National Australia Bank Limited · ASX:NAB
National Australia Bank — European Investor Conference 2005
151 slides from National Australia Bank's conference presentation, Feb 24, 2005
Slide 1: European Investor Conference: Portfolio Review
European Investor Conference Portfolio Review 7 February 2005 expertise Fapproachable
Slide 2: Strategy Refreshed
Strategy Refreshed a Late 1980s to Early 1990s > Full service bank > Managed for short term profit ... but increasingly challenged by lack of scale and os leverage in UK - run as relatively autonomous banks Mid 1990s to Early 2000s Awaiting potential “transformational deal’ L 2002 to 2004 > Doing th
Slide 3: Portfolio Review
Portfolio Review Europe Banks Portfolio Options Pros Cons 1. Retain All GB: ce || ¥B Wretand: | we |{ we + Regional coverage + Cost synergies from integration + Complexity and delivery risk + Significant costs to implement compliance and infrastructure programs -reon ==
Slide 4: Portfolio Review (continued)
Portfolio Review (continued) Europe Banks Pros Cons Portfolio Options 2. Sell All + Refocus on core + Not the highest value option GB: Australian operations Remover expaciretalaruer and more stable growth of UK Ireland: market + Makes any further international investment difficult
Slide 5: Portfolio Review (continued)
Portfolio Review (continued) Europe Banks Pros Cons Portfolio Options 3. “Shrink to Grow’ on a Single Franchise + Reduces investment + Significant complexity to requirement and complexity undo the existing CB/YB + Reduced delivery risk profile ineravon, [-sean =sen
Slide 6: Portfolio Review (continued)
Portfolio Review (continued) Europe Banks Pros Cons Portfolio Options 4, Retain GB, Sell Irish + Greater management + Separation and transitional focus arrangements add complexity in short term Ireland not central to new strategy GB market is attractive Highest value option
Slide 7: Portfolio Outcome: Irish Banks Sold to Danske Bank
Portfolio Outcome: Irish Banks Sold to Danske Bank > Sale announced December 2004 with sale proceeds of A$2.5 billion (£967 million) in cash * Profit on sale expected to be c.A$1.1 billion - expected to complete during the first quarter of calendar year 2005 > In relation to our remaining businesses
Slide 8: Strategy for Differentiation
Strategy for Differentiation I “Do what we do, but do it better” “Do what we do, but do it better” “Playing a different game”
Slide 9: European Investor Conference: Strategy Overview
European Investor Conference Strategy Overview 7 February 2005 expertise Fapproachable
Slide 10: Today's Programme
Today’s Programme > Why Stay in the UK > Issues > Progress to Date > Work Still to Do > Size of Prize
Slide 11: Today's Programme
Today's Programme ‘Agenda Activity Presenter UK Strategy Overview Lynne Peacock Doing What We Currently Do Better — Retail and Small ‘Steve Reid Business Banking Integrated Financial Solutions — Playing a Different Game ike Wiis Third Party Distibution - A Channel for Selective Growth Dean Cutbi Cot
Slide 12: Key Features of the UK Market
Key Features of the UK market — Household Balance Sheet (2003) Assets fon Non-Financial Assets (orepery) 3.424 Financial Assets fbn 3077 Liquid Assets 7 Shares ant Lite Assurance & Pensions 1,620 Other! 200 6501 774 m1 108 Total Liabilities Net Worth Size of Market Key Product Data (2003) Outstandin
Slide 13: UK Market
UK Market Rationale for Remaining in UK Attractiveness of UK Market PBT 2004" » Issues are company specific, not market Spoon related > UK market supports muttiple business model > Key differentiation for Group >» Our customer base in the UK compares favourably with our Australian business > Selling
Slide 14: UK Team
UK Team v Experience of existing business > Key new hires > Intra Group experience
Slide 15: Background
Background =| Key European Issues — Early 2003 > Strategy, Leadership and Structure > Distribution > Products and Pricing > Infrastructure and Process » Cost Base
Slide 16: 1. Strategy, Leadership & Structure
1. Strategy, Leadership & Structure Business Model (Early 2003) ESEEES | waragernnn | CoP — Seppe Che _— | (| Semcoy || Sewer |] Sey | | ic a ] | eecinctcay | reetectoay Corpor Suppo Funcons ‘SSopeon |] Surpor Undifferentiated strategy Significant duplication Multiple legal entities Insufficient man
Slide 17: 2. Distribution
2. Distribution =| of Scotland ‘9% of Population {8% of Gross Income 224 retail branches North & Midlands. 41% of Population 36% of Gross Income 221 retail branches Rest of Great Britain 50% of Population '56% of Gross Income 46 retal branches ‘Sawce: Hiiontt ein, intend ibrvennn, Best tend, UK Busi
Slide 18: 3. Products and Pricing
3. Products and Pricing I Net Interest Margin 2002 Product Profile 2002 4,200 Number of as Products 1,000 “ a se a 600 NB 20 400 10 os ree terme ut econ” ee "hard ater het ve po teeta “eer ‘fewer: Company pabitnctions, ternal tute
Slide 19: 4. Infrastructure & Processes
4. Infrastructure & Processes Back Office 24 ‘centralised’ operating centres Lack of common products, processes and systems — duplication of brands and locations Operations predominantly “in-house” Separate banking and wealth management platforms
Slide 20: 5. Cost Base
5. Cost Base =| FY 2002 Cost/ Average Average Assets ‘Assets Ranting PBT /FTE —Rantiny, === FTE Ranting co) (€000) (em) Best Northern Rock 0.64 1 85.6 1 77 1 He0s 113 2 455 2 52 2 Abbey National 164 2 336 a 74 2 Barclays 174 ‘ as 5 49 4 Bradford & Bingley 198 5 310 2 32 7 Alliance & Leicester 199 6
Slide 21: Positives
Positives Brands v v Asset quality > Customer base in natural marketing area People v Y Business and retail banking skills — leveraged between franchises
Slide 22: Financial Consequences
Financial Consequences ‘Total National Australia Group Europe (AUS GAAP) PROFIT & LOSS ‘Netinerestincome ‘Ofer operating income Total income ‘Expenses (excl, pension) Pension expense PBT PAT RATIOS CCostincome (incl. pension) Netintrestmargin Total Europe) Netinerestmargin (FSE) FTES (sp0) ee
Slide 23: 2002 Strategy Themes
2002 Strategy Themes I v Integration of systems Y Convergence of processes Quality Fix the “core” v 7
Slide 24: Portfolio Outcome: New Shape of Business
Portfolio Outcome: New Shape of Business ‘ota oe ox Pro forma figures based on Tomson “na Neg bishess sold Fro Fre Foe au ow or ; sont svoet > Cost flow back and declining Neineestrcme 2 ca 70 recharges Otero 50 a @ “etal incone Ta 7m 7 pans (ee pr) os on cy > Remaining business delivered erom exert
Slide 25: Strategy Overview
Strategy Overview >» Management team has significant UK market experience > Ability to leverage market knowledge > Small size can be used to our advantage
Slide 26: Strategy for Differentiation
Strategy for Differentiation I “Do what we do, but do it better” “Do what we do, but do it better” Q “Playing a different game”
Slide 27: Summary of Our Approach
Summary of Our Approach =| “Do What We Do But Do It Better” > Realignment of distribution footprint including small business > Increase capability of staff > Simplified and reinvigorated product set > Refreshed brands and improved customer understanding > Efficient back office Impact Volume growth a
Slide 28: Summary of Our Approach (continued)
Summary of Our Approach (continued) “Playing a Different Game” » Focus on relationship managed integrated financial solutions for Business / Premium customers * National IFS programme. > Third Party Distribution Impact - IFS / Third Party » Significant customer acquisition, asset and revenue growth,
Slide 29: Revised European Model - Based on New Customer Value Segmentation
Revised European Model - Based on New Customer Value Segmentation Previous Segmentation and Model ‘Customers managed within business / personal silos BFS PFS Corporate Premium / Private Mid-size Transactors ‘Small business Customer type segmentation —> Revised Business Model Integrated CVP delivered
Slide 30: Doing What We Currently Do Better - Retail and Small Business
European Investor Conference Doing What We Currently Do Better - Retail and Small Business Steve Reid, GM Retail Banking 7 February 2005
Slide 31: Agenda
Agenda > Background to Retail > The Opportunity > Customer Profitability > Sales Performance > Cost Base
Slide 32: The Retail Bank as at FY04
The Retail Bank as at FY04 I Clydesdale & Yorkshire Bank Metrics Clydesdale & Yorkshire Banks Market ‘Share in UK > 58% of FSE revenue > 4,217 staff » 460 branches > 2.7m customers > 92% of total UK customer base > Core lending of £5.1bn' > Deposits of £5.3bn' NB. Current Account market share based
Slide 33: The Opportunity: Improving the Game
The Opportunity: Improving the Game CYB Banking Product Cross Holdings Opportunity Customers with i? ‘3 Products 6% Customers with, ¥ 2 Products 21% Customers with 1 Product orm The average product holding for CYB is 1.5. The average product holding for competitors is24 Only a third of our customers
Slide 34: The Opportunity: Improving the Game
The Opportunity: Improving the Game I rae > 532,000 customers within CYB who have a mortgage with a competitor > 18% of CYB current account ‘customers have mortgage with us — market average 35% > In Oct-Dec 04 CYB Retail achieved an average penetration rate of 39% = Best in Class is 75% > Our home i
Slide 35: Customers
Customers Issue Impact — > Vicious circle of high margins, low volumes — > Lack of investment in people, products and processes > One size fits all approach
Slide 36: Actions Taken to Grow Customer Numbers and Improve Profitability
Actions Taken to Grow Customer Numbers and Improve Profitability =| > Two significant new products have been launched + Offset Mortgage (March 2004 in Yorkshire, January 2005 in Clydesdale) + Current Account Plus (January 2004) > Improved customer insight + Better understanding of customer value / p
Slide 37: Trends Now Moving in Right Direction
Trends Now Moving in Right Direction — i Customer Acquisition - CYB > 12% increase in premium / i) private customer numbers om » 11% reduction in customer complaints
Slide 38: Aligning Segmentation with Customer Value
Aligning Segmentation with Customer Value 3 Key Focus is on reducing cost to serve Key Focus ison increasing product holdings Customer Profitability ‘High End Retail = 275,000 ‘Small Business = 40,000 High Potential Reta = 643,000 “Transactors = 1,540,000 ‘Micro Business = 120,000 Basle Banking = 63
Slide 39: Sales Performance
Sales Performance Issue Impact ee > Over-reliance on branch vs direct i > No common sales management processes and reward schemes > Little integration between Bank and Wealth Management sales forces
Slide 40: Actions Taken to Improve Sales Performance
Actions Taken to Improve Sales Performance » Simplified sale process and improves sales training > Driven Wealth and Retail integration > Improved variable remuneration for all Retail staff with incentives clearly linked to performance
Slide 41: Improvements in Wealth Management Sales
Improvements in Wealth Management Sales Wealth Management Advice Sales - CYB Life and Critical liness Penetration % of Mortgages Number of Sales ‘Average Sales per Advisor ge Sales per 16% 408 75 39% 21% 16% 20032008 008200 NAGE NAGE Retail Best in os of tos Class
Slide 42: Actions Currently Underway to Improve Sales Performance
Actions Currently Underway to Improve Sales Performance Key Levers Impact External Recruitment * Targeting competitor's top performers Improved product cross sales > Increased Investment in Trai * Cross sales training * Coaching skils for Sales Managers 1g Quality Staff > Performance Management ‘+ R
Slide 43: Cost Base
Cost Base Issue Impact > Low customer to branch ratio — > Inefficient processes — too much administration wn > No common structures
Slide 44: Move to Common Operating Model
Move to Common Operating Model FROM Yorkshire ‘Common Structure
Slide 45: Ongoing Actions to Reduce Costs
Ongoing Actions to Reduce Costs Process Migration Call Sweeping Transaction Migration Structures and Supervisory Workload Further centralisation of processes Full implementation of call sweeping for all branches by April 05 Reductions in over the counter transactions Standardised branch manager and
Slide 46: Managing Our Cost Base Better - Distribution Footprint
Managing Our Cost Base Better - Distribution Footprint I] v Flagship program investing in high potential high Flagship Branch Locations > street locations g Third party distribution ° v > Developing non branch channels > IFS Expansion in South a v Branch network review + Blueprint for branch network
Slide 47: Summary
Summary > Cost base reduction » Improved customer profitability and numbers. » Sales performance > The opportunity
Slide 48: Integrated Financial Solutions - Playing a Different Game
European Investor Conference Integrated Financial Solutions - Playing a Different Game Mike Williams, GM Integrated Financial Solutions 7 February 2005 expertise
Slide 49: Agenda
Agenda v Overview of Business Banking The Opportunity Playing a Different Game Progress to Date
Slide 50: Recent History — Business Banking
Recent History — Business Banking Clydesdale Bank +#3 market share in business banking in Scotland #8 ranked business bank by Forum of Private Business Business Customers: 46,000 Business Centres: 27 Yorkshire Bank +#6 market share in business banking in natural marketing area #2 ranked business ban
Slide 51: The Opportunity — Size of Target Segments
The Opportunity — Size of Target Segments =| > SME Market in UK * 391,000 businesses with a turnover of > £500K * We currently only have 3% share > Private Banking Market in UK * 700,000 individuals earning > £60K per annum * We currently have less than 2% share of these customers * Others qualify o
Slide 52: The Opportunity — South of England
The Opportunity — South of England > Profitable target segments > No presence in the South
Slide 53: The Opportunity
The Opportunity =| > Profitable target segments > No presence in the South of England > Need to protect market share in Scotland > Opportunities to grow market share in Yorkshire > — Opportunities to grow Agribusiness > — Opportunity to provide differentiated proposition in order to compete against
Slide 54: Playing a Different Game — Integrated Financial Solutions
Playing a Different Game — Integrated Financial Solutions Relationship-based service out of Financial Solutions Centres > SME and Private Banking segment > Tailored products and pricing > Local decision-making > _ Professional partnership model > Creating value > Integrated > For the right customer
Slide 55: Playing a Different Game: Our Model
Playing a Different Game: Our Model =| The Customer Experience Tailored Centres
Slide 56: Playing a Different Game: Our Incentive Scheme
Playing a Different Game: Our Incentive Scheme ‘Managing Partners ‘Senior Partners. ¥ Partners Credit Partners Associates Unlimited earnings linked to retaining our best people Year Year Year Year Year 1 2.3 4 5 ‘nedyour apa compiee Tos gvenyovawam wad | 25% YEAR 1 ————> YEAR3
Slide 57: Progress to Date: Principles / Operating
Progress to Date: Principles / Operating I Achieved Since 1 March 04 (10 months) Control/Compliance and Supervision Structure > Expansion ~ 10 step, 278 day process > People - 200 top @ talent in 10 months; 300 more to go > Credit - 90% of decisions locally > Products, Pricing & Local Marketing > Al
Slide 58: Progress to Date: Our Presence in 2003
Progress to Date: Our Presence in 2003
Slide 59: Progress to Date: Southern Expansion in 2004
Progress to Date: Southern Expansion in 2004 _ — a me ke — wa 12 sites in key locations
Slide 60: Progress to Date: Planned Expansion
Progress to Date: Planned Expansion jouth of England network of 30+ sites by end 20(
Slide 61: Progress to Date: National IFS / Leveraging
Progress to Date: National IFS / Leveraging =| » National IFS structure launched > Heads of IFS appointed in 8 regions > Managing Partners appointed > 39 existing Clydesdale and Yorkshire business centres being turned into full/satellite Financial Solution Centres > Aiming for 80+ Financial Solution
Slide 62: Progress to Date: National IFS
Progress to Date: National IFS | with national coverage End of 05: 70+ sites 06/07: 80+ sites 7 FSCs (outside London) cover populations greater than Brisbane The 8 FSCs in Yorkshire cover a population greater than Melbourne The 9 London FSCs will cover population greater than Melbourne & Sydney comb
Slide 63: Progress to Date: Performance Management Culture
Progress to Date: Performance Management Culture > Pace and total personal accountability > P&Ls Accurate MI ¥ » Trend Monitoring and ratios > Regular recognition and challenge and support » Cost to income ratio driven ¥ Building a high performance culture ~ 53% engagement Building a high performanc
Slide 64: Progress to Date: IFS Opportunity Pipeline Performance Metrics
Progress to Date: IFS Opportunity Pipeline Performance Metrics Stock au of OpporntyPine Spportunty Approvals eed a i Pose 3 oe ff 8 fo oo to “* oes fe eff PEEL POEL EEF b LESS ELEC ES SE Comer} eo oF Soe Pe PEL SS EES OES o
Slide 65: Financial Expectations
Financial Expectations New Sites > Atypical new IFS centre is expected to have a cash flow payback of circa 23 months > Opportunity per new site represents circa £4m PBT in steady state » Targeting 40% cost / income ratio Converted Sites » Some costs when retro-fitting to traditional centres > Oppor
Slide 66: In Conclusion
In Conclusion We are confident that with IFS we will successfully develop a differentiated proposition to support sustainable growth Our results to date are very encouraging and we are moving with pace to implement the organisational and cultural change required to drive our business forward Competi
Slide 67: Third Party Distribution - A Channel for Selective Growth
European Investor Conference Third Party Distribution - A Channel for Selective Growth Dean Cutbill, GM Third Party Distribution 7th February 2005 empowerment expertise efpowefment
Slide 68: Agenda
Agenda a > Why Third Party Distribution? , Our Strategy >» Execution
Slide 69: Why Third Party Distribution and Size of the Opportunity
Why Third Party Distribution and Size of the Opportunity | The Shift in Mortgage Origination in UK Mortgage Market , Gross the UK Lending 2003 -£27bn 100% 20% Intermediary market 60% 40% 20% + Direct to Supplier 1993 2003 Hi istermeciary Dh direct Hh ranch
Slide 70: Mortgage is the Heart of the Consumer's Financial World
Mortgage is the Heart of the Consumer's Financial World Wealth Builder mmm Wealth Consolidator mmm Wealth Consumer First Time Buyer Second Time Buyer / Investor Retiree age 25-35 35-45 45-55 55-65 e+ ‘Source: tn Malone Hed of Prten! Mongage Chi
Slide 71: NAB's History in the UK Intermediary Mortgage Market
NAB’s History in the UK Intermediary Mortgage Market =| Key reasons for not having succeeded previously: 1. Lack of market expertise 2. Local not national 3. Imported thinking No credibility as a result
Slide 72: Intermediary Market Myths
Intermediary Market Myths =| Statement > “Poor quality customers go to intermediaries" > ‘Quality of business is poor” > “Brokers are constantly churning” > ‘High cost of customer aquisition” > “Shorter product life" Reality Financially aware customers seek professional advice ‘Comparable risk profi
Slide 73: Our Opportunity in the Intermediary Mortgage Market
Our Opportunity in the Intermediary Mortgage Market =| » The UK mortgage market is 3.5 times the size of Australian market > Ready to play in 65% of the market previously untapped » Mortgage has become the heart of the customer's financial world » The UK is a very professional regulated market > Acq
Slide 74: Key Elements of Third Party Strategy
Key Elements of Third Party Strategy =| » Focused distribution > Create mortgage growth > Adapt a selective approach » Acquisition channel for IFS customers
Slide 75: Third Party Distribution — Achievements so Far
Third Party Distribution — Achievements so Far a 1, Market entry and build Initial capability *Right Management ‘Team in place + Identified issues Launch with Charcol April 2004 es weed
Slide 76: Third Party Distribution - Achievements so Far
Third Party Distribution - Achievements so Far 2. Upgrade and refine aiiaiaeiél capability 1, Market entry and build | +FSA compliant Initial capability +New Relationship Managers in place Right Mi it Text inp + Premier Broker selection + Identified issues eMasiest entry reste TiGunch with Charco! °
Slide 77: Third Party Distribution - Achievements so Far
Third Party Distribution - Achievements so Far a 3. Strengthen capability 2. Upgrade and refine ey “Sontitated obote 4. Market entry and build [Vega compliant “Abily to E-trade Initial capability : * Best practice processing slew aston Managers. ; Beet practioe processing Right Management Team in pl
Slide 78: Third Party Distribution - Achievements so Far
Third Party Distribution - Achievements so Far 3. Strengthen capability 2. Upgrade and refine capability 1, Market entry and build Initial capability * Right Management Team in place + Identified issues *Launch with Charcot April 2004 + FSA compliant + New Relationship Managers in place + Premier Br
Slide 79: Third Party Distribution - Achievements so Far
Third Party Distribution - Achievements so Far a 4, Increase volumes. 3, Strengthen capability pe ing preferred 2 Upgrade and refine [New product range 1195 Broker fms Sepabitly + Sophisticated website ” anne BATH 1. Market entry and build | «SA compliant Spal to hace: = Completions £107m initial ea
Slide 80: Alignment with IFS
Alignment with IFS =| > A Hunter for IFS + New customer acquisition + Telephone sales team + Relationship management model » Other Opportunities + Commercial loan market + Asset finance market
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Searchable text section of graphics shown above Eur opean Investor Conference European Investor Conference Portfolio Review John Stewart, MD & CEO National Australia Bank February 2005 [GRAPHIC] [LOGO] Str ategy Refreshed Late 1980s to Early 1990s Build collection of regional • Full service bank Fra
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