Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Non-Deal Roadshow (November 2004)
66 slides from Anz's roadshow presentation, Nov 8, 2004
Slide 1: 2004 Annual Roadshow
Slide 2: A good 2004 result
A good 2004 result Strong financial performance a NPAT $2,815m | 19.9% = Cash EPS 161.1 cents *) 10.1% Shareholders rewarded ® Dividend 101 cents 1? 10.8% # Total shareholder return 17% & On-market share buyback of at least $350 million planned Year Total Shareholder Return $bn Market Capitalisation
Slide 3: ANZ has come a long way this year
ANZ has come a long way this year Strong momentum in Personal businesses in Australia With NBNZ acquisition, ANZ now dominant in New Zealand and Pacific $4.9b acquisition of NBNZ: $3.6b rights issue ANZ now 5“ on ASX by market capitalisation ANZ recognised for community, staff and cultural developme
Slide 4: Improved sustainability: Structural de-risking largely complete
Improved sustainability: Structural de-risking largely complete Offshore lending assets significantly reduced (% of group NLA*) 12% 7 = 11% 10% + 9% 8% + 6% 6% + 5% 2001 2002 2003 2004 Net Non-Accrual Loans 770 525 ' 451 2001 2002 2003 2004 More sustainable business mix {lending assets) 2000 “Commer
Slide 5: NZ integration complete end 2005 - low risk approach adopted
NZ integration complete end 2005 - low risk approach adopted ANZ and NBNZ share of Personal Customers (Main Bank) is stable 0% 1 —_ 1 Sep-01 Sep-02 Sep-03 Sep 04 cummin ANZ, ASB commie BIN. omp(ue National ——— Westpac Kiwibank Source: ACNielsen Consumer Finance Monitor A good acquisition; 2.3 cents
Slide 6: Carefully balancing investment and producing current returns
Carefully balancing investment and producing current returns Strong revenue growth; Higher revenue has increased our capacity to absorbed highest margin invest and produce future growth and return contraction in recent years — : 10% 7 10% 4 2 8% & 8% 5 Y 8% cS 6 6 i “4 i S 6% S 6% 4 5 6% c= G 4% G 4
Slide 7: 2004 result part of a series of consistent performances
2004 result part of a series of consistent performances $m 3,000 5 2,500 + 2,000 + 1,500 7 1,000 + 500 + NPAT growth 2,731 2,348 2,168 1,870 1,703 1,480 gx 1,171 o- 1,175 | ll iz : 1997 1998 1999 2000 2001 2002 2003 2004 Total Shareholder Return CAGR % 254 205 24 wag 22 21 17 16 5 Year -7 @ ANZ KECB
Slide 8: Financial results
tail: az 2004 Annual Roadshow
Slide 9: Cash EPS growth driven by strong underlying performance
Cash EPS growth driven by strong underlying performance Underlying DRP and option earnings growth NBNZ# share issuance 14.3 et 161 cents le 1.5% (1.2%) 146.3 9.8% anys ving ote Cash EPS* Growth: 10.1% Sept-03 Sept-04 Drivers: « Margin decline « Acquired at an « Dividend policy * Strong volume attrac
Slide 10: Margin decline is predominantly structural/cyclical
Margin decline is predominantly structural/cyclical Drivers 2004 v 2003 2H04v1H04 = Outlook bps bps NBNZ (3) (2) =) Asset Mix (1) (1) = Funding Mix (5) (2) > a Asset/Liability Wholesale Rate Impact (6) (3) <> Competition (3) (1) J Brokerage Impact (2) a) Other 2* 1 Total (18) (8) fe ea ' x, es tail
Slide 11: Increasing Mortgages business has reduced NIM through lower asset yields
Increasing Mortgages business has reduced NIM through lower asset yields and increased wholesale debt issuance Increase levels of lower risk, lower i Increased long term wholesale debt yielding assets have reduced NIM required to fund asset growth Approx Asset Mix am . / Approx Funding Mix tno : Mar
Slide 12: The changing shape of the domestic yield curve has impacted earnings
The changing shape of the domestic yield curve has impacted earnings « The shape of the curve in FY04 has negatively impacted the funding of mortgages as well as income from the interest rate mismatch position and investment in replicating portfolios. Asset t wholesale te impact _ Australian yield c
Slide 13: Strong balance sheet growth across most businesses
Strong balance sheet growth across most businesses * Continued strong volume growth in mortgages, FUM up 18% ¢ Institutional lending up marginally with good growth in 2HO4 ¢ Continued strong growth in Corporate e 10% increase in Banking Products deposit FUM reflected in strong Personal growth ¢ Inst
Slide 14: Non-interest income growing well
Non-interest income growing well Lyi hi Underlying growth in 4p 8.3% non-interest income Underlying growth TrUEPrS 232 3,008 hedge income* Cards under 2,808 (71) accrual =a PE 3 Property ee 4 .. sales Cashflow 2HO03 . FX impact on 27 impact trading (27) (44) securities income 72 Sep-03 Sep-04 Sep-04
Slide 15: Expenses - investing for sustainable growth
Expenses - investing for sustainable growth Incremental . integration Underlying expense growth 4% " ying exp 9 6 ° NBNZ* 21 4,026 443 fil Goodwill FX Technology Other amortisation impact 47 48 3,433 129 (39) =x - 3,228 ; ' ween Hil Premises Personnel 2i Costs 128 Sep-03 Sep-04 excl. NBNZ Sep-04 and
Slide 16: Cost management still a core capability
Cost management still a core capability; now a strategically sensible time for measured investment in growth Where we are putting Growth in FTEs additional people (% of existing Division FTEs) Growth in Expected change from Mar-04 to Mar-05 % Expected change from Mar-04 to Mar-05 FTEs (#) 600 5 10 5
Slide 17: Previous growth investments in Personal/Corporate paying off
Previous growth investments in Personal/Corporate paying off Division Sep-04 Sep-03 ($m) ($m) Personal Banking* 802 693 Institutional 788 802 New Zealand 584 211 Corporate 344 311 Esanda & UDC 143 129 Asia Pacific 111 100 ING JV 108 82 Treasury 64 95 Change (%) Full Year NPAT ($m) 16 (2) large il 11
Slide 18: Doubtful Debts charge higher due to lending growth
Doubtful Debts charge higher due to lending growth, partly offset by improved risk profile Bad Debt charge higher due to volume Decline in ELP Rate driven by growth, ELP Rate lower improved risk profile m $ arm ELP Adjustment bps 700 5 ams NBNZ Irnpact r 80 bps wea ELP Charge Standard ELP (bps) 600
Slide 19: Credit quality in good shape
Credit quality in good shape e Risk has markedly improved in our international portfolios ¢ Housing market headed for soft landing, consumer arrears remain at low levels ¢ Domestic corporates in good shape e Specific provisions and non accruals lower, despite impact of Telstra’s Reach joint venture
Slide 20: Non-accrual loans to Loans & Advances well down
Non-accrual loans to Loans & Advances well down Default rate continued to show ...Non-Accrual Loans as a % of the . i fy $m improvement... $m portfolio down to 0.37% 9009 004 p24% 1,500 |1357 1.8% 800 4 | 1.6% 700 5 1,200 1.4% 600 7 1.2% 900 500 4 1.0% 400 4 0.8% 600 300 4 0.6% 200 + 300 0.4% 100 4
Slide 21: New Zealand businesses delivering sound results
New Zealand businesses delivering sound results NBNZ performance slightly ahead Good underlying NPAT momentum of proforma (NZ$) in ANZ (NZ) businesses (NZ$m) 6% 202 ae ae | Net Interest Income Other Income Operating Expenses _PDD Income Tax & OEI NPAT yyy 1HO4 2HO4 NPAT comparison distorted by follo
Slide 22: Market share in New Zealand holding up well
Market share in New Zealand holding up well, particularly in the context of an acquisition 30% 25% 20% 15% 10% 5% 7 ANZ and NBWZ share of Personal Customers (Main Bank) is stable Rolling 4 quarter average 6% Sep So 50% 40% 30% 20% 10% 0% + -O1 Sep-02 Sep-03 Sep 04 urce: ACNielsen Consumer Finance Mo
Slide 23: Integration economics, adjusted for risk, compare favourably to previous estimates
Integration economics, adjusted for risk, compare favourably to previous estimates enefi RBNZ 2 | Total $31m RBNZ requirements increase H a costs by NZ$31im. Retail pategration NZ$265m NZ$265m = NZ$220 systems integration costs osts ~ $ m saved Detailed reviews have Revenue identified further benefi
Slide 24: Timing of integration costs and benefits
Timing of integration costs and benefits NZ$m 2004 2005 2006 Total Integration costs 49 153 18 Incremental Integration costs 29 “t Cost synergies 6 33 53 Revenue synergies 1 24 39 Attrition 20 32 34 30% of integration activities were completed in 2004 including: ¢ Amalgamation on 26 June 2004 ¢ Busi
Slide 25: New Zealand currency risk actively managed
New Zealand currency risk actively managed Attractive rates for hedging e Revenue hedging undertaken 1.40 7 future revenue when currency is believed to be 1.354 AUD/NZD outside its normal trading range 1.30 4 and inconsistent with their value. 1.25 4 « Revenue from FX hedges is re 4 reported as Inte
Slide 26: New Zealand structured finance transactions
New Zealand structured finance transactions NPAT from NZ Structured e IRD audit focused on so called Finance Transactions “conduit” transactions $NZm * Notices of Proposed Adjustment 904 received on 30 September 2004 e Net potential liability on all similar 80 | transactions $NZ232m* 70 4 * Do not c
Slide 27: Dividend growth in line with cash EPS growth
Dividend growth in line with cash EPS growth $1.20 5 $1.00 5 $0.80 5 $0.60 7 $0.40 5 $0.20 5 Dividend growth in line with cash EPS growth Up 10.8% 7 adjusted for rights issue» ae r 70% r 65% r 60% r 55% $0.00 - ‘a 1999 2000 2001 2002 2003 2004 wea Interim DPS we a Final DPS Cash Payout Ratio (RHS) P
Slide 28: Capital position strong, above the top end of our range
Capital position strong, above the top end of our range Drivers of the ACE ratio % 6.25 4 Earnings Dividend 0.81 0.54 6.00 4 . ( ) 578) RWA APRA's growth capitalised Other expense 5.50 7 changes (0.23) 5.25 5 5.00 5 4.75 7 4.50 4.25 9 4.00 - Mar-04 ities 2004 Annual Roadshow 28
Slide 29: Capital management initiatives likely in first half
Capital management initiatives likely in first half »,, Capital is a scarce resource to be ital M Phil h Capital Management Philosophy managed efficiently Currently above target range Our Response e Conservative approach pending. Continue to generate surplus Regulatory < and Rating Agency capital ec
Slide 30: Divisional Outlook for 2005
Divisional Outlook for 2005 Personal Banking Solid growth in all product business. Continued investment in the franchise. Improvement in margin decline anticipated Institutional Return to modest growth following de-risking. Improved environment anticipated particularly in Markets business New Zealan
Slide 31: Group Outlook for 2005
Group Outlook for 2005 Revenue ¢ 6.5% - 8% growth: e¢ Lending growth to remain robust; Improving margin environment ¢ Benefit from growth investments, weighted towards second half ¢ Weighed down by Panin and Group Treasury Expenses ¢ 5% to 7% growth: « Expense growth weighted towards first half ¢ In
Slide 32: Slide 32
Slide 33: oe i ae = i O° a om acy i Na
oe i ae = i O° a om acy i Na 2004 Annual Roadshow 33
Slide 34: Personal Banking Australia - strong momentum
Personal Banking Australia —- strong momentum Solid NPAT growth... 376 1HO3* 8 Mortgages is Banking Products Rural Banking NPAT growth of 11%* for the year, up 8% in 2H04: * Strong growth in Cards & Merchant Services, up 30%* reflecting reduction in “transactors” following RBA interchange reform and
Slide 35: Mortgage distribution
Mortgage distribution Mortgage franchises selling ahead of ..and we are attracting skilled .. driven by an attractive schedule (% sold)... ‘ applicants . proposition Background *« No “middle man” in Mortgage the commission Broking structure Sales « Sales leads and technical support provided by ANZ P
Slide 36: Retail deposits: good growth, changing customer behaviour
Retail deposits: good growth, changing customer behaviour Continuing to generate good Change in FUM distribution of ‘000s growth in transaction accounts low interest retail accounts 2000 Total Transaction accounts* % * Customers with high 1950 1.5 balances self selecting to ead Lo higher rate produc
Slide 37: Focus on the customer is closing the market share gap
Focus on the customer is closing the market share gap Customer Satisfaction* with Market share of “traditional banking” 85 Main Financial Institution % financial services increasing* 18 J ~~ - $02 nnn nnn 16 5 144 5.8% Closing the gap) = 4.0% 125 i 10 5 8 4 6 4 ------------------ ~~~ ~~~ Restoring ,
Slide 38: Institutional: structural de-risking largely completed
Institutional: we have largely completed a structural de-risking program that has been underway for a number of years « Underlying business momentum NPAT growth impacted by degree of de-risking adversely impacted by : 2004 v 2003 cos * Strategy to lower risk which has significantly reduced offshore
Slide 39: Corporate: increased momentum in Corporate Banking
Corporate: increased momentum in Corporate Banking, continued strong investment and growth in Business Banking Improved performance 12% 7 (% growth) 7 12% 9% + + 9% 6% 4 ncn L 6% 3% 4 r 3% 0% 4 rp 0% -3% 7 P -3% -6% > *~ -6% tiem Revenue ME Expense = wwamNPAT (RHS) * NPAT up 11% for the year * Stron
Slide 40: The Esanda Group has reshaped its business
The Esanda Group has reshaped its business and is focused on growth Esanda including UDC, have reshaped its business, Esanda & UDC NPAT % - 2000 increasing its focus on higher growth markets, whilst maintaining its commitment to traditional businesses. Commercial Asset This is being achieved through
Slide 41: Pacific - strong performance in most markets
Pacific — strong performance in most markets « NPAT grew 15.5% (17.6% excluding impact of exchange rate movements) driven by solid lending growth, up 12% « Expenses grew 4.9% reflecting increased investment in the region: ¢ Mobile rural banking model rolled out in Fiji, offering banking services to
Slide 42: Asia - retail partnerships delivering solid underlying growth
Asia — retail partnerships delivering solid underlying growth ANZ Asian Network (geographic) * Strong performance by Personai Banking, NPAT up 5% * IFS subdued with NPAT down 1.3%. Continued de-risking of the business, now largely completed * Increased investment in Trade Finance and Capital Markets
Slide 43: Treasury - mismatch earnings significantly reduced
Treasury - mismatch earnings significantly reduced Revenue Operating Expenses Provision for Doubtful Debts PBIT Income Tax Expense fees NPAT fosion of lon 120 ited portfolio FCC™TUlCOOCOOC = la, an TTT TTT TTT 1H 02 2H 02 1H 03 2H 03 1H 04 2H 04 43
Slide 44: Improving INGA returns reflect strengthening investment markets
Improving INGA returns reflect strengthening investment markets NPAT increased 39% driven by: Good Retail FUM growth* * Funds management income increased 13%, driven sc se by strong investment markets Period A$b * Risk income up 15% with increased sales of life insurance products through the ANZ net
Slide 45: Appendix
NZ 2004 Annual Roadshow 4s
Slide 46: Specific Provisions lower, despite impact from Telstra's Reach
Specific Provisions lower, despite impact from our exposure to Telstra’s Reach Joint Venture Net Specific Provisions I qi IIE Me r 100% r 90% P 80% [ 70% r 60% f 50% r 40% [ 30% P 20% fF 10% Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 ‘mug 2nd Half Net specific provisions - $m (LHS) taza ist Ha
Slide 47: New Specific Provisions down 7% on FY 2003
New Specific Provisions down 7% on FY 2003 Geographic Specific Provisions Specific Provisions by Source 2003 2004 = 50 a fy Aust/NZ — [JUK/US BAsia ¢jOther Inter #1 Energy i Domestic Coprorate @ Asset Finance @ Consumer Finance # Other Offshore ft Other Sais 2004 Annual Roadshow 47
Slide 48: Mortgages growth strong, albeit some slowing in second half
Mortgages growth strong, albeit some slowing in second half Strong LVR profile* 80% 4 « Mortgages Portfolio continues to 70% experience strong growth off the back of 60% excellent products and strong 50% 1 LVR at origination distribution networks 40% Dynamic LVR « Growth has been strongest in owner
Slide 49: Low exposure to Inner City residential mortgage lending
Low exposure to Inner City residential mortgage lending Lending policies driving shift from : . investment loans to owner occupier loans Inner City Dynamic LVR - August 2004 Purpose of inner city lending 100% 5 80% 5 60% 5 “LVR at Origination [Dynamic LVR 40% - 20% + 0% T T Aug-02 Aug-04 LVR<60% 61-
Slide 50: US power exposures continue to reduce
US power exposures continue to reduce Total US Limits US: September 200 AAA to BBB BBB- BB+ to BB- B+ to CCC Non Accrual Sep-02 Sep-03 Sep-04 « We continue to actively manage our exposure to the US power sector « Over the past two years, exposure to the merchant energy sector and other non-core segm
Slide 51: Power markets improving & offshore power exposures reducing
Power markets improving & offshore power exposures reducing Total Limits Split by Geography KMV Median Expected Default Frequency EDF % 2 (Max KMV EDF = 20.00) $8.2bn $8.2bn $9.7bn 20.00 i 10.00 1 CCC B Offshore B ‘ 1.00 A Wf . . B+ \, a ‘afro Op 4 Australia / BBB jw New Zealand 610) , pf ——North Am
Slide 52: The quality of the Telcos book has continued to improve
The quality of the Telcos book has continued to improve Total Telcos Limits‘) A$5.3bn KMV Median Expected Default Frequency o EDF % (Max KMV EDF = 20.00) 20.00 7 {ccc AAA to BBB 10.00 B %y B at 1.00 5 BB+ BBB- BBB BB+ to BB- 0.10 v B+ to CCC 1% rod | Non Accrual : b ] 2% A 7 North America ¥ a ~me As
Slide 53: Group risk grade profile
Group risk grade profile AAA to BBB BB+ to BB >BB- B+ to CCC Non Accrual ANZ Group - Outstandings $143bn $149bn $158bn $165bn $207bn $222bn Total investment grade as at Sep 04: $152bn or 68.5% of the portfolio Mar-02 Sep-02 Mar-03 Sep-03 Sep-04 2.8% 2.5% 2.5% 2.3% 1.8% 0.9% 0.8% 0.7% 0.6% 0.4% Ei #2
Slide 54: Geographic risk profiles
Geographic risk profiles Australia & New Zealand $145bn $155bn $198 $212bn AAA to BBB BB+toBB [jean 15.4% BB- >BB- Mar-03 Sep-03 Sep-04 B+ to CCC 2.3% 2.0% 1.8% Non Accrual 0.4% 04% 0.3% Mar-03 6.1% 4.5% International 10bn $9bn 24.3% 24.0% Sep-03 Mar-04 Sep-04 6.1% 4.0% 24% 44% 3.3% 2.9% Nis 2004 An
Slide 55: ANZ maintains the largest safety net for expected and unexpected losses
ANZ maintains the largest safety net for both expected and unexpected losses Specific Provision/Non-Accrual 50% 7 46% aso 4 Loans 40% 4 35% 4 30% 4 42% e The continued high level of our 25% 4 General Provisioning reflects the 20% + lower level of actual losses in 2004. 15% 4 ¢ The ELP methodology th
Slide 56: Industry exposures - Australia & New Zealand
2.5bn 2.0bn 1.5bn 1.0bn 0.5bn 0.0bn 2.5bn 2.0bn 1.5bn 1.0bn 0.5bn 0.0bn Industry exposures - Australia & New Zealand Health & Community Cultural & Recreational Services Services 7 10.0% 2.5bn 20.0% 4 g.o9 8.0% 2.0bn 15.0% 76.0% 1.5bn 10.0% 74.0% 1.0bn 9 + 2.0% 0.5bn 5.0% 0.0% 0.0bn + + 0.0% Sep-01 S
Slide 57: Industry exposures - Australia & New Zealand
Industry exposures - Australia & New Zealand Lending Assets (AUD) % of Portfolio (RHS scale) % in High Risk — excl NBNZ (RHS scale) % in Non Accrual ~ excl NBNZ (RHS scale) Finance ~ Other Transport & Storage Utilities 5bn 5.0% Sbn 10.0% abn 10.0% 4bn 4.0% 4bn 8.0% 8.0% 3bn 3bn 3.0% 3bn 6.0% 6.0% 2b
Slide 58: Industry exposures - Australia & New Zealand
Industry exposures - Australia & New Zealand Real Estate Operators & Dev. Retail Trade 20bn 10.0% 8bn J 9 15bn 8.0% ond 6.0% 10bn 4bn4 4.0% 5bn 2.0% 224 Obn + + + 0.0% Obn Sep-01 Sep-02 Sep-03 Sep-04 Sep-01 Sep-02 Sep-03 Sep-04 Manufacturing Wholesale Trade LObn 10.0% sp, 4 8bn 8.0% ann 4 6bn 6.0% 3
Slide 59: Na
Na 2004 Annual Roadshow 59
Slide 60: Australia and New Zealand are attractive low-risk markets
Australia and New Zealand are attractive low-risk markets High Return * Australia and NZ have had high returns compared to other developed markets Average Real GDP Growth (1993-2003) * 3.8% 3.5% 3.2% 2.7% 2.0% 1.2% | it T Japan EU. G7 US T NZ_ Aust. Source: *International Monetary Fund 0.6% 0.5% 0.4
Slide 61: Profit & Loss impact TrUEPrS versus StEPS
Profit & Loss impact TrUEPrS versus StEPS This analysis excludes the impact of the TrUEPrS buy- back which has been reported as a significant item Interest Income - TrUEPrS invested in USD, StEPS in AUD* Non Interest Income - Income from interest rate swap Income Tax - Tax on income - Tax credit on
Slide 62: Update on Basel II and IFRS
Sep Sep Update on Basel II and IFRS IFRS IFRS comparative accounts, except IAS 32/39 | first year of adoption | : coe | NZ ANZ Quarterly Interim GDS Results Evaluation complete Ad System design & build Dec Mar Dec Mar APRA Prudential Standards Issued Dratt > Finat > Accreditation _ Processes Austral
Slide 63: Composition of "other" in the high level margin analysis
Composition of “other” in the high level margin analysis (pcp) Other items 2 basis points basis points Capital Markets FX revenue hedging Cards TrUEPrS/StEPS Interest foregone derivatives substitution ¢ Cashflow mismatch on Capital Markets cross currency swaps negatively impacted the Group’s NIM. ¢
Slide 64: Summary of forecasts - Australia (bank year)
Summary of forecasts — Australia (bank year) GDP Inflation Unemployment (Sep) Cash rate (Sep) 10 year bonds (Sep) $A/$US (Sep) Credit - Housing - Business ~ Other 2004 3.7 2.4 6.2 5.25 5.5 0.71 14.5 19.9 7.6 14.3 2005 3.6 2.4 5.6 5.75 6.7 0.77 12.0 14.7 8.2 11.3 2006 3.0 2.7 5.8 5.75 5.5 0.71 11.0 1
Slide 65: Summary of forecasts - New Zealand (bank year)
Summary of forecasts —- New Zealand (bank year) 2004 2005 2006 GDP 4.1 3.0 2.0 Inflation 2.7 2.9 2.2 Unemployment (Sep) 4.1 4.1 4.6 Cash rate (Sep) 6.25 6.50 6.0 $A/$NZ (Sep) 1.07 1.15 1.16 Credit ~ Housing 15.5 8.0 7.5 ~ Business 7.3 5.0 4.5 - Total 11.4 6.6 6.2 #2 2004 Annual Roadshow
Slide 66: For further information visit 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 — Non-Deal Roadshow (November 2004) on 6ix