Perform Grow and Breakout
Presentation to
Deutsche Bank Asia Pacific Financial Institutions Conference
London, 9-10 July 2001
Peter Marriott
Chief Financial Officer
Australia and New Zealand Banking Group Limited
ANZ - who we are
•
•
•
One of the ‘Big Four” Australian banks.
Provider of full range of financial services in
Australia (since 1835) and New Zealand (since
1840)
Leadership in Corporate Banking, Credit Cards
and Mortgage origination, a strong
eCommerce position and an offshore network
in Asia and Pacific.
•
Assets
A$181b
(US$ 95b)
•
Market Cap
A$24.5b
(US$ 12.7b)
•
Profit (half year)
A$895m
(US$ 470m)
•
Staff
22,815
•
Credit Ratings
AA-/Aa3
ANZ Headquarters
100 Queen Street
Melbourne
Page 2
Note: figures as at 31/3/01, with exception of
market cap which is as at 28/6/01
We are on track to deliver on our 3 year
commitments
Measure
2003 Commitment
EPS growth
> 10%
13%
ROE
> 20%
19.1%
Cost-income ratio
mid 40’s
49.4%
Inner Tier 1
6%
Credit rating
maintain AA category
•
Achievement
6.2%
maintained
We have also committed to improving customer satisfaction,
and will publicly report our progress
Page 3
Building for the future - a distinctive
strategy
Specialise
e-Transform
Perform Grow
& Break out
Proposition
Strategy
• Entrepreneurial
specialists create
more value
• Reconfigure ANZ as
a portfolio of 16
specialist
businesses
• Specialist
approach to
customer and
product
businesses
• Corporations
must embrace
new technologies
• An e-Bank with a
human face
• Transform the
way we do
business with IP
technology
• Value depends on
performance,
growth and
breaking out
• Drive results,
invest in growth
businesses and
create new
paradigms/culture
• Meet
expectations,
fund growth by
cost reduction,
transform
Page 4
Implications
Transforming ANZ through Perform,
Grow and Breakout
Break
out
Grow
Perform
Page 5
• Focus:
long term ‘destiny’
• Benchmark:
global industry/players
• Looking for:
transforming moves
• Horizon:
5-10 years
• Success:
dramatic market cap increase
• Focus:
specialisation and out-growing
the market
• Benchmark:
competitors in each business
• Looking for:
breakout moves in key
businesses (eg QTV, Origin)
• Horizon:
3-4 years
• Success:
4-5 moves taking share and
worth ~AUD1bn+ market cap
each
• Focus:
performance
• Benchmark:
market expectations
• Looking for:
six monthly delivery
• Horizon:
1-2 years
• Success:
meet/exceed expectations
consistently
We are performing well - interim results
• NPAT from continuing operations $907m - up 18%
• EPS up 13% to 55.8 cents
• ROE of 19.1%, up from 17.8%
• Cost Income ratio down to 49.4%
• Continuing operations revenue up 10%, costs flat
• Credit quality sound:
– ELP charge down to 35 bp’s
– Total non-accruals down
– Specific provisions flat - down overseas and up
domestically
• Profit on sale of holding in St George $99m ($65m after
tax), offset by write downs in investments ($84m)
• Improved disclosure - financial information provided for each
business unit
Page 6
Building a strong track record
NPAT/ROE
NPAT $m
2000
1800
1600
1400
1200
1000
481
800
600
400
625
200
0
1998
$m
1800
Cost to Income
ROE %
20
19
18
17
930
763
817
895
14
13
12
1999
2000
62
60
CTI
2500
58
56
2000
54
52
1500
50
48
1000
1.5%
1200
900
1.0%
600
0.5%
300
0
0.0%
2000
Gross Non Accruals
Net Non Accruals
Non Accruals/Loans
46
Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01
2.0%
1500
1999
Income
3000
2001
Non-accrual loans
1998
%
64
Expenses
16
15
717
$m
3500
2001 1H
%
45
40
35
30
25
20
15
10
5
0
Internet banking users as % of
main relationships
39.1
32.0
23.5
13.7
ANZ
Page 7
Source: JP Morgan &
Roy Morgan Research
WBC
NAB
CBA
$m
Good profit growth across a diversified
portfolio
Mar 00 v Mar 01
140
120
Personal
100
80
Corporate
60
International and
subsidiaries
40
20
0
Metro Banking
Mortgages
Institutional
Structured Finance
Regional Banking
Corporate Banking
Cards
Transaction Services
Small Business
Asset Finance
Foreign Exchange
Investment Mgmt
Asia
Capital Markets
Pacific
Private Clients
Page 8
A strong performance culture
EVA focus
Cost Control
• Rigorous Risk v Reward
discipline
• Part of culture
• Driver based capital allocation
• Allocation of a scarce
resource
• Integrated model
• Ongoing re-engineering
• eTransformation
• Activity Value Analysis
(AVA)
Value Aspirations
Strategies
Leading Cost
Income Ratio
EVA targets
Business Unit
EVA performance
Customer
Rewards
Page 9
We continue to actively manage and
reduce risk
Lending Profile by Asset Type*
100%
• Exiting higher risk businesses
• More emphasis on lower risk
businesses
80%
60%
• Corporate balance sheet
deliberately constrained –
focus on fee income
40%
• Risk based approach
embedded through EVA
20%
0%
ANZ ANZ ANZ
1991 1996 2001
CBA
NAB
WBC
business
consumer
* CBA as at 31/12/00, NAB & WBC as
at 30/9/00
Page 10
Total non-accrual loans continue to
fall, but increase in Australia
Historic
$m
1800
Gross Non-Accrual
Loans (LHS)
Geographic
Non-Accrual Loans/
Loans & advances (RHS)
1662
2.0%
$m
Gross Non-Accrual Loans
Mar-00
1000
1543
1500
Sep-00
Mar-01
1391
1295
1.5%
800
1200
749
681
651
872
900
600
900
495
1.0%
657
699
457
727
400
600
428
858
0.5%
Net Non-Accrual
Loans (LHS)
200
300
72 59 89
0
0.0%
1997
1998
1999
0
Aust
2000 2001 1H
Page 11
NZ
Inter
Group risk grade profile continues to
improve - but some signs of turning domestically
$114.6bn
$126.5bn
$134.9bn
$141.0bn
AAA to
BBB+
14.8%
16.2%
16.2%
16.9%
BBB to
BBB-
41.5%
49.7%
50.5%
14.6%
14.7%
15.6%
14.1%
BB + to
BB
19.2%
BB17.3%
>B
ELP (bp’s)
45.3%
15.8%
5.4%
17.3%
3.9%
7.2%
3.8%
Sep 1998
Sep 1999
Sep-2000
Mar-01
45
43
38
35
>B = B, B-, CCC
& non-accrual
Page 12
Provisioning in line with expectations
….but increasing in Australia and New Zealand
$m
Actual SP v ELP
charge
140
120
100
ELP charge
SP charge
80
60
40
20
0
-20
-40
Mar00
Sep-00 Mar-01
Personal
Mar-00 Sep-00 Mar-01
Corporate
Mar-00 Sep-00 Mar-01
International &
Subsidiaries
• Slowing domestic economy likely to increase specific provisions
• ELP is a function of volume (on and off balance sheet), risk
grade profile, and level of security
• Specific Provisions tend to be less volatile in Personal
businesses and track more closely to ELP
Page 13
Provisioning levels remain strong
$m
ELP
charge
241
1700
1500
represents
3 years
expected
losses
%
1.10
1.06
FX
impact
1460
27
1.05
1373
1.02
1.00
(181)
Net SP
transfer
1300
GP/Lending Assets*
Surplus
448
0.98
0.97
0.95
0.90
1100
1012
0.85
900
0.80
700
0.75
0.70
500
1H
APRA
2001 Guidelines
2000
ANZ
Mar-01
CBA
Dec-00
NAB
Jun-00
ELP - Economic Loss Provision
SP - Specific Provision
Page 14
* includes acceptances
WBC
Jun-00
We are developing a track record for
building growth businesses
%
15
%
30
Mortgage market
share
14
Share of credit
card spend
25
13
12
20
11
10
95
$m
700
96
97
98
99
00
Growing FM inflows
01
%
16
600
FM inflows
500
400
300
Deposit
(LHS)
market share
(RHS)
95
m
4.2
96
97
98
99
00
01
Personal customers
- Australia
4.0
14
3.8
12
3.6
200
100
10
3.4
Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00
0
-100
15
Mar-00 Jun-00 Sep-00 Dec-00 Mar-01
8
Page 15
Most businesses’ targeting revenue
growth well in excess of expense growth
Plan Revenue Growth 01-03 cagr
Personal
High
Cards
Corporate
Int. & Subsidiaries
GFX
Private
Clients
Asia
Asset Fin
Nominal
GDP
Growth
GCM
Small Bus
Cost:Income
falling
Inst.
Bank
Metro
& Reg Banking
GSF
GTS
Pacific
Corporate
Low
ANZ
Investments
Mortgages
ILLUSTRATIVE
Low
Note: Bubble size approx. in
proportion to 2001 forecast NPAT
High
Plan Operating Expense Growth 01-03 CAGR
Page 16
We are developing a strong CRM
capability
In Place
INFRASTRUCTURE
CAPABILITIES
• Enterprise Customer Data Mart
(ECDM)
• Full account and customer EVA
• Tran$act database
• Customer scoring and decision
engine
• Behavioural credit scoring
systems
• Segmentation markers and
profiles
• Propensity-to-buy scores
• Application/behavioural scores
• Multiple campaign management
• Campaign Management System
• Interim front line screen delivery
In Pilot/
Development
• Call centre, ATM, and SSP
integration
• Attrition scores by customer
• anz.com integration
• Automated, event-based
campaigns
• Recovery scores
• Multi-product decisioning
• Automated prospect list delivery
(“My Sales”)
• Full front line screen delivery
• “Optimal” strategy selection by
customer (longer term)
Page 17
Substantial growth opportunities in
Personal
System Growth
Customer #’s
(m)
Total potential revenue
growth - $1.5b
• Underlying credit growth ~
8-10% pa
Market Share
• Product businesses growing
customer numbers and
market share
Peer Average
10
7.3
Increased
wallet on higher
share $160m
Potential revenue
$650m
Increase Wallet
• Customer businesses
deepening wallet share
5
4
0
• Customer #’s increasing by
1.0m - translates to $650m
in additional revenue pa
Potential
revenue
$650m
Existing revenue
$2.6b
40%
50%*
Share of Customer Wallet
* Average share of wallet for CBA, NAB, SGB, WBC
- source: Roy Morgan Research
Page 18
• $650m revenue gain by
matching our peers
– Created customer
businesses
- Sales programs
- CRM
In Corporate, our main focus is on
growing total wallet share
# Customers
Focus on deeper
penetration of existing
CFS customer base
Potential
revenue ~$1.3b
Grow wallet share
•
New high value
products
•
New delivery
mechanisms
•
Improved cross-sell
•
Increased sale of 3rd
party products
~5,000
Total wallet
of ANZ customer
base ~$8.5b
FY 2000 revenue
$1.7b
0
~20%*
~35%
Share of Customer Wallet
* source: internal estimate
Page 19
Our breakout approach is
differentiating us
Strategy
Staff
• Specialised businesses - open architecture
• First class execution (no surprises)
• 91% of managers on individual contracts
• 12% rise in staff satisfaction
• Breakout cultural change program
Customers
• Establishment of Customer Charter,
Customer Advocate and distinctive
customer and community initiatives
eTransformation
• Leading cost income ratio
• Highest internet banking penetration
Risk
• Leading financial disclosure & transparency
• EVA embedded in culture
Page 20
Developing a breakout performance
culture
Mission
/aspiration
where we are
where we want to be
Distinctive (Top 10%)
Targets/goals
Superior (Top 25%)
Organisational
approach
Average
BU Performance
feedback
Consequence
management
People
Financial
Operational
Coordination and
control
Average
+
Rewards &
recognition
Superior
Distinctive
* Benchmark - 33 Australasian companies surveyed over 1999-2000
Page 21
Opportunities
Motivation
Values
ANZ’s aspiration
A high performing company,
exceeding expectations
• Revenue growth
• Cost leadership
• Risk mitigation
• EPS
• ROE
Perform
Grow
AND
Breakout
More dynamic than
competitors
• High P/E rating
• Performance culture
• Lean and agile
• The e-bank with a human face
• A breakout mentality
Page 22
Positioned in
growth markets
• Actively managed
portfolio
• Annual
investment in
growth ideas
• Higher than peer
revenue growth
Summary
• We are performing well
• Cost management momentum –
eTransformation has just
begun…
• Risk reduction continues
• Our new strategy is creating
value and better positioning us for
growth
• We are differentiating ourselves
through our Breakout program
Page 23
We are
on track
to achieve
our goals
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.com
or contact
Philip Gentry
Head of Investor Relations
ph: (613) 9273 4185
fax: (613) 9273 4091
Page 24
e-mail: gentryp@anz.com
Economic outlook - cautiously optimistic
7
Real GDP Growth incl. and excl.
housing and Olympics (est)
%
6
5
4
Year ended, excluding
dwellings and Olympics
3
2
1
-0
0
Se
p
-9
9
Se
p
-9
8
Se
p
Se
p
-9
7
0
Index
Financial conditions in Australia
1.4
more expansionary than US
1.2
1.0
0.8
US
0.6
Contractionary
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
Australia
-1.0
Expansionary
-1.2
-1.4
90 91 92 93 94 95 96 97 98 99 00 01
• Retail sales continue to rebound
• Housing recovery continues
• But unemployment is still rising
• Forecast GDP growth for 2001
calendar year - 2%, rising to 4%
in 2002
Page 25
• Unlike the US, Australia did not
experience contractionary
financial conditions
• With domestic growth indicators
strengthening, and early signs of
rising inflation, the interest rate
cycle has likely bottomed
Copy of presentation
available on
www.anz.com
Page 26