Australia and New Zealand Banking Group Limited
Judith Downes, Head of Finance and Business Information CentreRoss Glasscock, Executive Treasurer, Group Wholesale Funding
16 June 2003
2 2003 Interim Results
Outline
• Group overview
• Result review
• Portfolio performance
• Credit Quality
• Other issues
• Term debt funding
• Supplementary information
3 2003 Interim Results
Group Overview
• One of the four major Australian banks
• Established in 1835
• Full range financial service provider
• Distinctive specialist business strategy – 17 separate businesses
• Assets (as at 1H2003) A$190.5bn.(US$115bn.)
• Market Cap. (as at 10 June 2003) A$28.7bn.(US$18.8bn.)
• Tier 1 Capital Ratio 7.7%
• Credit Ratings AA-/Aa3 (Stable)
4 2003 Interim Results
2003 Interim Results
• NPAT
• EPS
• Cash EPS
• Interim Dividend
• Net Specific Provisions
• NPAT
• EPS
• Cash EPS
$1,141m
72 cents
74 cents
44 cents
$259m
$1,141m
72 cents
74 cents
8.7%
8.6%
10.4%
12.8%
29%
7.0%
6.8%
8.7%
v Mar 02
Before Significant Items
5 2003 Interim Results
A respectable result
• A respectable result, with good underlying momentum– Strong interest income driven by asset growth– Non-interest income impacted by one-offs– Expenses well controlled – Majority of portfolio performing well
• Credit quality strong in Australia, offshore issues containable
• Remain well provisioned, with strong capital position
• On target for approximately 8% full year NPAT growth
6 2003 Interim Results
Outline
• Group overview
• Result review
• Portfolio performance
• Credit Quality
• Other issues
• Term debt funding
• Supplementary information
7 2003 Interim Results
Result driven by asset & deposit growth, non-interest income impacted by one offs
800
850
900
950
1,000
1,050
1,100
1,150
1,200
1,250
1,300
1102*
Sep-02
Interest Income
87
Provisioning 6
Non Interest Income
(35)Expenses
(27) Tax & OEI8
$m
1141
Mar-03
3.5% headline basis
3.7% cash basis
NPAT
* Sep-02 excludes significant items
8 2003 Interim Results
Expenses well controlled, cost income ratio flat
1,500
1,520
1,540
1,560
1,580
1,600
1,620
1575
JV impact
(6)
FX impact
11
Underlying growth
22 1602
Sep-02 Mar-03
• Growth spend held back due to lower income growth
• Underlying half on half cost growth of 1.4%
• Includes $10m increase in software amortisation
• Restructuring costs of $32m taken, in line with previous half
• Continued focus on re-engineering “business as usual” costs
$m
9 2003 Interim Results
303309
241246258 252 256
301290
40434242
36 35
4145
40
0
50
100
150
200
250
300
350
Mar-99
Sep-99
Mar-00
Sep-00
Mar-01
Sep-01
Mar02
Sep-02
Mar-03
0
10
20
30
40
50
60
70
80ELP adjustmentELP $ELP BP's
Provisioning charge reflects conservative management
ELP Charge$m bp’s • ELP rate down 3bps
– reflecting strong mortgage growth & improved risk profile
• ELP Portfolio adjustment continued
! accruing higher level of ELP, reflecting ongoing global economic uncertainty
10 2003 Interim Results
Outline
• Group overview
• Result review
• Portfolio performance
• Credit Quality
• Other issues
• Term debt funding
• Supplementary information
11 2003 Interim Results
0 50 100 150
A diversified portfolio performing well
NPAT increase
NPAT decrease
Prior period NPAT
1st half NPAT $m
Institutional BankingPersonal BankingMortgagesTransaction ServicesSMEConsumer FinanceNew ZealandTreasuryAsset FinanceCorporate BankingWealth ManagementAsia PacificForeign ExchangeStructured FinanceCorp Fin & AdvisoryCapital MarketsINGA JV*
1451371318478477449605551674336383621
131133124777271696154535251434437337
11%3%6%9%8%
-34%7%
-20%11%4%
-2%31%0%
-18%3%9%
large
Mar 03 Sep 02 Change
* Excludes funding costs
12 2003 Interim Results
JV performance – good insurance and expense performance, offset by FM
• Life Insurance business performing well due to improved service, efficiency, and claims management
• Subdued equity market conditions continue to impact Funds Management business
• Improved capital investment returns, combined with hedge delivering cash rate of return
• Synergies being extracted in line with expectations
0
10
20
30
40
50
60
70
80
90
5 m
onth
s to
Sep
02
Sem
i-an
nual
ised
Life
Insu
rance
Funds
Man
agem
ent
Cap
ital
Inve
stm
ent
Cost
s
Tax
1H
03
42
506 (29)
31
83
ING Australia NPAT*$m
196
* Movements on a semi-annualised basis
13 2003 Interim Results
Valuation supports carrying value of investment in INGA JV
1000
1200
1400
1600
1800
2000
2200
2400
Carrying Value 1 May 02
1591
Unrecognised profit on sale
of ANZ FM
248
Opening proforma
value
1,839
Synergies and cost savings in
INGA
360 (approx)
Expected value
2199
EY ABC Valuation
1617-1808Carrying value 31 March 03
1612
26%18%
Reduction in expectations
$m
14 2003 Interim Results
Outline
• Group overview
• Result review
• Portfolio performance
• Credit Quality
• Other issues
• Term debt funding
• Supplementary information
15 2003 Interim Results
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%M
ar-0
1
Sep
-01
Nov-
01
Jan-0
2
Mar
-02
May
-02
Jul-
02
Sep
-02
Nov-
02
Jan-0
3
Mar
-03
Small to Medium Enterprises
Mortgages
Cards
Total Personal & SME Businesses*
Arrears profile close to historical lows
• Consumer sector in good shape, with continuing low levels of unemployment and low interest rates
• Mortgage arrears remain very low
• Ongoing focus on collections management
• Upwards movement in cards arrears expected, will be carefully managed
• Scorecards remain “tight”
Arrears > 60 days%
* excl Asset Finance, Pacific, Asia
16 2003 Interim Results
Mortgages portfolio healthy*
0%
5%
10%
15%
20%
25%
30%
35%
< $
250
< $
500
< $
750
<$1000
<$1500
>$1500
2000 2003
0.00%0.05%0.10%0.15%0.20%0.25%0.30%0.35%0.40%0.45%
Mar-
02
May-0
2
Jul-02
Sep-0
2
Nov-0
2
Jan-0
3
Mar-
03
RILS Australia & NZO/O Australia & NZTPMI Australia
High quality arrears profileAustralia & NZ – 60 Days Past Due
Increasing flexibility to service mortgage
Uncommitted Monthly Income at Application
0%10%20%30%40%50%60%70%80%90%
100%
0-60% 61-75% 76-80% 81%+
LVR at originationDynamic LVR
25.1 26.7 28.3 30.3 32.3 34.8
9.9 10.611.6 12.6
14.215.9
1.71.9
2.22.3
2.53.2
0
10
20
30
40
50
60
Sep-0
0
Mar-
01
Sep-0
1
Mar-
02
Sep-0
2
Mar-
03
EquityRILO/O
Equity Loans remain modestStrong LVR profile $b
* Charts are for Australia only excluding Origin
17 2003 Interim Results
Domestic corporates well placed
40
60
80
100
120
140
160
Ma
r-89
Ma
r-90
Ma
r-91
Ma
r-92
Ma
r-93
Ma
r-94
Ma
r-95
Ma
r-96
Ma
r-97
Ma
r-98
Ma
r-99
Ma
r-00
Ma
r-01
Ma
r-02
Domestic corporatesremain lowly geared
%
Reflected in healthy risk grade profile*
Gearing ratio (Debt to Equity)#
# source: ABS
Series break
3.4% 3.7%4.4%9.9% 10.4%10.0%
21.7% 24.0%21.5%
29.6% 26.9%27.8%
34.5% 37.2% 35.0%
Mar '02 Sep '02 Mar '03
AAA to BBB
BB-
BBB-
BB+ to BB
* Institutional & Corporate Australia & NZ
<BB-
41.0bn 41.4bn 43.2bn
0.8%0.9%1.2%CCC and Lower
2.9%2.5%3.2%B+ to CCC
18 2003 Interim Results
Top 10 exposures further reduced
Limits represent total 7 month limits excluding uncommitted and non-recourse, net of credit derivatives
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
Top 10 committed exposures
Top 10 exposures as % of ACE
Sep 01 Sep 02
Limits represent total 7 month limits excluding uncommitted and non-recourse, net of credit derivatives
excludes non-recourse and uncommitted facilities
0 250 500 750 1000 1250
Funded Unfunded
S & P Rating
A+
BBB+
AA+
A
BBB+
AAA
A+
BBB
A
AA-Mar 03
Position of top 10
exposures as at Sep 02
AUDm
19 2003 Interim Results
< $5m
$20m - $50m
$10m - $20m
$5m - $10m
Specific provisions down 29% – no large single provisions
0
50
100
150
200
250
300
350
400
Mar-98
Sep-98
Mar-99
Sep-99
Mar-00
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net specific provisions - $m (LHS)% International SPs (RHS)ELP charge - $m (LHS)
Provisions$m Significant impact from
single customers
1st half Specific Provisions by size
• No major individual specific provisions during the half
2customers
Grindlayscredit
indemnity
4customers
3customers
20 2003 Interim Results
59
651 681
388
80
792
523
37
643589526
38
0
200
400
600
800
1000
200020012002Mar-03
1543
1391
12601203
1153
1662
600628
770699
657
900
0
300
600
900
1200
1500
1800
1998 1999 2000 2001 2002 Mar-030.00%
0.25%
0.50%
0.75%
1.00%
1.25%
1.50%
1.75%
Non-accrual loans continue to fall, reflecting overall health of portfolio
Gross Non-Accrual Loans (LHS)
Net Non-Accrual Loans (LHS)
$m
Non-Accrual Loans/ Loans & advances (RHS)
Historic
Aust InterNZ
GeographicGross Non-Accrual Loans$m
21 2003 Interim Results
214
118109
144
4254
9182
61
243
3731
72 76
9990
7360
0
50
100
150
200
250
300
1H02 2H02 1H03
Energy Domestic Corporate Asset Finance Consumer FinanceOther Offshore Other
New non-accruals down 50% on March 2002
GeographicNew Non-Accrual Loans
$m
New non-accrual loans by source
0
100
200
300
400
500
600
700
800
900
Mar-
99
Sep-9
9
Mar-
00
Sep-0
0
Mar-
01
Sep-0
1
Mar-
02
Sep-0
2
Mar-
03
Aust/NZ UK/US Asia Other Inter
$m
22 2003 Interim Results
Existing and future problem loans well provided for
%
0.92
0.82
0.90
1.03
0.00
0.20
0.40
0.60
0.80
1.00
1.20
ANZ Mar03
CBA Dec02
NAB Sep02
WBCSep 02
48%
31% 31%
39%
0%
10%
20%
30%
40%
50%
60%
ANZ Mar03
CBA Dec02
NAB Sep02
WBCSep 02
GP/RWASP/NALs
23 2003 Interim Results
Outline
• Group overview
• Result review
• Portfolio performance
• Credit Quality
• Other issues
• Term debt funding
• Supplementary information
24 2003 Interim Results
4.50
4.75
5.00
5.25
5.50
5.75
6.00
6.25
6.50
6.75
Sep-02 Mar-03
ANZ’s capital position remains strong
Drivers of ACE ratio
Target range
5.71
Earnings
0.77
Dividend
(0.47)
RWA growth
(0.29)
5.68
%
Other (0.04)
Peer ComparisonACE/RWA
• Buybacks likely if ACE ratio above target range
4.00
4.25
4.50
4.75
5.00
5.25
5.50
5.75
6.00
ANZ(Mar-03)
CBA(Dec-02)
NAB(Mar-03)
WBC(Mar-03)
%
25 2003 Interim Results
Outlook for second half
• Australian & NZ economies to perform relatively well, despite weakness in offshore markets
• Mortgage growth to be more subdued, moving towards 8-12% pa growth rate, offset by moderate rebound in business lending
• Specific provisions below ELP
• Cost growth rate to increase, but remain lower than revenue growth rate with resultant improvement in cost-income ratio
• Second half outlook favourable, delivering approximately 8% full year NPAT growth
26 2003 Interim Results
Outline
• Group overview
• Result review
• Portfolio performance
• Credit Quality
• Other issues
• Term debt funding
• Supplementary information
27 2003 Interim Results
Determining the term debt funding requirement
• Importance of stable funding base
• Analysed domestic and offshore peer group
• Businesses required to meet a self funding ratio – CFI (customer to total funding)
• Wholesale funding ratio – TFI (term wholesale funding to term lending)
• Securitisation as a balance sheet tool
Customer Funding Indicator
50%
55%
60%
65%
Sep-2000
Sep-2001
Mar-2002
Jun-2002
Sep-2002
Dec-2002
Mar-2003
CFI Minimum
Term Funding Indicator
0%
5%
10%
15%
20%
Sep-1997 Sep-1998 Sep-1999 Sep-2000 Sep-2001 Sep-2002
TFI Minimum
28 2003 Interim Results
ANZ’s term funding requirement and strategy for 2003
• A$7 billion term debt funding requirement, since revised to A$12billion
- a mix of senior debt, subordinated debt and securitisation dependent on maintenance of CFI targets
• A$8 billion raised since 1st October 2002
• Maintain a prudent approach to management of the liability portfolio
- avoiding maturity concentration and roll over risk
• Issuance preference for senior debt- one to five year maturities- aim to achieve a weighted average maturity of four years
• Focus on reverse enquiry MTNs- 50/50 mix between private placement and public issuance- willingness to meet investor needs- timely response
29 2003 Interim Results
Benefits of a consistent and widely communicated strategy• Presented to in excess of 200 investors over three years
• More than 100 new investors in ANZ fixed rate € debt at primary issuance, substantially more in secondary market
• Creditable spread performance despite volatile markets
0
10
20
30
40
Nov-01 Feb-02 May-02 Aug-02 Nov-02 Feb-03 May-03
Ass
et s
wap
mar
gin
(bps
)
010203040506070
Ass
et s
wap
mar
gin
(bps
)
ANZ 4.875% 07-Feb-07 ANZ 5.125% 07-Mar-06 (LHS )ANZ 5.5% 23-Feb-05 (LHS ) ANZ 4.45% 5-Feb-15 (RHS )iBoxx € Bank Index (RHS )
30 2003 Interim Results
The strategy to date has worked
• Highest penetration of € investors of any of our domestic peers
• Diverse investor base
• Strong correlation between successfully executed public issuance and reverse enquiries received
• Most proactive of Australian major banks to regularly update domestic and offshore debt investors
• Access during difficult market conditions
• Credit line availability
• Rating agencies focus on liability management
31 2003 Interim Results
Potential to issue Lower Tier II
• Opportunity to restructure capital composition
• Underweight Lower Tier II relative to domestic peer group
• Amortisation of subordinated debt portfolio under APRA guidelines
Capital ratios
0%
5%
10%
15%
Tier 2 3.39% 4.08% 3.02% 4.08%
Hybrid 0.82% 0.77% 1.05% 0.34%
ACE 5.68% 4.96% 5.09% 5.31%
ANZ CBA NAB WBC
Adjusted Common Equity
3%
4%
5%
6%
ANZ CBA NAB WBC SGB
Average (excl. ANZ)
Copy of presentation available on
www.anz.com
33 2003 Interim Results
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 investors and does not take into account the
investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an
investment is appropriate.
For further information visit
www.anz.comor contact
Philip GentryHead of Investor Relations
ph: (613) 9273 4185 fax: (613) 9273 4091 e-mail: [email protected]
34 2003 Interim Results
Outline
• Group overview
• Result review
• Portfolio performance
• Credit Quality
• Other issues
• Term debt funding
• Supplementary information
35 2003 Interim Results
Additional information on businesses & strategy
36 2003 Interim Results
Distinctive strategy and track record4 clear themes going forward
$0
$200
$400
$600
$800
$1,000
$1,200
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
YT
D
ANZ Peers*
• Leverage real capabilities to build sustainable strategic position
• Grow value by creating a rich portfolio of specialised businesses
• Become one of the most efficient and best-managed banks in the world
• Bold and different, leveraging a unique performance culture and business approach
Core themesTSR
(base $100)
ANZ relative TSR
* CBA, NAB, WBC
37 2003 Interim Results
Leverage real capabilities to build sustainable strategic position
• Leverage specialisation as distinctive strategy
• Leverage leading product capability to increase share
• Leverage superior cost position
• To give customers the best deal
• To give shareholders sustainable and growing returns
• Leverage ANZ’s emerging and distinctive “human face”
• Unique positioning against peers
• Gain traction in earning the trust of the community
38 2003 Interim Results
A rich portfolio of specialised businesses -material improvement in last 2 years
Weak Strong
Low
High
Mark
et
Att
ract
iven
ess
Current ANZ Position
ING JV/Wealth
Cards
PersonalBanking
SmallBus
Institutional&
InvestmentBanking
Corporate
AssetFinance
Mortgages
Source of profit
Pacific
• More sustainable portfolio foundation
• Each business has clear differentiated approach
• Systematically building capabilities to establish future growth options
Asia
39 2003 Interim Results
Grow value by creating a rich and diversified portfolio of specialised businesses
Weak Strong
Low
High
Mark
et
Att
ract
iven
ess
ANZ Target Position
ING JV/Wealth
PersonalBanking
SmallBusiness
Corporate
AssetFinance
Mortgages
Asia
Optimise portfolio for sustainability, growth and return
• Raise revenue productivity in Personal Banking
• Lift performance and productivity in Wealth Management
• Develop sustainable post-interchange cards strategy
• Regain position in Small Business• Develop Institutional while reducing
risk concentrations• Leverage specialised distribution in
Mortgages• Advance customer franchise in NZ
through local approach• Turn Asset Finance into a sustainable
growth proposition
Create a portfolio of growth options• Invest in high growth domestic
franchises• Leverage capabilities with partners in
Asia-Pacific
Institutional
Consumer Finance
Pacific
40 2003 Interim Results
Aim to make ANZ one of the best managed and most efficient banks in the world• Make execution a distinctive capability
• Accelerate revenue and productivity momentum in businesses
• Rebalance higher risk segments
• Simplify operations and technology infrastructure
1000
1200
1400
1600
1800
2000
2200
Sep-9
7
Mar-
98
Sep-9
8
Mar-
99
Sep-9
9
Mar-
00
Sep-0
0
Mar-
01
Sep-0
1
Mar-
02
Sep-0
2
Mar-
03
40
45
50
55
60
65
70
Expenses
Cost Income Ratio
$m CTI (%)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Jan-9
6
Jul-96
Jan-9
7
Jul-97
Jan-9
8
Jul-98
Jan-9
9
Jul-99
Jan-0
0
Jul-00
Jan-0
1
Jul-01
Jan-0
2
Jul-02
Jan-0
3
Lower relative riskWorld class efficiency
Peer 2 year Beta*
ANZ 2 year Beta
Difference
2 year beta
* CBA, NAB, WBC
41 2003 Interim Results
Bold and different, leveraging a unique performance culture and business approach
* Benchmark comprises 33 of Australia’s Top 50 companies
• Systematic improvement
• Aim to be distinctive• financial
• values
• Build on preferred employer status
• Gain shareholder and community recognition
• Raise our game in execution to minimise surprisesCoordination and control
Distinctive (Top decile)
Superior(Top quartile)
Australian average*
Motivation
2000
2002
Fin
an
cial
Peo
ple
Rew
ard
s &
reco
gn
itio
n
Op
po
rtu
nit
ies
Op
era
tio
nal
Valu
es
42 2003 Interim Results
3.83
1.74
1.10
3.47
4.78
1.54
1.24
2.762.96
3.83
2.712.76
-
1.00
2.00
3.00
4.00
5.00
6.00
Mar-01 Sep-01 Mar-02 Sep-02 Mar-03
Corp & Small Bus IBMortgages Asset FinPersonal Group
Higher interest income, driven by strong asset growth
%Interest Margins
53.9
81.4
61.157.2
86.4
59.2
89.2
61.6
56.2
97.3
67.3
58.2
30
40
50
60
70
80
90
100
110
120
Mortgages Business* Deposits*
Sep-01 Mar-02Sep-02 Mar-03
Average Lending & Deposit Volumes
$b
*Business Lending includes Corporate & Small Business, and Institutional Segments. Deposits includes Esanda retail debentures
43 2003 Interim Results
Underlying non-interest income reasonable, but dominated by one-offs
1,250
1,275
1,300
1,325
1,350
1,375
1,4001387
JV impact(10) Cards
under-accrual
(38)
E*Trade writedown
(6)
Paninbond sales
16
Higher loyalty costs#
(16)
Underlying growth
25 1352
Sep-02* Mar-03
FX M’ment
9
Personal fee
changes(9)
Card repricing
8
* Sep-02 excludes significant items
2H02 cards under-accrual
(14)
# higher loyalty costs reflects change in pricing, and does not include higher volume impact
Includes loss of
$17m in SFI fees
44 2003 Interim Results
Consumer Finance – challenges, but good underlying performance
0
20
40
60
80
100
120
1H00 2H00 1H01 2H01 1H02 2H02 1H03
Improved underlying performance (NPBT)*
10%12%14%16%18%20%22%24%26%28%30%
1H00 2H00 1H01 2H01 1H02 2H02 1H03
Growth in Acquiring share
Issuing (spend)
Acquiring (spend)
Outstandings
51%
19%
11%
9%
6% 4% Aust Issuing
Aust Acq
Personal Loans
NZ Issuing
NZ Acquiring
Other
Diversifying revenue*
$m
Issues
• Loyalty schemes increasingly costly to operate
• Reduction in interchange and loyalty costs likely to impact 2004 NPAT by not more than $40m
* Adjusted for under-accrual of loyalty points
45 2003 Interim Results
Mortgages – well placed to benefit from shift to mortgage brokers
Brokers strongest in states where ANZ has weaker branch presence
Leading broker distribution model, with high quality MIS
Award winning products
+
Low cost income ratio – efficient processing platform
+0
1020304050607080
Australia UK US
Broker penetration of mortgage market
Growing presence And we are well placed to participate
+• 80% of broker originated
customers new to ANZ
• 92% purchase additional ANZ products (89% for network originated customers)
%
46 2003 Interim Results
Institutional & Investment Banking – a leading franchise
102 114 119 131 145
6670 76
778424
2931
3336
4246
4143
43
3534
4044
36
3834
4137
38
0
50
100
150
200
250
300
350
400
450
Mar-01 Sep-01 Mar-02 Sep-02 Mar-03Institutional Trans ServicesCapital Markets FXStructured Finance Corp Fin & Adv
307327
348364
$m
382
0
10
20
30
40
50
60
70
80
90
100
Domestic &core MNC
OffshoreCorporate
Maximum –60% of
equivalent domestic
limits
Maximum unsecured
lending (25% of 60%)
Maximum secured lending (80% of 60%)
%
More focused single customer limits
Consistently strong NPAT growth
47 2003 Interim Results
789
10111213
2H
01
1H
02
2H
02
1H
03
0
5
10
15
20
25
30
AN
Z
CB
A
NA
B
WB
C
6.0
6.5
7.0
7.5
8.0
AN
Z
CB
A
NA
B
WB
C
Corporate and SME – well positioned for upswing in business lending
Market Share*
A very strong Corporate franchiseCustomer
Satisfaction*
• Enhanced customer service proposition
• Disciplined business execution and a stronger performance culture
• Investment in an expanded business ‘footprint’ – customer facing staff up 10%
• Market advantage with “Wall St to Main Street” capability
• Strong cross selling • Focus around total customer value
to Group
Investment in SME has yielded strong balance sheet growth
without loss of credit standards
• Risk grade profile has improved over past 6 months
• 80% of portfolio fully secured
* Roberts Research 2002 (customers with turnover between $10m-$100m)
FUM (loans & deposits)$b
6%6%
3%
48 2003 Interim Results
Personal banking – impacted by margin squeeze on deposits and fee changes
150
160
170
180
190
200
210
220
185
Deposit Volumes
18
Deposit Margins
(10)New A/c
fee structure & honour fee
impact
(9)
188
Sep-02 Mar-03
$m
Software Amortisation
(6)
Other*
6
• Overall 16 bp decline in margins due to
•Lower interest rates over the half
•Increased flows to higher rate deposit products such as TDs
• Fees lower due to new transaction account fee structure and lower honour fees
• RCF rolled out in NSW & Vic, remainder of States over calendar 2003
Sales Commissions
4
* Includes tax impact
49 2003 Interim Results
…but strong account and deposit growth
0
20
40
60
80
100
120
140
160
180
1H '02 2H '02 1H '030
10
20
30
40
50
60
Opened (LHS) Closed (LHS) Net (RHS)
30.429.027.7
25.824.524.023.4
1H00 2H00 1H01 2H01 1H02 2H02 1H03
New deposit strategy launched in Aug 01
Access Accounts Deposits ($b)
New accounts up 14%
Closed accounts down 15%
Net new accounts up 229%
000’s000’s
50 2003 Interim Results
Asset Finance – a leading position, & developing new momentum
• Reengineering undertaken in recent years now paying off
• Significant reductions in unit processing costs achieved delivering strong competitive position45
48 48
54
60
0
10
20
30
40
50
60
70
1H01 2H01 1H02 2H02 1H03
$m NPAT
05
101520253035404550
1h02 2h02 1h03
NPAT/FTE$000’s
51 2003 Interim Results
New Zealand – greater autonomy and a mandate to reinvest
• Increased training, and greater number of sales specialists
• Strengthen brand and increase community involvement
• Upgrade branch network, and open new branches in key geographic growth centres
0
10
20
30
40
50
60
70
80
90
100
1H01 2H01 1H02 2H02 1H03
Performance tapering off Greater investment requiredNZ $m
NPAT
52 2003 Interim Results
Personal – significant opportunity, but clear challenges remain
• Underweight position
• RCF rolled out to Victoria & NSW, to roll out to other states
• Strong product capability
• More traction required on improving customer proposition
Rural38%
Metro62%
40
42
44
46
48
50
52
54
56
1H02 2H02 1H037072747678808284868890
1H02 2H02 1H03
6%
20%
Metro NPAT Rural NPATPersonal Banking Australia NPAT
• Rural Banking completed roll out of local market model
• Good progress in devolving responsibility to front line
• Strong focus on community involvement
• Increased focus on agribusiness
53 2003 Interim Results
• Top Ten foreign bank• Only Australian/NZ bank• 50 Lending Relationships, 53% Inv Gr
• Only Australian/NZ bank• Highly regulated/competitive
environment• Largest number of corporate
relationships in Asia• 60 Lending Relationships, 68% Inv Gr
• Largest Australian/NZ Bank• 14,000 customers with deposit base of
$700m• 38 Lending Relationships, 83% Inv Gr
• Strategic for Asia & network Trade• 34 Lending Relationships, 52% Inv Gr
• Leading JV bank• 130,000 cards issued• 26 Lending Relationships, 69% Inv Gr
• One of a small group of fully licensed foreign banks
• Restricted transactions with locals expected to be lifted gradually with WTO membership
• 40 Lending Relationships, 95% Inv Gr
• Leading foreign bank in Vietnam• Only Australian/NZ bank• Fastest-growing Asian operation• 50 Lending Relationships, 72% Inv Gr
• Representative offices• Regional Trade Finance support• FI & correspondent banking
• Centre for GSF operations in ANZ Asia• Striving to carve a niche in the market
amongst global banks operating here• 4,000 customers/deposit base of $2b• 60 Lending Relationships, 87% Inv Gr
• Leading Australian/NZ bank• Focus to expand Trade Finance business• Excess liquidity driving margins down to
dangerously low levels• 60 Lending Relationships, 82% Inv Gr
• Product Support• Finance & Planning• Credit/Risk• Corporate Portfolio Management• Human Resource
Asia - circa 450 lending relationships with 85% investment grade
BEIJING & SHANGHAI, CHINA
HONG KONG
HANOI & HO CHI MINH, VIETNAM
SEOUL, KOREA
TOKYO & OSAKA, JAPAN
TAIPEI, TAIWAN
MANILA, PHILIPPINESMALAYSIA & THAILAND
REGIONAL OFFICE, SINGAPORESINGAPORE JAKARTA, INDONESIA
54 2003 Interim Results
A selective asset writing strategy in AsiaCustomer Category Customer Description
Global MNCs Parent – Investment GradeTypically listed on local exchangeSubsidiaries in network countries per Cross Border Risk Policy (10/99)
Regional MNCs Parent – Investment GradeTypically listed on local exchange (Top 50 ‘blue chip’)Typically externally rated
Financial Institutions Well-established and high quality FIsIn top 20 FIs in countryStrong correspondent banking relationships
Major Local Corporates Top ranking, typically listed on local exchange and recognised as ‘blue chip’Investment Grade Significant foreign currency earnings in freely negotiable currenciesMarket capitalisation typically in excess of USD200m. Potential for significant non interest income, deposit, trade, FX or network opportunities
Middle Market Corporates Not target market
SMEs Not target market
• established high quality names/groups, including Asian conglomerates, that have survived Asian crisis; recent CPM ‘shadowing’ review has validated this;
• core relationships;• network business for Australia/NZ and Asia;• good product penetration potential;• leveraging relationships across Asia network.
Current/Target customer list represents:
Small exceptions for Trade where collateralised, eg. Vietnam
55 2003 Interim Results
Additional credit quality information
56 2003 Interim Results
Deterioration in global electricity sector has stabilised
• Deterioration in US and European utility sectors largely occurred prior to our 2002 Annual Results announcement
• In 2002, S&P ratings actions in US power industry resulted in 182 downgrades, against 15 upgrades
• First half 2003 has seen some evidence of stabilisation
0.01
0.10
1.00
Mar-
98
Sep-9
8
Mar-
99
Sep-9
9
Mar-
00
Sep-0
0
Mar-
01
Sep-0
1
Mar-
02
Sep-0
2
Mar-
03
North America
Europe
AAA
A
AA
BBB-
BBB
BB+
EDF%KMV Median Expected Default Frequency
BBB+
57 2003 Interim Results
Mar-03Sep-02
US energy portfolio – some issues, remains containable
Sep-02
Total Limits
$2.1bn
AAA to BBB
BBB-
BB+ to BB
BB-
>BB-
Total Limits
Excl O&G$2.0bn
32% $0.7b
16% $0.4b
36% $0.7b
16% $0.3b
Total Limits
Excl O&G$2.0bn
35% $0.7b
18% $0.4b
29% $0.6b
18% $0.3b
33% $0.7b
18% $0.4b
21% $0.4b
12% $0.2b
Mar-03
16% $0.3b
23% $0.3b
13% $0.1b
26% $0.3b
23% $0.3b
15% $0.2b
Total Outstandings
$1.2bn
(AUD) No of custTotal 30
B+ to CCC 12.3% 13.0% 3.8% 3.9% 4.0% 2Non Accrual 4.0% 4.2% 8.0% 8.2% 11.2% 3
>BB- = B+ B, B-, CCC & non-accrualExcludes uncommitted
facilitiesIncludes utilised guarantees and market related products
Committed Limits$1.9bn
Mar-03
33% $0.6b
18% $0.4b
21% $0.4b
12% $0.2b
16% $0.3b
$913m in projects
$332m in Corporate
lending
58 2003 Interim Results
Mar-03Sep-02
Global Telco portfolio – no material issues expected
Total Limits
$5.5bn
AAA to BBB+
BBB to BBB-
BB+ to BBBB-
>BB-
>BB- = B+ B, B-, CCC & non-accrual
Total Limits$4.7bn Committed
Limits$3.9bn
63% $3.4b
21% $1.2b
9% $0.5b
7% $0.4b
63% $2.5b
17% $0.6b
5% $0.2b
12% $0.5b
Mar-03
55% $1.3b
16% $0.4b
18% $0.4b
Outstandings$2.3bn
6% $0.1b
(AUD) No of cust
total 41B+ to CCC 1.9% 6.8% 7.8% 11.1% 5Non Accrual 4.8% 3.5% 4.3% 7.2 3
Mar-03
67% $3.1b
15% $0.7b
5% $0.2b
10% $0.5b
3% $0.2b 3% $0.1b 5% $0.1b
59 2003 Interim Results
Mortgages – low representation in inner city Sydney and Melbourne
6%
11%
0%
5%
10%
15%
20%
25%
30%
35%
Sydney Inner City Melbourne InnerCity*
* limited sample size# source: Roy Morgan
ANZ share
Range of major peers
Market Share by location
• Tightened assessment criteria for inner city investment properties
• Delinquency profile of inner city borrowers in line with average
60 2003 Interim Results
3.9% 3.7% 3.3% 3.2%
14.1% 14.1% 13.7% 13.8%
14.9% 14.7% 14.3% 14.9%
51.4% 53.9% 54.0%
15.7% 13.6% 14.7% 14.3%
53.8%
Sep-01 Mar-02 Sep-02 Mar-03
ANZ Group - Outstandings$143bn $149bn$142bn $158bn
B+ to CCC 3.0% 2.8% 2.5% 2.5%Non Accrual 0.9% 0.9% 0.8% 0.7%
Total investment grade as at Mar-03:$107.7bn or 68.0% of the portfolio
Group risk grade profile
AAA to BBB
BBB-
BB+ to BB
BB-
>BB-
61 2003 Interim Results
4.3% 4.3% 4.4% 4.8%7.5% 6.8% 7.3% 8.4%
17.3% 17.5% 16.9%18.5%
28.1% 27.1% 25.1%
42.8% 44.3% 46.3% 45.5%
22.8%
Sep-01 Mar-02 Sep-02 Mar-03
9.1% 8.1% 5.4% 4.2%
17.3% 18.0%17.0%
14.6%
33.9% 34.7%35.0%
25.4% 25.1%
14.1% 16.0% 16.3%
38.2%
26.6% 26.7%
14.3%
Sep-01 Mar-02 Sep-02 Mar-03
Institutional & Corporate Risk Grade Profiles
B+ to CCC 2.7% 2.3% 2.6% 3.1%Non Accrual 1.6% 2.0% 1.8% 1.7%
Institutional Banking (Outstandings) Corporate Banking Aust. (Outstandings)
7.4% 6.4% 4.1% 2.8%1.7% 1.7% 1.3% 1.4%
AAA to BBB
BBB-
BB+ to BB
BB-
>BB-
62 2003 Interim Results
Specific provisions in most businesses lower than expected losses
0
10
20
30
40
50
60
70
80
90
GFX
CF&A SM
EMor
tgag
esPe
rson
al B
ankin
g SFI
Asse
t Fin
ance
CBB CF
SPELP
0 50 100 150
ConsumerFinance
CBB
Asset Finance
SFI
Personal
Mortgages
SME
CF&A
GFX
SP’s v ELP1st Half 2003
SP’s v ELP2nd Half 2002
$m
$m
Specific Provisions 1st Half 2003 v 2nd Half 2002
$mLower SP
Higher SP
-20
0
20
40
60
80
100
120
140
160
180
GFX
CF&A SM
EMor
tgag
esPe
rson
al B
ankin
g SFI
Asse
t Fin
ance
CBB CF
SPELP
63 2003 Interim Results
Offshore lending assets decreasing as a proportion of total lending assets
70% 69% 70% 73% 77% 76% 78% 79%
15% 15% 13% 13%12% 13% 13% 13%
15% 16% 16% 14% 11% 11% 9% 8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Mar-03
Australia NZ International
64 2003 Interim Results
Increased industry diversification
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Co
mm
erc
ial
Pro
pert
y
Man
ufa
ctu
rin
g
Reta
il T
rad
e
Fin
an
ce -
Ban
ks
Wh
ole
sale
Tra
de
Ag
ricu
ltu
re
Bu
sin
ess
Serv
ices
Fin
an
ce -
Oth
er
Cu
ltu
ral
& R
ec
serv
ices
Acco
mm
,P
ub
s, C
lub
s
Tra
nsp
ort
&S
tora
ge
Oth
er
1993 Mar-03
% of Group Lending Assets(Aust/NZ)
Policy Cap
65 2003 Interim Results
Industry exposures – Australia & NZ
Health & Community Services
Mining
Cultural & Recreational Services
Personal & Other Services
Forestry & Fishing
Communication Services
Lending Assets (AUDm)% of Portfolio (RHS scale)% in CCR 7D-8G (RHS scale)% in CCR 9-10 (RHS scale)x
0.0bn
0.5bn
1.0bn
1.5bn
2.0bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0.0bn
0.5bn
1.0bn
1.5bn
2.0bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0.0bn
0.2bn
0.4bn
0.6bn
0.8bn
1.0bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0.0bn
0.2bn
0.4bn
0.6bn
0.8bn
1.0bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0.0bn
0.5bn
1.0bn
1.5bn
2.0bn
2.5bn
3.0bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
5.0%
10.0%
15.0%
0.0bn
0.2bn
0.4bn
0.6bn
0.8bn
1.0bn
Sep-00 Sep-01 Sep-02 Mar-030.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%
66 2003 Interim Results
Industry exposures – Australia & NZ
Finance - Other
Finance – Banks, Building Soc etc.
Transport & Storage
Accommodation, Clubs, Pubs etc.
Utilities
Construction
Lending Assets (AUDm)% of Portfolio (RHS scale)% in CCR 7D-8G (RHS scale)% in CCR 9-10 (RHS scale)x
0bn
1bn
2bn
3bn
4bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0bn
1bn
2bn
3bn
4bn
5bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0bn
1bn
2bn
3bn
4bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
0bn
1bn
2bn
3bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0bn
1bn
2bn
3bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
0.0bn
0.5bn
1.0bn
1.5bn
2.0bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
67 2003 Interim Results
Industry exposures – Australia & NZ
Real Estate Operators & Dev.
Manufacturing
Retail Trade
Wholesale Trade
Agriculture
Business Services
Lending Assets (AUDm)% of Portfolio (RHS scale)% in CCR 7D-8G (RHS scale)% in CCR 9-10 (RHS scale)x
0bn
2bn
4bn
6bn
8bn
10bn
12bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0bn
2bn
4bn
6bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0bn
1bn
2bn
3bn
4bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0bn
1bn
2bn
3bn
4bn
Sep-00 Sep-01 Sep-02 Mar-030.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%