Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Debt Investor Presentation (August 2012)
64 slides from Anz's debt investor presentation, August 2012
Slide 1: ANZ Asian Investor Update
ANZ Asian Investor Update August 2012 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Graham Hodges, Deputy CEO David Goode, Head of Debt IR
Slide 2: ANZ released Q3 trading update on 17th August
ANZ released Q3 trading update on 17th August Highlights Underlying Profit $m • YTD (9 months to end June) Underlying profit after tax1 up 5.5% PCP • YTD total Global Markets income up 2% to $1.4b3 with market sales well up • Group margins (ex Global Markets) stable4 • Provision coverage2 at June 12
Slide 3: Key points from the ANZ Trading Update released 17th August
Key points from the ANZ Trading Update released 17th August for the 9 months to 30 June 2012 ANZ has continued to execute against its super regional strategy with a solid business performance despite headwinds from softer economic conditions. In Australia, market share gains were achieved across hou
Slide 4: ANZ continues to organically pursue our Super Regional Strategy
ANZ continues to organically pursue our Super Regional Strategy ANZ Footprint in Asia Rationale behind the Super Regional Strategy 1. Strategy aligned to Asian growth • Strong domestic franchises and established Japan (3) market position S. Korea • Focus of expansion in higher growth Asian China (6)
Slide 5: Our Super Regional Strategy is built on three pillars
Our Super Regional Strategy is built on three pillars Diversification Connectivity 1. Revenue 1. Trade & Capital Flows a. Focus Markets • Trade +25% • Indonesia +17% • Cash Management +19% • Singapore +5% x • FX +23% • India +71% • Capital Markets +12% • Greater China +24% • Greater Me
Slide 6: ANZ's operations in Asia have an institutional focus
ANZ’s operations in Asia have an institutional focus with products linked to trade and capital flows Revenue mix by product Asia deposit & lending book USDb 50 48 Transaction Global Other Asia Banking Loans 40 42 Taiwan 30 Japan 20 Market HK Trading 10 Market Singapore Sales 0 Deposits NLA's Revenue
Slide 7: Customer Deposits have exceeded loans by $41b since 2008
Customer Deposits have exceeded loans by $41b since 2008 Net Loans & Advances Customer Deposits (incl. Acceptances) 5% CAGR* 12% CAGR* * Since Mar 08 LTD Gap Australia APEA New Zealand Group Sep 11 v Mar 12 (9) 4 2 (3) Sep 08 v Mar 12 3 29 9 41 7
Slide 8: Lower structural funding gap - a growing competitive advantage
Lower structural funding gap - a growing competitive advantage ANZ Peer 1 Peer 2 Peer 3 Loan – Deposit Ratio (%) 134 158 152 141 Loan – Deposit Gap ($bn) 104 186 165 153 Australian Household Funding Gap ($bn) 111 193 125 179 Short Term US Money Market Funding (US$bn) 18 50 36 34 Australian Household
Slide 9: FY12 wholesale debt issuance requirement completed; maturity profile
ANZ’s $19bn FY12 wholesale debt issuance requirement has been completed. The forward maturity profile is well within manageable levels. ANZ Annual Term Debt Issuance / Maturity Profile A$b Issuance Maturities 30 25 Indicative annual issuance volumes 20 15 10 5 0 FY08 FY09 FY10 FY11 FY12 FY12* FY13 F
Slide 10: Term funding portfolio increasingly diversified
ANZ’s term funding portfolio is increasingly diversified with a declining reliance on offshore funding Term Debt Issuance Term Debt Outstandings Weighted avg. Weighted avg. tenor : 4 yrs tenor : 5 yrs 10% 12% 13% 13% 14% 33% 18% 25% 20% 34% 29% 68% 23% 36% 32% 31% 35% 28% 44% 32% 33% 34% 28% 28% 27%
Slide 11: Continued strengthening of capital levels for Basel III
Continued strengthening of capital levels places ANZ in a strong position for upcoming Basel III implementation Current capital levels are strong Well placed to meet Basel III CET1 target (Mar-12) under APRA’s draft capital standards Common Equity Tier 1 Ratio (CET1) Basel III (APRA) Basel III Tier
Slide 12: Liquid assets of $99b exceed total offshore wholesale debt of $85b
Liquid assets of $99b exceed total offshore wholesale debt of $85b Strong liquidity position ($b) ANZ Total Offshore Wholesale Debt securities Prime Liquidity Portfolio Other Eligible & Highly Liquid Securities Long-term Short-term Composition of liquid assets ($98.5b) Class 1 Class 2 Class 3 Other
Slide 13: Provision Charge and Impaired Assets
Provision Charge and Impaired Assets Total Provision Charge Gross Impaired Assets by Type (IP charge by Division, total CP charge) $m $m 8,000 1,200 1,098 7,000 6,561 6,561 6,221 1,000 6,000 5,581 5,343 800 722 565 660 5,000 551 600 4,000 400 3,000 200 2,000 0 1,000 -200 0 1H10 2H10 1H11 2H11 1H12 M
Slide 14: Australian Mortgages – robust structure results in low losses
Australian Mortgages – robust structure results in low losses through the cycle Dynamic Loan to Valuation Ratio Portfolio Statistics Total Number of Mortgage Accounts 851k Total Mortgage FUM $178b Portfolio >90% LVR: • Mar 12 = 4% % of Total Group Lending 43% • Sep 08 = 7% Owner Occupied Loans - % o
Slide 15: ANZ Economic forecasts
ANZ Economic forecasts Australia New Zealand 2011 2012 2013 2014 2011 2012 2013 2014 GDP 2.6 2.9 2.8 3.4 1.2 2.2 2.5 2.6 2 Inflation 3.5 1.9 3.21 2.6 4.6 1.0 2.5 2.6 Unemployment 5.2 5.3 5.2 5.2 6.6 6.4 6.0 5.8 Cash rate 4.75 3.0 3.0 3.0 2.50 2.50 3.00 3.50 AUD/USD 0.97 0.99 1.07 0.98 N/A N/A N/A N/
Slide 16: Appendices
Appendices :
Slide 17: Appendices
Appendices 1. Balance Sheet 2. Asset quality including Australian mortgage portfolio 3. 2012 Half Year Results 4. Economics 5. Covered Bonds 17
Slide 18: Balance Sheet
Balance Sheet
Slide 19: Group balance sheet strengthened across all key metrics
ANZ’s group balance sheet has been strengthened significantly across all key metrics APRA CET1: increased by 3.6% Stronger Funding Composition (Mar-12 offshore CP ~$15bn) (or > $10b of additional equity) 14% 21% 4% 9% 13% 13% 60% Liquid assets increased significantly 51% ($bn) 25% 29 7% 9% 7% Mar-08
Slide 20: Well diversified funding profile with increasing customer funding
ANZ has a well diversified funding profile with an increasing weighting to customer funding Strong Funding Composition Offshore short-term Commercial Paper makes up just 3% of total Short Term Wholesale Customer Funding Group funding Funding Term Debt < 1 year Residual Shareholders equity & Hybrid G
Slide 21: FY12 debt issuance ahead of plan; portfolio costs increase
FY12 debt issuance is well ahead of plan; portfolio costs continue to increase ~80% FY12 term wholesale debt issuance Portfolio term funding costs will completed continue to increase A$B 3m BBSW 30 Issuance Maturities 180bp 25 160bp Indicative annual issuance volumes 140bp 20 Forecast Portfolio fund
Slide 22: The APEA balance sheet is self funded
The APEA balance sheet is self funded Customer Deposits Net Loans & Advances (incl. acceptances) The key aspects of the Super Regional USDb Strategy from a balance sheet management 80 perspective are: 74 70 41% CAGR • Much of our focus in the region is on 63 providing non lending products (eg 60 Cas
Slide 23: Asset quality
Asset quality
Slide 24: Total lending exposures – by Sector
Total lending exposures – by Sector Exposure at default (EAD) Category EAD % in Non as a % of group total Performing Sep-11 Mar-12 Sep-11 Mar-12 Consumer Lending 45.2% 45.7% 0.4% 0.3% 14% Finance, Investment & 14.4% 14.4% 0.3% 0.2% Insurance 7% Property Services 6.9% 7.0% 2.5% 2.1% 6% Agriculture, F
Slide 25: Watch & Control Lists and Risk Grade Profiles
Watch & Control Lists and Risk Grade Profiles Group Risk Grade profile by Watch & Control List Exposure at Default Index Watch List by Limits Mar 2009 Watch List by No. Groups 6% 6% 6% = 100 6% 6% Control List by Limits 9% 9% 9% 8% 8% Control List by No. Groups 180 12% 12% 13% 13% 13% 160 59% 58% 60
Slide 26: Commercial Property Credit Exposure
Commercial Property Credit Exposure Commercial Property Exposure Exposure by Sector GLA by Region (A$b) 7.2% of Group GLA’s 26
Slide 27: Australia Commercial
Australia Commercial Australia Commercial 90+ day delinquencies 3.0% 3.0% Business Business Banking Banking Regional Regional Commercial Commercial BankingBanking Esanda Esanda 3.0% 2.5% SmallBusiness Small Business Banking Banking Total Total Commercial Commercial 2.5% 2.5% 2.0% 2.0% 2.0% 1.5% 1.5%
Slide 28: New Zealand Businesses
New Zealand Businesses Net impaired assets Total provision charge NZDm NZDm 1.89% 400 351 300 165 98 119 1.63% 200 102 1,669 100 1.49% 0 1.31% 1,442 1.34% 1,298 -100 1H10 2H10 1H11 2H11 1H12 1,165 1,153 IP Charge CP Charge 90+ Days arrears 1.20% Mortgages Commercial Rural 0.80% 0.40% Mar 10 Sep 10 M
Slide 29: Structure of the Australian mortgage market yields low losses
The structure of the Australian mortgage market has resulted in very low losses through various cycles Australian mortgage market benefits Non-performing Housing Loans Per cent of loans* • Full recourse • Variable rate • Limited tax advantages • Originate to hold models • Low LVR’s • No sub prime 29
Slide 30: Australian mortgages 90+ Day delinquencies
Australian mortgages 90+ Day delinquencies Australia Retail ANZ Individual Provision Loss 90+ day delinquencies Rates (%) 1.0% Group 0.8% 0.6% Australia Region 0.4% 0.2% Australia Mortgages 0.0% 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 Owner Occupied vs. Investment Loans 90+ DPD (%) 1.0% 0.8% Ow
Slide 31: Australian house price growth explained by income and interest rates
Australian house price growth since the mid 1980s is explained by income growth and a 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 $30
Slide 32: House prices have fallen in most capital cities
Although house prices have fallen in most capital cities, partially retracing earlier gains Median Australian house prices International housing prices 180 index Dec 2004=100 230 index Dec 2005=100 Melb. Singapore 170 210 (-7.4%)* Hong 160 Per. 190 Kong (-9.7%)* 170 150 Adel. 150 China 140 (-6.0%)*
Slide 33: Half Year Results
Half Year Results 6 months ended 31st March 2012
Slide 34: Overview of financial performance
Overview of financial performance 1H12 Growth Growth AUDm vs 2H11 vs 1H11 Underlying Profit 2,973 5% 6% Operating Income 8,704 4% 3% Expenses 4,020 3% 5% Provisions 565 3% -14% Statutory Net Profit After Tax 2,919 8% 10% EPS (cents) 112.2 3% 2% Dividend per Share (cents) 66 n/a 3% Net Interest Margi
Slide 35: Net Interest Margin – Divisional Trends
Net Interest Margin – Divisional Trends Net Interest Margin 1H12 v 2H11 Net Interest Margin Institutional ANZ Group ex-markets Australia Division ex-Markets Australia Division NZ Businesses 3.40% APEA ex-markets 9.9% Institutional ex-markets 3.5% Down 13 bps Down 10 bps 3.20% -3.3% -5.2% 3.00% Volum
Slide 36: Australia Division
Australia Division Underlying profit growth (AUDm) 1H12 v 2H11 Australia Division -7% Net Interest Margin Profit composition NPAT Contribution (AUDm) 2.70% 13% 2.60% Retail 2.50% 48% Commercial 2.40% 39% 2.30% Wealth 1H11 2H11 1H12 Net Loans & Advances1 Customer Deposits AUDb Retail & Wealth Commerc
Slide 37: New Zealand Businesses
New Zealand Businesses Underlying profit growth (NZDm) 1H12 v 2H11 New Zealand Businesses 11% Net interest margin Profit composition NZDb NIM% NPAT Contribution 90 2.8% 88 2.6% 8% 86 2.4% Retail 84 2.2% 59% Commercial 82 2.0% 33% 1H10 2H10 1H11 2H11 1H12 Wealth Net Loans & Advances (incl. acceptance
Slide 38: Asia Pacific, Europe & America (APEA) Division
Asia Pacific, Europe & America (APEA) Division Underlying profit growth (USDm) 1H12 v 2H11 APEA Division 21% APEA revenue (pro forma USD) Customer deposits & lending 20% Net loans and advances Customer Deposits 1,820 USDb (including acceptances) 18% 1,596 1,656 80 74 1,306 1,389 63 60 55 38 42 18% C
Slide 39: Institutional Division
Institutional Division Underlying profit growth (AUDm) 1H12 v 2H11 Institutional Division 24% Institutional revenue mix ($m) Cross border income By Product By Geography 2,612 2,769 2,612 2,769 2,430 2,430 Cross Domestic Border Booked Growth in trade and supply chain Global Markets revenue mix 39
Slide 40: Economics
Economics
Slide 41: Key economic themes
Key economic themes There are challenges for the Australian economy • Two-speed Australian economy remains in force, overall relatively strong growth • The record terms of trade / mining investment boom is offsetting weakness in sectors such as tourism, manufacturing, retail and services • The stron
Slide 42: Australia remains in a very strong fiscal position
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 -20 -40 Korea -8 -6 -4 -2
Slide 43: Terms of Trade has driven 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 44: GDP growth likely to move back to trend
GDP growth likely to move back to trend levels, driven largely by investment growth GDP growth Business investment vs. consumption 7 Forecasts 6 62 22 Forecasts 5 60 20 % yearly change 58 18 4 56 16 % of GDP % of GDP 3 54 14 2 52 12 1 50 10 48 8 0 90 92 94 96 98 00 02 04 06 08 10 12 Household consum
Slide 45: Investment spend in mining, energy and infrastructure
This investment spend is in the mining, energy and infrastructure sectors Major infrastructure projects by industry 160 Communications Hospitals Forecasts 140 WaterSupply & Sewerage Manufacturing Electricity Gas Pipeline 120 Energy Airports Rail 100 Ports Roads Mining A$bn 80 60 40 20 0 2008 2009 20
Slide 46: Major projects in mining and energy under way
Major projects in mining and energy currently under way 46 Source: BREE
Slide 47: Australian economy grappling with structural change
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 48: Job ads by state reflect structural adjustment
Job ads by state reflect this structural adjustment Mining States Non-mining States 900 900 800 800 Index, average 2002-04 = 100 (s.a.) Index, average 2002-04 = 100 (s.a.) 700 700 600 600 500 500 400 400 300 300 200 200 100 100 04 05 06 07 08 09 10 11 12 04 05 06 07 08 09 10 11 12 NSW VIC TAS SA NT
Slide 49: Ongoing caution in the Household sector
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 50: Banks net repayers of offshore debt
Banks have become net repayers of offshore debt; Equity, government and corporates now fund the CAD 15 Funding the Current Account Deficit % of GDP Current account deficit 10 5 0 -5 -10 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Others sectors (Net accounts payable, RBA, Derivati
Slide 51: ANZ retains a positive view on China
ANZ retains a positive view on China over the longer term China - Contribution to GDP Growth 20 ANZ’s view on China: Key themes 15 • As the Chinese economy grows and growth 10 becomes more domestic orientated, we expect GDP growth rates to be 5 – 8% over the 5 medium term rather than 7-10% which has
Slide 52: What does a slowdown in China mean for Australia?
What does a slowdown in China mean for Australia ? • While a hard landing is not ANZ’s base case and our Case 1 : China shock forecast for GDP growth in 2012 is ~8%, it is worth Real GDP considering what would happen in the event of a Australia hard landing in China. Emerging Asia • The IMF has publ
Slide 53: Policy adjustments to offset global shocks
In addition to fiscal policy, The Australian economy has 2 other policy adjustments to offset global shocks Australian dollar vs. 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
Slide 54: Covered Bonds
Covered Bonds
Slide 55: Australian Covered Bonds have elements of structural support
Australian Covered Bonds have a number of elements of structural support Dual recourse Residential mortgage collateral Legislative framework Indexed for property price movements APRA regulated High level of transparency AAA rating Issuer rating downgrade protection Illustration of Su
Slide 56: 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 Government Rationale Guaranteed debt maturing from 2012 to 2014 • Reduces requirements for senior unsecured debt in offshore markets Lengthen funding profile in a cost effec
Slide 57: Australian Covered Bonds – Strong Character
Australian Covered Bonds – Strong Character…. • Legislative framework comparable to UK ensures segregation of assets, limited eligibility criteria and oversight of programme • Dual recourse - a direct issue by ANZ and ring fenced collateral Structure • Contractual arrangements provide further enhanc
Slide 58: 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 59: Programme Structural Enhancements
Programme Structural Enhancements • Prior to a Notice to Pay, the Asset Coverage Test used to ensure sufficient assets to support the value of outstanding covered bonds Collateral • After a Notice to Pay, the Amortisation Test to ensure sufficient cash to pay any maturing bonds • Value of assets are
Slide 60: Cover Pool and the Demand Loan structure
Cover Pool and the Demand Loan structure Excess OC • The Asset Coverage Test (“ACT”) is an ongoing Senior Above Demand Minimum test to ensure Adjusted Aggregate Receivable Loan Contractual Amount (“AARA”) is equal to or greater than AUD Amount equivalent of Covered Bonds outstanding Sub- ordinated M
Slide 61: 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 62: Covered Bond Pool: Composition and qualifying criteria
Covered Bond Pool : Composition and qualifying criteria Weighted Average Original/Current/Indexed LVR % Portfolio Summary at 24-July-2012 Original Current Indexed Covered Bond Pool $10,012m 45 Covered Bonds on issue $6,595m 36 Average loan size $277,063 32 32 27 Weighted Ave Current LVR 64.08% 21 We
Slide 63: 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-m
Slide 64: 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
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