ANZ Bank (ANZ) Unquestionably strong 1Q17. Healthy Jaws, safe to go back in the water SOURCE: BELL POTTER SECURITIES ESTIMATES

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1 17 February 2017 Analyst TS Lim Authorisation Chris Savage ANZ Bank (ANZ) Unquestionably strong 1Q17 Recommendation Buy (Hold) Price $30.21 Target (12 months) $33.25 (previously $32.50) Expected Return Capital growth 10.1% Dividend yield 5.3% Total expected return 15.4% Company Data & Ratios Enterprise value Market cap n/a $88,698m Issued capital 2,936m Free float 100% Avg. daily val. (52wk) $218.2m 12 month price range $ $31.84 GICS sector Price Performance Banks (1m) (3m) (12m) Price (A$) Absolute (%) Rel market (%) Healthy Jaws, safe to go back in the water ANZ s 1Q17 trading update included: (1) cash NPAT +31% to $2.0bn (BP ~$1.7bn); (2) adjusted pro-forma cash NPAT +20% to ~$2.0bn (BP ~$1.8bn); (3) revenue +7% (+4% adjusted pro-forma); (4) expenses -4% (-1% adjusted pro-forma); (5) Group NIM down by several basis points (BP down ~1bp); (6) BDD charge $283m (BP ~$488m); and (7) CET1 capital ratio 9.5% (BP ~9.4%). ANZ s 1Q17 trading performance registered strong revenue growth and very tight cost management, boosted by good Retail banking performances in Australia and New Zealand (home lending being the major contributor) and a turnaround in Institutional banking fortunes that offset more subdued volumes in commercial lending. The higher profit also benefited from a lower BDD charge and sale of the bank s 100 Queen Street (Auckland, New Zealand) property. The latter could have raised an issue over earnings quality but we choose to think this is similar to how CBA treated its Visa disposal gains in 1H17, i.e. taken above the line. CET1 capital ratio was 9.5% net of the payment of the 2016 final dividend (vs. 9.6% at the end of 4Q16). Disclosed asset disposals that should complete in 2H17 and 1H18 (20% of SRCB, UDC and the retail and wealth businesses in five Asian countries) would add ~$2.7bn or ~70bp to the 9.5% CET1 capital ratio and make ANZ the sector leader in capital adequacy among the majors. Price target increased to $33.25, Buy rating reinstated We have increased near term adjusted pro-forma cash NPAT by 3% and subsequent year forecasts by 1-2%. These are due to higher other income from the sale of the 100 Queen Street property and improved Institutional banking contributions in addition to better asset quality outcomes. The price target is increased by ~2% to $33.25 (previously $32.50) given the better overall earnings outlook and improved quality of earnings from the Retail and Institutional banks. The Buy rating is reinstated (previously Hold) purely based on value, i.e. 12-month TSR >15%. Absolute Price $38 $36 $34 $32 $30 $28 $26 $24 $22 $20 Feb Jun ANZ Oct 15 Feb Jun Oct S&P 300 Rebased Earnings Forecast Year end 30 September e 2018e 2019e NPAT (reported) (A$m) 5,709 6,831 7,227 7,726 NPAT (adjusted pro-forma) (A$m) 6,966 7,089 7,274 7,746 EPS (adjusted pro-forma) (A ps) EPS growth (%) -7% 0% 2% 6% PER (x) P/Book (x) P/NTA (x) Dividend (A ps) Yield (%) 5.3% 5.3% 5.4% 5.6% ROE (%) 12.2% 12.0% 11.8% 12.0% NIM (%) 2.00% 2.01% 2.01% 2.00% Franking (%) 100.0% 100.0% 100.0% 100.0% SOURCE: IRESS SOURCE: BELL POTTER SECURITIES ESTIMATES BELL POTTER SECURITIES LIMITED ACN AFSL DISCLAIMER AND DISCLOSURES THIS REPORT MUST BE READ WITH THE DISCLAIMER AND DISCLOSURES ON PAGE 8 THAT FORM PART OF IT. Page 1

2 Unquestionably strong 1Q17 Healthy Jaws, safe to go back in the water The elements of ANZ s 1Q17 unaudited trading update are summarised below: 1. Reported (statutory) NPAT +8% to $1.6bn (BP ~$1.7bn); 2. Cash NPAT +31% to $2.0bn (BP ~$1.7bn); 3. Adjusted pro-forma cash NPAT +20% to ~$2.0bn (BP ~$1.8bn); 4. Profit before provisions +17% (+9% adjusted pro-forma); 5. Revenue +7% (+4% adjusted pro-forma); 6. Expenses -4% (-1% adjusted pro-forma); 7. Group NIM declined several basis points (BP down ~1bp); 8. BDD charge $283m (BP ~$488m); and 9. CET1 capital ratio 9.5% (BP ~9.4%). ANZ s 1Q17 trading performance was a pleasant surprise, registering strong revenue growth and very tight cost management. It should also come as no surprise that higher cash and adjusted pro-forma NPAT were boosted by good Retail banking performances in Australia and New Zealand (home lending being the major contributor) and a turnaround in Institutional banking fortunes that offset more subdued volumes in commercial lending. The higher profit also benefited from a lower BDD charge and sale of the bank s 100 Queen Street (Auckland, New Zealand) property. The latter could have raised an issue over earnings quality but we choose to think this is similar to how CBA treated its Visa disposal gains in 1H17, i.e. taken above the line. The trading update included three forms of NPAT: (1) reported (statutory); (2) cash; and (3) adjusted pro-forma cash (adjusted to remove the prior period impact of accelerated software amortisation, AMMB investment impairment, asset disposal gains and restructuring charges). The stated cash and adjusted pro-forma cash NPAT increments appear large but are largely due to the reclassification of certain 2016 specified items. In effect, this would lead to a lower 2016 base NPAT after reversing the amortisation benefit and including higher project expenses from amended policy. Our best guess estimate of the revised 1Q16 adjusted pro-forma cash profit before provisions is ~$2.8bn. After deducting the actual 1Q16 BDD charge of $362m and assuming a 30% effective tax rate, we estimate a revised base position of ~$1.7bn. Adding 20% as per ANZ s disclosure would then result in a notional 1Q17 adjusted proforma cash NPAT of ~$2.0bn (that would be ~$200m higher than our forecast). Assuming an estimated gain on sale of the Queen Street property of A$50-100m, ANZ s underlying 1Q17 result would still be $ m ahead of our forecast and likely due to positive revenue and BDD variances (that will be reflected in our revised forecasts). Group NIM was impacted by higher funding costs (from strong retail and commercial deposit growth higher by 4% and 6% respectively largely to shore up the NSFR including competition effects) and liquidity drag (i.e. lower free fund effect). The definition of several basis points is believed to mean 4-5bp but this would only be in line with recent sector experience. On the other hand, recent mortgage repricing should alleviate some of these headwinds. Similar to the recent experience of CBA and NAB, we expect ANZ s Retail business to have experienced improvements across the main revenue and expense components (although details are undisclosed). Institutional banking also benefited from a number of Page 2

3 tailwinds in 1Q17 including higher Global Markets income ($706m, from favourable sales and trading conditions including the positive impacts of higher US$ and rising yield curve) and a $99m CVA benefit. The Institutional portfolio further reduced by ~$3bn, in line with the stated objective of focusing on higher ROE business to improve Group returns and this should provide further upside to Group NIM. Jaws was the most important result driver in our view, coming in at +11% on a cash basis and +5% on an adjusted pro-forma basis. Revenue growth (+7% cash, +4% adjusted proforma) was likely supported by higher volumes and other income while cost discipline also benefited from productivity initiatives (-4%, -1% adjusted pro-forma). Asset quality remains manageable with GIA increasing by only 1.8% to $3.2bn. The lower BDD charge of $283m ($362m in 1Q16) or 4-5bp based on our estimates comprised a $325m IP charge but was positively impacted by a $42m CP release (portfolio improvement, transferred to IP). CET1 capital ratio was 9.5% net of the payment of the 2016 final dividend (vs. 9.6% at the end of 4Q16). Disclosed asset disposals that should complete in 2H17 and 1H18 (20% of SRCB, UDC and the retail and wealth businesses in five Asian countries) would add ~$2.7bn or ~70bp to the 9.5% CET1 capital ratio and make ANZ the sector leader in capital adequacy among the majors. ANZ s funding and liquidity profile also remain strong with NSFR estimated to be >108% (CBA >105%, NAB >100%) and LCR of 132% (proforma after the $6.5bn reduction in the CLF post 1 January 2017, vs. 135% for CBA and 124% for NAB). Price target increased to $33.25, Buy rating reinstated We have increased near term adjusted pro-forma cash NPAT by 3% and subsequent year forecasts by 1-2%. These are due to higher other income from the sale of the 100 Queen Street property and improved Institutional banking contributions in addition to better asset quality outcomes. The price target is increased by ~2% to $33.25 (Tables 2 and 3 on the next page, previously $32.50) given the better overall earnings outlook and improved quality of earnings from the Retail and Institutional banks. The Buy rating is reinstated (previously Hold) purely based on value, i.e. 12-month TSR >15%. Table 1 Estimate changes ANZ Bank 2017e 2018e 2019e 2020e Y/e September 30 ($m) Current Previous Change Current Previous Change Current Previous Change Current Previous Change Profit & Loss Net interest income 14,760 14, % 14,913 14, % 15,592 15, % 16,362 16, % Other income 5,894 5, % 5,647 5, % 5,931 5, % 6,232 6, % Total operating income 20,653 20, % 20,560 20, % 21,523 21, % 22,593 22, % Operating expenses -9,000-8, % -8,691-8, % -8,984-8, % -9,285-9, % Impairment expenses -1,810-1, % -1,670-1, % -1,664-1, % -1,748-1, % Net profit before income tax 9,844 9, % 10,199 9, % 10,875 10, % 11,560 11, % Corporate tax expense -2,741-2, % -2,911-2, % -3,115-3, % -3,316-3, % OEI, other adjustments n/m n/m n/m n/m NPAT (cash basis) 6,851 6, % 7,247 7, % 7,746 7, % 8,230 8, % NPAT (cash basis, adjusted proforma) 7,089 6, % 7,274 7, % 7,746 7, % 8,230 8, % DPS (cps) % % % % EPS (cash, adjusted pro-forma) (cps) % % % % ROE 12.0% 11.7% 0.4% 11.8% 11.6% 0.2% 12.0% 11.9% 0.1% 12.1% 12.0% 0.1% NIM 2.01% 2.01% 0.00% 2.01% 2.00% 0.00% 2.00% 2.00% 0.00% 2.00% 2.00% 0.00% Cost ratio (adjusted pro-forma) 44% 44% 0% 42% 42% 0% 42% 42% 0% 41% 41% 0% Impairment expense as % of GLA 0.31% 0.33% 0.02% 0.28% 0.29% 0.01% 0.26% 0.26% 0.00% 0.26% 0.26% 0.00% Page 3

4 Table 2 ANZ composite valuation (current) Composite Valuation Value ($m) Per share Weighting Composite value per share DCF 100,954 $ % $13.75 Dividend yield (sustainable) 87,273 $ % $11.89 ROE (sustainable) 90,804 $ % $3.09 Sum-of-Parts 91,693 $ % $3.12 Total $31.86 Total plus notional surplus capital $1.35 $33.21 Table 3 ANZ SOP valuation (current) Sum-of-Parts (As Is) 2018e NPAT Pros. PE (times) Value ($m) Per share Australia 4, ,549 $19.26 Asia Retail & Pacific ,031 $0.35 Institutional 1, ,875 $4.39 Wealth Australia ,344 $1.48 New Zealand 1, ,579 $5.65 Other $0.11 Total 7, ,693 $31.23 Table 4 ANZ composite valuation (previous) Composite Valuation Value ($m) Per share Weighting Composite value per share DCF 99,257 $ % $13.52 Dividend yield (sustainable) 86,480 $ % $11.78 ROE (sustainable) 90,454 $ % $3.08 Sum-of-Parts 79,257 $ % $2.70 Total $31.08 Total plus notional surplus capital $1.35 $32.44 Table 5 ANZ SOP valuation (previous) Sum-of-Parts (As Is) 2018e NPAT Pros. PE (times) Value ($m) Per share Australia 4, ,491 $17.20 Asia Retail & Pacific ,031 $0.35 Institutional ,482 $3.23 Wealth Australia ,344 $1.48 New Zealand 1, ,621 $4.64 Other $0.10 Total 7, ,257 $26.99 Page 4

5 ANZ Bank Company description ANZ operates primarily in Australia, New Zealand and 26 key markets in the Asia Pacific region (with sizeable operations in Indonesia, Malaysia, Vietnam and Cambodia). The bank services 6m customers and provides the following products and services: retail banking; business banking; institutional banking; and wealth management. Investment strategy ANZ is in the midst of reassessing its offshore strategy. While the focus is now on the more profitable and higher ROE Australian and New Zealand consumer and business banking space, we believe there is still some residual value in selected APEA growth options especially if the bank was to focus on the Institutional and High Net Worth segments and divest its multiple regional bank holdings. ANZ has just begun its derisking/transformation phase. Based on the experience of NAB and SUN, we believe it would take months before prospects and returns start to improve. We will continue to assess ANZ as further clarity around its divestment strategies emerges. Valuation The price target is closely aligned with the bank s composite valuation, weighted as follows: Table 6 ANZ composite valuation (current) Composite Valuation Value ($m) Per share Weighting Composite value per share DCF 100,954 $ % $13.75 Dividend yield (sustainable) 87,273 $ % $11.89 ROE (sustainable) 90,804 $ % $3.09 Sum-of-Parts 91,693 $ % $3.12 Total $31.86 Total plus notional surplus capital $1.35 $33.21 Table 7 ANZ SOP valuation (current) Sum-of-Parts (As Is) 2018e NPAT Pros. PE (times) Value ($m) Per share Australia 4, ,549 $19.26 Asia Retail & Pacific ,031 $0.35 Institutional 1, ,875 $4.39 Wealth Australia ,344 $1.48 New Zealand 1, ,579 $5.65 Other $0.11 Total 7, ,693 $31.23 SWOT analysis Strengths 1. Domestic retail and SME banking franchise, including service and sales; and 2. Management execution. Weaknesses 1. Underweight home lending Australia; and 2. Overweight New Zealand. Opportunities 1. Further cost management; 2. Seeking further wealth opportunities (distribution partnerships); and 3. Divesting Asian partnerships and other interests. Page 5

6 Threats 1. Macroeconomic factors such as higher regulatory requirements, higher regional unemployment and slowing domestic credit growth; 2. Sovereign risk exposed to sometimes unstable governments; and 3. Increased competition specifically from CBA and WBC on the domestic front in retail and wholesale banking and wealth management. Sensitivities Table 8 ANZ sensitivities Y/e September e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e Sensitivities Group NIM +10bp NPAT upside (underlying basis) 7.2% 7.2% 7.0% 6.9% 6.9% 6.8% 6.7% 6.6% 6.5% - Price target upside $2.41 $2.38 $2.34 $2.31 $2.28 $2.26 $2.23 $2.20 $2.17 Group Loans +1% NPAT upside (underlying basis) 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% - Price target upside $0.21 $0.21 $0.21 $0.21 $0.21 $0.21 $0.21 $0.21 $0.21 Aust. loans (ex Wealth/IB) +1% NPAT upside (underlying basis) 0.5% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% - Price target upside $0.18 $0.18 $0.19 $0.19 $0.19 $0.19 $0.19 $0.19 $0.19 APEA loans +1% NPAT upside (underlying basis) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% - Price target upside $0.01 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 NZ loans +1% NPAT upside (underlying basis) 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% - Price target upside $0.06 $0.06 $0.06 $0.06 $0.06 $0.07 $0.07 $0.07 $0.07 Other income +1% NPAT upside (underlying basis) 0.6% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% - Price target upside $0.19 $0.18 $0.18 $0.18 $0.17 $0.17 $0.17 $0.17 $0.17 BDD +1% NPAT upside (underlying basis) -0.2% -0.2% -0.2% -0.1% -0.1% -0.1% -0.1% -0.1% -0.1% - Price target upside -$0.06 -$0.05 -$0.05 -$0.05 -$0.05 -$0.05 -$0.05 -$0.05 -$0.05 Costs +1% NPAT upside (underlying basis) -0.9% -0.8% -0.8% -0.8% -0.8% -0.7% -0.7% -0.7% -0.7% - Price target upside -$0.30 -$0.28 -$0.27 -$0.26 -$0.26 -$0.25 -$0.24 -$0.23 -$0.23 Page 6

7 ANZ Bank as at 17 February 2017 Recommendation Buy Price $30.21 Target (12 months) $33.25 ANZ Bank (ANZ) 17 February 2017 Table 9 Financial summary ANZ Bank Share Price (A$) As at 17-Feb-17 Market Cap (A$M) 88,698 PROFIT AND LOSS VALUATION DATA Y/e September 30 ($m) e 2018e 2019e Y/e September e 2018e 2019e Net interest income 14,361 15,064 14,760 14,913 15,592 NPAT (adjusted pro-forma) ($m) 7,145 6,966 7,089 7,274 7,746 Other banking income 4,692 4,716 4,699 4,383 4,592 EPS (statutory basis) (cps) Total banking income 19,053 19,780 19,458 19,295 20,184 - Growth 2% -27% 18% 5% 6% Funds management income EPS (adjusted pro-forma) (cps) Insurance income Growth -1% -7% 0% 2% 6% Total operating income 20,231 20,936 20,653 20,560 21,523 P / E ratio (times) Operating expenses -9,304-9,384-9,000-8,691-8,984 P / Book ratio (times) Impairment expenses -1,075-1,933-1,810-1,670-1,664 P / NTA ratio (times) Net profit before income tax 9,852 9,619 9,844 10,199 10,875 Net DPS (cps) Corporate tax expense -2,693-2,642-2,741-2,911-3,115 Yield 6.0% 5.3% 5.3% 5.4% 5.6% Minority interests Franking 100% 100% 100% 100% 100% Investment experience Payout (underlying cash basis) 70% 67% 67% 67% 65% NPAT (adjusted pro-forma) 7,145 6,966 7,089 7,274 7,746 Restructuring, CDS items, etc. 71-1, CAPITAL ADEQUACY NPAT (cash basis) 7,216 5,889 6,851 7,247 7,746 Y/e September e 2018e 2019e Hedging, one off gains, etc Risk weighted assets ($m) 401, , , , ,761 NPAT (statutory basis) 7,493 5,709 6,831 7,227 7,726 Average risk weight 48% 47% 50% 51% 51% Tier 1 ratio 11.3% 11.8% 12.0% 12.1% 12.1% CASHFLOW CET1 capital ratio 9.6% 9.6% 10.0% 10.2% 10.3% Y/e September 30 ($m) e 2018e 2019e Total capital ratio 13.3% 14.3% 14.4% 14.3% 14.2% NPAT (cash basis) 7,216 5,889 6,851 7,247 7,746 Equity ratio 6.4% 6.3% 6.5% 6.5% 6.5% Increase in loans -47,903-6, ,907-30,305 DIVISIONAL Increase in other assets -48,159-24,394-17,229-18,338-19,521 Y/e September 30 ($m) e 2018e 2019e Capital expenditure Australia Investing cashflow -96,102-30,837-17,154-41,314-49,897 Net interest income 7,698 8,200 8,488 8,911 9,356 Other income 1,214 1,208 1,244 1,311 1,382 Increase in deposits & borrowings -30,419 28,466 20,207 24,950 34,753 Total banking income 8,912 9,408 9,732 10,223 10,738 Increase in other liabilities 140,158-4,071-5,663 13,435 11,872 Operating expenses -3,193-3,389-3,454-3,527-3,597 Equity raised 3, Impairment expenses Other -2,974-5,073-4,711-4,795-4,969 Net profit before tax 4,867 5,099 5,396 5,770 6,169 Financing cashflow 110,230 19,720 10,303 34,067 42,150 Corporate tax expense -1,454-1,526-1,619-1,731-1,851 NPAT (underlying basis) 3,413 3,573 3,778 4,039 4,318 Net change in cash 21,344-5, Loans 315, , , , ,626 Cash at end of period 53,903 48,675 48,675 48,675 48,675 Deposits 177, , , , ,482 BALANCE SHEET Asia Retail & Pacific Y/e September 30 ($m) e 2018e 2019e Net interest income Cash and liquid assets 53,903 48,675 48,675 48,675 48,675 Other income Divisional gross loans 570, , , , ,202 Total banking income 1,062 1, Provisions -4,017-4,183-4,656-4,924-5,195 Operating expenses Other gross loans / inter div. 2,050 1,876 1,876 1,876 1,876 Impairment expenses Other IEA 208, , , , ,324 Net profit before tax Intangibles 8,312 7,672 7,672 7,672 7,672 Corporate tax expense PP&E 2,221 2,205 2,272 2,340 2,411 NPAT (underlying basis) Insurance assets 34,820 35,923 38,854 42,024 45,454 Loans 12,545 13,379 6,690 3,479 3,583 Other assets 13,663 10,815 10,815 10,815 10,815 Deposits 19,455 22,814 11,407 5,932 6,110 Total assets 889, , , ,336 1,023,233 Institutional Divisional deposits & IBL 506, , , , ,896 Net interest income 3,585 3,452 2,872 2,851 2,981 Other borrowings 275, , , , ,633 Other income 2,177 1,723 1,718 1,805 1,897 Other liabilities 50,648 48,967 48,967 48,967 48,967 Total banking income 5,762 5,175 4,591 4,656 4,878 Total liabilities 832, , , , ,496 Operating expenses -2,806-2,935-2,546-2,541-2,669 Impairment expenses Ordinary share capital 28,367 28,765 29,234 29,712 30,207 Net profit before tax 2,758 1,499 1,408 1,533 1,686 Other equity instruments Corporate tax expense Reserves 1,571 1,078 1,078 1,078 1,078 NPAT (underlying basis) 1,967 1, ,073 1,180 Retained profits 27,309 27,975 30,115 32,567 35,344 Loans 142, , , , ,698 Minority interests Other IEA 261, , , , ,210 Total shareholders' equity 57,353 57,927 60,536 63,465 66,737 IBL 224, , , , ,912 Total sh. equity & liabs. 889, , , ,336 1,023,233 Wealth Australia Net interest income WANOS - statutory (m) 2,760 2,892 2,932 2,948 2,964 Other operating income WANOS - underlying (m) 2,772 2,907 2,948 2,964 2,980 Net funds management income Net insurance & other income PROFITABILITY RATIOS Total operating income 1,273 1,254 1,290 1,360 1,435 Y/e September e 2018e 2019e Operating expenses Return on assets (underlying) 0.8% 0.8% 0.8% 0.8% 0.8% Impairment expenses Return on equity (underlying) 13.7% 12.2% 12.0% 11.8% 12.0% Net profit before tax Leverage ratio 5.2% 5.3% 5.7% 5.9% 5.9% Corporate tax expense Net interest margin 2.04% 2.00% 2.01% 2.01% 2.00% NPAT (underlying basis) Cost / income ratio 46% 45% 44% 42% 42% FUM 46,801 48,251 49,699 51,686 53,754 Cost / average assets 1.06% 1.04% 0.97% 0.90% 0.89% Growth in operating income 3% 3% -1% 0% 5% New Zealand Growth in operating expenses 6% 1% -4% -3% 3% Net interest income 2,381 2,451 2,576 2,618 2,759 Jaws (underlying) -3% 3% 3% 3% 1% Other income Effective tax rate 27% 27% 28% 29% 29% Total operating income 2,985 3,090 3,268 3,346 3,530 Operating expenses -1,197-1,225-1,291-1,290-1,333 ASSET QUALITY Impairment expenses Y/e September e 2018e 2019e Net profit before tax 1,733 1,745 1,812 1,919 2,052 Impairment expense / GLA 0.19% 0.33% 0.31% 0.28% 0.26% Corporate tax expense Impairment expense / RWA 0.27% 0.47% 0.41% 0.36% 0.34% Minority interests Total provisions ($m) 4,017 4,183 4,656 4,924 5,195 Investment experience Total provisions / RWA 1.00% 1.02% 1.06% 1.05% 1.05% NPAT (underlying basis) 1,254 1,267 1,304 1,382 1,477 Indiv ass prov / gross imp assets 39% 41% 41% 41% 41% Loans 96, , , , ,099 IBL / IEA 101% 100% 100% 100% 100% Deposits 60,501 71,883 78,356 82,381 88,971 Total provisions + GRCL / RWA 1.00% 1.02% 1.06% 1.05% 1.05% Other IBL 24,376 25,186 25,420 25,420 25,420 SOURCE: BELL POTTER SECURITIES ESTIMATES Page 7

8 Recommendation structure Buy: Expect >15% total return on a 12 month view. For stocks regarded as Speculative a return of >30% is expected. Research Team Staff Member TS Lim Sam Haddad John O Shea Title/Sector Head of Research Phone tslim shaddad joshea Hold: Expect total return between -5% Tim Piper tpiper and 15% on a 12 month view Jonathon Higgins jhiggins Sell: Expect <-5% total return on a 12 month view Chris Savage Jonathan Snape John Hester Healthcare csavage jsnape jhester Speculative Investments are either start-up enterprises with nil or only prospective operations or recently commenced operations with only forecast cash flows, or companies that have commenced operations or have been in operation for some time but have only forecast cash flows and/or a stressed balance sheet. Such investments may carry an Tanushree Jain Financials TS Lim Lafitani Sotiriou Resources Peter Arden David Coates Associates James Filius Healthcare/Biotech Banks/Regionals Diversified Resources Resources Associate Analyst tnjain tslim lsotiriou parden dcoates jfilius exceptionally high level of capital risk and volatility of returns. Bell Potter Securities Limited ACN Level 38, Aurora Place 88 Phillip Street, Sydney 2000 Telephone The following may affect your legal rights. Important Disclaimer: This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. In the USA and the UK this research is only for institutional investors. It is not for release, publication or distribution in whole or in part to any persons in the two specified countries. In Hong Kong this research is being distributed by Bell Potter Securities (HK) Limited which is licensed and regulated by the Securities and Futures Commission, Hong Kong. This is general investment advice only and does not constitute personal advice to any person. Because this document has been prepared without consideration of any specific client s financial situation, particular needs and investment objectives ( relevant personal circumstances ), a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the representative of such licensee, who has provided you with this report by arraignment with Bell Potter Securities Limited) should be made aware of your relevant personal circumstances and consulted before any investment decision is made on the basis of this document. While this document is based on information from sources which are considered reliable, Bell Potter Securities Limited has not verified independently the information contained in the document and Bell Potter Securities Limited and its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility for updating any advice, views opinions, or recommendations contained in this document or for correcting any error or omission which may become apparent after the document has been issued. Except insofar as liability under any statute cannot be excluded. Bell Potter Securities Limited and its directors, employees and consultants do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this document or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this document or any other person. Disclosure of interest: Bell Potter Securities Limited, its employees, consultants and its associates within the meaning of Chapter 7 of the Corporations Law may receive commissions, underwriting and management fees from transactions involving securities referred to in this document (which its representatives may directly share) and may from time to time hold interests in the securities referred to in this document. TS Lim owns 200 shares in ANZ. ANALYST CERTIFICATION Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers and were prepared in an independent manner, including with respect to Bell Potter, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report. Page 8