Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Debt Investor Presentation (September 2012)
47 slides from Anz's debt investor presentation, September 2012
Slide 1: Covered Bond Investor Update
Covered Bond Investor Update September 2012 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED John Needham, Head of Structured Funding Luke Davidson, Head of Group Funding
Slide 2: ANZ Covered Bond Investor Update
ANZ Covered Bond Investor Update • ANZ rated Aa2/AA-/AA- by Moody’s / S&P / Fitch (all Stable) • Traditional commercial banking operations in Australia, NZ and Asia AA Rated • Strong balance sheet – well capitalised, sustainable funding profile Issuer • Credit quality sound - total provision charge
Slide 3: ANZ Overview
ANZ Overview
Slide 4: ANZ released Q3 trading update on 17th August
ANZ released Q3 trading update on 17th August Highlights Underlying Profit $m • YTD (9 months to end June) Underlying profit after tax1 up 5.5% PCP • YTD total Global Markets income up 2% to $1.4b3 with market sales well up • Group margins (ex Global Markets) stable4 • Provision coverage2 at June 12
Slide 5: ANZ continues to organically pursue our Super Regional Strategy
ANZ continues to organically pursue our Super Regional Strategy ANZ Footprint in Asia Rationale behind the Super Regional Strategy 1. Strategy aligned to Asian growth • Strong domestic franchises and established Japan (3) market position S. Korea • Focus of expansion in higher growth Asian China (6)
Slide 6: ANZ's operations in Asia have an institutional focus with products linked to trade and capital flows
ANZ’s operations in Asia have an institutional focus with products linked to trade and capital flows Revenue mix by product Asia deposit & lending book USDb 50 48 Transaction Global Other Asia Banking Loans 40 42 Taiwan 30 Japan 20 Market HK Trading 10 Market Singapore Sales 0 Deposits NLA's Revenue
Slide 7: Customer deposit growth has exceeded loan growth by $41b since 2008
Customer deposit growth has exceeded loan growth by $41b since 2008 Net Loans & Advances Customer Deposits Loan / (incl. Acceptances) $b $b Deposit Ratio 450 5% CAGR* 450 12% CAGR* 180% 167% 400 400 160% 134% 350 350 140% 300 300 120% 250 250 100% 200 200 80% 150 150 60% 100 100 40% 50 50 20% 0 0 0%
Slide 8: ANZ has a well diversified funding profile with an increasing weighting to customer funding
ANZ has a well diversified funding profile with an increasing weighting to customer funding Strong Funding Composition Offshore short-term Commercial Paper makes up just 3% of total Short Term Wholesale Customer Funding Group funding Funding Term Debt < 1 year Residual Shareholders equity & Hybrid G
Slide 9: Lower structural funding gap - a growing competitive advantage
Lower structural funding gap - a growing competitive advantage ANZ Peer 1 Peer 2 Peer 3 Loan – Deposit Ratio (%) 134 160 153 141 Loan – Deposit Gap ($bn) 104 186 164 153 Australian Household Funding Gap ($bn) 111 193 125 179 Short Term US Money Market Funding (US$bn) 18 50 36 34 ANZ has built a sust
Slide 10: Relative to domestic peers, ANZ has the lowest and most consistent term wholesale funding requirement
Relative to domestic peers, ANZ has the lowest and most consistent term wholesale funding requirement Aust Major Banks 2yr+ Term Debt Issuance by Calender Year (estimated percentage of global FIG issuance shown in parentheses) A$bn 200 180 $158bn (10%) 160 140 120 $97bn $87bn $93bn (2%) $89bn 100 $7
Slide 11: ANZ's FY12 wholesale debt issuance requirement completed
ANZ’s FY12 wholesale debt issuance requirement completed. The forward maturity profile is well within manageable levels. ANZ Annual Term Debt Issuance / Maturity Profile A$b 30 Issuance Maturities 25 Indicative annual issuance volumes 20 15 10 5 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY
Slide 12: ANZ's term funding portfolio is well diversified with a declining reliance on offshore funding
ANZ’s term funding portfolio is well diversified with a declining reliance on offshore funding Term Debt Issuance Term Debt Outstandings Weighted avg. Weighted avg. tenor : 4 yrs tenor : 5 yrs 10% 12% 13% 13% 14% 33% 18% 25% 20% 34% 29% 68% 23% 36% 32% 31% 35% 28% 44% 32% 33% 34% 28% 28% 27% FY08 1H
Slide 13: Continued strengthening of capital levels places ANZ in a strong position for upcoming Basel III
Continued strengthening of capital levels places ANZ in a strong position for upcoming Basel III implementation Current capital levels are strong Well placed to meet Basel III CET1 target (Mar-12) under APRA’s draft capital standards Common Equity Tier 1 Ratio (CET1) Basel III (APRA) Basel III Tier
Slide 14: Liquid assets of $99b exceed total offshore wholesale debt of $85b
Liquid assets of $99b exceed total offshore wholesale debt of $85b Strong liquidity position ($b) ANZ Total Offshore Wholesale Debt securities Prime Liquidity Portfolio Other Eligible & Highly Liquid Securities Long-term Short-term Composition of liquid assets ($98.5b) Class 1 Class 2 Class 3 Other
Slide 15: Provision Charge and Impaired Assets
Provision Charge and Impaired Assets Total Provision Charge Gross Impaired Assets by Type (IP charge by Division, total CP charge) $m $m 8,000 1,200 1,098 7,000 6,561 6,561 6,221 1,000 6,000 5,581 5,343 800 722 565 660 5,000 551 600 4,000 400 3,000 200 2,000 0 1,000 -200 0 1H10 2H10 1H11 2H11 1H12 M
Slide 16: ANZ Covered Bond Overview
ANZ Covered Bond Overview
Slide 17: Australian Covered Bonds have a number of elements of structural support
Australian Covered Bonds have a number of elements of structural support Legislative framework Illustration of Structure Dual recourse Supporting Collateral Portfolio ~$185 Residential mortgage collateral Underlying Indexed for price movements Mortgaged Collateral Property High level of tr
Slide 18: ANZ's Covered Bond Strategy
ANZ’s Covered Bond Strategy Diversification of investor base • Access to AAA investor base - timely to assist in redemption of Rationale Government Guaranteed debt maturing from 2012 to 2014 • Reduces requirements for senior unsecured debt in offshore markets Lengthen funding profile in a cost effec
Slide 19: Australian Covered Bond Legislation
Australian Covered Bond Legislation Timing • Banking Amendment (Covered Bonds) Bill 2011 introduced in September 2011 • Passed the Senate on 11 Oct 2011, and received Royal Assent on 17 Oct 2011 Structure • Covered bond issuance permitted pursuant to the Banking Act 1959 • ADIs to be covered bond is
Slide 20: Programme Structure
Programme Structure ANZBGL ANZBGL ANZBGL Contingent Covered Interest Rate Swap Ccy and Interest Rate Bond Swap Provider Provider Swap Provider Mortgages and Demand Loan and Intercompany ANZ Residential Related Security ANZBGL Loan Covered Bond ANZBGL Issuer Trust Seller Covered Bond Guarantor Consid
Slide 21: Programme Structural Enhancements
Programme Structural Enhancements • Monthly Asset Coverage Test (ACT) to ensure cover pool is sufficient to secure Over the outstanding covered bonds per minimum contractual OC Collateral- • Maximum Asset Percentage 95% isation • Asset Percentage (as at August 2012) was 82.7% • OC is the inverse of
Slide 22: Programme Structural Enhancements – Ratings Triggers
Programme Structural Enhancements – Ratings Triggers (if below any of the following) Pre Maturity Moody’s: P-1 • The Pre-Maturity Ledger must be funded by the A$ Test Fitch: F1+ / A+ Equivalent of the Required Redemption Amount for Hard Bullet Covered Bonds maturing within the next 12 months. • Fail
Slide 23: Asset Coverage Test ("ACT")
Asset Coverage Test (“ACT”) • Tested monthly on every Determination Date prior to the service of a Notice to Pay • The ACT is designed to protect Covered Bondholders by ensuring that the value of housing loans, cash, and other eligible assets is greater than the AUD equivalent of outstanding Covered
Slide 24: Amortisation Test
Amortisation Test • Tested monthly on every Determination Date after the service of a Notice to Pay. • The Amortisation Test is designed to ensure the Covered Bond Guarantor has sufficient assets to meet its obligations under the Covered Bond Guarantee. • A failure of the Amortisation Test will cons
Slide 25: 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 • Service of an I
Slide 26: Australian Property Market, ANZ Mortgage Portfolio and Cover Pool
Australian Property Market, ANZ Mortgage Portfolio and Cover Pool
Slide 27: The structure of the Australian mortgage market has resulted in very low losses through various cycles
The structure of the Australian mortgage market has resulted in very low losses through various cycles Full • All mortgage lending is full recourse Recourse • Investment loans are also secured by mortgage over primary residence Variable • Most mortgage lending in variable rate rate format (ANZ ~85%)
Slide 28: Australian house prices have fallen, partially retracing earlier gains
Australian house prices have fallen, partially retracing earlier gains Higher priced dwellings have Median house prices weakened more 200 Index Dec 2004=100 130 Index (Dec 2008=100) 190 * peak to June 2012 125 180 Melb. (-7.4%)* 170 120 160 150 Bris. 115 (-12.2%) 140 110 130 120 105 Syd. 110 (-1.6%)
Slide 29: Although house prices have weakened, fundamentals remain supportive
Although house prices have weakened, fundamentals remain supportive Vacancy Rates remain low And the Demand Supply dynamic remains supportive % 110 (% deviation from trend) 5 100 population Long-term 90 gain average 80 4 70 60 50 3 40 Per 30 . Mel. 20 2 Bris 10 Syd 0 . -10 dwelling 1 completions -20
Slide 30: Australian house price growth since the mid 1980s is explained by income growth and interest rates
Australian house price growth since the mid 1980s is explained by income growth and the structural decline in interest rates $700,000 Interest rate contribution to simulated house price** Income growth contribution to simulated house price*** Actual house prices $600,000 $547,861 $500,000 $400,000 $
Slide 31: Australian Mortgages – robust structure results in low losses through the cycle
Australian Mortgages – robust structure results in low losses through the cycle Dynamic Loan to Valuation Ratio Portfolio Statistics % Portfol i o Total Number of Mortgage Accounts 851k 60% Total Mortgage FUM $178b 50% % of Total Group Lending 43% Owner Occupied Loans - % of Portfolio 63% 40% Averag
Slide 32: Australian mortgages 90+ Day delinquencies
Australian mortgages 90+ Day delinquencies Australia Retail ANZ Individual Provision Loss 90+ day delinquencies Rates (%) 1.0% Group 0.8% 0.6% Australia Region 0.4% 0.2% Australia Mortgages 0.0% 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 Owner Occupied vs. Investment Loans 90+ DPD (%) 1.0% 0.8% Ow
Slide 33: Cover Pool - Composition and qualifying criteria
Cover Pool - Composition and qualifying criteria Portfolio Summary at 22-August-2012 Weighted Average LVR (%) Covered Bond Pool $10,439m 43 Covered Bonds on issue $6,596m 33 33 33 Average loan size $273,785 28 Weighted Ave Current LVR 63.37% 21 Weighted Ave Indexed LVR 63.74% 14 14 12 Weighted Ave S
Slide 34: Australian Economy
Australian Economy
Slide 35: ANZ Economic forecasts
ANZ Economic forecasts Australia New Zealand 2011 2012 2013 2014 2011 2012 2013 2014 GDP 2.8 2.8 2.8 2.8 1.2 2.2 2.4 2.6 2 Inflation 3.5 1.6 3.11 2.5 4.6 1.1 2.5 2.7 Unemployment 5.2 5.3 5.4 5.2 6.6 6.7 6.3 6.0 Cash rate 4.75 3.5 3.0 3.0 2.5 2.5 2.5 3.0 AUD/USD 0.97 1.02 1.07 0.98 Credit 3.4 4.3 4.0
Slide 36: The Australian economy has performed relatively well in aggregate
The Australian economy has performed relatively well in aggregate 36
Slide 37: The Terms of Trade has driven the economy and resulted in strong income growth
The Terms of Trade has driven the economy and resulted in strong income growth Terms of trade since 1960 Income growth is continuing 140 120 Australia 130 US 110 New Zealand 120 100 110 000's (A$, US$, NZ$ 90 100 Index Forecasts 80 90 70 80 70 60 60 50 50 40 60 70 80 90 00 10 00 01 02 03 04 05 06 07
Slide 38: Strong investment growth driving the economy
Strong investment growth driving the economy Business investment vs. consumption 62 22 Forecasts 60 20 58 18 56 16 % of GDP % of GDP 54 14 52 12 50 10 48 8 90 92 94 96 98 00 02 04 06 08 10 12 Household consumption (left) Business investment (right) Sources: ABS and ANZ 38
Slide 39: Investment is concentrated in the mining, energy and infrastructure sectors
Investment is concentrated in the mining, energy and infrastructure sectors 160 Communications Hospitals Planned investment 140 WaterSupply & Sewerage Manufacturing Electricity Gas Pipeline 120 Energy Airports Rail 100 Ports Roads Mining A$bn 80 60 40 20 0 2008 2009 2010 2011 2012 2013 2014 2015 201
Slide 40: Downside risks to the investment pipeline have emerged due to lower prices and rising costs
Downside risks to the investment pipeline have emerged due to lower prices and rising costs. Risks appear to mainly affect 2014 and beyond. 160 Impact of Port Hedland, Olympic Dam, Pluto 2 and Peak Downs indefinite delays and cancellations 140 120 Mining & Energy 100 A$bn 80 60 40 20 0 2011 2012 201
Slide 41: The Australian economy is grappling with the structural change associated with this 2 speed economy
The Australian economy is grappling with the structural change associated with this 2 speed economy Employment growth by industry, 12 months to Feb 2012 Hospitality Transport & post Net employment change, Retail Trade 12 months to February 2012: Wholesale Trade +22k Manufacturing Arts & Recreation A
Slide 42: Some positive signs regarding household finances, however household balance sheets need to consolidate
Some positive signs regarding household finances, however household balance sheets need to consolidate Household Savings rate back to Debt levels remain elevated but more sustainable levels servicing is expected to decline 42
Slide 43: Banks have become net repayers of offshore debt
Banks have become net repayers of offshore debt; Equity, government and corporates now fund the CAD 15 Funding the Current Account Deficit % of GDP Current account deficit 10 5 0 -5 -10 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Others sectors (Net accounts payable, RBA, Derivati
Slide 44: 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 45: In addition to fiscal policy, the Australian economy has two other policy adjustments
In addition to fiscal policy, the Australian economy has two other policy adjustments to offset global shocks Australian Dollar vs RBA Cash Rate 10 1.4 1997 2001 2009-12 2007-08 Asian Crisis Sep 11, Twin towers European sovereign GFC, Lehman's fails 1.2 (AUD record low) debt crisis 8 1.0 6 0.8 % 0.6
Slide 46: 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
Slide 47: Key Contacts
Key Contacts Australia and New Zealand Banking Group Limited Level 9, 833 Collins Street Docklands VIC 3008 Australia Head of Group Funding Head of Structured Funding Luke Davidson John Needham Phone: +61 (3) 8654 5140 Phone: +61 (3) 8654 5373 Mobile: +61 (0) 413 019 349 Mobile: +61 (0) 411 149 158
Australia and New Zealand Banking Group — Debt Investor Presentation (September 2012) on 6ix