Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — Debt Investor Presentation (2018)
101 slides from Anz's debt investor presentation, 2018
Slide 1: 2018 Full Year Results Debt Investor Update
2018 FULL YEAR RESULTS DEBT INVESTOR UPDATE AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 2: Important Information & Disclaimer
IMPORTANT INFORMATION & DISCLAIMER This document has been prepared by Australia and New Zealand Banking Group Limited (ABN 11 005 357 522) (the "Bank") for the information of intended recipients only (being persons who meet the requirements described in the following paragraphs). This document is in
Slide 3: Contents
CONTENTS FULL YEAR 2018 RESULT CEO FY18 Results Presentation 4 Group Financial Performance 12 Group Treasury 34 Corporate Overview & Sustainability 44 Risk Management 53 Housing Portfolio 71 Economics 84 All figures within this investor discussion pack are presented on Cash Profit (Continuing operat
Slide 4: Executive Committee Priorities
EXECUTIVE COMMITTEE PRIORITIES 1. Improve the process and speed of remediation 2. Continue simplification and cost out 3. Complete announced asset sales, move to new partnership model 4. Bias resources to the redesign of our Australia business 4
Slide 5: Financial Snapshot
FINANCIAL SNAPSHOT FY18 Change (vs FY17) Statutory Profit ($m) 6,400 0% Cash Profit After Tax (continuing operations) ($m) 6,487 -5% Earnings Per Share (cents) 223.4 -4% Return on Equity 11.0% -67bp Dividend Per Share (cents) 160 Flat CET1 Ratio (APRA) 11.4% 87bp Net Tangible Assets Per Share ($) 18
Slide 6: Strategic Focus
STRATEGIC FOCUS OUTCOMES CAPITAL RETURNS ASSETS CREDIT QUALITY CET1 ROE1 NTA PER SHARE INTERNAL EXPECTED LOSS 11.4% 12.2% $18.47 0.35% 11.8% $17.13 9.6% 0.27% Sep 16 Sep 18 FY16 FY18 Sep 16 Sep 18 FY16 FY18 ~12.2% calculated on an APRA CET1 ratio of 10.5% 1. ANZ 2018 on a Cash Continuing basis (excl
Slide 7: Strategic Focus
STRATEGIC FOCUS 1. Reduce operating costs and risks by removing product and management complexity 1. Creating a simpler, better 2. Exit low return and non-core businesses. balanced bank 3. Reduce reliance on low-return aspects of Institutional banking in particular. 4. Further strengthen the balance
Slide 8: Strategic Focus
STRATEGIC FOCUS A SIMPLER BETTER BALANCED BANK CAPITAL REALLOCATION1 CAPITAL FLEXIBIILTY % CET1 CAPITAL FREED UP FROM TRANSFORMATION ($b) SEPTEMBER 2015 Pro forma SEPTEMBER 20182 INCLUDING ANNOUNCED ASSET DISPOSALS 11.7 11.7 Other (0.2) Institutional 4.5 reshaping Retained for higher 5.5 capital and
Slide 9: New Zealand 8 Years In
NEW ZEALAND 8 YEARS IN EXECUTION CONSISTENCY New Zealand Division1 Sep 2010 Sep 2018 Core systems 2 1 Brands 2 1 ANZ brand consideration2 27% 51% FTE3 9,412 7,511 Staff engagement 64% 77% Revenue (NZDm) 2,675 3,555 Expenses (NZDm) 1,349 1,282 CTI 50.4% 36.1% Cash Profit (NZDm) 585 1,633 1. 2010 fina
Slide 10: Institutional 3 Years In
INSTITUTIONAL 3 YEARS IN EXECUTION CONSISTENCY CUSTOMERS FTE CREDIT RISK WEIGHTED ASSETS % change in # of customers1,2 % change in # of FTE2 % change in CRWA2 -21% -39% -24% -49% -27% -32% Institutional International Institutional International Institutional International RISK ADJUSTED NIM REVENUE &
Slide 11: Australia
AUSTRALIA Australia Division1 Sep 2016 Sep 2018 Retail customers 5.4m 5.7m Small Business customers 472k 500k Branches 724 629 includes digital branches 40 114 Products 373 236 FTE2 13,687 12,885 Revenue ($m) 9,197 9,667 Expenses ($m) 3,242 3,406 Cash Profit ($m) 3,551 3,889 CTI 35.3% 35.2% Risk Pro
Slide 12: Financial Performance
2018 FULL YEAR RESULTS FINANCIAL PERFORMANCE AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 13: Overview
OVERVIEW CASH PROFIT1 CASH EPS1 Strong balance sheet $m cents 6,809 6,487 232.7 223.4 5,889 202.6 ‘BAU’ costs well managed FY16 FY17 FY18 FY16 FY17 FY18 Strong credit quality ROE1 CET1 RATIO 11.7 Difficult year in Australia division % 11.0 % 11.4 10.3 10.6 9.6 Good result in Institutional
Slide 14: Cash Profit Composition – Full Year
CASH PROFIT COMPOSITION – FULL YEAR IMPACT OF DIVESTMENTS AND OTHER LARGE / NOTABLE ITEMS FULL YEAR 2018 $m 698 6,960 682 6,487 5,805 -225 FY18 Cash Profit Discontinued FY18 Cash Profit Divestments Other large / notable items FY18 ex large / Reported Wealth operations1 Continuing notable items FULL
Slide 15: Cash Profit Composition – Divestments
CASH PROFIT COMPOSITION – FULL YEAR DIVESTMENTS (CONTINUING OPERATIONS) FULL YEAR 2018 $m 698 6,960 6,487 6,262 -225 FY18 Cash Profit Divestments FY18 ex Divestments Other large / FY18 ex large / notable items Continuing notable items $m Continuing operations Announced divestment status Earnings1 Ga
Slide 16: Cash Profit Composition – Other Large / Notable Items
CASH PROFIT COMPOSITION – FULL YEAR OTHER LARGE / NOTABLE ITEMS FULL YEAR 2018 $m 698 6,960 6,487 6,262 -225 FY18 Cash Profit Divestments FY18 ex Divestments Other large / FY18 ex large / notable items Continuing notable items $m Other large / notable items within Continuing Operations Accelerated E
Slide 17: Other Large / Notable Items
OTHER LARGE / NOTABLE ITEMS FULL YEAR 2018 CASH PROFIT IMPACT (REDUCTION) $m CONTINUING OPERATIONS 698 Royal Commission 38 External legal costs associated with responding to the Royal Commission. Total $55 million (pre-tax) for FY18. Restructuring 159 Restructuring charges of $104 million in 2H18, w
Slide 18: 2018 Financial Performance
2018 FINANCIAL PERFORMANCE CASH PROFIT CONTINUING OPERATIONS (EXCLUDING LARGE / NOTABLE ITEMS) GROUP PERFORMANCE $m 413 6,960 6,763 -66 126 -276 -1.4% -1.5% -38.4% +2.3% +2.9% FY17 Revenue1 Expenses Provisions Tax & NCI FY18 DIVISIONAL PERFORMANCE $m 119 204 74 6,960 118 6,763 FY18 v FY17 Australia
Slide 19: Net Interest Margin
NET INTEREST MARGIN CASH PROFIT CONTINUING OPERATIONS GROUP NET INTEREST MARGIN (NIM) bp High return 193 1 low margin 0 189 -2 -1 -2 -2 182 -4 -1 BBSW / OIS impact ~-2bp -4bp -7bp 1H18 Asset & Funding cost Deposits Assets Treasury 2H18 ex Customer Markets Asia Retail 2H18 funding mix Remediation, re
Slide 20: Risk Adjusted Performance
RISK ADJUSTED PERFORMANCE CASH PROFIT CONTINUING OPERATIONS (EXCLUDING LARGE / NOTABLE ITEMS) NET INTEREST INCOME / AVERAGE CREDIT RWA % GROUP TOTAL1 AUSTRALIA NEW ZEALAND INSTITUTIONAL1 6.15 6.05 6.05 5.87 5.12 5.22 4.54 4.52 4.78 4.91 4.40 4.23 2.34 2.21 2.13 2.07 1H17 2H17 1H18 2H18 1H17 2H17 1H1
Slide 21: Expenses
EXPENSES CONTINUING OPERATIONS BY CATEGORY BY DIVISION FULL TIME EQUIVALENT STAFF $m $m # Continuing Operations basis Continuing Operations basis Continuing Operations basis 10,439 10,439 46,554 2,562 43,011 1,525 9,248 9,248 997 8,967 8,967 4,794 2,759 3,664 37,860 278 1,553 1,431 845 1,517 1,578 1
Slide 22: FY18 Balance Sheet
FY18 BALANCE SHEET NET LOANS & ADVANCES – BY SEGMENT CUSTOMER DEPOSITS – BY SEGEMENT $b $b 605 487 576 580 6 468 450 23 15 9 27 18 150 132 140 206 174 189 94 95 92 14 13 16 62 70 75 331 341 312 195 182 184 Sep 16 Sep 17 Sep 18 Sep 16 Sep 17 Sep 18 Housing (Aus & NZ) Commercial (Aus & NZ) Other1 Reta
Slide 23: Credit Impairment Charges
CREDIT IMPAIRMENT CHARGES TOTAL PROVISION CHARGE INDIVIDUAL PROVISION CHARGE $m $m Total loss 1,956 1,047 rate 9bp 892 787 803 1,199 554 196 430 343 404 400 688 0.36% 0.31% 0.27% 249 0.19% 0.15% 0.11% 732 745 548 17 -142 -85 -24 FY16 FY17 FY18 1H16 2H16 1H17 2H17 1H18 2H18 Collective Provision Consu
Slide 24: AASB 9 Financial Instruments – Transition Impact
AASB 9 FINANCIAL INSTRUMENTS – TRANSITION IMPACT ILLUSTRATIVE DAY 1 IMPACT: COLLECTIVE PROVISION BALANCE & COVERAGE AASB 139 AASB 9 Increase Collective Provision balance $2,523m $3,336m $813m Existing deduction from CET1 APRA Basel 3 expected loss in excess of eligible $567m 0 $246m impact to CET11
Slide 25: Australia Division Priorities
AUSTRALIA DIVISION PRIORITIES MOVEMENTS PRIORITIES ACTIONS METRICS FY15 FY16 FY17 FY18 Simplified products # Products decommissioned <10 <10 47 90 Optimised branch footprint # Branches 751 724 684 629 Create a simpler, better capitalised, More digital branches # Digital branches 5 40 81 114 better b
Slide 26: Australia Division Digital
AUSTRALIA DIVISION DIGITAL DELIVERING SUPERIOR EXPERIENCE FOR OUR TRANSLATING INTO BUSINESS OUTCOMES CUSTOMERS 3.6m Introduced ANZ App in Feb 18, combining goMoney and Grow 3.3m 3.5m into a new unified mobile banking application. 3.0m ANZ app offers a single location for Australian retail customers
Slide 27: Australia Division
AUSTRALIA DIVISION CONTINUING OPERATIONS (EXCLUDING LARGE / NOTABLE ITEMS) REVENUE EXPENSES TOTAL PROVISIONS $m $m $m 4,660 4,818 4,896 4,771 1,646 1,679 1,737 1,669 468 417 386 312 415 449 358 35.3% 35.5% 35.0% 338 375 338 345 350 34.8% 53 11 -32 -25 1H17 2H17 1H18 2H18 1H17 2H17 1H18 2H18 1H17 2H1
Slide 28: Institutional
INSTITUTIONAL RESHAPING THE BUSINESS, TRANSITIONING TO DISCIPLINED GROWTH • RWA $44b (21%) lower and ~6,000 reduction in clients1 since RESHAPE THE BUSINESS September 2015 AND IMPROVE RISK PROFILE • Improved portfolio quality since September 2015 with 85% (+510bps) of exposures now investment grade
Slide 29: Institutional Market Positions
INSTITUTIONAL MAINTAINED OUR LEADING MARKET POSITIONS ACROSS OUR KEY GEOGRAPHIES AUSTRALIA NEW ZEALAND ASIA #1 Lead Bank Penetration1 #1 Lead Bank Penetration1 Top 4 Corporate Bank2 37% 50% 58% #1 Overall Quality 47% 45% 26% = #4 28% 33% 20% 20% 26% 9% ANZ Bank 2 Bank 3 Bank 4 ANZ Bank 2 Bank 3 Bank
Slide 30: Institutional
INSTITUTIONAL CONTINUED MOMENTUM IN 2H18 WITH PROFITABLE CUSTOMER REVENUE GROWTH, A FIFTH CONSECUTIVE HALF YEAR OF ABSOLUTE COST REDUCTION, AND IMPROVED RETURNS REVENUE1 EXPENSES1 TOTAL PROVISIONS $m $m $m 3,070 1,416 1,392 1,363 1,333 129 2,576 2,539 2,597 49 2,146 2,009 2,038 2,142 54% 54% 51% 46%
Slide 31: New Zealand Division Priorities
NEW ZEALAND DIVISION PRIORITIES PRIORITIES ACTIONS METRICS SEP 16 SEP 17 SEP 18 Brand consideration1 49.6% 50.9% 51.4% Grow customer Migrant Banking brand consideration1 74.9% 74.1% 70.2% #1 in service satisfaction and brand consideration Retail Net Promoter Score2 8.6 12.3 16.0 KiwiSaver provider (
Slide 32: New Zealand Digital
NEW ZEALAND DIGITAL DELIVERING SUPERIOR EXPERIENCE FOR OUR PEOPLE TRANSLATING INTO BUSINESS OUTCOMES AND CUSTOMERS 1.5m +181k 1.4m IntroducedJamie, Introduced Jamie,aadigital digitalassistant assistanton onhelp.anz.co.nz help.anz.co.nz 1.4m 1.3m to assist customers with over 40 common to assist cust
Slide 33: New Zealand Division Financial Performance
NEW ZEALAND DIVISION1 FINANCIAL PERFORMANCE REVENUE EXPENSES TOTAL PROVISIONS NZDm NZDm NZDm 1,670 1,723 1,767 1,788 632 631 637 645 44 39 37.8% 22 36.6% 36.0% 36.1% 517 533 555 565 -16 1H17 2H17 1H18 2H18 1H17 2H17 1H18 2H18 1H17 2H17 1H18 2H18 Revenue Revenue/Avg FTE ($k) annualised Expenses CTI C
Slide 34: Treasury
2018 FULL YEAR RESULTS TREASURY AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 35: Regulatory Capital
REGULATORY CAPITAL CAPITAL UPDATE APRA LEVEL 2 COMMON EQUITY TIER 1 (CET1) Capital Position % Net Organic Capital APRA Level 2 CET1 ratio of 11.4% (or 16.8% on an Internationally Comparable Generation +107bp basis1), which is in excess of APRA’s ‘unquestionably strong’ benchmark2, well ahead 0.90
Slide 36: Regulatory Capital Generation
REGULATORY CAPITAL GENERATION Second half Full Year COMMON EQUITY TIER 1 average 2H18 average FY12- FY18 GENERATION (bp) 2H12 – 2H17 FY17 Cash NPAT1 95 90 191 180 RWA movement (1) 15 (16) 3 Organic Capital Generation 2 Capital Deductions (7) 2 (21) (1) Net organic capital generation of +182bp for
Slide 37: Internationally Comparable Regulatory Capital Position
INTERNATIONALLY COMPARABLE1 REGULATORY CAPITAL POSITION APRA Level 2 CET1 – 30 September 2018 11.4% Corporate undrawn EAD and Australian ADI unsecured corporate lending LGDs and undrawn CCFs exceed those applied in many jurisdictions 1.6% unsecured LGD adjustments APRA requires 100% deduction from C
Slide 38: CET1 and Leverage in a Global Context
CET1 AND LEVERAGE IN A GLOBAL CONTEXT CET1 RATIOS1 LEVERAGE RATIOS1,2 5% 10% 15% 20% 25% 30% 2% 4% 6% 8% Swedbank UOB Svenska Handelsbanken OCBC Nordea DBS SEB ABN Amro Intesa Sanpaolo ANZ Erste Bank Danske Bank BBVA Morgan Stanley Raiffeisen Bank International (RBI) RBS Rabobank Standard Chartered
Slide 39: TLAC
TLAC APRA ANNOUNCEMENT: INCREASING LOSS ABSORBING CAPACITY OF ADIs TO SUPPORT ORDERLY RESOLUTION Proposed Proposed additional KEY CONSIDERATIONS 18% - 19% 4%-5% ($16-20bn) of total capital • The key element of APRA’s proposal for the 4 major banks Sedse2 – is to increase Total Capital requirements b
Slide 40: Key Terms Australian Tier 2 Securities
KEY TERMS AN AUSTRALIAN TIER 2 SECURITIES • Basel 3 Australian tier 2 securities include contractual PONV loss absorption Structure • In liquidation ranks ahead of ANZ Ordinary Shares and AT1 Capital and behind Tier 2 issued pre 1 January 2013 • Conversion to ordinary equity once regulator deems PON
Slide 41: Balance Sheet Structure
BALANCE SHEET STRUCTURE FUNDED BALANCE SHEET COMPOSITION1 SOURCES AND USES OF FUNDS Sep 2017 to Sep 2018 $b STRUCTURAL FUNDING POSITION SHORT TERM $4.8b increase to Structural funding $4.8b reduction in Short position Term funding position Short Term Wholesale Debt & Liquid and Other Assets Other Fu
Slide 42: Funding & Liquidity Metrics
FUNDING & LIQUIDITY METRICS1 NSFR COMPOSITION NSFR MOVEMENT Sep 2018 Sep 2017 v Sep 2018 $500b $436b 2.3% Wholesale Funding & Other2 Liquids 0.5% 114.6% Non Financial and Other Assets3 113.9% 0.8% 0.9% 0.1% Corporates Other Loans4 -3.9% Retail/SME Residential Mortgages5,6 Capital <35% Available Requ
Slide 43: Term Wholesale Funding Portfolio
TERM WHOLESALE FUNDING PORTFOLIO1 ISSUANCE MATURITIES $b 32 26 24 24 23 22 22 23 19 14 12 11 6 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25+ Senior Unsecured Covered Bonds Tier 2 RMBS PORTFOLIO PORTFOLIO BY CURRENCY 7% 6% 1% 14% 21% 33% Domestic (AUD, NZD) Senior Unsecured Tier 2
Slide 44: Corporate Overview & Sustainability
2018 FULL YEAR RESULTS CORPORATE OVERVIEW & SUSTAINABILITY AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 45: ANZ Corporate Profile
ANZ CORPORATE PROFILE CORPORATE PROFILE OUR LARGEST BUSINESSES FULL YEAR 2018 CASH PROFIT ($m)2 • Top 5 listed corporate in Australia and the largest bank in New Zealand by bank market share • Market capitalisation of AU$81b1 INSTITUTIONAL Provides products, services and solutions to global Institut
Slide 46: Sustainability Approach
SUSTAINABILITY OUR APPROACH Our Sustainability Framework supports our business strategy, reflects our most material issues and is aligned with our purpose. This year we refreshed our Framework: At the core of our Framework is Fair and responsible banking - keeping pace with the expectations of our c
Slide 47: Sustainable Development Policies
SUSTAINABLE DEVELOPMENT POLICIES OUR POLICIES SHAPE DECISIONS ON WHO WE BANK SUSTAINABLE DEVELOPMENT POLICIES CORE POLICY • Our policies align to our purpose and our sustainability priorities • We assess business customers against our policies to ensure they manage their social and environmental imp
Slide 48: Sustainability Performance Trends
SUSTAINABILITY PERFORMANCE TRENDS COMMUNITY INVESTMENT1 ENVIRONMENTAL FINANCING MONEYMINDED & SAVER PLUS $15B TARGET Total community investment ($m) Funded and facilitated ($b) Estimated # of people reached 137 88,308 131 80,074 11.5 69,826 65,549 59,461 90 76 75 6.9 2.5 2014 2015 2016 2017 2018 201
Slide 49: Climate-Related Financial Disclosures (TCFD)
CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)1 Governance Strategy Risk Management Metrics & targets • Board Risk Committee oversees • Identifying material sustainability • Climate-related financial risks • Support at least 100 of our largest management of climate-related risks, including climate-rel
Slide 50: TCFD-Related Metrics and Industry Exposures
TCFD-RELATED METRICS AND INDUSTRY EXPOSURES IMPROVED CREDIT QUALITY IN KEY INDUSTRIES IDENTIFIED BY THE TCFD INDUSTRY GROUPS AND CREDIT QUALITY SUMMARY EXPOSURES TO KEY TCFD SUB-INDUSTRIES Exposure ad Default Non performing Loans Investment Grade EAD ($b) (EAD) ($b) (% of sector EAD) (% of sector EA
Slide 51: Key ANZ Reforms
KEY ANZ REFORMS IMPLEMENTED OVER THE LAST TWO YEARS IMPROVED MONITORING, CONDUCT AND SAFEGUARDS • Appointed Colin Neave AM as Customer Fairness Advisor, a new role to help improve fairness of the bank’s products and services • Implemented a new Retail ‘Customer Experience Framework’ in branches and
Slide 52: Key ANZ Reforms
KEY ANZ REFORMS IMPLEMENTED OVER THE LAST TWO YEARS REDUCED REMUNERATION FOCUS ON SALES • Updated and published ANZ Remuneration Principles to further reinforce our focus on customer outcomes • Changed Retail (branch and call centre) and Business and Private Bank incentive plans removing campaign in
Slide 53: Risk Management
2018 FULL YEAR RESULTS RISK MANAGEMENT AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 54: Key Risk Metrics
KEY RISK METRICS CREDIT IMPAIRMENT CHARGE INDIVIDUAL PROVISION CHARGE CP BALANCE & COVERAGE $m $m $m 1,956 1,939 3,336 1,341 2,956 2,876 1,110 2,662 2,523 1,205 1,199 773 0.99% 0.85% 0.82% 0.79% 0.75% 688 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 Sep 15 Sep 16 Sep-17 Sep 18 Sep 181 IP Charge CP Charge
Slide 55: Total & Collective Provision Charge
RISK MANAGEMENT TOTAL & COLLECTIVE PROVISION (CP) CHARGE TOTAL PROVISION CHARGE CP BALANCE BY DIVISION $m $m 1,956 2,000 1,258 0.4 4,000 3,336 1,500 1,199 2,876 2,662 1,197 989 1,205 0.3 3,000 2,523 1,000 688 2,000 0.2 500 1,000 0 0.1 -85 0 -500 -142 0.0 Sep 16 Sep 17 Sep 18 Sep 18 (AASB9) FY12 FY13
Slide 56: Individual Provision Charge
RISK MANAGEMENT INDIVIDUAL PROVISION (IP) CHARGE ANZ HISTORICAL LOSS RATES INTERNAL EXPECTED LOSS bp % 250 Mar 16 Sep 16 Mar Sep Mar Sep 17 17 18 18 200 Australia Div. 0.35 0.33 0.33 0.33 0.31 0.29 150 100 New Zealand Div. 0.25 0.26 0.26 0.22 0.21 0.19 50 Institutional Div. 0.37 0.36 0.35 0.30 0.32
Slide 57: Impaired Assets
RISK MANAGEMENT IMPAIRED ASSETS CONTROL LIST GROSS IMPAIRED ASSETS BY DIVISION Index Sep 09 = 100 $m 150 4,000 3,173 2,940 2,708 2,719 2,883 100 3,000 0.55% 2,384 0.48% 0.47% 0.51% 0.51% 2,034 2,013 50 2,000 0.41% 0.34% 0.33% 1,000 0 Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep 0 09 10 11 12 13 14 15 16
Slide 58: Risk Weighted Assets
RISK MANAGEMENT RISK WEIGHTED ASSETS TOTAL RISK WEIGHTED ASSETS TOTAL RWA MOVEMENT $b $b 402 409 391.1 0.8 0.3 1.4 390.8 397 391 396 391 388 38 39 39 37 37 38 -2.8 38 14 18 17 17 16 16 16 Sep 17 Credit RWA Op RWA IRRBB RWA Mkt. RWA Sep 18 CRWA MOVEMENT 350 352 342 337 343 338 $b 334 4.1 1.2 336.8 33
Slide 59: Risk Weighted Assets
RISK MANAGEMENT RISK WEIGHTED ASSETS GROUP EAD1 & CRWA’s GROUP EAD1 MOVEMENT $b ($b) 930 944 31.4 944.1 903 889 894 899 903 13.6 903.1 -4.0 Sep 17 FX Impact Lending Data/Meth. Sep 18 Mvmt. Review GROUP EAD & CRWA GROWTH MOVEMENT1,2 38.7% 37.6% 39.4% 38.0% 37.3% 36.9% 35.8% SEP 18 v SEP 17 ($b) 25.4
Slide 60: Improving Portfolio Risk Profile
IMPROVING PORTFOLIO RISK PROFILE ACTIONS TAKEN TO IMPROVE RISK PROFILE INTERNAL EXPECTED LOSS (IEL) Sold Asia Retail & Wealth businesses (IEL 151bp) 1 (AS A % OF GROSS LENDING ASSETS) (IEL 100bp)2 GROUP TOTAL (%) INSTITUTIONAL (%) Sold Esanda Dealer Finance business 0.35 0.31 0.27 0.27 (IEL 41bp)1 L
Slide 61: Portfolio Composition
RISK MANAGEMENT PORTFOLIO COMPOSITION Portfolio % of Portfolio in Category % of Group EAD Balance in Non Non Performing Performing EXPOSURE AT DEFAULT (EAD) AS A % OF Sep 17 Sep 18 Sep 17 Sep 18 Sep 18 GROUP TOTAL Consumer Lending 41.5% 39.7% 0.1% 0.1% $448 Finance, Investment & Insurance 17.2% 19.6
Slide 62: Portfolio Trend
PORTFOLIO TREND PERCENTAGE OF PORTFOLIO IN NON PERFORMING CONSUMER LENDING RETAIL TRADE WHOLESALE TRADE $b % $b % $b % 400 3.5 80 3.5 80 3.5 3.0 3.0 3.0 300 2.5 60 2.5 60 2.5 2.0 2.0 2.0 200 40 40 1.5 1.5 1.5 100 1.0 20 1.0 20 1.0 0.5 0.5 0.5 0 0.0 0 0.0 0 0.0 Mar-14 Mar-17 Mar-18 Mar-13 Sep-13 Sep-
Slide 63: Portfolio Trend
PORTFOLIO TREND PERCENTAGE OF PORTFOLIO IN NON PERFORMING CONSTRUCTION MANUFACTURING AGRI, FORESTRY, FISHING $b % $b % $b % 80 3.5 80 3.5 80 5 3.0 3.0 60 60 4 60 2.5 2.5 2.0 2.0 3 40 40 40 1.5 1.5 2 20 1.0 20 1.0 20 1 0.5 0.5 0 0.0 0 0.0 0 0 Mar-13 Mar-15 Mar-16 Mar-17 Mar-18 Mar-15 Mar-16 Mar-17 Ma
Slide 64: Group Resources Portfolio
RISK MANAGEMENT GROUP RESOURCES PORTFOLIO RESOURCES EXPOSURE BY SECTOR (%) Total EAD (Sep 18): $15.3b As a % of Group EAD (Sep 18): 1.6% 8.6 7.8 7.4 7.0 4.9 4.4 4.0 3.5 2.9 2.3 1.5 1.1 1.4 1.3 1.7 1.4 1.2 1.1 1.0 0.9 Coal Mining1 Metal Ore Mining Oil & Gas Extraction Other Mining Services To Mining
Slide 65: Commercial Property Portfolio
RISK MANAGEMENT COMMERCIAL PROPERTY PORTFOLIO COMMERCIAL PROPERTY OUTSTANDINGS BY REGION1 COMMERCIAL PROPERTY OUSTANDINGS BY SECTOR1 $b % 40.2 100 38.4 8.0 80 37.4 37.5 37.9 37.7 37.5 37.6 2.9 3.9 3.6 2.7 2.4 3.0 60 4.5 4.7 7.5 40 9.8 20 8.8 9.5 9.5 9.7 9.7 8.3 8.4 Mar 17 Sep 17 Mar 18 Sep 18 7.0 Of
Slide 66: Residential Development
RESIDENTIAL DEVELOPMENT COMMERCIAL PROPERTY EXPOSURE OVERVIEW PROFILE (SEP 18) Total Residential Limits: $10.28b • Overall Apartment Development limits have increased by $0.56bn (17%) to ~$4bn in FY18 and now accounts for ~39% of Total 29% Residential Limits. 21% Apartment Development Other Developm
Slide 67: Group Agriculture Portfolio
RISK MANAGEMENT GROUP AGRICULTURE PORTFOLIO AGRICULTURE EXPOSURE BY SECTOR (% EAD) GROUP AGRICULTURE EAD SPLITS1 Total EAD (Mar 18) As a % of Group EAD A$34.8b 3.7% 6.6% 3.3% 43.5% 15.9% 10.2% 98.9% 74.2% 56.2% 12.6% 36.2% 0.3% 1.1% <60% Secured Australia Productive 60 - <80% Secured New Zealand Imp
Slide 68: New Zealand
RISK MANAGEMENT NEW ZEALAND NEW ZEALAND GEOGRAPHY GROSS IMPAIRED ASSETS NEW ZEALAND GEOGRAPHY TOTAL PROVISION CHARGE1 NZ$m % NZ$m 1,451 300 202 2.5 200 147 955 2.0 66 60 254 77 53 708 1.5 100 86 130 83 46 106 101 419 491 1.0 31 61 368 337 0 -52 -46 -48 -64 -92 0.5 -100 0.0 -9 Sep 12 Sep 13 Sep 14 Se
Slide 69: ANZ Institutional Portfolio
RISK MANAGEMENT ANZ INSTITUTIONAL PORTFOLIO (COUNTRY OF INCORPORATION1) INSTITUTIONAL PORTFOLIO SIZE & TENOR (EAD2) ANZ INSTITUTIONAL INDUSTRY COMPOSITION $b EAD (Sep 18): A$408b2 400 Finance (Banks and Central Banks) Government Admin. 27% 31% Property Services3 350 Services to Fin. & Ins. Basic Mat
Slide 70: ANZ Asian Institutional Portfolio
RISK MANAGEMENT ANZ ASIAN INSTITUTIONAL PORTFOLIO (COUNTRY OF INCORPORATION1) COUNTRY OF INCORPORATION1 ANZ ASIA INDUSTRY COMPOSITION EAD (Sep 18): A$101b2 EAD (Sep 18): A$101b2 Finance (Banks & Central Banks) 6% 20% Basic Material Wholesaling 3% Machinery & Equip Mnfg 3% 25% 3% Petroleum,Coal,Chem
Slide 71: Housing Portfolio
2018 FULL YEAR RESULTS HOUSING PORTFOLIO AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 72: Australia Home Loans Portfolio Overview
AUSTRALIA HOME LOANS PORTFOLIO OVERVIEW Portfolio1 Flow2 Portfolio1 FY16 FY17 FY18 FY18 FY16 FY17 FY18 Number of Home Loan 976k 1,009k 1,011k 170k3 Average LVR at Origination9, 10, 11 71% 69% 67% accounts1 Total FUM1 $246b $264b $272b $57b Average Dynamic LVR10,11,12, 13 55% 54% 54% Average Loan Siz
Slide 73: Australia Home Loans Portfolio Growth
AUSTRALIA HOME LOANS PORTFOLIO GROWTH LOAN BALANCE & LENDING FLOWS1 HOME LOAN COMPOSITION2 $b $b +3% Payment Type Owner Investor Equity Loan Total Occupied 16 45 1 264 272 P&I Loan 155.6 49.1 - 204.7 -54 Interest Only 21.9 36.8 - 58.7 Equity Loan - - 8.2 8.2 FY17 New Sales Net OFI Refi Redraw & Repa
Slide 74: Australia Division Portfolio Dynamics
AUSTRALIA DIVISION PORTFOLIO DYNAMICS HOME LOANS REPAYMENT PROFILE1,2 HOME LOANS ON TIME & <1 MONTH AHEAD PROFILE1,2 72% of accounts ahead of repayments % composition of accounts (September18) Investment:5 Interest payments may receive 26% negative gearing/tax benefits 25% New Accounts: Less than 1
Slide 75: Australia Division Portfolio Performance
AUSTRALIA DIVISION PORTFOLIO PERFORMANCE PRODUCT 90+ DAY DELINQUENCIES1,2 HOME LOAN DELINQUENCIES1,2,4 % % 5.0 2.0 4.0 1.5 3.0 1.0 2.0 1.0 0.5 0.0 0.0 Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep 12 13 14 15 16 17 18 12 13 14 15 16 17 18 Home Loans Personal Loans 30+ DPD % 90+ Investor Co
Slide 76: Australia Home Loans Areas of Interest
AUSTRALIA HOME LOANS AREAS OF INTEREST WA OUTSTANDING BALANCE • Greater focus on Acquisition & Collection management strategies have been applied $b 40 • Exposure to WA has decreased since Mar-16 driven by the economic environment and credit policy tightening (mining town lending, etc) 35 • Currentl
Slide 77: Australia Home Loans Interest Only
AUSTRALIA HOME LOANS INTEREST ONLY INTEREST ONLY FLOW COMPOSITION1 • Serviceability assessment is based on ability to repay principal & interest repayments calculated over the residual term of loan % • 83% of Interest Only customers have net income >$100k pa. (portfolio APRA’s 30% limit introduced M
Slide 78: Underwriting Practices and Policy Changes
AUSTRALIA HOME LOANS UNDERWRITING PRACTICES AND POLICY CHANGES1 Multiple checks during origination process • End-to-end home lending responsibility managed within ANZ Pre – application2 Income & Expenses • Effective hardship & collections processes • Full recourse lending Quality assurance, info ver
Slide 79: Underwriting Practices and Policy Changes
AUSTRALIA HOME LOANS UNDERWRITING PRACTICES AND POLICY CHANGES1 ANZ Policy changes Jun'15 LVR cap reduced to 70% in high risk mining towns Jul'15 LVR cap reduced to 90% for investment loans Aug’15 Interest rate floor applied to new and existing mortgage lending introduced at 7.25% Apr’16 Introductio
Slide 80: Stress Testing the Australian Mortgage Portfolio
AUSTRALIAN HOME LOANS STRESS TESTING THE AUSTRALIAN MORTGAGE PORTFOLIO Assumptions Current Year 1 Year 2 Year 3 • ANZ conducts regular stress tests of its loan portfolios to meet risk management Unemployment 5.0% 6.4% 10.3% 10.6% objectives and satisfy regulatory requirements. rate • Stress tests ar
Slide 81: Lenders Mortgage Insurance
LENDERS MORTGAGE INSURANCE ANZLMI HAS MAINTAINED STABLE LOSS RATIOS SEPTEMBER FULL YEAR 2018 RESULTS LMI & REINSURANCE STRUCTURE Australian Home Loan portfolio LMI and Reinsurance Structure at 30 Sep 18 (% New Business FUM Oct-17 to Sep-18) Gross Written Premium ($m) $141.1m LVR<80% Not LMI Insured
Slide 82: New Zealand Home Loans Portfolio Overview
NEW ZEALAND HOME LOANS PORTFOLIO OVERVIEW1 Portfolio Growth Portfolio Growth FY18 v FY18 v FY17 FY18 FY17 FY18 FY17 FY17 Number of Home Loan Accounts 520k 526k 1.1% % Broker Originated 35% 36% 186bps Total FUM NZ$77b NZ$81b 4.9% Average LVR at Origination2 59% 58% -128bps Average Loan Size at Origin
Slide 83: New Zealand Home Lending
NEW ZEALAND HOME LENDING1 FLOW2 PORTFOLIO 5% 5% 21% 18% 21% 20% 34% 39% 11% 11% 7% 7% 10% 11% 79% 82% 66% 61% 46% 46% FY17 FY18 FY17 FY18 FY17 FY18 Auckland Christchurch Other Nth Is. Proprietary Broker Fixed Variable Wellington Other Sth Is. Other³ MARKET SHARE4 ANZ HOME LOAN LVR PROFILE5 31.1% 31.
Slide 84: Economics
2018 FULL YEAR RESULTS ECONOMICS AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
Slide 85: Australia Forecast Table
ECONOMICS AUSTRALIA FORECAST TABLE1 2015 2016 2017 2018 2019 2020F Australia – annual % growth GDP 2.5 2.6 2.2 3.2 3.0 2.8 Domestic final demand 1.2 1.9 3.0 3.3 2.4 2.2 Headline CPI 1.5 1.3 1.9 1.9 2.0 2.3 Core CPI 2.2 1.5 1.9 1.9 2.0 2.2 Employment 2.8 0.9 3.3 1.9 1.8 1.6 Wages 2.2 2.0 2.0 2.2 2.5
Slide 86: Australian Economy
AUSTRALIAN ECONOMY GDP GROWTH1 CONSUMER PRICE INFLATION*1 CREDIT GROWTH BY SECTOR1 AUSTRALIAN GOVERNMENT BUDGET BALANCE*1 (year ended) Per cent of nominal GDP 86 Sources: 1. RBA Chart Pack Oct 2018
Slide 87: Australian Economy and Population
AUSTRALIAN ECONOMY AND POPULATION POPULATION GROWTH1 – AUSTRALIA AND G7 CONTRIBUTION TO GDP GROWTH2 % yoy 2.5% 2.0% Australia 1.5% 1.0% G7 weighted average 0.5% 0.0% 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 POPULATION GROWTH – MAJOR STATES3 STATE SHAR
Slide 88: Australian Labour Market
AUSTRALIAN LABOUR MARKET UNEMPLOYMENT AND UNDEREMPLOYMENT1 JOB VACANCIES AND ADVERTISEMENTS WAGE PRICE INDEX GROWTH1 LABOUR COSTS AND INFLATION3 8 5.0 7 4.5 6 4.0 5 3.5 % change y/y % change y/y 4 3.0 3 2.5 2 2.0 1 1.5 0 1.0 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 NAB labour c
Slide 89: Commodity Prices
COMMODITY PRICES1 RBA INDEX OF COMMODITY PRICES BASE METALS, RURAL, AND OIL PRICES SDR, 2016/17 Average = 100, log scale Weekly BULK COMMODITY PRICES TERMS OF TRADE* Free on board basis 2015/16 average = 100, log scale 89 1. RBA Chart Pack Aug 2018
Slide 90: Australian Economy – State by State
AUSTRALIAN ECONOMY – STATE BY STATE STATE FINAL DEMAND (STATE GDP)1 CHANGE IN EMPLOYMENT BY STATE2 % yoy Past 3 years 4 NT 2 Tas 0 ACT -2 WA -4 -6 SA -8 Qld -10 NSW NSW VIC TAS SA QLD WA Vic 2014 2015 2016 2017 0 50 100 150 200 250 300 350 '000 change in employment over 3yrs to Sep-18 POPULATION GRO
Slide 91: Australian Economy – WA and QLD
AUSTRALIAN ECONOMY – WA AND QLD WA AND QLD GDP HAS IMPROVED1 6 MONTHS OF JOB GROWTH IN WA AND QLD1 16 30 Tas 14 26 12 22 ACT 10 18 8 NT 14 y/y % change (trend) y/y % change (trend) 6 10 SA 4 6 2 WA 2 0 -2 Qld -2 WA & QLD -6 -4 improved Vic -6 -10 -8 -14 NSW -10 -18 04 06 08 10 12 14 16 18 05 07 09 1
Slide 92: Australian Economy – Service Exports
AUSTRALIAN ECONOMY – SERVICE EXPORTS SERVICE EXPORTS AND AUD1 INTERNATIONAL TOURIST VISA’S GRANTED2 2.5 40 2.0 45 49% growth 50 6 1.5 1.0 55 5 AUDbn, 3-month sum 60 0.5 4 Index 65 0.0 70 3 -0.5 75 2 -1.0 80 -1.5 85 1 -2.0 90 - 95 97 99 01 03 05 07 09 11 13 15 17 Net tourism & education related expor
Slide 93: Australian Housing Dynamics: A Cooling Market
AUSTRALIAN HOUSING DYNAMICS: A COOLING MARKET HOUSING PRICE FORECASTS BY STATE HOUSE PRICE GROWTH1 16 yoy % 5 yr Cumulative 2012-2017 5 yr Cumulative Sep 13-Sep 18 Total housing prices, y/y % change (calendar year) 12 All All All Sep 2018 Houses Units Houses Units Houses Units dwellings dwellings dw
Slide 94: Rental Vacancy Rates Remain Low
RENTAL VACANCY RATES REMAIN LOW VACANCY RATES VACANCY RATES BY STATE 5.0 7.0 Average 1987-2004 6.0 4.0 Vacancy rates (%, trend) Vacancy rates (%, trend) 5.0 3.0 Post-2004 average 4.0 2.0 3.0 2.0 1.0 1.0 0.0 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 0.0 Australian capital cities Average 1987-20
Slide 95: Australian Housing Dynamics
AUSTRALIAN HOUSING DYNAMICS PRIVATE RESIDENTIAL BUILDING APPROVALS1 FOREIGN PURCHASES OF NEWLY CONSTRUCTED RESIDENTIAL 35% APARTMENTS2 30% NSW VIC 25% 20% 15% 10% 5% 0% Sep-16 Dec-16 Mar-17 Jun-17 HOUSING LOAN APPROVALS1 HOUSING BALANCE3 Forecast 200 150 100 Dwellings ('000) Shortage 50 0 Surplus -5
Slide 96: Australian Housing: Household Debt and Income
AUSTRALIAN HOUSING HOUSEHOLD DEBT AND INCOME Household Debt and Deposits1 Household Debt-to-income Ratios2 % of annual household disposable income Housing Price-to-income Ratio2 Household Mortgage Debt Indicators2 Sources: 1. ABS, RBA. Housing Debt refers to ratio of housing debt to annualised house
Slide 97: Australian Housing: Household Debt and Income
AUSTRALIAN HOUSING HOUSEHOLD DEBT AND INCOME Household Debt-to-income1 Household Wealth and Liabilities2 Income quintile, median* % of annual household disposable income Sources: 1. RBA Household Debt, Housing Prices and Resilience, May 2017. 2. RBA Chart Pack oCT 2018 97
Slide 98: Australian Housing: Interest Only Lending
AUSTRALIAN HOUSING INTEREST ONLY LENDING Components of Household Mortgage Payments1 Indexed Loan-to-Valuation Ratio1 Share of household disposable income* Share of outstanding interest only securitised mortgages; Dec 2017* Securitised Housing Loan Arrears Additional Mortgage Payments1 Share of outst
Slide 99: Australian Housing: Borrowing Capacity
AUSTRALIAN HOUSING BORROWING CAPACITY Distribution of Borrowing Capacity Used1 Distribution of Households by DSR1 Amount borrowed as a share of estimated maximum* Share of indebted owner-occupiers by income quintile, 2016* Distribution of Households by LVR and DSR1 Share of indebted owner-occupiers
Slide 100: Australian Mortgage Buffers
AUSTRALIAN MORTGAGE BUFFERS OFFSET BALANCES HOUSEHOLD MORTAGE BUFFERS1 LOAN-TO-VALUATION RATIOS2 Offset Balances Balanced-Weighted Share of Securitised Loans • Aggregate buffers of 18% of outstanding mortgage balance or nearly 3 years scheduled payments • Of those with <1 month buffer, this includes
Slide 101: Further Information
FURTHER INFORMATION Key contacts Adrian Went Scott Gifford John Needham Group Treasurer Head of Debt Investor Relations Head of Capital and Secured +61 3 8654 5532 +61 3 8655 5683 Funding +61 412 027 151 +61 434 076 876 +61 2 8037 0670 Adrian.went@anz.com scott.gifford@anz.com +61 411 149 158 John.N
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