Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — 1H06 Earnings Presentation
60 slides from Anz's earnings presentation, Apr 27, 2006
Slide 1: ee a il a OE i ve, i a / Fee = cu i)
ee a il a OE i ve, i a / Fee = cu i) ee xecu Se nil i on ahi en i a a “oN ane oe oo a oe oe oe HA aM) ii aM ‘il a ie a a me ah » | “ | a a a == == == == .2)—)—CrtC<—is—OCOCOCOCOdCdCO == —— m7 ee anz.co oo -_— CO rr—r—™—m™m™™™™L™™™L™™™™™™L™™™™™™——
Slide 2: A good first half
A good first half 1HO6 v 1HO5 Statutory profit 4} 16% Cash’* profit 4 10% Cash’ profit before provisions 4p 10% Cash* EPS 4» 10% Dividend 4s 10% 2006 guidance Revenue Growth* 8% 7%-9% Expense Growth* 6% | 5%-7% *adjusts headline numbers for AIFRS 2005 adjustments, significant items and incremental i
Slide 3: Strong performance from the major divisions
Strong performance from the major divisions Mar-06 v ivisi NPAT ($m) Division Mar-05 (%) Personal 16 542 Institutional 8 486 New Zealand Bus 14 Corporate 16 Esanda (20) Zz NPAT increase HB NPAT decrease Asia Pacific” 18 / 46 @ Mar-05 NPAT * Does not include Asia institutional business which is repor
Slide 4: A clear strategy - advance domestically while developing long term growth options in Asia
A clear strategy - advance domestically while developing long term growth options in Asia ~"e Winning share in Australia oy Good earnings momentum : Leading customer satisfaction Leading staff. engagement Longer-term growth irom Asia Improved results from Portfolio of low-risk Asian growth _ New Zea
Slide 5: A stronger foundation than ever for the future
A stronger foundation than ever for the future > Years of investment (branches, customers, people, technology, community) > Now engaged staff, satisfied customers, community respect, > Specialisation strategy and unique culture key differentiators > Growing in Australia, dominant in NZ, real Asian o
Slide 6: ee ae va ae Fe ee | eae aoe > a l eee —
ee ae va ae Fe ee | eae aoe > a l eee — ee _ -_ _— _ _ ee ee - -_ — — -_ SC —— CS
Slide 7: Welcome to IFRS!
Welcome to IFRS! October 2004 ~~ _ 1 October 200 _ IFRS applies, except AASB 139/132/4_ AASB 139, 13284 bed AASB 139 the most significant of new yy ae _come into play __ standards for a pa oe oo Lo Mar 2005 Statutory IFRS Accounts 2005 not restated for AASB 139, 132, and 4 Lack of comparability HOH
Slide 8: Very strong headline growth; 10.4% underlying growth
Very strong headline growth; 10.4% underlying growth Cash EPS 9.7% Underlying growth (pcp) 163. 1,731. _—*13 NPAT mes 00 m & ra , ge 6 2 a =o 1.555 15 (19) 17 1,568 ae os . a meee Ba ae ¥ ‘y ) I> 5 Ee € — oe 25 &§ 33 x BY eg co fF 2, 5S && Do as £8 #2 Mar-05 Mar-05 Mar-06 Mar-06 Cash Cash 10.4% 16.5
Slide 9: Good underlying business momentum
Good underlying business momentum Strong income growth, continued investment (Cash Earnings) 156 (132) 105 sm hii (62% = (6.7%) 17.2% 1,568 10.4% a LOA eens Profit before provisions Mar-05 Net Interest Other Expenses Provisions Tax & OEI Cash Income income HOH Growth 4.2% 2.3% 2.1% (31.1%) 12.4% Pro
Slide 10: Solid volume growth offset by margin pressure, particularly in Corporate and Esanda
Solid volume growth offset by margin pressure, particularly in Corporate and Esanda Net Interest Income* Drivers 1HO6 v 2HO5 End of Period+ $62m 5.6% 6.2% Personal -$7m (0.7%) $55m 4.9% $75m 14.9% 6.8% Institutional® “$16m (3.3%) $59m | 4, 11.6% $3im 7 711% 5.0% 7 Corporate -$17m [| (4.0%) $14m 3.1%
Slide 11: Competitive impacts on overall margin moderating slightly
Competitive impacts on overall margin moderating slightly* Lower competitive intensity in NZ, Competition reflected mainly partly offset by increase in Australia in product migration (competition impact on Group Margin ne ; 2HO5 - 1H06) | Includes 1.5bp impact from higher trading securities bps ete,
Slide 12: Non Interest Income highly seasonal, but good momentum
Non Interest Income highly seasonal, but good momentum | It Fee Income FX Earnings Profit on Trading Secs. Other g 16% § 7% Total 2% Non Interest Income is subject to seasonality, largely on fee line (other income growth hoh*) Series break due to IFRS 8.6% 2.2% 0.6% Mar- Sep- Mar- Sep- Mar- 04 04 05
Slide 13: Client flows driving increased Markets income, assisted by favourable conditions
Client flows driving increased Markets income, assisted by favourable conditions Total Markets Revenue ($m) Looking at Trading Income in / isolation is misleading, given Interplay with NII and FX revenue 21% oer" BBB -_ 300 280 1HOS 2HO5 1HO6 ff Net Interest Income fa Other Income (mainly FX) l4 Pro
Slide 14: Re-opening the 'Jaws' - increasing the gap between revenue and cost growth
Re-opening the ‘Jaws’ - increasing the gap between revenue and cost growth Cost to Income reduced“ Revenue/Cost ‘Jaws’ reopening 50% , Impacted by IFRS restatements 48% 4 on TA 46% 4 1.1% — -2.2% -1.3% +0.1% +2.2% ; 44% 4 10% 4 — AIFRS 42% 7 —~ — AGAAP 40% T T T T T ’ FyY01 FY02 FY03 FY04 FY05 1H06
Slide 15: Portfolio credit quality remains strong
Portfolio credit quality remains strong Increase in Non Accrual loans Delinquencies remain low driven by two accounts 24% + (60+ day delinquencies) $m # mom Mortgages a 0% | — | Normal seasonal 700 - + 45 Credit Cards up-tick 1.6% 7\ Ne + or ! me 600 4 40 1.2% 4 NY aw A , NOS 7 35 8% 500 4 ° T 30 0.
Slide 16: Collective Provision driven by a reduction in risk offset by lending growth
Collective Provision driven by a reduction in risk offset by lending growth Collective Provision Charge ($m) —% Core Businesses —4 Scenario impact Ba Non-Continuing Businesses 10%+ portfolio growth : 11%+ portfolio growth and ; f+ i : Portfolio growth T a Aporttalio growth T and flat risk mix in fla
Slide 17: Capital management and other financial considerations
Capital management and other financial considerations Capital Management ¢ Capital management initiatives will generally be considered when ACE capital is above the target range « In the short-term, ACE capital generation needs to cover: ¢ Balance Sheet impact of market share gains driving above pee
Slide 18: Group outlook
Group outlook Slightly above mid * Continued strong volume growth in both Revenue point of 7% - 9% Aust & NZ, driving interest and fee income medium term target | « Margin compression forecast to be slighter range greater than long term trend ¢ Ongoing investment particularly in Personal and increas
Slide 19: ee a il a OE i ve, i a / Fee = cu i)
ee a il a OE i ve, i a / Fee = cu i) ee xecu Se nil i on ahi en i a a “oN ane oe oo a oe oe oe HA aM) ii aM ‘il a ie a a me ah » | “ | a a a == == == == .2)—)—CrtC<—is—OCOCOCOCOdCdCO == —— m7 ee anz.co oo -_— CO rr—r—™—m™m™™™™L™™™L™™™™™™L™™™™™™——
Slide 20: A good first half
A good first half Statutory profit Cash’* profit Cash’ profit before provisions Cash* EPS Dividend Revenue Growth* 8% Expense Growth* 6% 1HO6 v 1HO5 16% 10% 10% 10% mp o> > > 10% 2006 guidance 7%-9% 5%-7% — integration costs and fair value hedge gains/losses 2 me *adjusts headline numbers for AIFRS
Slide 21: Se a
OE i a — Se a SS — SS =
Slide 22: Profit & Cash EPS reconciliation
Profit & Cash EPS reconciliation Income 4,963 Expenses —_ (2,185) _Provisions 2778 Provision for Cre 224) Tax & OEI (743) NPAT 1,811 AIFRS 2005 Adjustments 7 Non Core Ttems* (67) aisles 09 Pref. Share Dividend (12) Adjusted Cash NPAT 1,719 Average Shares 1,828 Basic Cash EPS (cents) 94.0 4,814 (2,26
Slide 23: Cash EPS comparison — AGAAP v A-IFRS
Cash EPS comparison — AGAAP v A-IFRS ended 30/09/05 ($n) _ Netinterestincome 0 708 | 6371 Other operating income 3,552 2,992 Operating expenses _ (4,515) (4,418) Provision for Credit impairment_ __(580)_ __ (565) Income tax expense (1,234) (1,233) Net profit attributable to minority interests (3) (3
Slide 24: Major divisions driving improved revenue growth
Major divisions driving improved revenue growth Divisional Revenue“* Growth Matrix * Good momentum in major divisions | « Personal driven by strong FUM P @ Institutional (12%) growth and stable margins Asia Pac (11%) > « Good growth in Markets, Trade, 2 2 C&SF driving Institutional >9% « Solid volum
Slide 25: Australian Geographic margin down 2bps
Australian Geographic margin down 2bps Competition key driver of Competition impacts across margin decline the portfolio . (competition impact on Aust margin hoh) Includes benefit of TTS provision release, FX revenue hedge and Ca es eee m 3HOS reduced broker impact eee a A 4 5 . Impact (bps) | (bps)
Slide 26: Reduced competition offset by increased funding impact in NZ Geographic margin
Reduced competition offset by increased funding impact in NZ Geographic margin Shift in funding mix offset by Fixed rate mortgage capital investment earnings competition abated in 1HO6 (competition impact on NZ margin hoh) Transfer of capital | [ oe | a SUNG “fomuciote” | Lampace | 10S | 2H05 236.2
Slide 27: ACE capital position relatively stable over the half
ACE capital position relatively stable over the half ACE Capital conservatively managed during 1HO6 awaiting final APRA rules 6.00 9 0.82 (0.47) A 5.75 74 5.50 4 5:25 9 (0.07) 55 0.03 (0.12) Ea i: i“ "BB vo ao) = a 3 2 QO (0.02) (9 92) 0.01 4.98 Ee wee if 5.00 4 Zara 8 38 E g of 4.75 4 vo Le i Ss ss
Slide 28: NZ revenue hedges partially unwound as NZ$ weakens
NZ revenue hedges partially unwound as NZ$ weakens A$/NZ$ weakened to long term ¢ Current revenue hedging policy is to average rate remain unhedged unless the 1.35 5 currency is perceived to be 1.30 4 A$/NZ$ significantly overvalued. 1.25 7 ¢ Post Sept 06, AIFRS requires 1.20 + average rate revenue
Slide 29: $350m on market share buyback completed in March
$350m on market share buyback completed in March 06 # shares 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 4 0 ra) wo io ra) ee 8 8 ne 4 o &§ 8B @ wu = << = tam Weekly buyback volume (LHS) mee Total buyback VWAP ($22.26) Jun-05 in ro} D a <x @ ANZ Weekly VWAP (RHS) Jul-05 Sep-05 “Total mkt V
Slide 30: Trying to making your life easier! ILLUSTRATIVE
Trying to making your life easier! ILLUSTRATIVE Revénue Growth Profit before provisions Expense growth PBP Growth Cash Profit $454 $678 $398 $622 $344 $565] $285 Provisioning $509 $228 $452 $172 $396 $145 $339 Each 10% change in provisioning charge yoy equals 1.3% change in growth rate Assumes sligh
Slide 31: Credit Quality
Credit Quality
Slide 32: Net Individual Provision charge down 8.5%
Net Individual Provision charge down 8.5% « Credit quality in New Zealand and Offshore continues to improve, with lower Net Individual Provisions. « Net Individual Provisions are up in Australia, due to the downgrade and provisioning of two Institutional accounts. woe soe Net Individual Provisions N
Slide 33: Group risk grade profile largely unchanged
Group risk grade profile largely unchanged Group — Outstandings $206bn $236bn $248bn AAA to BBB BBB- BB+ to BB BB- >BB- Mar-04 Mar-05 Sep-05 B+ to CCC 1.8% 1.7% 1.6% Non Accrual 0.5% 0.3% 0.3% $257bn* Investment Grade lending as at Mar-06 is $178bn or 69.5% of the portfolio Mar-06 1.5% 0.3% uh ar ma
Slide 34: Institutional risk grade profile continues to improve
Institutional risk grade profile continues to improve Institutional —- Outstandings $43bn $46bn $47bn $49bn AAA to BBB Investment Grade lending as at Mar-06 is $36bn or 73.4% of the portfolio BBB- BB+ to BB BB- >BB- Mar-04 Mar-05 Sep-05 Mar-06 B+ to CCC 1.8% 1.1% 1.1% 0.9% Non Accrual 1.4% 0.6% 0.5%
Slide 35: Credit quality robust in Mortgages Australia
Credit quality robust in Mortgages Australia « Dynamic LVR profile reflects strong Strong LVR profile migration into lower LVR buckets 80% compared to time of origination 70% ft LVR at origination Sep-05 LVR at origination Feb-06 « Owner Occupied dominates the 60% portfolio, while the uptake of Equi
Slide 36: Credit Cards: Risk Mix shift towards Proprietary Cards
Credit Cards: Risk Mix shift towards Proprietary Cards * The Consumer Cards portfolio has traditionally been weighted towards Loyalty however this balance is progressively changing due to strong Proprietary growth through competitive products and focused marketing campaigns, including the very succe
Slide 37: NZ consumer credit quality — putting it in perspective
NZ consumer credit quality — putting it in perspective 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% + NZ Home Loan arrears in line with same period last year 60+ day arrears Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Income growth likely to absorb higher repayment costs from refinancing at higher intere
Slide 38: Industry exposures — Australia & New Zealand
25bn 20bn 15bn 10bn 5bn Obn + Industry exposures — Australia & New Zealand Health & Community Cultural & Recreational Lending Assets (AUD) % of Portfolio (RHS scale) % in High Risk (RHS scale) % in Non Accrual (RHS scale) Forestry & Fishing Mir Wile X= Services ast «= eFVices 25bn 9.0% 9.0% 9.0% 20b
Slide 39: Industry exposures — Australia & New Zealand
Industry exposures — Australia & New Zealand Finance - Other 25bn 9.0% 20bn 15bn 6.0% 10bn 3.0% Sbn Obn + + + + 0.0% Sep-03 Sep-04 Sep-05 Mar-06 Finance — Banks, 25bn Building Soc etc. 9.0% 20bn 15bn 6.0% 10bn 3.0% 5bn Obn 0.0% Sep-03 Sep-04 Sep-05 Mar-06 25bn 20bn 15bn 10bn 5bn Transport & Storage
Slide 40: Industry exposures — Australia & New Zealand
Industry exposures — Australia & New Zealand Real Estate Operators & Dev. Retail Trade Lending Assets (AUD) % of Portfolio (RHS scale) % in High Risk (RHS scale) % in Non Accrual (RHS scale) Agriculture 25bn 25bn 9.0% 9.0% 9.0% 20bn 20bn 6.0% 15bn 6.0% 15bn 6.0% 10bn i0bn 3.0% 3.0% 3.0% 5bn Sbn Goca
Slide 41: Divisional Performance
Divisional Performance
Slide 42: Personal: Record lead on customer satisfaction driving market share and share of wallet gains
Personal: Record lead on customer satisfaction driving market share and share of wallet gains Closing gap on number 2 market position (share of traditional banking products*) Market Share Gap Leading major bank customer satisfaction (Main Financial Institution*) a Closest major peer Mar-03 Mar-04 Ma
Slide 43: Personal: Convenience & Simplicity delivering for our staff and customers
Personal: Convenience & Simplicity delivering for our staff and customers Continuing to invest in distribution (# branches and ATMs) 8007 1,800 11 Branches & 134 ATMs added 1,650 780 during 1HO6 ‘ 1,500 760 1,350 740 1,200 720 1,050 700 900 Sep-04 Mar-05 tweak Branches (LHS) Sep-05 Mar-06 eam ATMs (
Slide 44: Mortgages: Good performance driven by solid FUM growth and favourable margin environment
Mortgages: Good performance driven by solid FUM growth and favourable margin environment Mortgage growth continues at solid rate (FUM A$b excl securitised assets) 96.7 a5 86.7 —— © 6% L | ; 1HO5 2HO5 1HO6 ANZ Retail* growing well above system, Origin run-off impacting total growth (APRA Oct 05 - Feb
Slide 45: Banking Products: good growth in all products driving market share gains
Banking Products: good growth in all products driving market share gains Account numbers continue to Majority of new accounts part of grow solidly “Everyday Banking” package \ (% of new accounts) 11% increase in account numbers y 74% 76% . 2HOS 1HO6 1HOS 2HO5 1HO6 fH Everyday Banking Accounts* M4 Ot
Slide 46: Consumer Finance: Solid FUM growth, losses in line with long term trends
Consumer Finance: Solid FUM growth, losses in line with long term trends Increased low rate flows assisting FUM growth ($m) 5,714 12% 5253 7. ‘ “ 280 Growth in Low Rate cards moderating after strong launch (% growth of new accounts) 1HO5 2HO5 1HO6 st Loyalty la Proprietary a Low Rate* Proprietary an
Slide 47: Investment & Insurance: Direct Businesses building momentum
Investment & Insurance: Direct Businesses building momentum oh NPAT Strong Growth in all Direct contribution BUSinesses (1HO6 NPAT growth)... Gen Ins Trustees 9 Planning 43% Margin Lending Fin‘al Margin Trustees Gen Insur. Planning Lending .. driven by solid FUM growth ine $9.5b $1.1b $2.1b 22% 11%
Slide 48: Institutional: Solid lending growth, driven by buoyant market; High market liquidity still impacting margins
Institutional*: Solid lending growth, driven by buoyant market; High market liquidity still impacting margins Specialist product businesses continuing to Strong market driven RWA growth perform well (1H06 NPAT growth) (hoh RWA growth*) 20% 12% 10% 9o " 11% 13% Focus on 4 reducing reliance 8% i _on d
Slide 49: New Zealand: Good underlying momentum in both retail businesses
New Zealand: Good underlying momentum in both retail businesses Strong underlying business momentum in both retail brands (NZ$ profit before provisions*) 8 G 7.1% 1% NBNZ ‘ w2HO5 ™ 1HO6 -5.4% NBNZ maintains customer satisfaction lead, ANZ improving* 85% 75% ee 4 amet 72% ied 71% = ae Soe 65% 65% 59%
Slide 50: New Zealand: Institutional and Corporate performing well, Rural impacted by competition and seasonality
New Zealand: Institutional and Corporate performing well, Rural impacted by competition and seasonality Strong growth in Institutional* and Corporate; Institutional*: Result driven by Markets Rural impacted by competition and seasonality performance given increased NZ$ (NZ$ profit before provisions)
Slide 51: Corporate: Solid FUM growth partially offset by increased competition
Corporate: Solid FUM growth partially offset by increased competition Strong Lending and Deposit growth Investment in Small Business in all business (average FUM growth) paying dividends Net Lending Assets Deposits “All Key Customer ~ Smaii Bus. Metrics improved* Smail Bus. 16.2% Business Business T
Slide 52: Esanda and UDC: impacted by high oil prices and structural changes in NZ business
Esanda and UDC: impacted by high oil prices and structural changes in NZ business Lending growth in Australia | LHOG result impacted by partly offset by decline in NZ | lower used vehicle prices . . . | « Since January 2004 used vehicle * Solid growth in Australia prices in Australia have been ¢ NZ
Slide 53: Asia: Asian Network performing well, supported by Card JV's, Panin JV impacted by tough economic environment
Asia: Asian Network performing well, supported by Card JV's, Panin JV impacted by tough economic environment Growing revenues faster | Panin earnings impacted by difficult economic than expenses... : environment partly offset by provisioning (1HO6 v 1HO5) i 33.4% i / 16.1 15.2% 12.0 Revenue Growth E
Slide 54: Pacific: Solid FUM growth and customer acquisition continues to drive momentum
Pacific: Solid FUM growth and customer acquisition continues to drive momentum Strong NPAT growth... .. driven by continued solid lending growth despite deposit growth moderating in 1H06, following strong 2HO5 2HOS mm 1HO6 $m 14.4% 1HOS 1HO6 Lending Deposits Profit growth driven by continued Continu
Slide 55: Strong progress on our Corporate Responsibility agenda
Strong progress on our Corporate Responsibility agenda 2005 Total Seore a 20 40 60 ec) i Average Global ‘W ANZ Banking Group @ Basi company global Economic Dimension 8 20 4g 60 80 Social Girrension Environmental Dimension 6 26 40 ct) 60 4100 400 400 sy wo e “Community Involvement” No.3 value evident
Slide 56: Strong progress on our Corporate Responsibility agenda
Strong progress on our Corporate Responsibility agenda Putting our customers first * ANZ has the most satisfied retail customers of the four major banks and St George according to Roy Morgan research. Customer satisfaction continues to improve - from 76.6% in September 2005 to 78.2% in February 2006
Slide 57: Strong progress on our Corporate Responsibility agenda
Strong progress on our Corporate Responsibility agenda Earning community trust * We are expanding our Saver Plus financial literacy and matched savings program to include 18 sites nationally and 6,000 families over the next three years. The program will be implemented in partnership with The Smith F
Slide 58: Summary of forecasts — Australia
Summary of forecasts — Australia GDP Inflation Unemployment Cash rate 10 year bonds $A/$US Credit - Housing - Business - Other All Forecasts for Sept bank year 2005 2.3 2.6 5.0 5.5 5.4 0.76 13.4 13.3 13.8 12.8 2006 2.8 3.0 5.4 5.5 5.4 0.69 12.4 12.6 13.1 8.2 2007 3.8 2.9 5.2 5.75 5.3 0.67 10.2 11.3
Slide 59: Summary of forecasts — New Zealand
Summary of forecasts —- New Zealand GDP Inflation Unemployment Cash rate 10 year bonds $NZ/$US Credit - Housing - Business (incl rural) - Other (personal) All Forecasts for Sept bank year 2005 2.6 3.4 3.7 6.75 5.7 0.70 15.2 16.1 18.3 7.5 2006 1.4 2.9 3.9 7.00 6.0 0.60 11.3 12.3 9.7 7.0 2007 2.1 2.6
Slide 60: General background information disclaimer and investor relations contact
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 — 1H06 Earnings Presentation on 6ix