Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Debt Investor Presentation (November 2013)
66 slides from Anz's debt investor presentation, November 2013
Slide 1: Debt Investor Update
13 DEBT INVESTOR UPDATE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2013
Slide 2: ANZ FY2013 Debt Investor Update
ANZ FY2013 Debt Investor Update 1. 2013 Full Year Result Overview 2 2. Capital, Funding & Liquidity 12 3. Subordinated Debt Issuance 19 4. Appendices Asset Quality 23 Economic Update 37 Covered bonds 57 AUSTRALIA DIVISION 1
Slide 3: Full Year Results released 29 October 2013
13 DEBT INVESTOR UPDATE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Full Year Results released 29 October 2013
Slide 4: Overview of Financial Performance
Overview of Financial Performance FY13 FY12 FY13 $M $M v FY12 Cash Profit 6,498 5,830 +11% Operating Income 18,378 17,848 +3% Expenses 8,236 8,519 -3% Provisions 1,197 1,258 -5% Statutory NPAT 6,272 5,661 +11% EPS (cents) 239 219 +9% Dividend per Share (cents) 164 145 +13% All figures other than Sta
Slide 5: 2013 Result by Division
2013 Result by Division FY13 Cash Net Profit after Tax ($m) +11% +15% 2,873 2,430 +37% +36% 881 469 Australia International & New Zealand Global Wealth Institutional Banking Excludes Group Centre that includes a $301m decrease in revenue mainly due to the gain on sale of Visa shares in 2012 4
Slide 6: 2013 Result by Division
2013 Result by Division FY13 v FY12 FY13 v FY12 Australia New Zealand (NZD) Operating Income 7,867 +7% Operating Income 2,678 -1% Operating Expenses 2,951 -2% Operating Expenses 1,155 -15% Cost to Income Ratio 37.5% -330 bps Cost to Income Ratio 43.1% -750 bps Net Interest Margin 2.53% +5 bps Net In
Slide 7: Income by Division and Geography
Income by Division and Geography Operating Income Mix by Division (FY13) Operating Income Mix by Geography (FY13) FY13 Network Revenue1 from APEA represented 21.4% of Group Operating Transaction Income Banking Retail Asia Global Pacific Asia Loans 8% Partnerships 4% Other 9% 2% 1% New Zealand 6% Ret
Slide 8: Net Interest Margin – Group ex markets
Net Interest Margin – Group ex markets Net Interest Margin movement 2H13 v 1H13 bps 267 2 2 261 4 2 3 1 1H13 Impact of Funding costs Business & Deposits Assets (incl. Other 2H13 lower interest (ex impact of funding mix credit risk mix) rates lower rates) Net Interest Margin movement FY13 v FY12 bps
Slide 9: Strong credit quality
Strong credit quality Credit Quality Trends Provision Charge FY13 v FY12 $m Individual Provision Charge (LHS) Collective provision Charge (LHS) Collective Provision 100bps coverage1 3,500 Total Provision Charge as % Avg. net Advances 2,500 0.85% 1,500 0.50% 5% Total Provision charge 500 0.32% 0.30%
Slide 10: Individual Provision Charge
Individual Provision Charge Individual Provision Charge by Segment Individual Provision Charge Composition $m Institutional Commercial Consumer $m New Increased Writebacks & Recoveries 3,000 2,815 2,815 3,000 1,823 1,637 1,213 1,167 2,000 2,500 1,000 0 2,000 1,823 -1,000 FY09 FY10 FY11 FY12 FY13 1,6
Slide 11: Strong Balance Sheet
Strong Balance Sheet FY13 v FY12 Capital 10.0% 10.8% 47bps APRA Basel 3 CET1 Internationally Harmonised 76bps CET1 8.0% 8.5% Customer Funded Balance 62% Sheet Sep 12 Sep 13 APRA CET1 Internationally Harmonised CET1 Term Wholesale Funding $24b issued, 29% to Domestic Stable Funding Mix investors 14%
Slide 12: Deposit growth continues to fund loan growth
Deposit growth continues to fund loan growth Customer Lending & Deposits by Geography Customer Lending1 movement FY13 v FY12 $b Customer Lending1 Customer Deposits $b 14 469 8% CAGR 12 500 469 15 450 428 428 13% CAGR 397 400 369 369 Up 10% 350 328 297 Sep 12 Australia New APEA Sep 13 300 Zealand 257
Slide 13: Capital, Funding & Liquidity
13 DEBT INVESTOR UPDATE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Capital, Funding & Liquidity
Slide 14: Balance Sheet composition by Geography
Balance Sheet composition by Geography Customer Lending1 by Geography Customer Deposits by Geography Australia APEA Institutional Retail & APEA Wealth APEA Commercial APEA Retail & & Institutional 10% 2% Commercial Wealth 22% 11% & Institutional 4% Australia Commercial APEA 14% Australia APEA 13% Ne
Slide 15: Capital levels remain well positioned
Capital levels remain well positioned Basel 3 CET1 Capital Overview 10.8% • Capital generation and initiatives in FY13 10.0% Internationally have lifted capital levels by 47bps (APRA 9.5% Harmonised CET1) and 76bps (Internationally APRA Harmonised CET1) • The group is well placed in regards to capit
Slide 16: Liquidity position has benefitted from improved funding mix and asset profile
Liquidity position has benefitted from an improvement in both funding mix and asset profile Funding mix has stabilised Shortened asset tenor 29% 19% 18% 16% 23% 24% 7% 14% 15% 14% 13% 22% 8% 5% 3% 1% 6% 8% 3% 3% 7% 12% 12% 14% 80% 61% 62% 74% 73% 50% 7% 8% 8% 4% 3% 3% Sep 08 Sep 12 Sep 13 Sep 08 Sep
Slide 17: Lowest structural funding gap of major domestic peers
Lowest structural funding gap of major domestic peers, providing flexibility Peer Funding Comparison ANZ Westpac NAB CBA Loan – Deposit Ratio (%) 127% 145% 145% 139% Loan – Deposit Gap ($b) 101 162 153 157 Australia Household Funding Gap ($b) 115 181 129 174 Loan – Deposit Gap Benefits of a lower Fu
Slide 18: A sustainable term wholesale funding profile
A sustainable term wholesale funding profile Term Wholesale Funding Profile Issuance Maturities $b 26 26 24 24 Annual indicative 21 issuance volume 18 16 16 13 12 11 FY19+ FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Senior Unsecured Covered Bonds Government Guaranteed Tier 2 Includes transacti
Slide 19: Strong liquid asset position
Strong liquid asset position Liquidity Portfolio Basel 3 Liquidity Rules Update $b 122 ● In August, APRA provided further details on 115 their approach to Basel 3 Liquidity implementation relating to High Quality Liquid Assets (“HQLA”) 39 91 38 ● Each ADI needs to hold their relative component of th
Slide 20: Subordinated Debt Issuance
13 DEBT INVESTOR UPDATE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Subordinated Debt Issuance
Slide 21: Basel – Improving the banking sector's ability to absorb shocks
Basel 3 – Improving the banking sector's ability to absorb shocks from financial and economic stress Capital More capital, better quality Liquidity Higher levels of liquidity, funded with more stable funding Leverage Limits imposed to prevent excessive build up of risk Risk More focus on measurement
Slide 22: ANZ B3 Tier 2 Securities Loss absorption
ANZ B3 Tier 2 Securities • Key change from the Terms & Conditions of Basel 2 Tier 2 securities is the inclusion of Point-of-Non-Viability (PONV) loss absorption Likely • Dated subordinated liabilities structure • ANZ anticipates that it will continue to periodically issue bullet or non-step callable
Slide 23: Tier 2 comparison across jurisdictions
Tier 2 comparison across jurisdictions US Canada UK Scandinavia Australia Issue rating (vs Issuer 1 notch (Moody's) No current 1 notch (Moody's) 1 notch (Moody's) 2 notches (Moody's) unsupported 1 notch (S&P) precedents 1 notch (S&P) 1 notch (S&P) 2 notches (S&P) rating) Senior to Additional Senior
Slide 24: Asset Quality
13 DEBT INVESTOR UPDATE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Asset Quality
Slide 25: Control List and Risk Grade Profiles
Control List and Risk Grade Profiles Group Sub-Investment Grade1 Exposures Control List as % Exposure at Default Control List by limits Control List by No of Groups <BB- BB- BB+ to BB Index Sep 09 = 100 120 28% 28% 26% 100 80 23% 22% 60 13% 13% 12% 40 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 11% 11% Inves
Slide 26: Gross Impaired Assets
Gross Impaired Assets Gross Impaired Assets by Type Gross Impaired Assets by Size of Exposure $m Impaired Loans NPCCD1 Restructured $m > $100m $10-$99m < $10m 8,000 8,000 Avg. $0.8b 7,000 decline YOY 7,000 6,561 since Sep 10 6,561 6,000 5,595 5,581 6,000 5,595 5,581 5,196 5,196 5,000 5,000 4,264 4,2
Slide 27: Total Credit Exposure (EAD) by Industry
Total Credit Exposure (EAD) by Industry Exposure at Default (EAD) % in Non as a % of group total Category EAD Performing ANZ Group Mar 13 Sep 13 Mar 13 Sep 13 Total EAD (Sep 13) Consumer Lending 40.4% 40.8% 0.2% 0.2% $725b Finance, Investment & 16.8% 15.9% 0.2% 0.1% Insurance Property Services 7.1%
Slide 28: Resources
Resources Resources Exposure by Sector (% EAD) Resources Exposure by Geography (EAD) Resources Australia 22% Total EAD (Sep 13) As a % of Group EAD $13.7b 1.9% Asia 6% New Zealand 52% 20% 6% 19% Europe, America, Pacific & Other Includes Resources Exposure by Geography (EAD) Iron Ore 7% 37% 22% $b Au
Slide 29: Agriculture
Agriculture New Zealand Agri Credit Exposure (EAD) Agriculture Exposure by Sector (% EAD) and Average Probability of Default NZD Total Credit Exposure (LHS) Agriculture NZDb Average PD (Non-Defaulted Customers) (RHS) Total EAD (Sep 13) As a % of Group EAD 25 2.50% $30.9b 4.3% 20 2.00% 15 1.50% 10 21
Slide 30: Commercial Property credit exposure
Commercial Property credit exposure Commercial Property Exposure Commercial Property Exposure by Sector Gross Loans and Advances by Region APEA (LHS) New Zealand (LHS) 29% Offices Australia (LHS) % of Group GLA's (RHS) $b Retail 35 8.5% Residential 28% 30.9 30.7 24% Industrial 30 28.2 29.3 27.8 3.5
Slide 31: Australia Division Credit Quality
Australia Division Credit Quality Australia Home Loans 90+ day Australia Division Credit Exposure (EAD) delinquencies by state Sep 10 Sep 11 Sep 12 Sep13 Home Loans 1.00% Corporate & 24% 0.80% Commercial Consumer Cards 0.60% 7% 0.40% Personal Loans 1% 67% 0.20% Other 1% 0.00% VIC NSW QLD WA Portfoli
Slide 32: Australia Division - Home Loan Portfolio
Australia Division - Home Loan Portfolio Total Number of Home Loan Accounts 887k Dynamic Loan to Value Ratio % of Portfolio Total Home Loan FUM $195b 60% % of Total Australia Geography 50% 60% Lending 40% % of Total Group Lending 41% 30% Owner Occupied Loans - % of 20% 62% Portfolio1 10% Average Loa
Slide 33: New Zealand Division – Home Loan Portfolio
New Zealand Division – Home Loan Portfolio Total Number of Home Loan Accounts 478k Dynamic Loan to Valuation Ratio Total Home Loan FUM (NZD) $59b % of Total New Zealand Lending 56% 0-60% 9% 61-70% 11% % of Total Group Lending 11% 45% 71-80% Owner Occupied Loans - % of Portfolio 77% 18% 81-90% Averag
Slide 34: New Zealand – Credit Quality
New Zealand – Credit Quality New Zealand Geography New Zealand Geography Net Impaired Assets Total Provision Charge NZDm NZDm IP Charge CP Charge Net Impaired Assets NIA as % GLA 1,000 883 800 600 456 1,463 400 190 202 200 66 1,307 0 -200 FY09 FY10 FY11 FY12 FY13 990 New Zealand Division 90+ days de
Slide 35: Stress Testing I: APRA
Stress Testing I : APRA (November 2012) Test Scenario Domestic market - Households and businesses reduce consumption and APRA Assumptions investment leading to lower GDP and higher unemployment Macroeconomic Assumption Global market - Disorderly resolution of the fiscal problems in Europe parameter
Slide 36: Stress testing II: Moody's Scenario analysis
Stress testing II : Moodys‟ Scenario analysis (July 2013) Moodys‟ broad conclusion is that “Australian banks have sufficient earnings capacity and capital to absorb housing related credit losses arising in both the Adverse & Highly Adverse scenarios” Cyclical Economic Downturn (Adverse) Severe Econo
Slide 37: Stress testing III: S&P's China slowdown analysis
Stress testing III : S&P‟s China slowdown analysis (August 2013) “S&P concludes that a soft or medium slowdown in China would have no, or a low, impact on Australian FI ratings while a severe slowdown would see ratings of major Australian FI‟s fall by 1 notch ” S&P Stress Test Results Base Case Medi
Slide 38: Economic Update
13 DEBT INVESTOR UPDATE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Economic Update
Slide 39: Australian economic forecasts
Australian economic forecasts 2008 2009 2010 2011 2012 2013 2014 2015 2016 Australia - annual % growth GDP 2.7 1.4 2.6 2.4 3.7 2.6 3.1 3.4 4.4 Domestic final demand 4.2 0.0 3.5 4.2 4.8 0.8 1.2 1.4 2.9 Headline CPI 4.4 1.8 2.9 3.3 1.8 2.4 3.1 2.6 2.6 Core CPI 4.7 3.8 2.8 2.7 2.4 2.3 2.6 2.4 2.5 Emplo
Slide 40: Australia remains in a very strong fiscal position
Australia remains in a very strong fiscal position Fiscal & Debt position 160 Greece 140 Japan 120 Italy 100 Singapore Belgium Portugal US Net Debt % GDP, 2012f 80 Ireland France UK India 60 Spain Germany Taiwan 40 Canada Hong Kong China 20 Indonesia Australia NZ Denmark 0 -20 -40 Korea -8 -6 -4 -2
Slide 41: Key economic driver I: household caution
Key economic driver I : household caution Household savings and credit 25 Forecast 20 y/y % change / per cent 15 10 5 0 -5 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Household savings rate (%) Household credit growth Source: ABS 40
Slide 42: Key economic driver II: rise in the terms of trade
Key economic driver II - the significant rise in the terms of trade Terms of trade 110 100 90 Index 80 Forecasts 70 60 50 40 60 64 68 72 76 80 84 88 92 96 00 04 08 12 Terms of trade Sources: ABS, ANZ 41
Slide 43: Business investment will detract from growth going forward
Business investment will detract from growth going forward so the economy is currently in transition Major projects capital expenditure 180 160 140 120 100 AUDbn 80 60 40 20 0 2011 2012 2013 2014 2015 2016 Under construction Committed Under consideration Possible Cancelled/Indefinitely delayed Sourc
Slide 44: Growth expected to rebound despite fall in mining investment
Australian growth is expected to rebound despite a fall in mining investment GDP Sources: ABS, ANZ
Slide 45: Sentiment responding favourably to low rates and new government
Sentiment is starting to respond favourably to low interest rates and a new government Consumer sentiment Business sentiment 130 net balance 20 net balance 15 120 10 5 110 0 -5 100 -10 -15 90 -20 80 -25 05 06 07 08 09 10 11 12 13 05 06 07 08 09 10 11 12 13 Source: ABS 44
Slide 46: Export growth will replace business investment as key driver
Export growth will replace business investment as a key driver of Australia‟s future GDP growth Contributions to real GDP growth 8 ppts contribution to year-average GDP growth 7 6 5 4 3 2 1 0 -1 -2 -3 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Household consumption Public demand Dwelling
Slide 47: Bulk commodity volumes will rise sharply
While bulk commodity volumes will rise sharply, the question is how much employment will be created? Bulk commodity export volumes Value of bulk commodity exports 1600 250 ANZ forecasts Prices assumed to decline ANZ forecasts 2% pa from 2016 Bulk commodity export volumes (million tonnes) 1400 Value
Slide 48: Unemployment rate expected to drift higher
The unemployment rate is expected to drift higher as the economy transitions from the mining led investment boom Unemployment rate vs RBA target cash rate 12 Monetary policy easing has typically ceased soon after the unemployment rate has peaked 11 10 9 8 Per cent 7 6 5 4 3 2 91 92 93 94 95 96 97 98
Slide 49: Activity in the housing market has improved recently
Activity in the housing market has improved recently; prices and volumes up Building approvals vs cash rate „Time to buy a dwelling‟ 200 0 17 160.0 190 1 16 147.5 180 2 Annualised completions rate ('000s) 15 135.0 170 3 14 122.5 160 4 Index 000s 150 5 % 13 110.0 140 6 12 97.5 130 7 11 85.0 120 8 GST
Slide 50: Australian house prices in a global context
Australian house prices in a global context 49
Slide 51: Appetite towards borrowing has changed; household indebtedness still high
Appetite towards borrowing has changed and household indebtedness is still high 50
Slide 52: The outlook for house prices
The outlook for house prices is a function of income growth and interest rates Median house price vs. purchasing power 800 $'000 700 ? 600 500 Actual Purchasing power - house income growth price 400 and interest 300 rates* 200 100 0 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 * Represents the av
Slide 53: Dwelling construction remains well below requirements
Dwelling construction remains well below requirements Population gain vs. dwelling completions % deviation from trend 110 population 100 gain 90 80 70 60 50 40 30 20 10 0 dwelling -10 completions -20 -30 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Sources: ABS, ANZ Research 52
Slide 54: AUD is a function of the USD, commodity prices & rate differentials
AUD is a function of the USD, commodity prices & rate differentials : ANZ expects a drop towards USD0.85 Terms of trade vs. AUDTWI 1.30 AUD/USD and USD TWI 50 110 80 1.20 60 100 75 1.10 70 AUD/USD 90 70 1.00 USD index 80 80 65 0.90 90 0.80 Index Index 70 60 0.70 100 60 55 ANZ forecasts 0.60 110 50 5
Slide 55: New Zealand – broad based recovery underway
New Zealand – broad based recovery underway GDP vs Confidence Composite Key Themes - moderate growth • The recovery is looking broader, with sentiment in manufacturing Annual % change Standardised improving, migration picking up, and a windfall dairy payout 8 8 GDP (LHS) providing a huge income lift
Slide 56: Chinese GDP growth may decline, but growth remains substantial
Chinese GDP growth rate may decline, but overall growth remains substantial China - Annual GDP Growth • ANZ forecasts China‟s GDP to grow at 7.6% this 1,800 16 year and 7.2% next year (IMF : 7.6% in „13 & 1,600 USD1.1trn 14 7.3% in „14) 1,400 (avg 8.2%) 12 • For CPI, ANZ forecasts 2.5% for „13, whic
Slide 57: Medium term outlook for China supported by urbanisation
The medium term outlook for China will continue to be supported by ongoing urbanisation Global Comaparison of Urbanisation Ratio Global Commodity Intensity Curves 90 (2011, %) Gas 80 70 Thermal demand per capita Coal 60 50 40 China Copper 30 Steel 20 Coking Coal 10 India 0 World OECD US ASEAN China
Slide 58: Covered Bonds
13 DEBT INVESTOR UPDATE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Covered Bonds
Slide 59: Australian Covered Bond Legislation
Australian Covered Bond Legislation • Enabling legislation (to amend the Banking Act 1959) passed the Australian Federal Parliament and became law in October 2011 Structure • ADIs to be covered bond issuer, with dual recourse to issuer and cover pool • Guarantee provided by an SPV, used for segregat
Slide 60: Programme Structural Enhancements
Programme Structural Enhancements • Asset Coverage Test (ACT) is performed monthly to ensure the cover pool is sufficient to secure outstanding covered bonds per minimum contractual OC Over • Maximum Asset Percentage 95% Collateralisation • Asset Percentage at 87% (October 2013) as set by rating age
Slide 61: Issuer Event of Default and Covered Bond Guarantee
Issuer Event of Default and Covered Bond Guarantee Include: • Default in principal or interest for 7 days Issuer • Fail to perform obligations for 30 days Events of • Winding up, encumbrancer takes possession of all assets Default • Bankruptcy proceedings • An uncured breach of ACT and PMT • Service
Slide 62: Programme Structure
Programme Structure ANZBGL ANZBGL ANZBGL Contingent Covered Interest Rate Swap Ccy and Interest Rate Provider Bond Swap Provider Swap Provider Mortgages and Demand Loan and ANZ Residential Related Security ANZBGL Intercompany Covered Bond ANZBGL Issuer Loan Trust Seller Covered Bond Guarantor Consid
Slide 63: Australian Issuance – October 2013
Australian Issuance – October 2013 Covered Bonds ANZ Covered Bonds Issuance Tenor Bonds Issued (A$) 13.2bn Program Ratings Aaa / AAA Number of Issues 15 Number of Currencies 7 WA Term at Issue 5.57 years ANZ Covered Bonds Currency Mix Issuance Capacity Contractual AP% 87% Min Required OC% 14.94% Max
Slide 64: Cover Pool - Composition and qualifying criteria
Cover Pool - Composition and qualifying criteria Portfolio Summary at 22 October 2013 Weighted Average LVR (%) Covered Bond Pool $16.8bn 49 Covered Bonds on issue $13.2bn Average loan size $289,840 35 Weighted Ave Current LVR 64% 24 23 Weighted Ave Indexed LVR 63% 16 12 11 Weighted Ave Seasoning 21.
Slide 65: Key Contacts
Key Contacts Australia and New Zealand Banking Group Limited Level 9, 833 Collins Street Docklands VIC 3008 Australia Group Treasurer Head of Debt Investor Relations Rick Moscati David Goode Phone : +61 (3) 8654 5404 Phone: +61 (3) 8654 5357 Mobile: + 61 (0) 412 809 814 Mobile: +61 (0) 410 495 399 E
Slide 66: Disclaimer
Disclaimer • 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
Australia and New Zealand Banking Group — Debt Investor Presentation (November 2013) on 6ix