Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — H1 2017 Earnings Presentation
51 slides from Anz's earnings presentation, May 2, 2017
Slide 1: Half Year Results Presentation
2017 For personal use only HALF YEAR RESULTS RESULTS PRESENTATION AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED 2 MAY 2017 To be read in conjunction with ANZ 2017 half year Investor Discussion Pack
Slide 2: Shayne Elliott, Chief Executive Officer
2017 For personal use only HALF YEAR RESULTS SHAYNE ELLIOTT CHIEF EXECUTIVE OFFICER AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED 2 MAY 2017
Slide 3: Headline Financial Performance
HEADLINE FINANCIAL PERFORMANCE For personal use only $m 1H16 1H17 Growth Statutory Profit 2,738 2,911 +6% Cash Profit 2,782 3,411 +23% EPS (cents) 96 117 +22% ROE 9.7% 11.8% +210bp Adjusted Profit 3,224 3,637 +13% Pro-forma EPS (cents) 111 124 +12% ROE 11.2% 12.5% +130bp Dividend per share (cents) 8
Slide 4: Four Priorities: Building a Better Bank
FOUR PRIORITIES BUILDING A BETTER BANK For personal use only 1. Creating a simpler, 2. Focusing on areas better balanced bank where we can win 3. Building a superior everyday 4. Driving a purpose and experience to compete in the values led transformation digital age 4
Slide 5: 1H17 Progress
W O R K T O D AT E 1H17 PROGRESS For personal use only 1. Completed senior executive team 2. Further rebalancing of the portfolio 3. More progress on disposals 4. Continued reshaping of workforce 5. Adjusted operating model 6. Changed cost trajectory 7. Better response to changing expectations 5
Slide 6: Responding to Changing Expectations
R E S P O N D I N G T O C H A N G I N G E X P E C TAT I O N S For personal use only 1. Reduced interest rates on credit cards 2. Constructive responses to parliamentary inquiries 3. Ongoing customer innovation • Apple Pay & ANZ BladePayTM • Voice Bio Security • Digital Card Replacement • Be Trade Re
Slide 7: Progress on Portfolio Rebalancing
PROGRESS ON PORTFOLIO REBALANCING A BETTER BALANCED, HIGHER RETURN BUSINESS For personal use only CAPITAL ALLOCATION1 % of total Capital allocated (Sep 16 & Mar 17 on a post announced divestments basis) MAR-16 SEP-16 MAR-17 Institutional Retail & Commercial Wealth RORWA2 2.73% 2.82% 2.89% (Pre provi
Slide 8: Capital Efficiency
C A P I TA L E F F I C I E N C Y EXECUTIVE FOCUS For personal use only COMMON EQUITY TIER 1 GENERATION First half average CET1 bps 2H16 1H17 1H12 – 1H16 Cash Profit1 97 84 89 RWA impact -21 22 28 Capital Deductions2 -15 1 2 Net capital generation 61 107 119 Gross dividend -70 -60 -57 Dividend Reinve
Slide 9: Operating Environment
O P E R AT I N G E N V I R O N M E N T WELL POSITIONED For personal use only ENVIRONMENTAL FORCES STRATEGIC RESPONSE Lower credit growth Strong capital management Low wage growth Absolute cost discipline Regulatory intervention Risk based pricing Geopolitical & economic uncertainty De-risking Lower
Slide 10: Our Focus
OUR FOCUS For personal use only 1. Consistent execution 2. Responsible growth in Retail & Commercial 3. Ongoing re-positioning of Institutional 4. Further rationalisation of non-core assets 5. Continued focus on productivity 6. Implementing ‘Scaled Agile’ 10
Slide 11: Scaled Agile
SCALED AGILE FASTER TO MARKET, MORE EFFICIENT, HIGHER ENGAGEMENT For personal use only WATERFALL METHODOLOGY AGILE METHODOLOGY1 • Project based • Team based • Multiple Handoffs • Generalists • Sequential • Self-directed • Specialists, Hierarchical • Collaborative SPRINT 1 Plan Deliver Design Rework
Slide 12: Results Summary
R E S U LT S S U M M A RY For personal use only FROM TO (1H16) (1H17) 11.2% 12.5% RETURN ON EQUITY1 CET1 RATIO 9.8% 10.1% EARNINGS PER SHARE1 111 cents 124 cents 1. Adjusted Pro-forma basis 12
Slide 13: Michelle Jablko, Chief Financial Officer
2017 For personal use only HALF YEAR RESULTS MICHELLE JABLKO CHIEF FINANCIAL OFFICER AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED 2 MAY 2017
Slide 14: Overview
OVERVIEW For personal use only RETURN ON EQUITY % 14.7 Adjusted % growth (1H17 v 1H16) Cash Pro-forma 13.3 12.5 Net Profit After Tax 23% 13% 11.2 11.5 Net interest income -2% -2% • Net Loans and advances 3% 3% • Net interest Margin -7bps -7bps Other income 5% 17% Total income 0% 3% 11.8 10.9 Expense
Slide 15: Agenda
AGENDA For personal use only 1 Cash profit compared to last year 2 Key drivers of 1H17 Result 3 Revenue and margins 4 Capital, funding and dividends 15
Slide 16: Financial Performance: Cash Profit
FINANCIAL PERFORMANCE CASH PROFIT For personal use only 1 2 3 4 STATUTORY PROFIT CASH PROFIT ADJST PRO-FORMA PROFIT $m $m $m 3,411 3,637 2,911 3,224 2,738 2,782 +6% +23% +13% +$173m +629m +413m 1H16 1H17 1H16 1H17 1H16 1H17 Statutory Profit movement Cash Profit movement Adjusted pro-forma movement $
Slide 17: Portfolio Rebalancing: Credit Risk Weighted Assets
PORTFOLIO REBALANCING CREDIT RISK WEIGHTED ASSETS For personal use only 1 2 3 4 CREDIT RWAs1 CRWA MOVEMENT 352 $b $b 342 334 26 Aus. housing 352 regulatory 26 change on 3 342 Aus. housing 42 1 July 2016 -3 43 -8 -2 45 Aus. 74 non-housing 72 72 Sep-16 FX Lending Data/Meth. Risk Mar-17 Impact Mvmt. Re
Slide 18: Operating Performance
O P E R AT I N G P E R F O R M A N C E CASH PROFIT For personal use only 1 2 3 4 1H17 vs 1H16 (PCP) Cash Adjusted $m 198 Pro-forma 757 3,411 112 Income -0.2% 3.4% -304 2,782 Expenses -13.8% -1.1% -22 PBP 15.2% 7.3% 3,299 Provisions -21.6% -20.4% Net Profit 22.6% 12.8% EPS (basic) 21.7% 12.0% 1H16 Ca
Slide 19: Portfolio Rebalancing: Risk Adjusted Returns
PORTFOLIO REBALANCING RISK ADJUSTED RETURNS1 For personal use only 1 2 3 4 NET INTEREST INCOME / AVERAGE CREDIT RISK WEIGHTED ASSETS Group ex-Markets Australia New Zealand (NZD) Institutional ex-Markets 7.42% 7.09% 7.15% 4.61% 4.52% 4.79% 5.12% 4.79% 4.78% 1.96% 1.94% 2.09% 7.42% 7.09% 4.61% 4.52% 4
Slide 20: Institutional Performance
INSTITUTIONAL PERFORMANCE For personal use only 1 2 3 4 INSTITUTIONAL INCOME CONTRIBUTION1 INSTITUTIONAL CREDIT RISK WEIGHTED ASSETS $m $b 168 169 2,945 152 142 34 28 133 21 18 2,716 2,701 18 93 99 95 86 80 754 41 42 36 38 35 874 781 221 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 240 Trade L&SF Other 277 MA
Slide 21: Productivity
PRODUCTIVITY For personal use only 1 2 3 4 EXPENSE COMPOSITION1 $m 14 4,805 4,783 57 12 34 4,731 -61 -92 -13 -3 0.5% -1.5% 1H16 Personnel Premises Tech Other 2H16 Personnel Premises Tech Other 1H17 expenses expenses expenses EXPENSE GROWTH1 (PCP) FULL TIME EQUIVALENT STAFF (FTE) CHANGE2 500 2H16 1H1
Slide 22: Investment
INVESTMENT For personal use only 1 2 3 4 TOTAL INVESTMENT SPEND1 TOTAL INVESTMENT SPEND1 $m $m Reduction a result of 509 632 552 549 469 552 refocused strategy 33% 38% and project disciplines 64% 63% 66% 509 57 45 469 67% 62% 34 36% 37% 34% 172 160 1H15 2H15 1H16 2H16 1H17 172 Expensed Capitalised 1
Slide 23: Credit Quality
CREDIT QUALITY For personal use only 1 2 3 4 TOTAL PROVISION CHARGE ANZ HISTORICAL OBSERVED LOSS RATES $m bps 1,100 1,038 250 1,000 200 918 IP Loss Rate 900 150 Median IP Loss Rate 720 100 800 695 700 50 600 0 510 Sep Sep Sep Sep Sep Sep Sep Sep Sep Mar 500 90 93 96 99 02 05 08 11 14 17 400 300 COLL
Slide 24: Revenue Composition
REVENUE COMPOSITION DIVISIONAL PERFORMANCE1 For personal use only 1 2 3 4 INCOME CONTRIBUTION $m +3% 10,384 10,569 10,224 1,312 GROWTH AUS. NZ (NZD) INST’L 1,344 1,390 (1H17 VS 1H16) Income 2% 1% 8% 2,701 2,945 2,716 Expenses 2% 0% -6% PBP 2% 2% 25% 1,521 1,571 1,577 Cash Profit 1% 2% 52% (1H17 VS 2
Slide 25: Australia & New Zealand
AUSTRALIA & NEW ZEALAND For personal use only 1 2 3 4 INCOME CONTRIBUTION1 AUSTRALIA DIVISION LENDING $m +2% Home Loans ($b) Corporate & Commercial ($b) 6,295 6,304 +5% +3% 6,148 427 430 243 247 256 66 68 68 421 1,561 1,552 1,544 1,146 1,139 1H16 2H16 1H17 1H16 2H16 1H17 1,084 NEW ZEALAND DIVISION L
Slide 26: Net Interest Margins
NET INTEREST MARGINS For personal use only 1 2 3 4 GROUP NET INTEREST MARGIN bps -2bp -4bp 206 0 1 -1 200 -2 -4 2H16 Funding & Funding cost Deposits Assets Markets & 1H17 Asset mix Treasury BALANCE SHEET DIVISIONAL NIM $b bps 570 576 576 2.75% 558 562 2.73% 2.69% 2.54% 2.40% 2.30% 468 2.04% 2.17% 43
Slide 27: Capital, Liquidity & Dividends
C A P I TA L , L I Q U I D I T Y & D I V I D E N D S For personal use only 1 2 3 4 CAPITAL DIVIDEND AND DIVIDEND PAYOUT RATIO % 1.19 DPS (cents) DPOR (%) 100 10.13 181 178 -0.51 90 9.61 -0.16 164 160 80 70 Sep-16 Organic Dividends Other Mar-17 60 capital generation 50 40 FUNDING & LIQUIDITY Net Stab
Slide 28: Group Performance: Additional Information
2017 For personal use only HALF YEAR RESULTS GROUP PERFORMANCE ADDITIONAL INFORMATION AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED 2 MAY 2017
Slide 29: Financial Performance: Cash Profit Movement
FINANCIAL PERFORMANCE CASH PROFIT For personal use only 1H17 VS 1H16 (PCP MOVEMENT) $m 413 3,637 665 3,411 3,224 -226 2,782 -223 +13% +23% 1H16 1H16 specified Asian 1H16 Adjusted 1H17 growth 1H17 Adjusted Impact of 1H17 Cash profit items minority Pro-forma profit Pro-forma profit divestments Cash pr
Slide 30: Specified Items
FINANCIAL PERFORMANCE SPECIFIED ITEMS (SI) For personal use only 1H16 SPECIFIED ITEMS 1H161 $m 665 3,224 Software capitalisation changes 389 2,782 -223 Restructuring 101 Asian Minority pro-forma -223 AmBank & BOT valuation adjustments 231 Esanda DF divestment -56 1H16 1H16 specified Asian 1H16 Adjus
Slide 31: 2016 Specified Item Reconciliation
GROUP PERFORMANCE 2016 SPECIFITED ITEM RECONCILIATION For personal use only $m 1H16 SPECIFIED ITEMS Software Asian minority CVA TOTAL capitalisation valuation Esanda DF methodology Subtotal Asian Minority SPECIFIED Results disclosure changes Adjust.1 Restructuring divestment change Specified items p
Slide 32: Asset Divestments
ASSET DIVESTMENTS EARNINGS IMPACTS – BASED ON FULL COMPLETION OF TRANSACTIONS1 For personal use only Cessation of Equity $m Announced divestments Accounting ASIA RETAIL & Bank of TOTAL WEALTH2 SRCB UDC Tianjin IMPACT Revenue ~(850) ~(250) ~(100) ~(150) ~(1,350) Expenses ~(400) to ~(600) - ~(30) - ~(
Slide 33: Group Performance Trends
GROUP PERFORMANCE GROUP PERFORMANCE TRENDS1 For personal use only INCOME EXPENSES PROVISIONS $m $m $m 10,569 10,195 10,342 10,224 10,384 4,775 4,783 4,805 4,731 4,603 1,028 905 695 720 510 2% 0% 13% CAGR CAGR CAGR 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 CASH PROFIT
Slide 34: Treasury – Capital
GROUP PERFORMANCE TREASURY – CAPITAL For personal use only Further detail on capital, funding and liquidity is contained in the 1H17 investor discussion pack available on shareholder.anz.com APRA COMMON EQUITY TIER 1 (CET1) REGULATORY CAPITAL GENERATION % 52 bps First half COMMON EQUITY TIER 1 4 0.8
Slide 35: Treasury – Funding & Liquidity
GROUP PERFORMANCE TREASURY – FUNDING & LIQUIDITY For personal use only Further detail on capital, funding and liquidity is contained in the 1H17 investor discussion pack available on shareholder.anz.com NSFR1 COMPOSITION LCR7 COMPOSITION MARCH 2017 NSFR ~113% MARCH 2017 LCR 135% MARCH 2017 PRO-FORMA
Slide 36: Risk Management – Provisions & Credit Quality
GROUP PERFORMANCE RISK MANAGEMENT – PROVISIONS & CREDIT QUALITY For personal use only Further detail on provisions and credit quality is contained in the 1H17 investor discussion pack available on shareholder.anz.com TOTAL PROVISION CHARGE1 IP CHARGE COMPOSITION $m % $m 1,500 0.4 1,500 1,047 0.3 892
Slide 37: Risk Management – Portfolio Composition
RISK MANAGEMENT RISK MANAGEMENT – PORTFOLIO COMPOSITION For personal use only Further detail on provisions and credit quality is contained in the 1H17 investor discussion pack available on shareholder.anz.com % of Portfolio in Portfolio Balance EXPOSURE AT DEFAULT (EAD) AS A % Category % of Group EA
Slide 38: Strategic Priorities Progress
S T R AT E G I C P R I O R I T I E S PROGRESS For personal use only Reduce operating costs & risks • APRA CET1 ratio 10.1% (up 52bps); costs down 2% Remove product and management complexity. • FTE down 1% Exist low return and non-core businesses. • Announced sale of SRCB, UDC, Asia Retail & Wealth i
Slide 39: Income and Outflows
INCOME AND OUTFLOWS 1H17 For personal use only INCOME OUTFLOWS $10.3b $10.3b RETAIL AND COMMERCIAL (AUS & NZ) (61%) PERSONNEL (26%) 26% of ANZ’s income was 61% of 1H17 income from Retail and Commercial paid in wages and salaries to ~46,000 employees customers in our home markets $2.6b In 1H17 we hel
Slide 40: Divisional Contribution
DIVISIONAL CONTRIBUTION DIVISIONAL RESULTS1 For personal use only INCOME EXPENSES CASH PROFIT AFTER TAX $m $m $m 10,384 10,569 4,783 4,805 4,731 3,637 10,224 3,224 3,264 1,660 1,680 1,693 4,643 4,722 4,735 1,798 1,773 1,821 587 617 600 1,521 1,571 1,577 677 1,460 1,406 1,379 648 635 2,716 2,701 2,94
Slide 41: Australia Performance
AUSTRALIA PERFORMANCE AUSTRALIA DIVISION PERFORMANCE TRENDS1 For personal use only INCOME EXPENSES PROVISIONS $m $m $m 4,643 4,722 4,735 1,660 1,660 1,680 1,693 4,422 1,596 4,221 449 448 472 397 325 6% 3% 20% CAGR CAGR CAGR 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 C
Slide 42: Australia Division 1H17 Performance
AUSTRALIA AUSTRALIA DIVISION 1H17 PERFORMANCE1 For personal use only 92 $m -33 1,798 1,773 -23 -11 PROFIT GROWTH HOH PCP Retail -1% 2% Commercial -1% 0% TOTAL -1% 1% 1H16 profit Income Expenses Provisions Tax & NCI 1H17 profit VOLUMES NET INTEREST MARGIN OTHER OPERATING INCOME $b 321 327 337 2.76% 2
Slide 43: Australia Performance Drivers
AUSTRALIA PERFORMANCE DRIVERS For personal use only OVER 6 MILLION CUSTOMERS MORE PRODUCTS PER CUSTOMER (%) 000’s Products per Customer 331k 6,100 6,000 Multiple 5,900 58.4 59.3 60.3 5,800 5,700 Single 41.6 40.7 39.7 5,600 5,500 Mar 15 Mar 16 Mar 17 Mar-15 Mar-16 Mar-17 GOOD MOMENTUM NSW INVESTMENT
Slide 44: Wealth Australia
W E A LT H A U S T R A L I A 1H17 PERFORMANCE1 For personal use only $m 176 -101 21 123 27 PROFIT GROWTH HOH PCP Insurance -20% -19% Funds Mgt -15% 5% TOTAL -24% -30% 1H16 profit Income Expenses Tax & NCI 1H17 profit Insurance EMBEDDED VALUE2 RETAIL LAPSE RATES • Revenue impacted by adverse disabili
Slide 45: Institutional Performance Trends
INSTITUTIONAL PERFORMANCE PERFORMANCE TRENDS1 For personal use only INCOME EXPENSES PROVISIONS $m $m $m 419 2,961 2,945 2,786 1,413 1,449 1,460 1,406 1,379 324 2,716 2,701 111 125 88 0% -1% 19% CAGR CAGR CAGR 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 CASH PROFIT RISK
Slide 46: Institutional 1H17 Performance
INSTITUTIONAL 1H17 PERFORMANCE1 For personal use only 199 $m 1,021 81 229 -158 PROFIT GROWTH HOH PCP 670 Markets 46% 169% Transaction 3% 25% Banking Loans & SF 150% 13% TOTAL 69% 52% 1H16 profit Income Expenses Provisions Tax & NCI 1H17 profit VOLUMES NET INTEREST MARGIN2 OTHER OPERATING INCOME $b $
Slide 47: Institutional: Maintaining Leading Market Positions
INSTITUTIONAL MAINTAINING LEADING MARKET POSITIONS For personal use only RWA REDUCTIONS MARGINS2 WORKFORCE RESHAPING3 $b FTE # 198 2.40% 2.46% 2.58% -8 159 2.16% 2.21% 2.17% -12% -28 -3 2.05% 1.94% 2.09% 1.79% -17% 1.70% 1.86% -19% 1.66% 1.62% 1.59% Sep 15 FX RWA Other1 Mar-17 1H16 2H16 1H17 Senior
Slide 48: New Zealand Performance Trends
NEW ZEALAND PERFORMANCE NZ DIVISION PERFORMANCE TRENDS1 For personal use only INCOME EXPENSES PROVISIONS NZ$m NZ$m NZ$m 1,648 1,672 1,670 1,591 1,620 648 655 636 657 636 83 39 46 39 2.5% -0.9% 20 39.6% CAGR CAGR CAGR 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 CASH PRO
Slide 49: NZ Division 1H17 Performance
NEW ZEALAND PERFORMANCE NZ DIVISION 1H17 PERFORMANCE1 For personal use only NZ$m 22 0 7 717 702 -14 PROFIT GROWTH HOH PCP Retail 2% 7% Commercial 12% -2% TOTAL 6% 2% 1H16 profit Income Expenses Provisions Tax & NCI 1H17 profit VOLUMES NET INTEREST MARGIN OTHER OPERATING INCOME NZ$b 2.40% 2.35% 2.30%
Slide 50: New Zealand Strategic Focus – Customer Outcomes
NEW ZEALAND STRATEGIC FOCUS – CUSTOMER OUTCOMES For personal use only NET CUSTOMER GROWTH BRAND CONSIDERATION1 New Zealand Division (‘000) #2 #2 #1 40 51.6% 35 29 45.8% 43.8% Mar-15 Mar-16 Mar-17 Mar-15 Mar-16 Mar-17 Net Retail acquisition (new less defection) ANZ brand consideration RETAIL NET PROM
Slide 51: Further Information
F U R T H E R I N F O R M AT I O N For personal use only DISCLAIMER & IMPORTANT NOTICE: 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
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