National Australia Bank Limited · ASX:NAB
National Australia Bank — Investor Day (July 2006)
68 slides from National Australia Bank's investor day presentation, Jul 14, 2006
Slide 1: Bank of New Zealand Market Update
Bank of New Zealand Market Update Sydney, 11 July 2006
Slide 2: Welcome
WELCOME John Stewart Group Managing Director & CEO, NAB
Slide 3: Bank of New Zealand Market Update
Bank of New Zealand Market Update Sydney, 11 July 2006
Slide 4: What we aim to achieve today
What we aim to achieve today Provide an overview of the NZ market and BNZ Present key data we believe will be of most interest to you Directly address perceptions about Unbeatable Provide in-depth information on the two key revenue generating business lines – business and personal banking Answer you
Slide 5: Executive team introductions
Susan Basile GM Direct Sales & Service Shona Bishop GM Marketing & Business Development Chris Black GM Corporate Office & Quality Anthony Grayson GM Corporate & Institutional Banking Mark Hosking Chief Financial Officer Bridget O’Shannessey GM People and Culture Glenn Patrick GM Payments Mike Skilli
Slide 6: Key messages
Consistent strategy over the last four years We are a customer-driven organisation Experienced management team and excellent people practices We are strongly positioned to compete in New Zealand Strong organic growth over the last three years - now the second largest bank by lending assets Key messa
Slide 7: Today's Agenda
Today’s Agenda NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key actions Stakeholder outcomes: BNZ in 2006 Business banking - Mike Skilling, General Manager, BFS Personal banking - Blair Vernon, General M
Slide 8: Today's Agenda
Today’s Agenda NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key actions Stakeholder outcomes: BNZ in 2006 Business banking - Mike Skilling, General Manager, BFS Personal banking - Blair Vernon, General M
Slide 9: Private sector credit growth forecasts
0 2 4 6 8 10 12 14 01 02 03 04 05 06 07 08 Forecasts PRIVATE SECTOR CREDIT GROWTH Relative growth likely to underperform near term 20 year performance 1% below the G14 average Recent out-performance crossed over in 2005 NZ likely to revert to long term underperformance System growth peaked at 15.2%
Slide 10: Inflation outlook above 3%
Inflation outlook above 3% -16 -14 -12 -10 -8 -6 -4 -2 0 74 77 80 83 86 89 92 95 98 01 04 07 Forecasts CURRENT ACCOUNT DEFICIT AS % GDP Reliance on foreign investors to continue Currency & growth volatility risk remain Reserve Bank scope to ease monetary policy low OCR low-point likely 5.75% in 2008
Slide 11: NZ has poor savings record with outlook for continued dis-saving
NZ has poor savings record with outlook for continued ‘dis-saving’ 0 10000 20000 30000 40000 50000 60000 70000 80000 Switzerland UK US Australia New Zealand Turkey US$ per capita PENSION & LIFE INSURANCE INVESTMENT ASSETS Source : OECD 6 7 8 9 10 11 12 13 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Slide 12: Net immigration and house price inflation
-20000 -10000 0 10000 20000 30000 40000 50000 01 02 03 04 05 06 07 08 Forecasts NET IMMIGRATION INTO NEW ZEALAND Record 12 month gain 43,000 May 2003 House price boom ending Price falls up to 5% next 18 months Unlikely to see major investment property sell off given tight labour market and fixed rat
Slide 13: Exchange rate declining
Exchange rate declining 80.0 90.0 100.0 110.0 120.0 130.0 140.0 150.0 160.0 170.0 00 01 02 03 04 05 06 07 08 ANZ Commodity Price Index World Price terms NZ EXPORT COMMODITY PRICES Forecasts 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 00 01 02 03 04 05 06 07 08 NZD/USD EXCHANGE RATE Forecasts Return to 4
Slide 14: Clear themes emerge
Clear themes emerge NEGATIVES GDP outlook – a reversion to under perform trading partners in line with long term trend Interest rates – inflation concerns mean limited scope for RB to prime economy by reducing interest rates Currency volatility – dependence on off-shore borrowing & high current acco
Slide 15: Today's Agenda
Today’s Agenda NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key actions Stakeholder outcomes: BNZ in 2006 Business banking - Mike Skilling, General Manager, BFS Personal banking - Blair Vernon, General M
Slide 16: Regulatory environment reflects global trends
Regulatory environment reflects global trends Commerce Commission Prosecution on credit card fees Increasing surveillance of fee/price levels Structured finance tax disputes Trans-tasman transfer pricing scrutiny Outsourcing policy Compliance with Basel, anti-money laundering Inland Revenue Reserve
Slide 17: Income profile in New Zealand limits wealth creation
Income profile in New Zealand limits wealth creation New Zealand income statistics very different to Australia – and widening No compulsory saving or tax incentives for superannuation 33% of working population on some form of government support – with likely increasing trend < $40,000 11% 14% 75% $4
Slide 18: Australasian comparison reveals the gap
Australasian comparison reveals the gap Strong emigration to Australia & UK of professional and trades people Embedded high dependency on Government Superannuation 400,000 New Zealanders (10% of population) now permanently resident offshore Source: Statistics NZ, Australian Bureau of Statistics (200
Slide 19: Industry profit growth aided by efficiency but slowing
Industry profit growth aided by efficiency – but slowing Source: Major Banks GDS Net Profit (CAGR) : 9% Cost Income ratio leveling off Industry Net Profit and Efficiency Trends 1,500 1,700 1,900 2,100 2,300 2,500 2,700 2000 2001 2002 2003 2004 2005 $m Net Profit 42 44 46 48 50 52 54 Net Profit Cost
Slide 20: Forces driving increasing competitive pressure on industry earnings
Forces driving increasing competitive pressure on industry earnings Five major bank brands - 85% of market KiwiBank price led growth strategy Niche players / new entrants to banking sector Finance Company sector growth Competitive pressure on industry earnings
Slide 21: Today's Agenda
Today’s Agenda NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key actions Stakeholder outcomes: BNZ in 2006 Business banking - Mike Skilling, General Manager, BFS Personal banking - Blair Vernon, General M
Slide 22: The challenge for BNZ in 2002: rebalancing the business
The challenge for BNZ in 2002: rebalancing the business Business banking performance was strong in 2002 Personal markets strategy had been adopted from Australia in the mid-1990’s, with a wealth management focus Mortgage market share falling since mid-1990’s Personal customer defections were acceler
Slide 23: By 2002: Personal satisfaction falling
By 2002: Personal satisfaction falling Source: AC Nielsen
Slide 24: Today's Agenda
Today’s Agenda NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key actions Stakeholder outcomes: BNZ in 2006 Business banking - Mike Skilling, General Manager, BFS Personal banking - Blair Vernon, General M
Slide 25: Revised strategic intent since 2002
Revised strategic intent since 2002 Aggressive fee and price focus Short term profits Reliant on Business banking Unhappy staff & customers Unsustainable Our Reality Actions Direct communication with customers Streamline product offering 6-sigma Reinvigorate sales capability Teller platform Web & ca
Slide 26: Marketing problems and the Unbeatable solution
Marketing - lack of cut through in marketing messages Urgent need to change long held perceptions about BNZ Media - negative coverage over many years Staff - lacked belief in our renewed customer focus and competitiveness Competitors - brokers misleading customers about BNZ positioning Customers - p
Slide 27: Unbeatable myths
Only about Fixed Rate home loans Damages industry profit Damages BNZ margins/profit Unbeatable: Unbeatable ‘myths’ Myth # 3 Myth # 2 Myth # 1
Slide 28: Myth 1: Unbeatable just a fixed rate home loan campaign
MYTH 1: Unbeatable just a fixed rate home loan campaign Reality: ‘Unbeatable’ is an essential repositioning element of the BNZ brand – internally and externally
Slide 29: Myth 2: Unbeatable home loans damage BNZ profit
Source : internal source data - as at March 2006 MYTH 2: Unbeatable home loans damage BNZ profit Reality: Fixed Home Loans represent only a small percentage of BNZ Net Interest Income 11% Fixed Rate housing NII contribution BNZ Net Interest Income Split
Slide 30: Myth 2: BNZ net interest margin shows the best trend
MYTH 2: Unbeatable home loans damage BNZ profit Reality: BNZ Net Interest Margin (NIM) shows the best trend Overall Margin Trend 198 233 Bank 3 256 272 Bank 2 245 279 Bank 1 248 243 Bank of New Zealand 2006* (bps) 2002+ (bps) + Source: KPMG FIPS report * Source: Major Banks GDS Interest Margin Analy
Slide 31: Myth 3: Unbeatable damages industry profitability
7.45% 7.55% 7.65% 7.75% 7.85% 7.95% 8.05% Representative pricing - 2 year fixed – 6 July 2006 Source – Interest.co.nz & bank research MYTH 3: Unbeatable damages industry profitability ~8.00 7.85 Classic 7.95 Reality: Discounting prevalent across the whole market Our experience Carded rates selective
Slide 32: Summary: Unbeatable myths vs facts
Only about Fixed Rate home loans Damages industry profit Damages BNZ margins/profit Summary: Unbeatable ‘myths’ vs facts Successfully repositioned BNZ brand internally and externally in all segments NII from Fixed Home Loans just 11% of total BNZ NIM performance shows best trend Discounted pricing p
Slide 33: Our strategic approach to long term sustainable growth
Fostering Talent Product & Process Innovation Deposits Sales Capability Simplification Consumer Finance Agribusiness Youth Small Business Emerging Consumer Finance Simplification Sales Capability Agribusiness Deposits Small Business Consumer Finance Agribusiness Home Loans Youth Small Business Brand
Slide 34: Today's Agenda
Today’s Agenda NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key actions Stakeholder outcomes: BNZ in 2006 Business banking - Mike Skilling, General Manager, BFS Personal banking - Blair Vernon, General M
Slide 35: Key stakeholder measures have improved
Key stakeholder measures have improved Shareholders Community Employees Customers
Slide 36: Customers: main bank market share trends
Customers: main bank market share trends 31% 32% Cards2f 10% 6% Youth1 18% 18% Retail deposits2 16% 14% Housing2 Personal Markets 18% 20% Agribusiness2 20% 18% Small Business1 26% 24% Middle Markets1 2006 2002 1 Source: AC Nielsen / TNS Surveys (2001/2 low-point) 2 Source: RBNZ / BNZ data (2001/2 lo
Slide 37: Customers: key satisfaction metric improved
Customers: key satisfaction metric improved Source: AC Nielsen
Slide 38: Employees: today's evolution
Employees: today’s evolution Leadership development – industry leading framework for all 600 people leaders Cultural change – fully engaged in group wide initiatives Corporate Principles – well embedded and understood across the organisation Employee Value Proposition – comprehensive approach to val
Slide 39: Community: an integrated approach
Sponsorships Auckland University Chair of Finance Tertiary Scholarships Katherine Mansfield Short Story Awards Community - staff involvement Save the Kiwi - partnership with Department of Conservation Community based sponsorship - regional theatre, small business awards Commonwealth Games Community:
Slide 40: Shareholders: BNZ delivers solid returns
Shareholders: Bank of New Zealand delivers solid returns Return on equity vs return on assets FY05* ROE: 21.20% ROA: 1.30% ROE: 16.68% ROA: 1.41% ROE: 16.95% ROA: 0.96% ROE: 19.80% ROA: 1.07% * Source: KPMG 2005 FIPS Return on Assets Return on Equity** ** ROE = NPAT/Average Net Assets 14.0% 16.0% 18
Slide 41: Shareholders: ongoing re-investment in franchise
Shareholders: ongoing re-investment in franchise to drive sustainable earnings Overall Cost to Income Trends 43% 51% Bank 3 40% 42% Bank 2 47% 49% Bank 1 47% 46% Bank of New Zealand 2006* 2002+ + Source: KPMG FIPS report * Source: Major Banks GDS Cost to Income Ratio (%) 1 2 2 8
Slide 42: Shareholders: asset quality remains robust
Levels of net write-offs Net write offs at very low levels historically Credit cycle is turning Some industries under pressure – pip fruit, forestry, fishing and finance company sector NZ$m Shareholders: Asset quality remains robust Source : BNZ GDS -20 -10 0 10 20 30 40 50 60 2000 2001 2002 2003 20
Slide 43: Recap
Recap NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key actions Stakeholder outcomes: BNZ in 2006
Slide 44: Today's Agenda
Today’s Agenda NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key actions Stakeholder outcomes: BNZ in 2006 Business banking - Mike Skilling, General Manager, BFS Personal banking - Blair Vernon, General M
Slide 45: Business & Agri banking
Business & Agri banking Business banking overview Middle and small business performance Agribusiness overview
Slide 46: Business banking: a great franchise, growing strongly
Business banking: a great franchise, growing strongly * Annualised based on first half 2005/2006 44% 34% 22% 46% 29% 25% CAGR 8% 45% 34% 21% 46% 33% 21% $NZm Revenue Growth 2003 - 2006 0 100 200 300 400 500 2003 2004 2005 2006* Asset Liability OOI
Slide 47: Business banking: above system volume growth
Business banking: above systems volume growth; focus on margins and fees Source: RBNZ, Internal analysis 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 System BNZ Business Lending volume growth versus systems Sept 02 - Mar 06
Slide 48: Middle Market integrated financial solutions
Internet Banking Branch Network Middle Market: Integrated financial solutions, specialisation & relationship management Call Centre Customer Telephone Banking PC Banking & CFS Asset Finance Debtor Finance Risk Management FX, IR Domestic & Int’l Payments Private Bank Insurances Credit Cards Economic
Slide 49: Middle Market: strength of proposition reflected in market share
Middle Market: strength of proposition reflected in market share Source: TNS (Market Share is defined by the proportion of businesses which have most of their funds at that bank) Banker Performance Reputation & Relationship Fees & Charges Everyday Banking Specialist Performance 16% 14% 13% 12% 11% T
Slide 50: Small Business: SME sector has strength and opportunities
Small Business: SME sector has strength and opportunities Source: TNS March 2006. Transactions & Savings Accounts 5 Key Areas of Focus Fees & Rates Internet Banking for Business Branch Specialists Business Managers Decentralised BNZ Market Share of Footings (businesses < $5m t/o) – March 2006 23%22%
Slide 51: Agribusiness: growing ahead of system again
Agribusiness: growing ahead of system again Source: RBNZ Reputation & Image Other Costs Borrowing & Investment Rates Agri Manager Service & Performance Fees & Charges 22% 18% 16% 11% 8% Top 5 Drivers of Customer Value Contribution to Overall Value Source: CVM BNZ customer survey Lending volume growt
Slide 52: Business & Agri Banking summary
Business & Agri Banking Business banking overview Middle and small business performance Agribusiness overview Excellent long term franchise continues to grow Better than system performance Middle business leverages strong specialists & channels Small business opportunity is more customers Long term
Slide 53: Today's Agenda
Today’s Agenda Business banking - Mike Skilling, General Manager, BFS Personal banking - Blair Vernon, General Manager, PFS Concluding comments Questions NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key
Slide 54: Personal banking agenda
Personal banking agenda Snapshot of today’s operation Six key changes from 2002-2005 Recent performance
Slide 55: Personal banking: the operation today
Personal banking – the operation today 680,000 customers – 13% main bank share 179 Branches 24/7 Contact Centre 60 Mobile Managers Private Banking & Investment Management Insurance – manufacture & in-sourcing 398 ATMs Web Retail Banking – ‘rebuilding’ Wealth Management – ‘right sizing’
Slide 56: Change: Simplify sales activity
Change 1 – Simplify sales activity 2002 - almost 200 products for a retail banker to ‘sell’ Biggest sales opportunity was to stop selling some products Major shift was removal of managed fund and superannuation product sales 5 point sales agenda Investments Home Loans Everyday Banking Credit Cards &
Slide 57: Change: Redefine the Branch and re-introduce Branch Managers
Change 2 – Redefine the Branch & Re-introduce Branch Managers Branch banking ‘rebuild’ ‘Reintroduce’ Branch Manager role Branch P&L & Balance Sheet Combine retail & ‘premium’ businesses Contact Centre outbound calling & lead centralisation Re-energise channel uptake to web, ATM and EFTPOS View outle
Slide 58: Change: Improve capability of our people
Track & monitor training outcome Change 3 – Improve the capability of our people through recruitment & training Drive down costs for advertising and temporary staff Reduce cycle time to recruit Model and track talent acquisition – learn and make ‘repeatable’ 6-Sigma used uniquely Defined ‘defect’ -
Slide 59: Change: Increase individual performance via targeted coaching
Change 4 – Increase individual performance via targeted coaching Historically a one-size fits all approach to coaching Deliver banker specific performance data to enable targeted coaching Expose super-performers to drive retention activities Individual Banker Sales BA* BA PM PM BA BA PM BA* BA* PM B
Slide 60: Change: Roll up data to define branch outlet opportunities
Change 5 – Roll up data to define branch outlet opportunities and talent movement Same data rolls up to aggregate outlet ‘velocity’ – reflecting coaching and local market performance Reveals talent strength and opportunities Combines with ‘right-sizing’ of individual branch locations and new branch
Slide 61: Change: Customer satisfaction and sales performance a single game
Change 6 – Make customer satisfaction and sales performance a ‘single game’ Matching sales velocity and service by outlet reveals the sweet spots and the opportunities for upside We have the underlying levers assembled to drive both outcomes in harmony rather than an either/or scenario Med Sales Out
Slide 62: Recent performance: substantial lift in sales
Recent performance – substantial lift in sales Change program never ‘finished’, but broadly 24-36 month turnaround program now behind us Now have a sound trajectory to build on as we face into a competitive landscape Total Products Sold (%) - last 12 months 60% 80% 100% 120% 140% 160% 180% 200% 220%
Slide 63: Next wave: revised brand having positive impact
Next wave – revised brand having positive impact BNZ is becoming more popular Source – Colmar Brunton 2006 BNZ Brand Tracking Base: All respondents who currently have a mortgage (n=470) Benchmark – Pre launch 8 weeks post launch = Significantly different from benchmark at 95% 14 15 4 22 21 22 9 31 B
Slide 64: Personal banking summary
Personal banking summary Snapshot of today’s operation Six key changes from 2002-2005 Recent performance Wealth management is ‘right sized’ for this market dynamic Retail business well positioned across channels 3 year change program largely complete – without BNZ earnings ‘break’ Driving the busine
Slide 65: Today's Agenda
Today’s Agenda NZ economic overview A highly competitive market with some unique differences BNZ in 2002: the critical turning point Our strategic response: key actions Stakeholder outcomes: BNZ in 2006 Business banking - Mike Skilling, General Manager, BFS Personal banking - Blair Vernon, General M
Slide 66: Conclusion
Conclusion Consistent strategy over the last four years We are a customer-driven organisation Experienced management team and excellent people practices We are strongly positioned to compete in New Zealand Strong organic growth over the last three years - now the second largest bank by lending asset
Slide 67: Disclaimer
Disclaimer This document is a presentation of general background information about the Group’s activities current at the date of the presentation, 11 July 2006. It is information in a summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or pot
Slide 68: Your Questions
| Your Questions EE] Bank of New Zealand