.anz.com
The material in this presentation is general background information about the Bank’s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and
Australia and New Zealand Banking Group — Credit Suisse conference Hong Kong (March 2011) on 6ix