Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Debt Investor Presentation (November 2004)
50 slides from Anz's debt investor presentation, Nov 19, 2004
Slide 1: Tier 1 Investor Presentation
Slide 2: ANZ at a glance
ANZ at a glance s# Established in 1835, ANZ is currently Australia’s fourth largest publicly-listed company (by market capitalisation) s ANZ’s market capitalisation is A$38 billion (US$28 billion) # Following the acquisition of National Bank of New Zealand, ANZ is the third largest Australasian bank
Slide 3: 2004 result part of a series of consistent performances
2004 result part of a series of consistent performances $m NPAT growth (A$m) 3,000 7 e Profit excluding significant 2,500 4 items and NBNZ increased by 8% to A$2,536Mm 1,500 4 Co ’ 4i7d 1475 ¢ Focus and discipline again delivered strong performance e Cost to income ratio - ANZ is 1997 1998 1999 2000
Slide 4: Strong revenue growth, increased investment
Strong revenue growth, increased investment Non-interest Income 272 Expenses a (205) Non-interest Tax & OEI Interest Income — Income TrUEPrsS (84) 196 Impacts 8 BRB 2s. es 5 x aa (72) Provisioning 4 _TPUEPrS 44 impact on 2,348 interest income* 37 NPAT growth excluding NBNZ acquisition 2 and signific
Slide 5: 'Reported' profit increased by NBNZ and one-off's
‘Reported’ profit increased by NBNZ and one-off’s ¢ NBNZ performance in line with expectations @ TrUEPrS buy-back in 1H04; e $112m in SWAP income & interest e $28m in income tax expense ¢ Incremental integration costs of $14m reflect low risk approach ¢ INGA completion accounts finalised in 2H04; e
Slide 6: Strong balance sheet growth across most businesses
Strong balance sheet growth across most businesses ¢ Continued strong volume growth in mortgages, FUM up 18% ¢ Institutional lending up marginally with good growth in 2HO4 ¢ Continued strong growth in Corporate 10% increase in Banking Products deposit FUM reflected in strong Personal growth ¢ Instit
Slide 7: Previous growth investments in Personal/Corporate paying off
Previous growth investments in Personal/Corporate paying off Division Personal Banking* Institutional New Zealand Corporate Esanda & UDC Asia Pacific ING JV 802 788 584 344 143 111 108 64 2944 ($m) 693 802 211 311 129 100 82 95 2423 Sep-04 Sep-03 Change ($m) (%) 16 (2) 176 (33) Full Year NPAT ($m) N
Slide 8: Market share in New Zealand holding up well
Market share in New Zealand holding up well, particularly in the context of an acquisition ANZ and NBNZ share of Personal Share of household deposits has 30% Customers (Main Bank) is stable actually increased since acquisition Rolling 4 quarter average 40% 35.0 36.5 36.4 25% 35% ‘ ; somone ANZ. 30%
Slide 9: Improved sustainability: Structural de-risking largely complete
Improved sustainability: Structural de-risking largely complete Offshore lending assets significantly reduced More sustainable business mix (% of group NLA*) {lending assets) 12% 7 11% 2000 2004 10% + 9% 8% + 6% 6% + 5% 4% + 2% 5 0% T 2001 2002 2003 2004 “ Commercial mg Consumer Net Non-Accrual Loan
Slide 10: Credit quality in good shape
Credit quality in good shape e Risk has markedly improved in our international portfolios e¢ Housing market headed for soft landing, consumer arrears remain at low levels e Domestic corporates in good shape e Specific provisions and non accruals lower, despite impact of Telstra’s Reach joint venture
Slide 11: 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 $ sem ELP Adjustment bps 700 7 wes NBNZ Impact r 80 bps tteveza ELP Charge Standard ELP (bps) 6
Slide 12: 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 . . 0 $m improvement... $m portfolio down to 0.37% 9009 004 p 24% 1,500 jy 357 1.8% 800 7 || 1.6% 700 + 1,200 1.4% 600 4 1.2% 900 500 7 1.0% 400 4 0.8% 600 300 4 0.6% 200 4 300 0.4% 100
Slide 13: ANZ maintains the largest safety net for losses
ANZ maintains the largest safety net for both expected and unexpected losses Specific Provision/Non- 50% 7 Accrual Loans 45% 4 42% 40% 4 a 35% 4 30% 4 25% 4 38% | The continued high level of our General Provisioning reflects the lower level of actual losses in 200% p 4 2004. 15% 4 * The ELP methodol
Slide 14: 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 0.06 5.32 (0.23) 5.25 5 5.00 5 4.75 7 ly 4.50 4.25 9 4.00 - aiid 2004 Euro Tier 1 Roadshow 14
Slide 15: Australian Operating Environment
Australian Operating Environment Major Countries’ Policy Interest Rates Unemployment Rate Auatralia 90 91 92 93 G4 95 98 97 98 99 OO O1 O2 03 04 Euro pen omen Australia ——-US. Source: Australian Bureau of Statistics; Thomson Financia Source: Reserve Bank of Austrafia Housing Loans Approvals Credit G
Slide 16: Divisional Outlook for 2005
Divisional Outlook for 2005 Personal Banking Solid growth in all product business. Continued investment in the franchise. Margin improvement anticipated Institutional Return to modest growth following de-risking. Improved environment anticipated particularly in Markets business New Zealand Solid und
Slide 17: 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 18: Some other key issues
Some other key issues eo *Project on track with implementation set for March 2005 *Estimated project cost - A$20m *Work effort is structured around specific teams *No guidance yet received from APRA as to the capital management implications of IFRS *ANZ aiming to achieve Advanced Status *Project on
Slide 19: Hybrid Capital Raising Analysis and Intentions
Hybrid Capital Raising Analysis and Intentions Transaction Overview and Timing e Hybrid Tier 1 PerpNCi0 FRN Minimum €400 million Issue rating A- / A2 Roadshow week beginning 22 November Launch/Pricing thereafter e ANZ Tier 1 Spread History Recent ANZ Tier 1 Issuance ince ce Activity 7 V\,. A + AUDA
Slide 20: Terms and Conditions
Terms and Conditions i er Non-cumulative Trust Securities representing a Unit Regulation S @ % floating rate payable quarterly in arrears (15 Mar / 15 Jun / 15 Sep / 15 Dec). Distributions are non- cumulative and subject to payment tests 0 bps t d : A liquidation preference of €1,000 per ANZ Prefere
Slide 21: Structure Summary
Structure Summary Pre Conversion Event ANZ UK ANZ Sub Fully Paid Preference Shares: Interest bearing Note Units ANZ Capita! Trust If Trust Securities Investors Post Conversion Event ANZ UK ANZ Sub Interest bearing Note: ANZ Paris Branch Fully Paid Preference Shares * Ca Tr ————-—-—-—-—- Investors *
Slide 22: Conversion Events
Conversion Events Axz 2004 Euroa Tier 1 Roadshow 22
Slide 23: Payment Tests & Investor Protection
Payment Tests & Investor Protection Pane se AMS 2004 Euro Tier 1 Roadshow 23
Slide 24: Supplementary Information
Slide 25: New Zealand businesses delivering sound results
New Zealand businesses delivering sound results NBNZ performance slightly ahead of proforma (NZ$) Item _ Net Interest Income Other Income Operating Expenses PDD Income Tax & OEI NPAT NPAT comparison distorted by following one- offs e¢ FYOQ3 includes NZ$18m one-off structured finance transactions « A
Slide 26: 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 matron ANZ, ASB veer BN omp(ue National ——— Westpac Kiwibank Source: ACNielsen Consumer Finance Monitor A good acquisition; 2.3 cents cash
Slide 27: Expenses - investing for sustainable growth
Expenses - investing for sustainable growth Incremental . integration Underlying expense growth e 6.4% " ying p g NBNZ* 21 4,026 443 fll Goodwill Technology Other amortisation 48 129 ——— ova Hil Premises Personnel 2i Costs 128 ) Sep-03 Sep-04 excl. NBNZ Sep-04 and significant Reported items Key driv
Slide 28: 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 additional people Growth in Expected change from Mar-04 to Mar-05 FTEs (#) 600 5 400 4 200 4 04 L Y £ rm] Oo Personal New Zealand Corporate Institutional Technology ¢ Inc
Slide 29: Non-interest income growing well
Non-interest income growing well Underlying growth in non-interest income a 8.3% Underlying growth TrUEPrS 232 hedge 3,008 income* Cards under 2,808 (71) accrual =a Property Mall =a ~ Ea sales ee" Cashflow 2HO03 . FX impact on (27) impact trading (44) securities income 72 Sep-04 Sep-04 other income
Slide 30: 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) ~G Asset/Liability Wholesale Rate Impact (6) (3) <> Competition (3) (1) - 5 Brokerage Impact (2) a) G Other 2* 1 Total (18) (8) Fee 2004 Euro Ti
Slide 31: Increasing Mortgages business has reduced NIM
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 32: enn
enn nforma sation Yn i Me Bi Nz 2004 Euroa Tier 1 Roadshow 32
Slide 33: Specific Provisions lower, despite Telstra's Reach exposure
Specific Provisions lower, despite impact from our exposure to Telstra’s Reach Joint Venture Net Specific Provisions $m 800 5 r 100% 700 4 r 90% rT 80% 600 4 - 70% 500 | + 60% 400 4 f 50% 300 4 r 40% r 30% 200 4 + 20% 100 4 + 10% 0 T 0% Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 teas 2nd Half
Slide 34: New Specific Provisions down 7% on FY 2003
New Specific Provisions down 7% on FY 2003 Geographic Specific Provisions Specific Provisions by Source 450 4 200 , 8" 2003 2004 -50- , . py Aust/NZ — pyUK/US BAsia [Other Inter tt Energy ttt Domestic Coprorate @ Asset Finance @ Consumer Finance # Other Offshore fa Other ANB ai 2004 Euro Tier 1 Road
Slide 35: 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% Pt LVR at origination distribution networks 40% @ Dynamic LVR « Growth has been strongest in own
Slide 36: 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% _ 80% + 60% 4 YELVR at Origination MDynamic LVR MERIL Wy 40% 400 20% + 0% 1 . T T Aug-02
Slide 37: 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 seg
Slide 38: Power markets improving & offshore power exposures reducing
Power markets improving & offshore power exposures reducing Total Limits Split by Geography $8.2bn $9.7bn $8.2bn Sep-02 Sep-03 Sep-04 KMV Median Expected Default Frequency EDF % (Max KMV EDF = 20.00) 20.00 10.00 {| CCC B 4 Offshore B ‘. 1.00 A Wl . B+ Wy Wt Wy) 4 Australia / BBB New Zealand 0.10) |
Slide 39: The quality of the Telcos book has continued to improve
The quality of the Telcos book has continued to improve Total Telcos Limits‘) AAA to BBB BBB- BB+ to BB- B+ to CCC Non Accrual Note: i 1% 2% Excludes Settlement Limits but includes Contingent and Market-Related products. 1.00 4 0.10 4 0.01 KMV Median Expected Default Frequency (Max KMV EDF = 20.00)
Slide 40: Group risk grade profile
Group risk grade profile BB+ to BB >BB- B+ to CCC Non Accrual ANZ Group - Outstandings $143bn $149bn $158bn $168bn $207bn $222bn a Total investment grade as at Sep 04: $152bn or 68.5% of the portfolio Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 2.8% 2.5% 2.5% 2.3% 1.9% 1.8% 0.9% 0.8% 0.7% 0.6% 0.4% 0.
Slide 41: Geographic risk profiles
Geographic risk profiles Australia & New Zealand International $9bn $10bn $145bn $155bn $198bn $212bn $10bn ” " i ; i, BB+ to BB ian, ie BB- 64% >BB-_ ) i i Mar-03 Sep-03 Mar-04 Sep-04 Mar-03 Sep-03 Sep-04 B+ to CCC 2.3% 2.0% 1.7% 1.8% 6.1% 6.1% 24% Non Accrual 0.4% 0.4% 0.4% 0.3% 45% 44% 2.9% ee ey
Slide 42: 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) Health & Community Cultural & Recreational Forestry & Fishing Services Services 2.5bn 7 10.0% 2.5bn 20.0% 1.0bn 10.0% +8.09 9 2
Slide 43: 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% 4bn 40.0% 4bn 4.0% 4bn 8.0% 8.0% 3bn 3bn 3.0% — 3bn 6.0% 6.0%
Slide 44: Industry exposures - Australia & New Zealand
Industry exposures - Australia & New Zealand Real Estate Operators & Dev. 10.0% 8bn 7 8.0% 6.0% 4.0% 2.0% nd 4bn 4 2bn 4 Retail Trade " Sep-01 0.0% Sep-02 $ep-03 Sep-04 Manufacturing 10.0% 8.0% 6.0% 4.0% 2.0% Sep-01 iia die 2004 Euro + 0.0% Sep-02 Sep-03 Sep-04 * Sep 04 includes NBNZ Obn 5bn 7 4on 7
Slide 45: srerarerzane
srerarerzane oe ( Axz 2004 Euroa Tier 1 Roadshow 4s
Slide 46: Update on Basel II and IFRS
Update on Basel II and IFRS IFRS comparative accounts, except IAS 32/39 | Evaluation complete Ad System design & IFRS first year of adoption NZ ANZ Quarterly Interim GDS Results Sep Dec Mar Dec Mar Dec APRA Prudential Standards Issued Draft: cdg Finat > APRA engagement Australian Basel II infrastruc
Slide 47: 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 48: 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 49: 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 &a@az 2004 Euro Tier 1 Roadshow
Slide 50: 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 — Debt Investor Presentation (November 2004) on 6ix