Anz Group Holdings Limited · ASX:ANZ
Anz — Australia and New Zealand Banking Group — FY2006 Earnings Presentation
69 slides from Anz's earnings presentation, Oct 30, 2006
Slide 1: Annual Results, 26 October 2006
26 October 2006 “ John McFarlane Chief Executive Officer ferestecee ANZ
Slide 2: A good year - met our targets again
A good year - met our targets again Headline profit t 16.2% Cash* profit t 13.8% Revenue Growth % 8.4%* Profit Before Provisions t 10.4% Cash* EPS % 13.2% Dividend % 13.6% Return on equity back above 20% Cost-Income ratio improved by 1.0% Smee hunts Peace numbers Yor TRS 2005 ausimants, igniicane Re
Slide 3: Good performance from divisions
Good performance from divisions Division Sep-06 v Sep-05 Cash NPAT ($m) Personal 4} 22% Institutional 4 11% New Zealand 20% Geography Cash NPAT ($m) Australia 16% 2,377 New Zealand ‘f 26% Asia/Pacific ‘ 25% 238 we Weare I NPAT decrease BH Sep-05 NPAT Other } 35%
Slide 4: Innovative strategy delivering results
Innovative strategy delivering results But some areas where we need to do more + Speed up Asian expansion + Advance wealth and private banking Australia * Personal outstanding, engine of group revenue, high customer satisfaction * Institutional regained #1 position New Zealand * Good operational mom
Slide 5: Building a sustainable difference
Building a sustainable difference Invest to increase revenue growth ‘* Maintain high expense growth trajectory + Maintain investment and revenue gap to peers ‘+ Resources directed to highest growth areas Updated Targets Improve cost and capital productivity Revenue growth 7-10% * Dynamic capital and
Slide 6: Peter Marriott, Chief Financial Officer
ing Group. 26 October 2006 Peter Marriott Chief Financial Officer fereancees ANZ
Slide 7: A quick reminder - it's not all 'apples and apples'
A quick reminder - its not all ‘apples and apples’ 1 October 2005 a cto gece AASB 139, 132 & 4 come into anges to treatment play, Sep-05 not restated for | of revenue hedges these standards, = Sep Mar Sep 2005 2006 2006 Statutory IFRS < Accounts 2005 not restated for , AASB 139, 132, and 4 Lack of c
Slide 8: A good result - 13.8% cash earnings growth
A good result - 13.8% cash earnings growth; 10.4% profit before provisions growth Strong income growth allowing continued investment Scorecard FY06 2HO6 ott) ae (240) s2 Hi u Volume Growth | vv | vv Ce ee 7.2% (6.1%) 28.0% Interest Margin v vv $m (19.2%) Non Int. Income vv v Expenses x x Provisions
Slide 9: Another way to think about this result
Another way to think about this result A good result even without provisioning benefit Cash EPS growth Non Continuing FYO6 drag ex provision benefit Non Continuing FYO6 Provisioning drag FY06 Continuing Businesses Provisioning Benefit Underlying Cash EPS Growth * 10%-11% a better reflection of under
Slide 10: Strong revenue growth the highlight, 9.1% FX adjusted
Strong revenue growth the highlight, 9.1% FX adjusted Top end of Revenue target revised upwards, now 7% to 10% Strong revenue growth across the Group (FY06 ANZ League Table -Top 10 Performers) 1088 I 9.1%* Business Caen , 4 Investments & Insurance 23% oe NZ Institutional** 23% Pacific 18% © i Privat
Slide 11: Good volume growth offset by margin pressure
Good volume growth offset by Institutional and New Zealand margin pressure, mainly in first half Net Interest Income* Drivers FYO5 v FYO6 End of Period* Personal $320 117% -$13m $317m $382m 21.2% 9.1% Institutional® 136m (10.7)% $196m $307m 17.6% 12.6% (nz) -$166m_ (9.9)% $i4im $807m Legend 10.9% Gr
Slide 12: Margin decline in line with expectations
Margin decline in line with expectations, improvement in second half e intensity in NZ, Competition impacts in all Australia segments (competition impact on Group Margin FYOS-FYO6 bps) Lower compet partly offset by increase bps 240.0 (5.1) 3.1 (7.7) zy fe 2.0 2 = ¢ = a 4 8 5 $8 = s 8 ec as 2 3 > F Z
Slide 13: Underlying Other Income growth remains strong
Underlying Other Income growth remains strong, still a seasonality impact leading to look at Trading Income in isolation - need to look at total Markets income’ (sm) 2HO6 Other Income’ impacted by NZD and Markets account 2HO06 Profit on Trading Securities down on 1HO6, offset in NIT 333 347 300 310
Slide 14: Higher investment funded by strong revenue growth
Higher investment funded by strong revenue growth 10% 8% 6% Expense growth’ above short term target range reflecting higher investment spend We have significantly increased our investment spend over last two years 78 FYO3. © FYO4 = FYOS—FYO6 1 CAPEX ™ OPEX "NZ integration Investment focused towards
Slide 15: Successfully lowered risk in the portfolio
Successfully lowered risk in the portfolio, very hard to see credit quality getting better than this! Individual Provisions at unsustainably low levels Consumer: Key Drivers + Continued growth in the portfolio ‘* Change in portfolio mix from growth in unsecured products - Commercial low rate cards 5
Slide 16: Days past due an early indicator? Alert but not alarmed
90 days past due an early indicator? Alert but not alarmed! 15 10 The cycle has clearly turned with higher interest rates & fuel costs impacting some consumers, but 90+ days still at low level: 90+ days past due as % of GLA" 2001 2002 2003 2004 2005 2006 Growth has mainly been in the Australian high
Slide 17: Portfolio growth driving Collective Provision charge
Portfolio growth driving Collective Provision charge FY06 Collective Provision charge at low levels $m 208 69 a 7 131 FYOS FYO6 Growth Risk Change 1 Portfolio Mix Scenario Impact ‘Non Continuing Bus. FY06 - Reduction in Collective Provision charge driven by: * Lower rate of portfolio growth than in
Slide 18: Hedging the Kiwi dollar - two key impacts
Hedging the Kiwi dollar - two key impacts ~P a . significant value created for shareholders '* FYO6 NPAT of $32m from hedges at average rate of ~1.105 * $118m of shareholder value created = FYO7-FYO9 hedge profits booked directly to reserves & retained earnings in FYO6 (-$23m) & FYO7 (+$141m) under
Slide 19: Key takeaways from today
Key takeaways from today A good result, with cash EPS up 13.2% Very good revenue growth, up 9.1%* Momentum continuing into ‘07, new target of 7%-10% Cost growth up 7.5%", significant investment in growth Still investing in ‘07, growth at upper end of 5%-7% Remarkably good credit quality outcome in ’
Slide 20: Additional Information
Additional Information
Slide 21: Strong headline growth; 13.8% cash profit growth
Strong headline growth; 13.8% cash profit growth CashEPS ff 13.2% Cash Profit growth 67 436 3,587 St, NPAT ge 3 mn 28 56 S38 3,175 Es (31) (31) 38 3,151 = a fF es &, 58 eeogs aE Hi ge Fs of ‘Sep-05 ‘Sep-05 Sep-06 ‘Sep-06 Cash Cash 13.8% 16.2% 21
Slide 22: Cash Profit & Cash EPS reconciliation
Cash Profit & Cash EPS reconciliation Provision for Credit Impairment (407) Tax & OE (1,490) NPAT Pref. Share Dividend 3,587 ‘Average Shares Basic Cash EPS (cents) ANZ 22
Slide 23: ANZ League tables
ANZ League tables z TZ inst. Continuing (NZD) De oe 2% 55% 7 Mortage 15% % 2% 2 5 ‘Consumer Finance Aust 15% om 2% 106%, a Povo Bonk 10% ™ oe osm 7 ark 15% 3% 1% 75% @ “Srv ines Baring 3 10% 1% = a Banking Preauets ne o 1% 72% 10 (CASE Contain 1 10% ae Som [Wenz Reta (20) oo * 1% ea 3 or & Commarea
Slide 24: Revenue Growth
Revenue Growth Revenue momentum to be maintained All Divisions revenue growth within or above Group target + Personal stil above group average, but may be difficult to maintain 13% revenue growth. Continue to expect solid FUM growth and > 10% relatively stable margins * Institutional good growth in
Slide 25: Underlying capital remains strong, ACE target range reduced
Underlying capital remains strong, ACE target range reduced consistent with peers ACE Ratio at top end of target 1.67 (0.95) 6.75 6.25 5,75 5.25 (0.04) 5.01 (0.33) vs a Dividends 4.75 Earnings+ Buyback | Target Range Sep-05 ACE pre — Sep-06 AIFRS * ACE ratio declined by 39bpts, due predominantly to
Slide 26: Divisional Performance
Divisional Performance 26
Slide 27: Personal: a compelling customer proposition
Personal: a compelling customer proposition Recent softening in customer Investment in the franchise reflected in satisfaction across the industry, improved brand image ANZ remains at top of other majors 4g (Brand Image, Source: ANZ Brand Health Monitor) (Main Financial Institution”) % 2 80 ® a 70 S
Slide 28: Personal: Investing to deliver More Convenient Banking
Personal: Investing to deliver “More Convenient Banking” Continuing to invest in distribution... Investments yielding strong ( branches and ATMs) revenue growth across division 800 — 2,200 (Revenue and Expense growth v0 a iases) bby Business % FYO6 v FYOS) “during 2006 1,900 Income Costs 25% 760 1,6
Slide 29: Banking Products: good growth
Banking Products: good growth customer numbers Solid growth in account numbers... .-with FUM growth delivered across alll products (Asb) Transactions m Savings Term Deposts 25% increase in account numbers sxe i strong growth and strong margin FUN flows growing above system 6 (Household Deposits adju
Slide 30: Mortgages: Solid FUM growth & balanced distribution mix
Mortgages: Solid FUM growth & balanced distribution mix ANZ Retail’ growing ahead of peers (volume growth relative to system) (Sep 05 - Aug 06") System ANZ” ANZ” Peer Peer?” Peer” Peer Reta Mortgages Solutions growing strongly ($b) 2.0, 18 months to ‘8 months to get first $1b get next $1 in FUM in F
Slide 31: Consumer Finance: Solid FUM growth, losses in line
Consumer Finance: Solid FUM growth, losses in line with long term trends ‘Strong FUM growth for cards % Acquisition growth by cards product and personal loans sr e 5455. 20% oe wom 2s ow 2004 2008 2008 2008 2008 2008 mconts Personal Loos Uiloyaty Proprietary m Low Rate* Commercial Cards Proprietary
Slide 32: Regional & Rural and Small Business: solid performance
Regional & Rural and Small Business: solid performance Rural Commercial and Agribusiness ‘Smalll business (PEP $m) (Average FUM growth $m) (PEP $m) (Average FUM growth $m) Growth 9 10% 15% Growth 14% 15% 10% yor 1 6,149 Deposit Deposit tending 112005 M2006 2005 mi 2006" 2005 2006 1H 2005 mi 2006 Len
Slide 33: Investment & Insurance Products: strong growth
Investment & Insurance Products: strong growth led by financial planning business Strong growth in all businesse: (2006 NPAT growth) 113% 61% 56% 20% ‘Gen insurance” Margin Trustees Fin Planning tending Future growth underpinned by growing planner numbers (% growth in planner numbers 2006") .« drive
Slide 34: Pacific
Pacifi Solid FUM growth and customer acquisition continues to drive momentum Continued growth in NPAT... (sm) 27% annual growth 06 v 05 55 57 50 2HOS 1406 2H06 Continued momentum in major markets ..driven by Deposit and Lending growth {average period growth %) w2HOS 106m 2HOS §=— mw 2HOS w AHOG wm 2
Slide 35: Esanda: improved 2H06 performance
Esanda: improved 2H06 performance from revenue growth and efficiency gains Revenue growth rebounded in 2H06 Improved financial performance in the (sm) second half (NPAT $m) $208 36% $56 $187 $193 $187 $49 so sat aos 2HOs Hos 2H06 Hos 2405 1H08 2106 Lower Australian New Vehicle Sales" Efficiency gain
Slide 36: Institutional: revenue growth supporting continued investment
Institutional : revenue growth supporting continued investment in people and systems Specialist product businesses driving performance (PBP growth 2006 v 2005) 16% 13% Warkets" casF "TTS “5% PG Continuing to invest in our growth businesses (FTE growth 2006 v 2005) 49 45 26 Markets” CS8F "TTS Com Bus
Slide 37: Institutional: regained Lead Bank status
Institutional: regained Lead Bank status #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 Lead bank across all customer relationship metrics Outright Lead Bank (Relationship Market Share (%)) Overalll Satisfaction Relationship Manager Capability Most Trusted Adviser Best Sector Analysts Knows Company's Industry Provid
Slide 38: Institutional: Business Banking continues to perform well
Institutional: Business Banking continues to perform well, Corporate impacted by competition Corporate Banking Business Banking ‘Soft 110s, Good volume growth Continued good Solid FUM growth... (Average grown) performance (Pe? growth) oom fasiod 5.3% 5.3% 2am hos anos rol wos” 1H9s "anos" 2H0S NOS”
Slide 39: Institutional Asia: investing for growth
Institutional Asia: investing for growth Revenue growth outpacing —_ Source of Revenue by Non Performing Loans expense growth delivering business reduced to zero in FYO6 strong NPAT 500 asm 400 259 7 26% mz00s 2006 200) 7 20%, 300 = Corp & Structured Financ! ‘= Debt Products Group Markets 30 Trade &
Slide 40: New Zealand: good momentum in Retail and Rural banking
New Zealand: good momentum i: and Rural banking For further information ‘on NZ businesses refer to NZ Market Briefing 7 September 2006 Continued momentum in National Bank Retail and Rural Banking, ANZ Retail ‘back in the game’ NPAT NZD 205m 266m 92m % growth 6.9% 21.7% 10% ANZ Retail National Bank R
Slide 41: New Zealand: strong growth in Corporate & Commercial and Institutional
New Zealand: strong growth in Corporate & Commercial and Institu nal*, UDC restructure completed Strong momentum in Corporate & Commercial and Institutional, signs of turnaround in UDC NPAT NZD % growth 172m 102% 226m 14.4% Corporate & Commercial BP NZD 246m % growth 11.2% + Strong volume growth wit
Slide 42: Building momentum in International Partnerships, Panin
Building momentum in International Partnerships, Panin performance impacted by tough macro environment Credit Card Joint Ventures ‘+ Strong growth momentum, continues* = 60% Increase in NPAT = 37% increase in card accounts Indonesia ‘65% market share of Platinum, Mastercard; 5% overall cards market
Slide 43: INGA: underlying business performing well
INGA: underlying business performing well Solid operating profit growth i | ! a | 2003 2005 Operating een nme Cap Invst Earnings Continued strong FUM growth* 14% CAGR l= Sep-03 Sep-04 —Sep-05—Sep-06 Employer Super and Personal Invest. businesses driving profit growth Operating Profit ' 2 » om | Sep-
Slide 44: Margin Analysis
Margin Analysis 44
Slide 45: Positive margin outcomes across all Divisions in 2H06
Positive margin outcomes across all Divisions in 2HO6 supporting strong Net Interest Income growth Net Interest Income* Drivers 1H06 v 2HO6 End of Period* Personal Son 5.4% $13m $103m $60m 3.0% Institutional® — ¢11m $71m $75m 5.5% (NZD) tim 1.1% $86m 9.1% $134m an Group 98 HE AEA growth $73m 2.2% HB
Slide 46: Group half on half margin up 4bps
Group half on half margin up 4bps NZ deposits & Aust Cards key Reported margin up 4.0bps, drivers of competition Underlying down ~3bps (competition impact on Group Margin (1H06-2H06) THOS:2HOS bye), 3.5 233.0 0.5 05 bps | ie a ust InstiCorp/ 229.0 - (04) 04 (29) 34 NZ Deposits Aust Cards wortgages ‘
Slide 47: Personal: Convenience & Simplicity strategy driving stable deposit margin
Personal: Convenience & Simplicity strategy driving stable deposit margin outcome Mortgages key driver of Asset Mix & Wholesale Rate benefits competion offset by increased Competition (competition impact on Personal Division (FY05-FY06) Margin FYO5-FYO6 bps) 3.2 (4.6) mr; 0.0 05 bps 19 “3.4 237-5 (0
Slide 48: Institutional: Margin decline driven by funding mix
Institutional: Margin decline driven by funding mix, asset mix and competition Competition spread across all Reported NIM decline adversely ceaasents impacted by accounting ‘noise’ (competition impact on Institutional Diviston (FYO5-FY06) Margin FYOS-FY06 bps) bps =e “La “13 13 “13 212.0 (4.8) (0) D
Slide 49: New Zealand Banking: Deposit & Mortgage competition
New Zealand Banking: Deposit & Mortgage competition key drivers of margin decline Deposits & Mortgages key drivers of competition (competition impact on New Zealand Competition driving margin decline ‘onking Margin FYOS-FYO6 bps) (FYO5-FY06) bps 19-8 RATES 255.0 (6.0) mG : 2HO6 margin up 1bp 234.0 (
Slide 50: Credit Quality
Credit Quality
Slide 51: Strong credit quality continues
Strong credit quality con’ Reduced Non Performing Loans Aum # of loans 800 50 40 600 30 400 20 200 10 ° ° Hos” 2Ho4” HOS” 2HOS” 1HO6 ” 2HO6 ‘mr New NPL Consumer Finance (ths) ‘mes New NPL Other (ths) “Number of New Non Performing Loans >$1m 2.4% 2.0% 1.6% 12% 0.8% 0.49% 0.0% + Mar- 02 Delinquencies
Slide 52: Net Individual Provision charge down 5.2%
Net Individual Provision charge down 5.2% Virtually all losses were in Australia Very few large losses in FYO6 NetAnaividual Provisions by Geography Net Individual Provisions By Size 1 Customer $m bi _2 customers 527 500 5 customers 443 357 400 396 300 Value of Writebacks & Recoveries sm inereasing
Slide 53: Portfolio growth driving Collective Provision charge
Portfolio growth driving Collective Provision charge Portfolio growth and risk shifts driving Oil price remains at 2HO6 Collective Provision charge historically high levels uss/bbl $m ‘zs 119 bu 60} 12mtn Average 40 1 20 36 33 é 2001 2002 2003 2004 2005 2006 Oil Provision run-off profile 507 45 unch
Slide 54: Collective Provision charge driven by Cards and Esanda
Collective Provision charge driven by Cards and Esanda FY06 Collective Provision charge ‘* Cards driven by strong FUM growth and deliberate risk shift to higher revolve rate products + Esanda impacted by oll price Group 131 23 (77) «69 affect on residual values, driving higher ‘loss given Institutio
Slide 55: Risk grade migrations
Risk grade migrations Debt Product Group (wet Lending ‘Assets $26.20") + Re-rating remained at a nominal level for 2006. * 8.6% of all customers were downgraded during the year, with 13.8% upgraded Corporate Australia (net Lending ‘Assets $13.96") * Re-rating within the portfolio has occurred as a r
Slide 56: Strong credit quality in Mortgages Australia
Strong credit quality in Mortgages Australia * Dynamic LVR profile reflects strong Strong LVR profile migration into lower LVR buckets 098 compared to the time of origination LVR at origination Sep-05, SLVR at origination Sep-06 f Dynamic LVR Sep-05 = Dynanie LVR Sep-06 © Owner Occupied dominates th
Slide 57: Credit Cards: credit quality remains sound
Credit Cards: credit quality remains sound + The Consumer Cards portfolio mix is shifting from loyalty products towards Proprietary and Low Rate products. + Proprietary and Low Rate products are traditionally higher risk than Loyalty products and while their arrears rate is higher, actual arrears ar
Slide 58: No signs of deterioration in Domestic consumer credit
No signs of deterioration in Domestic consumer credit Rate of growth in Household Debt ‘Aust. rate of growth in house prices reducing in Aust, stable in NZ improving, NZ coming off historic highs % (Quarterly % change) (yearly % change) RBESBRERSESEEES aagssssses aust, —Us —uK —=nz Aust. —us —uk —nz
Slide 59: Risk profiles remain largely unchanged
Risk profiles remain largely unchanged Group - Outstandings $223bn — $248bn——$272bn* Institutional - Outstandings $63bn $70bn $76bn . BBB B+ to BB BB+ to BB 5B ee. >8B- >BB- Sep-04 Sep-05—Sep-06 Brtocce 1.8% 1.69% 1.6% BHtocee 2.5% 17% 1.8% Impaired 0.4% 03% 0.2% Impaired 0.9% 0.5% 05% RES “excises
Slide 60: Industry exposures - Australia & New Zealand
Industry exposures —- Australia & New Zealand —B— Lending Assets (AUD) —F —_% oF Portfolio (RHS scale) ~_ % in High Risk (RHS scale) = Sein Non Accrual (RHS scale) Health & Community Cultural & Recreational Forestry & Fishing Services 10.0% 256 Services 10.0% 2560 10.0% 8.0% 20bn 8.0% 2000 0% 6.0% 1
Slide 61: Industry exposures - Australia & New Zealand
Industry exposures —- Australia & New Zealand 0.0% =H Lending Assets (AUD) + ——_% oF Portfolio (RHS scale) —*— —_% in High Risk (RHS scale) in Non Accrual (RHS scale) Finance - Other Transport & Storage 100% 2500 10.0% 2560. 8.0% 2000 8.0% 2000. 6.0% 15h 6.0% 1560 40% 1000 4.0% 1060 20% Stn 2.0% 5b.
Slide 62: Industry exposures - Australia & New Zealand
2560 180 0 00 2500) 2000, 1500 1b son. Industry exposures —- Australia & New Zealand Lending Assets (AUD) FoF Portfolio (RHS scale) sin tigh Risk (RHS scale) Se ntion Accrual (RHS scale) Real Estate . ; Operators & Dev. Retail Trade Agriculture 100% 2500 10.0% 2500 100% 0% 200 20% 20 20% 6086 1500 6
Slide 63: ANZ is a recognised Corporate Responsibility leader
ANZ is a recognised Corporate Responsibility leader * Ranked in the top five banks globally on the Dow Jones Sustainability Index DE (oP rare RESPONSIBILITY * Overall gold medal and ranked three on Wa x the Australian Corporate Responsibility Index * Prime Minister’s Special Award for Impact on the
Slide 64: Community investment strategy is leading practice
Community investment strategy is leading practice + Financia eda program for aduts fing ‘rancialdticuty, delved by communty paters and fnancal counselors Austral. ae + More than 15.000 people have parcipatedin Moneyhinded ts year and more than 650 ‘acitators were wines to delves te progtam + RMIT Un
Slide 65: People strategy has created the most engaged workforce
People strategy has created the seat most engaged workforce of major banks FoR + Steyear focus on ctrl transformation and values-based ecto making, 28,000 stat have partopated in Breakout vworshees, + This year we implemented the Breakout to the Frontine program ivelving 8.000 customer fang ta ne ye
Slide 66: Integrating environmental and social considerations into business practices
Integrating environmental and social considerations into our business practices Demonstrating business leadership by integrating environmental and social considerations into our business practices, decisions & behaviours Institutional & Corporate Sustainability + 86% ofa new lent eansactons and {nnu
Slide 67: Summary of forecasts - Australia (bank year)
Summary of forecasts - Australia (bank year) GDP Inflation Unemployment Cash rate 10 year bonds A$/US$ Credit - Housing - Business - Other 2005 2.5 2.6 5. 5.50 5.4 0.76 13.4 13.4 13.7 12.8 2006 27 3.3 4.8 6.00 5.5 0.75 14.4 14.4 15.8 9.3 2007 3.1 2.5 a2 6.25 5.9 0.72 12.0 12.5 11.3 11.0 2008 2.8 2.3
Slide 68: Summary of forecasts - New Zealand (bank year)
Summary of forecasts —- New Zealand (bank year) 2005 2006 2007 2008 GDP 2.6 17 14 24 Inflation 3.4 3.8 28 19 Unemployment (Sept qtr, s.a.) 3.7 3.8 44 4.6 Current Account (% GDP) “8.5 -9.6 9.8 -9.2 90 day bank bill FA: 7.6 68 5.6 10 year bond rate 5.7 5.8 6.2 65 NzD/USD 0.70 0.65 0.55 0.57 NZD/AUD 0.
Slide 69: Searchable text section of graphics shown above
Searchable text section of graphics shown above [GRAPHIC] 2006 Annual Results Australia and New Zealand Banking Group Limited 26 October 2006 A VERY DIFFERENT BANK John McFarlane Chief Executive Officer www.anz.com [LOGO] A good year – met our targets again Headline profit 16.2 % Cash * profit 13.8
Australia and New Zealand Banking Group — FY2006 Earnings Presentation on 6ix