Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Debt Investor Presentation (June 2014)
59 slides from Anz's debt investor presentation, June 2014
Slide 1: Debt Investor Update June 2014
Debt Investor Update June 2014
Slide 2: Super Regional Strategy; CEO Priorities FY14-16
SUPER REGIONAL STRATEGY STRONG PROFITABLE ENTERPRISE CORE ASIAN APPROACH MARKETS GROWTH STRONG LIQUIDITY AND CAPITAL MANAGEMENT DISCIPLINED AND EXPERIENCED MANAGEMENT CEO PRIORITIES FY14-16 Improving Diversifying Improving Improving customer revenue productivity returns experience 2
Slide 3: 1H14 Financial Performance
1H14 Financial Performance Cash Profit Movement 1H14 v 1H13 $m 528 48 71 3,515 3,179 242 69 Up 8% Up 2% Income Up 6% Up 6% Down 12% Up 5% Up 11% 1H13 Net Interest Other Expenses Provisions Tax & OEI 1H14 Cash Profit Income Operating Cash Profit Income 1H14 1 Year 3 Year Earnings per Share (cents) 12
Slide 4: ANZ Results overview
ANZ Results overview Operating Income Operating Income 1H14 Australia New Zealand APEA $m 1H14 APEA Network 20,000 17,848 18,391 Revenue1 represented 16,222 24% of Group Operating Income and 15,000 12,295 Australia 25% of Group Profit 9,668 62% APEA 9,299 10,000 20% 5,000 New Zealand 18% 0 FY08 FY10
Slide 5: Credit Quality – ongoing improvement
Credit Quality – ongoing improvement Credit Quality Trends Provision Charge 1H14 v 2H13 Individual Provision (IP) Charge (LHS) $m Collective Provision (CP) Charge (LHS) Collective Provision Total Provision Charge as % Avg. Net Advances 93bps Coverage1 1,000 750 500 250 0.36% 0.29% 0.28% 0.32% 0.27%
Slide 6: Balance Sheet, Capital, Funding & Liquidity
Balance Sheet, Capital, Funding & Liquidity
Slide 7: Customer loans and deposits by Geography
Customer loans and deposits by Geography Customer Lending1 Customer Deposits APEA APEA Commercial Retail & Wealth & Institutional Australia APEA Institutional APEA Commercial Retail & Wealth & Institutional 2% 22% 11% 13% 4% New Zealand APEA Retail & APEA Australia Australia New Zealand Commercial 1
Slide 8: Customer loans and deposits by client segment
Customer loans and deposits by client segment 1. Customer lending represents Net Loans & Advances including acceptances 8
Slide 9: Stable Balance Sheet composition
Stable Balance Sheet composition Stabilised funding mix Tenor of Assets has shortened 29% 18% 18% 16% 25% 25% 7% 15% 15% 13% 13% 22% 8% 3% 3% 1% 8% 8% 12% 12% 4% 4% 7% 14% 80% 62% 62% 72% 72% 50% 7% 8% 8% 4% 3% 3% 1 Sep 08 Sep 13 Mar 14 Sep 08 Sep 13 Mar 14 SHE & Hybrid Debt Customer Funding Other F
Slide 10: A well diversified term wholesale funding portfolio
A well diversified term wholesale funding portfolio Term Wholesale Funding Portfolio1 $b Issuance Maturities 26 24 24 21 Annual indicative 19 18 issuance volume 16 14 13 12 7 1 2 3 FY10 FY11 FY12 FY13 FY14 FY14 FY15 FY16 FY17 FY18 FY19 FY20+ Senior Unsecured Covered Bonds Tier 2 Government Guarantee
Slide 11: Structural funding gap
Structural funding gap Australian household credit growth not Peer Funding Comparison expected to return to previous levels % Change ANZ requires Household Sector Growth (YoY) ~$45b less Average (Mar 99 - Mar 08) wholesale funding 25 Average (Mar 08 - Mar 14) 183 to meet this gap 177 20 160 15 154 1
Slide 12: Liquidity Portfolio – well placed for introduction of LCR
Liquidity Portfolio – well placed for introduction of LCR Liquid Assets1 Liquidity Update $b • Reduction in internal RMBS in Australia 122 117 during the first half of FY14 is due to higher prescribed haircuts from the RBA2 39 35 • The final APS210 (Basel 3) liquidity standard was released in Decemb
Slide 13: ANZ is well capitalised
ANZ is well capitalised Capital Update Basel 3 Common Equity Tier 1 (CET1) 10.8% 10.5% • Capital levels will grow organically in the lead up 10.0% to the introduction of the higher loss absorbing 8.5% 8.3% 8.0% capital requirements for D-SIB‟s in 2016 • $1.6b ANZ Capital Notes 2 Additional Tier 1 tr
Slide 14: The strength of ANZ's capital levels (CET1) on a global comparison
The strength of ANZ’s capital levels (CET1) is more apparent on a global comparison Australia Canada UK >11.5% >11.0% CCB & D-SIB 10.5% effective 1 Jan 2016 9.3% 9.6% 8.0% 8.3% 1.0% D-SIB 2.5% CCB 4.5% CET1 APRA ANZ ANZ ANZ Canadian Peer ANZ UK Peer Average 2 Minimum APRA (Intenationally (under Cana
Slide 15: APRA / Basel 3 Compliant Tier 2
APRA / Basel 3 Compliant Tier 2
Slide 16: Australian Basel 3 Tier 2 - Structure
Australian Basel 3 Tier 2 - Structure • Subordinated, bullet/callable (non-step). EMTN expected to be listed on ASX • Key change from Basel 2 Tier 2 securities is the inclusion of contractual Structure PONV loss absorption as required by Basel 3 • In liquidation ranks ahead of ANZ Ordinary Shares &
Slide 17: Old style B2 instruments replaced by new style B3 instruments
“Old style” B2 regulatory capital instruments will be progressively replaced by “New style” B3 instruments Tier 2 Securities on Issue Issue Volume CCY Effective B2 Tier 2 Outstandings at FY end (A$m) Call Date PONV Date A$m (not AUD) Maturity Oct-86 331 USD300 - Perpetual N 5,817 Apr-08 770 NZD835 -
Slide 18: Management Actions and Capital Conservation Buffer
Management Actions and Capital Conservation Buffer play a key role in the prevention of PONV Basel 3 CET1 Capital & Actions Available to T2 buffers Capital Conservation Strengthen Capital Possible actions to be Maximum invoked as CET1 ratio Management Buffer Profit declines below FY13 NPAT 8.0% Dist
Slide 19: Australian Basel 3 Tier 2 – Key Considerations
Australian Basel 3 Tier 2 – Key Considerations Transaction terms are broadly consistent with European Tier 2 Australian banks are profitable and well capitalised by international standards Management have a range of alternative actions available to strengthen capital if required Contractual
Slide 20: Asset Quality
14 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED X ~ i,
Slide 21: Individual Provisions
Individual Provisions Individual Provision Charge by Segment Individual Provision Charge Composition $m Institutional Commercial Consumer $m New Increased Writebacks & Recoveries 1,000 1,500 915 915 1,250 609 722 594 595 572 602 900 1,000 750 500 800 250 722 0 700 -250 609 -500 594 595 602 600 572 1
Slide 22: Collective Provision
Collective Provision Significant “de-risking” across portfolios is CP Coverage Reflective of Portfolio Risk evident from the CP movement $b • ANZ remains prudently provided for with a Credit Risk Weighted Assets Collective Provision as a % of CRWA collective provision coverage ratio of 93bps 1.36% 1
Slide 23: Gross Impaired Assets
Gross Impaired Assets Gross Impaired Assets by Type Gross Impaired Assets by Size of Exposure Impaired Loans NPCCD1 Restructured > $100m $10-$99m < $10m $m $m 7,000 7,000 6,221 6,221 6,000 6,000 5,581 5,581 5,343 5,343 5,196 5,196 5,000 5,000 4,685 4,685 4,264 4,264 4,000 4,000 3,620 3,620 3,000 3,0
Slide 24: 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 14 Mar 13 Sep 13 Mar 14 Total EAD (Mar 14) Consumer Lending 40.4% 40.8% 40.3% 0.2% 0.2% 0.2% $762b Finance, Investment & 16.8% 15.9% 16.4% 0.2% 0.1% 0.
Slide 25: Total Credit Exposure (EAD) by Geography
Total Credit Exposure (EAD) by Geography Exposure at Default by Exposure at Default by Geography Line of Business2 Total Exposure at Default (Mar 14) - $762b1 Retail Institutional Commercial Australia New Zealand APEA 1% $467.5b $136.2b $158.7b 17% 29% 29% New Zealand UK & Europe 18% 22% 3% Americas
Slide 26: Asia and Trade Finance
Asia and Trade Finance Strong quality Asia Exposure Trade Finance Investment Grade Exposure • Strong growth in Trade Finance portfolio focussed $b Investment Grade Sub-Investment Grade on shorter duration exposures to investment grade counterparties 60 • The Trade Finance portfolio displays average
Slide 27: Resources
Resources Resources Exposure by Sector (% EAD) Resources Exposure by Geography (EAD) Resources Total EAD (Mar 14) As a % of Group EAD 19% Australia $17.2b 2.3% Asia 6% 48% New Zealand 16% 6% 27% Europe, America, Pacific & Other 23% (includes Resources Exposure by Geography (EAD) Iron Ore 10%) 39% $b
Slide 28: Agriculture
Agriculture New Zealand Agri Exposure and Average Agriculture Exposure by Sector (% EAD) Probability of Default NZD Total Credit Exposure (LHS) Agriculture NZDb Average PD (Non-Defaulted Customers) (RHS) Total EAD (Mar 14) As a % of Group EAD 25 2.5% $32.1b 4.2% 20 2.0% 15 1.5% 10 21 19 1.0% 14% 5 1
Slide 29: Commercial Property Lending
Commercial Property Lending Commercial Property Outstandings by Commercial Property Outstandings by Region Sector APEA (LHS) New Zealand (LHS) Australia (LHS) % of Group GLA's (RHS) 27% Offices $b Retail 35 8.0% Residential 30% 21% Industrial 30 4.1 4.5 Tourism 3.5 4.0 7.5% 3.1 3.4 3% 15% Other 2.7
Slide 30: Australia Division Credit Quality
Australia Division Credit Quality Australia Home Loans 90+ day Australia Division Credit Exposure (EAD) delinquencies by state1 Mar 11 Mar 12 Mar 13 Mar 14 2 Home Loans 1.2% Corporate & 24% 1.0% Commercial 0.8% Consumer Cards 0.6% 6% 1% 0.4% Personal Loans 68% 1% 0.2% Other 0.0% VIC NSW QLD WA Portf
Slide 31: Australia Division - Home Loan Portfolio
Australia Division - Home Loan Portfolio1 1H14 Portfolio Statistics Dynamic Loan to Value Ratio % of Portfolio Total Number of Home Loan Accounts 903k 60% Total Home Loans FUM $202b 50% 40% % of Total Australia Geography Lending 59% LVR >90% = 2.3% 30% (Mar 14) % of Total Group Lending 39% 20% Owner
Slide 32: Lenders Mortgage Insurance
Lenders Mortgage Insurance Background ANZLMI maintains industry low loss ratios1 • ANZ‟s Captive Mortgage insurance business Industry ANZ LMI (ANZLMI) provides Lenders Mortgage Insurance Insurer 1 Insurer 2 for residential mortgages originated through ANZ Insurer 3 LMI 17.5% channels 150% Insured •
Slide 33: New Zealand - Home Loan Portfolio
New Zealand - Home Loan Portfolio 1H14 Portfolio Statistics Dynamic Loan to Valuation Ratio Total Number of Home Loan Accounts 484k 0-60% Total Home Loan FUM (NZD) $61b 8% 61-70% 10% % of Total New Zealand Lending 59% 47% 71-80% 18% % of Total Group Lending 11% 81-90% Owner Occupied Loans - % of 17%
Slide 34: New Zealand – Credit Quality
New Zealand – Credit Quality New Zealand Geography New Zealand Geography Net Impaired Assets Total Provision Charge NZDm NZDm Net Impaired Assets NIA as % GLA IP Charge CP Charge 1,685 200 105 85 103 150 99 100 44 22 50 -39 1,307 0 -50 1,169 -100 1H11 2H11 1H12 2H12 1H13 2H13 1H14 991 1.74% 883 New
Slide 35: Australian Housing Market
14 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Slide 36: Structure of the Australian mortgage market has resulted in very low losses
The structure of the Australian mortgage market has resulted in very low losses through various cycles ANZ Individual Provision Loss Rates Australian mortgage market characteristics vs. Mortgage loss rates (%) • All mortgage lending is full recourse ANZ IP loss rates Full 1.0% • Investment loans are
Slide 37: Household debt has remained stable and lower rates have reduced debt burden
The level of household debt has remained stable and lower rates have reduced the debt burden Debt vs interest payments relative to household disposable income 175 14 150 12 Rateio to household disposable income, % Ratio to household disposable income, % Debt Interest payments 125 10 100 8 75 6 50 4
Slide 38: Housing market supported by income growth, lower rates, strong immigration
The housing market has been supported by income growth, lower interest rates, strong immigration …. House prices vs house purchasing power* Housing finance by type of buyer Population growth and net overseas migration 140 500 450 120 400 100 $bn annualised (trend) 350 80 300 250 000s 60 200 40 150 1
Slide 39: … and strong employment
… and strong employment Sources: ABS, ANZ 39 39
Slide 40: House prices reflect the strong underlying position
House prices reflect the strong underlying position House Prices International House Prices 275 250 225 200 175 150 125 100 75 50 06 07 08 09 10 11 12 13 14 Australia UK Canada Singapore US NZ China* Hong Kong * Data for newly constructed housing Sources: ABS, Global Property Guide, Nationwide, RBA,
Slide 41: Debt Investor Update - Economics
Debt Investor Update - Economics
Slide 42: Australian economic forecasts
Australian economic forecasts 2008 2009 2010 2011 2012 2013 2014 2015 2016 Australia - annual % growth GDP 2.7 1.5 2.2 2.6 3.6 2.4 3.2 3.2 3.6 Domestic final demand 4.0 0.3 3.5 4.4 4.2 0.9 1.3 1.4 3.0 Headline C PI 4.4 1.8 2.9 3.3 1.8 2.4 2.6 2.8 2.7 C ore C PI 4.6 3.8 2.8 2.7 2.3 2.4 2.6 2.6 2.5 Em
Slide 43: The Australian economy has performed relatively well in aggregate
The Australian economy has performed relatively well in aggregate 43
Slide 44: Fiscal position in Australia and NZ remains sound
The fiscal position in Australia and NZ remains sound, albeit the Australian Federal budget is not expected to return to surplus until ~2019 Fiscal & Debt position 200 Greece 150 Net debt % of GDP 2015f Japan Italy 100 Ireland France US Belgium UK Spain India Austria 50 Netherlands Germany Canada Br
Slide 45: Australia's Terms of Trade has driven strong income growth
Australia’s Terms of Trade has driven strong income growth Terms of trade since 1960 Income growth continues 110 130 Australia Household disposable income, 000s (A$, US$, NZ$) 120 US 100 New Zealand 110 90 100 Forecasts 80 90 Index 80 70 70 60 60 50 50 40 40 60 65 70 75 80 85 90 95 00 05 10 15 00 01
Slide 46: ANZ expects GDP to pick up in 2014 and 2015
ANZ expects GDP to pick up in 2014 and 2015 and accelerate further in 2016 Contributions to annual real GDP growth 8 ppts contribution to year-average GDP growth 7 6 5 4 3 2 1 0 -1 -2 -3 06 07 08 09 10 11 12 13 14 15 16 Household consumption Public demand Dwelling investment Business investment Inve
Slide 47: Business investment (largely mining) will detract from growth
Business investment (largely mining) will detract from growth for several years … Major projects capital expenditure 180 Potential investment pipeline excluding projects that have been either cancelled or indefinitely delayed since July 2012 Investment pipeline for 160 projects that are either under
Slide 48: Australia is entering the production phase
… but Australia is entering the production phase - export volumes will pick up sharply as projects complete Iron Ore - LNG Thermal/Coking Coal Sources: BREE, ANZ 48
Slide 49: Composition of growth by industry highlights ongoing challenges
Composition of growth by industry highlights ongoing challenges GDP by industry – five year average growth rates as of Dec-13 IT Hospitality Utilities Admin. services Transport Education Arts and rec. Retail Wholesale Public admin. Finance & insurance GDP Construction Rental & real estate Profession
Slide 50: China
14 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED X ~ i,
Slide 51: ANZ's strategic focus has resulted in a strong customer franchise
ANZ’s strategic focus has resulted in a strong customer franchise and growing business Strategic Focus Corporate Profile ANZ Greater China strategy is focused on: Presence Staff Branches since 1. Being the bank of choice for Greater China corporates and affluent individuals investing in China ~950 8
Slide 52: Chinese GDP growth is slowing as the economy develops
Chinese GDP growth is slowing as the economy develops, but the GDP added each year remains substantial China - Annual GDP Growth 1,800 16 1,600 USD1.1trn 14 (avg 8.3%) 1,400 12 1,200 1,000 10 800 8 USD390bn 600 6 (avg 10.3%) 400 USD63bn (avg 10.0%) 4 200 0 2 -200 0 1990 1995 2000 2005 2010 2015 Extr
Slide 53: Little sign of significant slowdown in Chinese demand
There remains little sign of any significant slowdown in Chinese demand in the latest Australian data 650 Iron ore export volumes Australia-China trade balance 600 Iron ore export volumes 550 500 MT, 12 m rolling sum 450 400 350 300 250 200 150 04 05 06 07 08 09 10 11 12 13 14 Other exports to China
Slide 54: Stress Testing
14 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED X ~ i,
Slide 55: Stress Testing I : APRA
Stress Testing I : APRA (November 2012) Test Scenario APRA Assumptions Domestic market - Households and businesses reduce consumption and investment leading to lower GDP and higher unemployment Macroeconomic Assumption parameter Global market - Disorderly resolution of the fiscal problems in Europe
Slide 56: Stress testing II : Moody's Scenario analysis
Stress testing II : Moody's Scenario analysis (July 2013) Moody’s 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 57: 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 58: Key Treasury Contacts
Key Treasury Contacts Australia and New Zealand Banking Group Limited Level 9, 833 Collins Street Docklands VIC 3008 Australia Group Treasurer (Acting) Head of Group Funding Adrian Went Luke Davidson Phone: +61 (3) 8654 5532 Phone: +61 (3) 8654 5140 Mobile: +61 (0) 412 027 151 Mobile: +61 (0) 413 01
Slide 59: 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. • The Presentation and its contents are private and confidential and may
Australia and New Zealand Banking Group — Debt Investor Presentation (June 2014) on 6ix