Investor Discussion Pack

Transcription

1 Investor Discussion Pack Graham Hodges Deputy Chief Executive Officer AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2010

2 ANZ has established a strong business foundation A clear company wide focus on our super regional strategy: Organised our business around three key geographies and our customers p Maintaining i i strong businesses in our home markets: Australia p New Zealand p Investing for strong organic growth in Asia p A redefined and clear focus in our global institutional business p Supported by a strong capital and funding position p Strengthened governance and risk systems and an improving credit outlook p

3 Investor Discussion Pack AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2010 Overview and strategy

4 ANZ is structured by Geography & Segment Asia Pacific, Europe & America (APEA) Retail (including partnerships) Wealth Commercial (emerging) Institutional Australia Retail Wealth Commercial Institutional New Zealand Retail Wealth Commercial Institutional Institutional is a global business 4

5 Super Regional strategy progressing g well RESTORE Institutional back to system Restore jaws increase revenue faster than costs Drive Asia profit Capture existing opportunities Strategic cost management OUT PERFORM Quality on par with global leaders in our markets Best of breed customer experience In-fill mergers and acquisitions in Asia (core geographies) Unlock the value of our franchise TRANSFORM Create a leading Super Regional bank Global quality, regional focus 1 to 2 years 2 to 5 years 5+ years Launched December 2007 ANZ target 2012 Australia ~60% of all ANZ profit NZ ~20% Asia Pacific ~20% 5

6 Super Regional Strategy Asian, Australian & New Zealand interconnectedness increasing: Following and supporting our customers to the region, developing relationships to work both ends of the trade flows. Trade flows between Asia and Australia and New Zealand continue to grow. Significant intra-asia trade flows are also growing Australian 2 way trade weights US & Europe Index USA UK Europe Strengthens and broadens the Group balance sheet: Leveraging deep liquidity pools within Asia where there is a higher propensity to save Diversifies the balance sheet Index Asia CHINA INDIA ASEAN 6 1. Source: ANZ, RBA. ASEAN 6: Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam 6

7 Regional and intra-regional trade and investment flows are substantive Denotes two way trade flow (2008) FDI inward flow (USDb, 2008) Asia 1 -Europe Asia 1 -USA Trade: US$1.1trn Trade: US$1.0trn CN 108 TW 5 IND 42 VN 8 HK 63 Pacific-Asia 1 Trade: US$7b Intra-Asia 1 Trade: US$2.5trn INDON 8 Aus/NZ-Pacific Trade: US$5b Aus/NZ-Asia 1 Trade: US$235b 1. Asia includes China, Cambodia, India, Indonesia, Hong Kong, Japan, Korea, Laos, Malaysia, Philippines, Singapore, Taiwan and Vietnam Data source: UN Comtrade database; country statistics; ADB website; press searches; Datamonitor, McKinsey Global Banking Pools, APRA, CEIC 7

8 Building a genuinely pan regional business - connectivity provides a competitive advantage Linked through flows of trade, capital and population Key focus is to bridge gaps across the region: Asia generates surplus liquidity, Australia and NZ generate hard and soft commodities Over 50% of domestic customers depend on Asia for over 25% of their business Strategy extends beyond banking Australia / NZ customers into Asia, we are actively facilitating intra-asia cash management, trade and markets transactions for Asian customers Growth in trade and capital flows between Asia and Australia are tracking 17% to 25% pa Migration & Investment Surplus savings There is approximately $60b in direct foreign investment into Australia from the Asian region Commodity consumers Commodity producers Natural resources account for $80b or 30% of Australian and New Zealand exports Soft commodities account for $40b or 15% of Australian and New Zealand exports 8

9 Strategy is supported by a disciplined approach to M&A RBS Asia acquisition Acquired RBS¹ businesses in six countries, aligned with current strategy: t Retail, wealth & commercial businesses in Taiwan, Singapore Indonesia² and Hong Kong; Institutional businesses in Taiwan, the Philippines and Vietnam Purchase price US$50m ( A$60m) premium to fully provided recapitalised net tangible book value³. Equates to 1.1 x net tangible book value Transaction includes US$7bn (A$9bn) deposits, US$3bn (A$4bn) loans, 2m affluent and emerging affluent customers, 54 branches Country Business Branches Customers Deposits Taiwan Retail Commercial Institutional 21 & 16 licenses ~1.3m ~US $2.5b Hong Kong Retail 5 ~30k ~US$1.4b Commercial Singapore Indonesia Retail Commercial Retail Commercial 5 ~300k ~US$1.8b 18 ~450k ~US$700m Vietnam Institutional 1 ~60 ~US$20m Philippines Institutional 1 ~100 ~US4m 1. Transaction is largely a sale of assets and liabilities, not companies, of businesses held by ABN- AMRO mainly through branches, RBS will retain a presence in some countries. 2. The Indonesian retail, wealth and commercial businesses will be acquired through ANZ s 99% owned subsidiary ANZ Panin. 3. Based on RWA calculated by ANZ under a Basel II standardised approach as at 31 May On a fully provided recapitalised basis 9

10 Strategy is supported by a disciplined approach to M&A - ING Australia and New Zealand Joint Ventures Acquired ING Groep s (ING) 51% interest in ING Australia and ING NZ (the JVs) for $1,760m 1 ~11x multiple of normalised 2008 earnings 2 1.2x multiple of embedded value (EV) 3 Cash EPS accretive in FY10 4 Delivered immediate scale FUM, In-force premiums, and distribution $45b of FUM, $1.3b of in-force premiums ~1,700 aligned dealer group advisers (Aus) Historically around 2/3 rd of operating income from wealth management, one third from risk Australia No. 3 in life insurance 5, No. 5 in retail funds mgt, largest aligned adviser force Australia Acquired ING's 51% in ING Australia manufacturing and distribution of investment life & GI products, the Equity owned advisor networks and administration platforms Oasis Wrap 13% Employer Super 27% Australia FUM: $39b Mezzanine 4% Wholesale 1% Other Retail15% OneAnswer Mastertrust 40% New Zealand No. 5 in life insurance 5 largest New Zealand KiwiSaver provider, No. 2 funds manager Acquired ING's 51% in ING New Zealand: Funded from existing resources, capital impact iti Wealth Management and Retail, Wholesale ~(70)bps, pro forma Tier 1 post acquisition 9.5% 6 and Property Investment Management Transaction completed 30 th November 2009 Announced new OnePath brand 5 th August Purchase price. Separately ANZ made a payment of $55m to acquire ING s share of the NZ Diversified Yield Fund (DYF) & Regular Income Fund (RIF) redeemable preference shares 2 Earnings for the year to 30 September 2008 incorporating normalised long term expectations 3 As at 31 December Based on current share price 5 By in-force premium share 6 As at 30 June 2009 adjusted for $2.2b SPP and impact of RBS acquisition 10

11 Strategy is supported by a disciplined approach to M&A - Landmark Loan and Deposit book Overview of transaction Acquisition of Landmark Financial Services (LFS) loan and deposit book from AWB s rural service business Landmark: Net book value on fully provided, nil premium basis ~$2.4b lending assets & $0.3b deposits ~10,000 banking customers ~100 Relationship Management Staff ~45 Support staff ANZ / Landmark to enter exclusive customer referral agreement: Access to ~100,000 Landmark rural service customers (~85% of Australian farming entities) Access through extensive network Overview of Landmark Leading Australian agribusiness company, offering merchandise, fertiliser, farm services, wool, livestock, finance, insurance and real estate Largest distributor ib t of merchandise and fertiliser, with ~2,000 employees servicing ~100,000 clients across over 400 outlets Acquired the LFS loan and deposit books, the lending and deposit taking divisions of Landmark Fertiliser Livestock Farm Services Finance Landmark Merchandise Wool Insurance Real Estate 11

12 ANZ has continued to invest for growth notwithstanding recent tougher economic conditions Revenue and Expenses 8% 9% 8% 6% 12% 10% Net Profit by region 17% 4% 2% 4% 4% 2% 7% 7% 10% 14% 12% Pro Forma 12% Basis 1 23% 22% 22% 14% 14% 7% 8% 66% 69% 64% 68% 72% FY06 FY07 FY08 FY09 FY10 Revenue Expenses Provision charges FY06 FY07 FY08 FY09 FY10 Australia New Zealand Asia Pacific Other Net Profit after tax ,814 1, , CP(4) FY06 FY07 FY08 FY09 FY10 3,587 3,924 3,426 3,772 5,025 Individual Provisions Collective Provisions FY06 FY07 FY08 FY09 FY10 1. Pro forma basis assumes ING Australia and New Zealand, Landmark and Royal bank of Scotland Asia acquisitions took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results. 2. FY06-07 presented on a cash basis, FY08-10 presented on an underlying basis adjusted to reflect the ongoing operations of the Group. 12

13 Group loans and deposits Group Customer Deposits (AUDb) Group Net Loans and Advances (including acceptances) (AUDb) Loan to Deposit Ratio Sep % Loan to Deposit Ratio Sep % Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 0 Sep 06 Sep 07 Sep 08 Sep 09 Sep Retail Commercial Institutional 1. Includes Wealth and Other Retail Commercial Institutional Regional performance: Overview 13

14 Net loans and advances 1 by ygeography g Australia New Zealand (NZD) APEA (USD) FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 Growth 13% 15% (1%) 6% 13% 11% (1%) (1%) 31% 99% (14%) 45% A$b Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 Sep 06 Sep 07 Sep 08 Sep 09 Sep NLAs include acceptances 2. Retail includes Wealth and Group Centre 2 Retail Commercial Institutional Regional performance: Overview 14

15 Customer deposits by geography g Australia New Zealand (NZD) APEA (USD) FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 Growth 20% 12% 14% 7% 7% 5% 2% 0% 26% 69% 31% 72% A$b Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 Sep 06 Sep 07 Sep 08 Sep 09 Sep Retail includes Wealth and Other 1 Retail Commercial Institutional Regional performance: Overview 15

16 Diversified lending portfolio, weighted to secured mortgage portfolio Net Loans and Advances (including acceptances) by product line (A$b) 361 Cards & Other 1 20 (A$b) Mortgages 1 Cards & Other Mortgages Australia NZ & APEA Commercial / Institutional 142 (A$b) Institutional Commercial (ex rural) Rural Sep 2010 Australia NZ & APEA 1. Includes Wealth. 16

17 Investor Discussion Pack AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2010 Australia Division

18 Australia Division high value strategy has delivered Pro Forma Basis 2 Profit Before Provisions growth 14% Australia Division Revenue & Expense growth 1 11% 2% 12% FY10 2H10 (HoH) 10% Provisions Pro Forma Basis 2 9% -34% -32% 8% 6% 5% FY10 2H10 (HoH) Net Profit after tax 4% 26% FY10 9% 2H10 (HoH) 2% 0% Revenue Expenses to 2008 based on Personal Division structure, 2009 and 2010 based on Australia Division structure, 2. Pro forma basis assumes ING Australia and New Zealand and Landmark a acquisitions took effect from 1 October Australia 18

19 ANZ s Super Regional strategy provides opportunities across our Australian business Retail By % of the Australian population will be of Asian origin Student volume is driving much of the in-flow from Asia (particularly China, India and Korea) Implementation of a global retail operating model coupled with supporting infrastructure Wealth Differentiated services for Asian customer segments linked to our regional proposition and product offer including the Private Bank Migrant banking platforms Asian banking specialists across major capital cities Regional product propositions In-country Business Development Managers Cultural competency education programs Private Bank Commercial Over 50% of domestic customers depend on Asia for over 25% of their business Links into our Institutional strategy supported by investment in trade, cash and markets products Customer insight in particular around resources, agriculture and infrastructure Building Common products & platforms Regional customer proposition Building Common strategic disciplines Regional talent pool 19

20 Retail building on a strong customer franchise, revenues impacted by fee changes and higher cost of funds Pro Forma Basis 3 Revenue growth 6% FY10-2% 2H10 Expense growth 9% FY10-2% 2H10 Provision growth -18% -18% FY10 2H10 iknow platform providing frontline staff with improved customer insights and support Renewed focus on customer service and execution in Mortgages. More in-branch and Mobile Managers and increased investment in back office support Deposit growth delivered through disciplined strategy New products and packages including Merchant EPOS, GoMoney iphone app, ANZ Extras package and prepaid cards Leader in customer satisfaction amongst the major Australian banks 1 85 % satisfied or very satisfied NPAT growth % 65 ANZ Peer 1 Peer % 60 Peer 3 Peer 4 0 FY10 2H10 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Market share 2 (% of market share) ) Mortgages Credit Cards Personal Deposits Merchant Loans Aug-10 Aug mortgage growth (Multiple of system) 3 Growth of 1.4x system ANZ Housing System Sep-09 Dec-09 Mar-10 Jun Roy Morgan Research ; Aust Main Financial Institution Pop n aged 14+, % satisfied (very or fairly satisfied), rolling 6 months 2. APRA / RBA statistics, Cannex. 3. APRA statistics 3. Pro forma basis assumes ING Australia and New Zealand and Landmark a acquisitions took effect from 1 October

21 Australia: Commercial Pro Forma Basis 3 Acquired Landmark Financial Services Revenue growth ($2.2bn lending, $400m deposits) 9% Invested in more small business (% of market share) 6% specialists Esanda transitioned to a purely auto financier with business equipment asset finance now in ANZ Commercial channels FY10 2H10 Expense growth Commercial Banking lending growth of 10% (5% ex. Landmark) 5% Deposits relatively flat, impacted by 2% debenture run-off in Esanda ($1.5bn from Commercial Business Small FY09) Banking Bus. Banking FY10 2H10 Sep-09 Aug-10 Provision growth -33% -29% FY10 2H10 NPAT growth 30% 18% FY10 2H Growing market share 1 Credit approvals increasing Growing share of wallet 2 Credit approvals (3mth rolling avg) 3 Index: Jan 2010= 100 Up 27% Jan-10 Mar-10 May-10 Jul-10 Sep-10 Business Bank Small Business DBM Business Financial Services Monitor, overall lending and deposit FUM, 2. Finance industry statistics, 3. Business Bank and Small Business Banking. 3. Pro forma basis assumes ING Australia and New Zealand and Landmark a acquisitions took effect from 1 October Commercial Business Banking Small Bus. Banking Sep-09 Aug-10 Esanda Market share of retail car loans through the Dealer channel is 27% 2 Estimated to be up from 19% prior to the GFC

22 Australia: Wealth Pro Forma Basis 1 Revenue growth ANZ assumed full ownership of ING's superannuation, investment and 23% insurance businesses $m Up 14% Combined with ANZ Private and 1,312 1,400 1,155 1,230 Investment & Insurance businesses to 2% 1,200 form a single Wealth unit 1,000 FY10 2H10 Strengthened customer 800 proposition, offering manufacturing and Expense growth 600 distribution of investment and insurance 400 3% products and advice, private 200 banking, trustees, investment lending 0 and E*TRADE broking. -3% Sep-09 Mar-10 Sep-10 Group Individual General Insurance FY10 2H10 E*Trade volumes Insurance in-force premiums Funds under Management Provisions contract notes per day (6 month avg) FY10: 36m credit vs $b Up 2% FY09 charge of 67m 16, , H10: 33m credit vs 12, m credit in 1H10 10, , NPAT growth 6,000 4, % 20% 2, Sep-09 Mar-10 Sep-10 Aus. Equities Golbal Equities FY10 2H10 Cash and FI Ppty & Infra'ure. Sep- Sep- Sep- Sep- Sep- Sep- 1. Pro forma basis assumes ING Australia and New Zealand acquisition took effect from 1 October

23 Investor Discussion Pack AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2010 The Asia Pacific Europe & America Division

24 Deep onshore presence and strong network model delivers connectivity to clients Franchise Markets Core markets for Institutional, Commercial, Retail & Wealth Greater China Greater Mekong 1 India Indonesia Malaysia Pacific Singapore Regional Business Hubs Hong Kong Institutional Network markets Network markets are crucial to delivering pan-regional integrated solutions to clients Korea Japan Philippines Thailand UAE Europe America India (1) Malaysia Singapore (6) Indonesia (28) () - Number of branches and representative ti offices in each country Franchise Network Hubs Greater China (33) Greater Mekong (31) Pacific (60) 1. Focus on Vietnam 24

25 Since 2008, we have prioritised our build out, enabling us to become a credible competitor 1H 2008 Today South and South East Asia Institutional network Formed partnership with AmBank Pan-regional Institutional/commercial business Top 4 foreign bank in Indonesia Largest foreign bank franchise in Greater Mekong Pre-approval for Indian banking licence AmBank an outperformer Limited Institutional business Pan-regional institutional banking network and customer base North East Two branches in China Asia, Europe & Taiwan full franchise Stand alone Europe & America Americas business China Branches in top 4 cities + rural bank Europe & America - Interconnectivity Hubs Limited institutional business with few customers Ex-pat focused Private Bank Deep on shore Institutional capability Full Retail and Wealth, Private Bank and Commercial businesses Full banking license in both Hubs 25

26 APEA: Balance sheet momentum APEA loans & deposits (USDb) RBS 2 Dep. Loans 2H H % loan and deposit growth by region 72% 92% 85% APEA Asia Pacific Europe & 1H09 2H09 1H10 2H10 America APEA loans APEA deposits Loans Deposits APEA Current & Saving accounts (CASA) (USDb) Includes accounts from RBS acquisition 1H08 2H08 1H09 2H09 1H10 2H10 8% 8% -5% 56% 2010 loan & deposit growth by segment 319% 150% 1. All figures based on USD financial information. 2. loans and deposits (in USDb) for the RBS acquisition, includes Vietnam, Philippines & Hong Kong in 1H10, Taiwan, Singapore & Indonesia in 2H10 26 APEA 6% 8% 42% 76% 23% 25% Retail Asia Retail Pacific Instit. Wealth Loans Deposits

27 Business strategy allows for efficient use of APEA's liquidity surplus Business Strategy Focus on affluent and emerging affluent client segments Building a substantive DCM and Cash Management capability and investor client base Efficient use of APEA Liquidity surplus This focus allows us to: Fund our own regional growth in a less expensive and sustainable way Tk Take Australian and New Zealand clients to the Asian debt markets Opportunity to provide Australian and New Zealand clients with diversified funding structures, through assets written in Asia Contribute positively to the Group balance sheet 27

28 Becoming a top four Institutional bank in Asia Pacific Customer Segments Value Proposition Institutional MNC / Regional Corporate Commercial Emerging Corporate / SME Financial Institution & Public Sector Be a core wholesale bank to our clients Leveraging our strengths: Regional network and connectivity AA rating Deep insights geographic, industry, client Experienced Asian bankers Out-deliver on service and speed Focused and deep product capabilities Cash, Trade, Rates and FX, Commodities and Debt Capital Markets 28

29 We are delivering for Institutional and our clients across Asia and the Pacific Regional Connectivity Examples Mandated Lead Arrangers with BNP and European and US Multinational HSBC companies accessing Asia USD411m (2.7x launch size)-maiden Asian syndication bond Asia Funding for Australian and New Zealand institutional clients Raised USD1,100m (3.7x launch size), most investors new to client Demand driven by companies with strong Asian business links Asian migration into Australia and New Zealand trade, investment t and people Lead arranged the 3-year club syndication refinancing facility for LaSalle Investment Management age e Asia's s 50% stake in Westfield e Doncaster Retail Mall. Joint lead managers for NZD225m Kauri Intra-Asia trade and investment bond issuance flows Demand from New Zealand (59%) and Asia (37%) Intra Pacific and Asia deals Lead arranger of USD14b financing for PNG LNG project Largest debt raising in Asia Pacific 29

30 Our Retail & Wealth and Private Bank will deliver local and regional banking to the affluent in each market Customer segments HNW, Affluent & Emerging Affluent Owners, management and staff of our institutional and commercial clients Position and Value Proposition Retail and Wealth Three critical value proposition themes Understands and recognises me Based upon relationships, customer advice not product led Accessible across the region Pan regional Signature Priority Banking branches Banking the family Meeting the holistic financial needs savings, protection to credit Private Bank A trusted advisor with an understanding of personal, professional and business needs Leveraging ANZ s Institutional and Commercial business to attract customers 30

31 Five key ypartnerships p expand our organic agenda Partnership Model Double play in high growth, high return market Focus on our key segments (Commercial, Affluent & Emerging Affluent) Significant influence Exposure to growth markets and segments we can t currently access ANZ adds value through - leadership & management, - product development, - technical expertise and - two way customer flows Scale (Number 5 by assets & deposits) in a closed market ANZ significant driver of leap in performance (market cap increase 56.4% ) Exposure to Shanghai Top Commercial / Wealth City in China Focus in Commercial & Retail segments - two way customer flows complements our organic focus Play on fourth largest city Commercial Centre in China Solid financial returns for ANZ Potential for long term strategic positioning Provides exposure in a market in which we do not have a branch presence Fourth largest credit card issuer Provides access to profitable segment of retail market 31

32 Organic growth a key driver of strategy Develop strategy and build business model Continue organic growth with bolt-ons Extend and deepen franchise Build substantive Institutional business Build Singapore and Hong Kong hubs Build South East Asia business Created business model for Retail and Wealth and Private Bank scaled up with RBS Build risk and governance model Obtained licences Organic growth anchored by Institutional / Commercial Rapid build out of Retail and Wealth and Private Bank Complete RBS acquisition and integration Continue to focus on liability growth Deepen influence in five key partnerships Continue to build out technology and operational platforms Deepen organic growth in hubs and franchise countries Commence build-out of franchise in second wave markets Seek inorganic opportunities to build scale 32

33 Investor Discussion Pack AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2010 The New Zealand Division

34 Our strategy is to fully leverage ANZ s leading market position to deliver superior growth and returns Two strong banking brands with a powerful market presence Leveraging leading market share positions 1 39% 39% 33% 32% 27% 33% 20% 13% Retail Mortgages Market share 1 39% 39% 22% 17% 37% 2% Commercial Rural Lending Main Bank Share ANZ National Bank Retail Credit Com'cial Rural Cust. M'gages Mgages Cards Deposits Well diversified portfolio, weighted to Residential Property Net Loans & Advances including Acceptances March % 2 Retail & Wealth 20% Corporate & Commercial 56% Rural 17% Institutional 1. RBNZ and TNS New Zealand Ltd Business Finance Monitor 2. Commercial Main Bank Share 34

35 New Zealand - Retail & Wealth Pro Forma Basis 2 Revenue growth 1% 4% FY10 2H10 Expense growth 2% 7% FY10 2H10 Provision growth (37%) (43%) FY10 2H10 NPAT growth 33% 26% Retail Asset growth flat, system growth rates subdued Income impacted by removal of exception fees, margins improving, costs impacted by marketing phasing Share of new mortgage business increasing in the <80% LVR market and overall mortgage growth in the later part of 2010 Retail Net Profit after Tax NZD m Wealth Wealth profitability favourably impacted by ING NZ full ownership $1.5 billion KiwiSaver FUM with over 360,000 customers, #1 with growing g market share (24.1%) 19.4% growth in ING Life Businesses InForce book ANZ Private Bank named Best Private Bank in New Zealand 1 Wealth growth rates FY10 74% 20% 4% Revenue Expenses NPAT 2H10 8% 0% 14% FY10 2H10 1H09 2H09 1H10 2H10 Revenue Expenses NPAT Euromoney Private Banking Survey 2. Pro forma basis assumes ING Australia and New Zealand, Landmark and Royal bank of Scotland Asia acquisitions took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results. 35

36 New Zealand - Commercial Commercial Pro Forma Basis 1 Revenue growth Leveraged Shanghai Expo as an opportunity to connect customers to 10% Asia and demonstrate regional 5% capabilities Privately Owned Business Barometer consolidates thought leadership and FY10 2H10 customer connections as market leader Expense growth Strong UDC performance taking (1%) advantage of relative strength in finance company sector (7%) Clear improvements in customer FY10 2H10 satisfaction, with ANZ score increasing from 58% to 69% Provision growth (30%) (60%) Commercial NPAT (excl. Rural) NZD m Rural Higher Rural incomes with Fonterra forecasting the third highest dairy payout on record ANZ continues to support customers through this period of increased volatility in product prices Greater focus by borrowers on cash returns and liquidity with many using increased incomes to reduce debt Provisions are expected to improve as farmers de-leverage Seminars conducted across the industry covering topics such as governance, large business management and financial understanding for young farmers NZD m Rural NPAT FY10 2H10 NPAT growth 208% 101% 66 (5) (8) FY10 2H10 1H09 2H09 1H10 2H10 1. Pro forma basis assumes ING Australia and New Zealand, Landmark and Royal bank of Scotland Asia acquisitions took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results. 36 1H09 2H09 1H10 2H10

37 New Zealand - Institutional Pro Forma Basis 2 Revenue growth (23%) (18%) FY10 2H10 Expense growth (1%) FY10 16% 2H10 NPAT growth (5%) FY10 (21%) 2H10 ANZ continues to dominate the NZ institutional segment Second half expense growth driven by investment in payments systems Connecting customers to Asia and demonstrating ANZ regional capability with Shanghai World Expo and Kiwi Day roadshows in Asia Institutional NZ 2010 Financial Performance Trading revenue 368 down 161m (175) (2) Customer revenue down 14m Awarded INFINZ bank of the year for focus on customers and 2009 Income Exp Provisions Tax 2010 developing growth opportunities Strong Customer Relationships for NZ New Zealand Relationship Market Penetration 1 (%) Extending its position as clear market leader with customers (outstanding results across Peter Lee Associate surveys) Leadership of Debt Capital Markets and Syndication loan 8 8 league tables ANZ Peer 1 Peer 2 Peer 3 Market leading innovative client Lead Relationships solutions, e.g. 1st HKD bond Significant Relationships excluding Lead Relationships issue, ECA financingi Other Relationships 1. Source: Peter Lee Associates Relationship Banking survey, New Zealand, Sample size 2009 N=132, 2010 N= Pro forma basis assumes ING Australia and New Zealand, Landmark and Royal bank of Scotland Asia acquisitions took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results. 37

38 Investor Discussion Pack AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2010 The Institutional Business

39 Global Institutional business focus redefined Foundations laid Strengthened the Institutional Leadership Team, additional team members with international experience Starting to execute the technology and operations roadmap Improving capital discipline Exiting non-core businesses Revenue Contribution by Product Target Mix 2010 Delivering record pre provision profits 40% 40% 21% Substantive progress in remediation completion 20% 37% 42% Clear goals set To become the bank of choice for Resources and Infrastructure in the region Building leading cash, trade and markets platforms with capabilities across Australia, NZ and Asia Targeting significant growth in customer relationships Generating well balanced and sustainable earnings across geographies and segments Global Markets Lending Trade & Transaction Banking 39

40 Increased focus on core customers s and geographies es Over 3,500 active Institutional and Corporate customers supported by over 5,000 staff Corporate banking customers: t/over $40-400m Institutional customers: t/over >$400m Customer relationship sectors Banking a full range of customers Building dominance in a limited number of segments Global lines Natural resources Infrastructure Priority segments Agribusiness Financial institutions & public sector Other lines Property Diversified industrials Consumer and services Telco s, media, entertainment and technology Corporate Banking A single global team services customer needs across the network Global representation supports customers based in Australia, New Zealand, Asia Pacific, Europe and America geographies Domestic presence in Australia and New Zealand for over 170 years Asian representation commenced over 40 years ago and we now have a presence in 15 Asian markets Institutional regional hub established in Hong Kong (centralised support functions for APEA institutional business) Branches in Europe and North America ensure global network coverage 40

41 Regional networks, superior insights & service underpin the competitive advantage Regionally Networked Model Competing globally ll requires superior insights and service Offering Why? How? A lead regional bank servicing clients with pan regional needs A strong regional branch footprint Single platforms for Cash, Trade and Markets offering fully networked seamless platforms across the region Deliver insight through industry sector and regional specialisation Have a sound network through Asia Pacific to build upon Uniquely placed to offer better insight to region Invest in technology and product development Grow relationship teams in key geographies Focus on lead sectors and products Building platforms offers viable alternatives Offering a global service proposition and setting clear service expectations Research and innovation at the core provides a competitive advantage over scaled and standardised models Drawing on insights into customer industries, the region and the financial markets adds significant value 41

42 Global Institutional a focus on growing g core customer relationships supporting income performance Customer Growth >1,100 new relationship managed customers ex-acquisitions 1,200 E&A 800 Aust/NZ Asia 400 AUDb Customer Income 1 Customer Income ex-markets Markets Sales Income 14% CAGR Cross Border Income Super Regional strategy increasingly capturing cross border revenue flows Customer Income Domestic Booked Cross Border 21% 0 FY Strong Customer Relationships Debt Capital Markets a key strength Peter Lee Associates survey of corporate and institutional clients in Australia ranked ANZ: First, or equal first, on 14 of the 26 qualitative relationship categories (up from 8 in FY09) First in "overall penetration" (domestic plus ) #1 Bookrunner in Australia/NZ for Q1-Q in terms of volume and number of transactions #1 Mandated Lead Arranger in Asia-Pacific (ex Japan) for Q1-Q in terms of number of transactions #1 Arranger of syndicated loans in Asia-Pacific (ex Japan) over the last five years in terms of total loan volume on a cumulative basis #1 on the A$ Corporate Bond League Table (INSTO) #1 in the utilities & infrastructure sector - ANZ has led over half of all Australian utility and infrastructure transactions and raised over A$2.3bn in this sector offshore) p ) y Peter Lee Associates survey of corporate and institutional clients in New Zealand ranked ANZ first on overall satisfaction, relationship strength, penetration and a further 17 measures These results reflect the strength and quality of our client relationships 1. Total income adjusted for Global Markets trading income. 42

43 Global Markets 2,500 2,000 1,500 1, Global Markets Income Sales & Trading Mix (AUDm) % 71% 1,225 36% 64% 2,062 49% 51% 1,816 43% 57% Sales Trading 100% 80% 60% 40% 20% 0% Product Contribution % Total Income Fixed Income FX Capital Markets Other Whilst lower than 2009, market Capital Markets growth underlines the benefits of volatility evident in 2010 Asian network expansion, ensuring we are well placed to connect our institutional customers with itraxx (bps) 1 month implied Asian liquidity pools AUD / USD Income diversification by geography and product line helping to offset revenue normalisation as 30 volatility recedes H10 investment in Global Markets management team to deliver scalable growth in coming years FX Adjusted. Sep 07 Mar 08 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 ITRAXX (lhs) AUD/USD VOL (rhs) Global Institutional 43

44 Global Institutional P&L drivers Underlying Performance 1 YOY Movement (FY10 vs FY09) AUDm Business Segment Performance 1 YOY Movement (FY10 vs FY09) AUDm 1, (124) 1,761 1, (206) large 14% (22%) large 1,758 (206) 2% 14% (46%) 23% Up 29% FY09 Lending Txn Markets Other 2 FY10 NPAT Banking NPAT Geographic Performance 1 YOY Movement (FY10 vs FY09) AUDm 388 1, FY09 NPAT Income Exp Prov Tax FY10 NPAT 1,360 (14) 2H10 vs 1H10 3% 10% (29%) 2% 13% FY09 Australia APEA New FY10 NPAT Zealand NPAT 1. Pro forma basis assumes Royal bank of Scotland Asia acquisition took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results.. 2. Increase largely due to provisions in FY09 related to divested custody business. 44

45 Investing across the business in systems and peoplep Expense Growth 1 YOY HOH 31% 13% Asia Pacific, Europe & America Continued investment in growing the Asia franchise and driving customer acquisition Investment in support infrastructure to underpin revenue growth Australia Investment in frontline capability - people and CRM tools - to drive revenue uplift Rollout of cash management platform (Transactive) - with in excess of 2,500 Institutional clients now on boarded. Investment in systems to enhance process automation and integrated work flow management and in bl t t ff t ffi i t ll t ll d environment 10% 8% enablement staff to ensure an efficient, well controlled (1%) 16% New Zealand Strong cost management led to a YoY reduction in expenses HoH increase reflects investment in payments systems (including settlement before interchange) and in cash management platform 1. Pro forma basis assumes Royal bank of Scotland Asia acquisition took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results. Global Institutional 45

46 Predicated on disciplined execution Implementation priorities Sustained customer growth Deepening relationships with existing 3500 active clients Targeting a significant number of new customer relationships already identified: o Over 50% of customer growth expected from APEA, 25% from Corporate Process redesign Simplifying i operating platforms and standardising procedures Risk management Effectively partnering with risk and introducing industry specialists in priority markets Equipping the team Building a high performance culture Recruiting and training across Asia, Operations, Relationships, Cash, Markets and Trade, Investing heavily in institutional banking executive leadership and product expertise Significantly expanding research capabilities within priority segments * Korea, Thailand, Vietnam ($b) Significant growth opportunities Estimated addressable Cash Management Revenue pools 17% of pool 46

47 Priority segments Natural resources & Agriculture Natural resources Well positioned to develop a super regional natural resources business linking Australian producers with Asian processors and consumers > Clients and representation in all major domestic cities, major financial centres globally and 15 Asian markets Strong Australian natural resources client base and an established and growing network in Asia Revenues exceed that of the other 3 major domestic banks combined Specialists mineral mining, oil & gas, mineral and oil and gas processing, commodity trading, primary services segments Agriculture Growing soft commodity demand from Asia Well positioned for Australian and NZ Corporate and Institutional agriculture clients Primary emphasis on providing Markets, Working Capital and supply-chain solutions to clients Revenue streams centred on trade and FX which are already core competencies An organic growth strategy with increasing wallet penetration of existing clients as well as capturing identified targets. Markets include cereals & sugar, protein cotton, Dairy and Oil Seeds 47

48 Priority segments Infrastructure Goal to become a leading commercial Infrastructure Bank in the Asia Pacific Region Maintain dominant position in Australia and NZ and invest selectively in Asia Infrastructure specialists, by adding Advisory, Equity placement, underwriting and DCM to lending and markets capabilities. Addressable revenue in APAC Infrastructure market set to grow to $5.5bn Debt Markets (A$m) Txn. Banking Debt Capital Mkts. Advice Equity Focus on power and utilities corresponding with Asia demand in this category ROE enhancing by reduced requirement of balance sheet Segments include Power & Utilities, Economic Infrastructure (roads, airports etc) and Availability Infrastructure The New Zealand Government has announced a significant National Infrastructure Plan and we are uniquely positioned to assist 48

49 Priority products Cash Management & Trade Cash Management Vision to be a lead provider of pan-regional cash management solutions via a single transactional interface Estimate the Asia Pacific wallet for cash management services at $20b A significant driver of cross-sell revenue Investment agenda centred around people and technology and designed to accommodate substantial growth in customer numbers and transaction volume Rolling out ANZ Transactive, a web-based cash management platform purpose-built for institutional, corporate and large business clients Trade Support trade flows between our core operating geographies Build on strong market position in Australia and established presence and reputation as a trade bank in Asia Estimated market share of Australian Institutional Trade Business International Peer Domestic Peer 49

50 Priority products Regional Rates and FX; Commodities and Debt Capital Markets Commodities Commodity revenue split: Hedging exposures of commodity producers and consumers ~ 60% of revenue Trading for customers ~ 40% Growth opportunities include capturing hedging g opportunities in domestic agri/ middle market and commodity consumers in Asia Debt Capital Markets Uniquely positioned with Super Regional strategy, with significant Asian Capital Market revenue pools Borrower / investor multiplier effect We raise more debt capital in Asia for Australian and New Zealand borrowers than anyone else ANZ Global Borrowers Capital Investors Markets Seeking access Team Research, Seeking diverse to low cost advice and quality capital and Loan credit exposure related hedging syndication Wholesale Corporates Bonds (funds Financial Institutions Public sector Securitisation Hedging insurers) Public sector Regional Rates and FX Largest domestic markets business FX revenues growing at 40% pa since 2007, Aus/NZ/Pacific Niche, opportunity to expand into Asian currencies & clients (to become Asian USD specialist) Rates revenues growing at 75% pa since key rates components, natural growth opportunity as Institutional expands: Hedging client interest rates Hedging client currency futures and swaps (as driven by rate differentials) Selling investors Gvt. and Semi Gvt. bonds Rates and credit trading Managing ANZ s balance sheet 50

51 Investor Discussion Pack AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2010 Treasury

52 ANZ s strong capital ratios are fully reflected when measured consistently across various jurisdictions Sep 09 Mar 10 Sep 10 FSA Sep 10 Core Tier 1 (1) 9.0% 8.5% 8.0% 11.3% Tier % 10.7% 10.1% 13.5% Total Capital 13.7% 13.0% 11.9% 15.2% Capital Update: ANZ s capital strength reflects ongoing economic and regulatory uncertainty and the Group s aim to maintain flexibility Net organic Tier-1 generation +22bps: Underlying earnings net of dividends +119bps; RWA growth -48bps (principally non traded market risk); Profit retention in Insurance and banking associates (-23bps) and software (-11bps) Impact of acquisitions reduced Tier-1 by 131bps, partly offset by net Tier-1 hybrid issuances (+63bps) 74 cent Final Dividend up 32% PCP (FY10 $1.26 up 24% PCP) 1.5% DRP discount retained to provide capital flexibility and continuity for shareholders 1. Core Tier 1 = Tier 1 excluding hybrid Tier 1 instruments Treasury 52 Capital Agenda: Continue to be well capitalised and consistent with AA long term credit rating category Manage Basel 3 implementation: ti Final Basel 3 regulations on capital deductions, minimums and buffers, and Tier-1 and Tier-2 regulations expected Dec-10 Engage APRA throughout FY11 on interpretation and implementation of these changes Full alignment to proposed Basel 3 guidelines would result in an increase in Core Tier-1 ratio from current levels However, APRA have indicated the Basel 3 rules are likely to be viewed as a minimum standard

53 Core Tier-1 level remains strong and well positioned Capital Position (Core Tier-1 Ratio) Portfolio growth & mix 19bp decrease Risk migration 3bp increase Portfolio data review 4bp increase Non credit RWA 27bp decrease ING 79bp decrease RBS 20bp decrease Landmark 7bp decrease Integration Costs 10bp decrease ING Debt Funding 9bp decrease 8.05 Net organic up 34bp Down 91bp Sep 09 NPAT Dividend / DRP 1 RWA Movement 2 3 Other Acquisitions Sep 10 Sep 10 FSA 1. Underlying NPAT. 2. Includes impact of movement in Expected Loss versus Collective Provision shortfall, 3. Includes ING Insurance Business, Asian Banking Associates, Capitalised Costs and Software, FX, Net Deferred Tax Assets, Pensions, MTM gains on own name included in profit Treasury 53

54 Tier-1 position reduced during FY10 due to recent acquisitions partially offset by Hybrid issuance 1.99 Capital Position (Tier-1 Ratio) Portfolio growth & mix 23bp decrease Risk migration 4bp increase Portfolio data review 5bp increase Non credit RWA 34bp decrease ING 79bp decrease RBS 24bp decrease Landmark 9bp decrease Integration Costs 10bp decrease ING Debt Funding 9bp decrease Net organic up 22bp Down 46bp Sep 09 NPAT Dividend / DRP 1 RWA Movement 2 3 Other Hybrids Acquisitions Sep 10 Sep 10 FSA 1. Underlying NPAT. 2. Includes impact of movement in Expected Loss versus Collective Provision shortfall. 3. Includes ING Insurance Business, Asian Banking Associates, Capitalised Costs and Software, FX, Net Deferred Tax Assets, Pensions, MTM gains on own name included in profit Treasury 54

55 Reconciliation of ANZ s capital position to FSA Basel 2 guidelines APRA regulations are more conservative than current FSA regulations, in that APRA requires: A 20% Loss Given Default floor for mortgages (FSA: 10% floor) Interest Rate Risk in the Banking Book (IRRBB) included in Pillar I risks (FSA: Pillar II) Capital deductions for investments in funds management subsidiaries (FSA: RWA assets) Insurance subsidiaries to be a mixture of Tier 1 and Tier 2 deductions (FSA: transitional regulations permit Total Capital deductions under certain circumstances) Expected dividend id d payments (net of dividend id d reinvestments) t to be deducted d d from Tier-1 (FSA: no deduction) d Collective Provision to be net of tax when calculating EL v CP deduction (FSA: tax effect difference between EL and CP on gross basis) Associates to be a mixture of Tier-1 and Tier-2 deductions (FSA: permits proportional consolidation under certain circumstances) Core Tier-1 Tier 1 Total Capital Sep-10 under APRA standards 8.0% 10.1% 11.9% RWA (Mortgages, IRRBB) 1.2% 1.4% 1.6% ING Funds Management and Life Co. businesses 0.8% 0.8% 0.3% Final dividend accrued net of DRP & BOP 0.5% 0.5% 0.5% Expected Losses v Collective Provision 0.2% 0.2% 0.3% Insurance subsidiaries (excluding ING businesses) 0.2% 0.2% 0.0% Investment in associates 0.2% 0.2% 0.4% Other 1 0.2% 0.1% 0.2% Total adjustments 3.3% 3.4% 3.3% Sep-10 FSA equivalent ratio 11.3% 13.5% 15.2% 1. Other includes Net Deferred Tax Assets, Capitalised Expenses, Deferred Income and roundings. Treasury 55

56 Basel 3 & APRA Regulatory reform - Capital Basel Committee Announcements To date, the Basel Committee has announced: New capital targets and buffers Timetable and transition rules for implementation of Basel 3 from Higher Core Tier-1 capital deductions: insurance businesses, banking associates, and shortfall of EL v CP, partly offset by 10/15% threshold allowance for insurance/banking associates and deferred tax assets Higher RWA charges for market & credit risks and securitisation assets Leverage ratio based on Tier-1 capital 8.0% What remains outstanding under B3? Methodology for determining countercyclical buffer Final requirements for Tier-1 & 2 instruments Contingent and bail-in capital requirements Capital overlays for systematically important banks ANZ position under B3 rules : ANZ s estimated Core Tier-1 position under full B3 rules is above the proposed 7.0% min. Position will remain uncertain until APRA finalises domestic rules and re-calibration. Recent indications are that local rules will at least meet the proposed new global standards Leverage ratio unlikely to be a binding constraint Core Tier-1 surplus over 7.00% ~9.2% 1 7.0% Capital Buffer: 2.5% 9.5% Counter cyclical buffer % Additional Basel 3 requirements ~ -140bps Full alignment to Basel ~ +260bps Minimum target: 4.5% Sep-10 Basel II Core Tier-1 Ratio Core Tier-1 Deductions (Insur,banking assoc,elvcp) Higher RWA Charges (market & credit risk, securitisation) 10%/15% threshold allowance Dividend accrual & net capitalised expenses 56 IRRBB & mortgage LGDs 1. Subject to change pending final form of regulations 2. Counter-cyclical buffer expected to be comprised of Core Tier-1, Tier-1 Hybrids and contingent capital. Treasury Sep-10 Pro Forma Basel III Core Tier-1 Ratio Basel III Core Tier-1 requirements Basel III counter cyclical buffer requirements2

57 Improved funding profile achieved, stable term debt issuance Stable term funding profile Senior Debt Government Guaranteed Subordinated Debt 30.0 Issuance Maturities Key Funding Metrics 82% of all funded assets financed by equity, deposits & LT debt (was 78% as at Sep 09 & 71% Sep 08) $26.4b of term funding (including $2.4b of pre funding and $2b CPS2 hybrid) issued in 2010 Weighted average term of new issuance was 4.7yrs Similar term funding task for FY11 of ~$25bn; 10% of which has been pre funded $13.5b of surplus APEA funding provided to Aus/NZ Offshore short-term te wholesale e debt makes up 2% of total funding for the Australian & NZ geographies Funding Composition Improved 17% 12% 22% Short Term Wholesale 6% 5% Funding 7% 15% 16% Term Debt < 1 year 14% Residual Maturity Term Debt > 1 year Residual Maturity 50% 55% 58% Customer Funding Shareholders equity & Hybrid Debt FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY Y15+ 7% 8% 8% Sep 08 Sep 09 Sep 10 Treasury 57

58 ANZ s term debt issuance consistent and well diversified APEA funding benefit reduces term debt issuance by ~10% Marginal term funding costs have stabilised but average costs continue to increase as portfolio reprices Offshore Private Placements Multi-currency APEA surplus deposits 20% 10% 25% Domestic AUD/NZD +bps margin Japan JPY 5% 20% UK & Europe EUR / GBP / CHF 20% North America USD/CAD Offshore public benchmarks account for less than half of ANZ s annual term debt issuance Future Repricing Margin over BBSW Treasury 58

59 Strong Liquidity Position leading into proposed p B3 changes Maintaining post GFC liquidity position ($b) Sep 08 Sep 09 Sep 10 Prime Liquidity portfolio Other Eligible Securities Additional Cash & Liquid Assets Composition of liquid asset portfolio ($66.7b) Class 1 Class 2 Class 3 $28.9b $7.3b $30.5b Government/ Semi Govt. / Govt. Guaranteed bank paper, NZ cash with RBNZ, supranational paper Bank or Corporate paper rated AA or better Internal RMBS Basel III Liquidity Developments Reduction in required core funding of mortgages from 100% to 65% Improved treatment of Retail and SME deposits Allowance for operational deposits from Financial Institutions Allowance for high grade corporate and covered bonds as liquid assets Extended transition period Impacts Liquidity Coverage Ratio will require additional liquid assets to be held resulting in higher core funding requirements This is primarily driven by non-operational deposits from Corporates and Financial Institutions, and short term wholesale debt Australian bank s no longer discouraged from holding mortgages on-balance sheet Widening of liquid asset criteria has limited impact given low supply of AUD high grade corporate and covered bonds An industry solution to the lack of eligible liquid assets still needs to be identified Net Stable Funding Ratio is unlikely to be the binding constraint Priority of use Treasury 59

60 AUD strength presents a headwind for future earnings ~1.25% negative impact, including current hedging positions, on FY11 EPS growth expected if the AUD maintains current levels NZD remains the most significant single currency revenue exposure USD and Asian local currency earnings expected to grow as a proportion of total Group revenue as Super Regional Strategy gains momentum Hedging approach remains to put in place macro and specific currency hedges only when the $A is perceived to be significantly below fair value FY10 profit before tax by currency 13% 73% 14% AUD NZD USD and other currencies FY10 earnings: effective average translation rate NZD earnings USD & Asian currency earnings FY10 EPS impact (0.3%) (2.7%) Hedging in place for FY11 EPS sensitivity to 5c move inc hedging ~0.15% ~0.5% In addition there is typically A$500m 750m of secondary FX risk due to non AUD & NZD revenues generated primarily by Markets business in Australia and New Zealand. Treasury 60

61 Investor Discussion Pack AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November Results

62 Overview of financial performance Consolidated Group pperformance Underlying performance H10 A$m Growth Growth Revenue 15, % + 9% Expense 6, % +15% Profit before provisions 8,811 +6% +4% Provisions 1,820-40% -34% Net Profit After Tax 5, % +19% Underlying EPS (cents) % +18% Statutory Profit 4, % +34% Dividend per share (cents) % Loans and Deposits Customer Deposits 257, % +8% Net Loans and Advances 1 360,816 +4% +4% 1. Including acceptances 62

63 Solid pre provision earnings, lower provisions and acquisition benefits delivering 33% NPAT growth Underlying EPS Up 18% AUD m 2, , up 6% 2010 Full Year 1, down 40% -4% and +4% offsetting impact on 33% Profit growth Up 33% Up 53% , Includes 480m of acquisition iti impacts 4, Non Core Statutory items Profit 2009 Underlying Profit PBP growth Provisions Tax FX Acquisitions 2010 impact Underlying Profit 2010 Second Half Non Core items 2010 Statutory Profit 1H10 1H10 2H10 2H10 Statutory Underlying Underlying Statutory Profit Profit Profit Profit 1, ,298 up 2% down 32% ~0% up ~3% 2,727 (151) 2,576 Underlying EPS Up 18% Up 19% Up 34% 63

64 Pro Forma data adjusts for acquisitions and FX, showing good revenue growth and continuing momentum Revenue Expense Profit before Net profit growth growth provisions after tax 2010 Full Year 10% 7% 15% 8% 6% 7% 33% 35% Underlying Pro Forma Underlying Pro Forma Underlying Pro Forma Underlying Pro Forma 2010 Second Half (vs 1H10) 9% 3% 15% 5% 4% 2% 19% 16% Underlying Pro Forma Underlying Pro Forma Underlying Pro Forma Underlying Pro Forma For explanation of Pro Forma refer slide 23 (Pro Forma profit introduced to normalise for the impact of acquisitions ) 64

65 Growth largely in Net Interest, Partnerships & Wealth income partly offset by lower markets income and fees Pro Forma revenue growth Markets income Lower relative to exceptional 2009, positive longer term trend Net interest1 11% A$m CAGR 29% 6% Fee income 1 (2%) % Markets 2 (12%) (10%) First half Second Half Product split Sales/Trading split Other income 1 22% 1. Excluding markets 2. FX adjusted 4% Fixed income FX Sales FY10 2H10 Capital Mkts Other Trading 65

66 NIM improved year on year with repricing for business risk, slowing in 2H10 and continued funding pressure 2010 Full Year NIM Basis points (12.3) (10.8) (16.1) 1) Group ex Markets bps Group bps 2009 Funding Funding Deposits Assets Oh Other Markets 2010 & Asset costs Mix (1.7) 2010 Second Half NIM ( 2.6) (5.9) (3.7) Group ex Markets +8.4 bps Group +4.7 bps 1H10 Funding Funding Deposits Assets Other Markets 2H10 & Asset costs Mix 66

67 Expense trend reflective of substantial investment and a focus on delivering sustainable revenue outcomes Revenue / Expense Jaws Expense growth Avg Revenue growth 11% Avg Expense growth 9% 15% 15% Acquisitions & FX 13% Ex Markets 1 12% 17% 12% 11% Ex Markets 7% 10% Group New Zealand Australia 9% 8% 9% 7% 8% 8% 3% 1% 4% 1% 2% Institutional (ex APEA) APEA 1% (incl Instit.) 1% 5% Pro Forma Pro Forma Revenue Expenses FY10 2H10 1 FX adjusted for comparability with 2010 ex Global Markets growth 67

68 Improved provision & new impaired asset trends predominantly in the Institutional business Total Provision Charge (IP charge by Division and total CP charge) 1,800 A$m 4,000 New & Increased Impaired Assets by Division A$m 1,600 1,400 1,200 1, , ,500 3,000 2,500 2,000 1,500 1,000 3,126 2, H08 2H08 1H09 2H09 1H10 2H10 0 2H08 1H09 2H09 1H10 2H10 Institutional Australia Division NZ Businesses APEA ex-institutional CP charge 68

69 Divisional performance 2010 Divisional Profit Before Provisions (Pro Forma basis) AUD m H10 growth Australia 4, ,460 11% 2% Institutional 3,291 (118) 3,173 (4%) 1 (1%) NZD m NZ Businesses 1, ,343 2% 8% USD m APEA % (3%) 2010 Divisional Net Profit After Tax (Pro Forma basis) AUD m H10 growth Australia 2, ,737 26% 9% Institutional 1, ,758 29% 13% NZD m NZ Businesses % 74% USD m APEA % 21% growth 2010 reduction 1. Growth of 12% ex Markets fx adjusted 69

70 Summary Group margin ex Markets % 2.38% 2.56% 2.71% 2.79% 2H08 1H09 2H09 1H10 2H10 NIM movement HOH (RHS) Net Loans and Advances 2 growth A$b avg 2009 EOP 2010 avg 2010 EOP NLAs NLAs NLAs NLAs A$m 613 Markets revenue 1,066 1, % 0.2% 0.1% 0.0% Cost growth % (HoH) 4% Investing in the franchise 7% A$m 1,364 1,435 6% 1,621 4% 5% 2H08 1H09 2H09 1H10 2H10 Total provision charge and CP coverage 1, H08 1H09 2H09 1H10 2H10 Provision charge AUD/USD 0.73 Currency impacts CP coverage (CP/CRWA) 20% 2.0% 1.5% 1.0% 0.5% 0.0% AUD/NZD H08 1H09 2H09 1H10 2H10 Avg Avg Spot Avg Avg Spot /09/ /09/10 1. Prior periods restated to includes the impact of NZ line fees reclassified from Other Operating income to Net Interest income for comparability to current period NIM 2. Including acceptances 70

71 Investor Discussion Pack AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2010 Risk Management

72 Individual Provision Charge Individual Provision (IP) Charge by Segment A$m 1,600 1,531 1,283 1,200 1, H08 1H09 2H09 1H10 2H10 Institutional Consumer Commercial IP Charge Movement Composition A$m 1,600 1, H08 1H09 2H09 1H10 2H10 New Increased Writebacks & Recoveries A$m 1,600 1, IP Charge by Region 2H08 1H09 2H09 1H10 2H10 Australia New Zealand APEA Risk 72

73 Collective Provision Charge Collective Provision Charge by Division FY10 (A$m) Total Charge Lending Risk Impacts & migration Cycle & Concentration Mix Group Total (4) 62 (68) 29 (26) Australia Division 10 New Zealand Businesses 48 Institutional (64) APEA (ex-institutional) & Other 2 58 (24) 29 (11) (72) 4 (37) (1) (7) (49) Risk 73

74 Credit Risk Weighted Assets Total Credit Risk Weighted Assets Credit RWA Movement FY10 vs FY09 A$b A$b (1.3) (6.2) (1.5) Acquisitions Impact: RBS Landmark $4.6b $2.3b Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Sep 09 Acq. Growth Data Review FX Impact Risk Sep 10 Risk 74

75 Impaired Asset balance has reduced ex-acquisitions A$m 8,000 7,000 Gross Impaired Assets By type Gross Impaired Assets By size of exposure Impaired Loans ex-acquisitions A$m NPCCD 8,000 > $100m $10-$99m < $10m Restructured Acquisitions 6,000 4,000 2,000 6,000 5,000 4,000 3,000 2,000 0 A$m 8,000 6,000 4,000 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 New Impaired Assets By Segment Institutional Commercial Retail 1,000 2,000 0 Sep 08 Mar 09 Sep 09 Mar 10 Sep H08 1H09 2H09 1H10 2H10 NPCCD Non Performing Credit Commitments and Contingencies Risk 75

76 Watch & Control Lists and Risk Grade Profiles Index Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Watch & Control List by limits (Mar 2009 Watch List index =100) Watch List Limits Control List Limits Top 5 Watch List Industries By Exposure By No. Groups Agriculture, Forestry & Fishing Agriculture, Forestry & Fishing Mining Property Services Finance & Insurance Manufacturing Property Services Wholesale Trade Manufacturing Construction Watch List - An alert report of customers with characteristics identified which could result in requirement for closer credit attention Group Risk Grade profile by Exposure at Default 5.7% 6.3% 6.4% 6.4% 8.9% 8.8% 9.4% 8.9% 13.0% 12.6% 13.0% 12.5% 13.8% 13.4% 12.6% 14.1% 58.6% 58.9% 58.6% 58.1% Mar 09 Sep 09 Mar 10 Sep 10 AAA to BBB BBB- BB+ to BB BB- >BB- Control List - A report of high risk accounts which may or may not have defaulted Risk 76

77 Commercial Industry Exposures A$b Finance & Insurance A$b Property Services % 75 15% 50 10% 50 10% 25 5% 25 5% 0 0% 0 0% Sep-09 Mar-10 Sep-10 Sep-09 Mar-10 Sep-10 Agriculture, Forestry & Fishing Manufacturing 75 15% 75 15% 50 10% 50 10% 25 5% 25 5% 0 0% Sep-09 Mar-10 Sep-10 Government 75 15% 0 0% Sep-09 Mar-10 Sep-10 Wholesale Trade 75 15% 50 10% 50 10% 25 5% 25 5% 0 0% Sep-09 Mar-10 Sep % Sep-09 Mar-10 Sep-10 Exposure at Default ($b) (LHS) % of Group portfolio (RHS) % in Non-Performing (RHS) 1. Property Services includes Commercial Property Operators, Residential Property Operators, Retirement Village Operators/Developers, Real Estate Agents, Non-financial asset investors and Machinery and Equipment Hiring and leasing. Risk 77

78 Commercial Industry Exposures A$b Retail Trade A$b Transport & Storage 75 15% 75 15% 50 10% 50 10% 25 5% 25 5% 0 0% 0 0% Sep-09 Mar-10 Sep-10 Sep-09 Mar-10 Sep-10 Electricity, Gas & Water Supply Mining 75 15% 75 15% 50 10% 50 10% 25 5% 25 5% 0 Sep-09 Mar-10 Sep-10 0% 0 Sep-09 Mar-10 Sep-10 0% Construction ti Other 75 15% 75 15% 50 10% 50 10% 25 5% 25 5% 0 Sep-09 Mar-10 Sep-10 0% 0 Sep-09 Mar-10 Sep-10 0% Exposure at Default ($b) (LHS) % of Group portfolio (RHS) % in Non-Performing (RHS) Risk 78

79 90+ days past due Australia 1.50% 1.20% 0.90% 0.60% Australia Mortgages Australia Cards 90+ day delinquencies 90+ day delinquencies 1.50% Total Portfolio QLD WA NSW & ACT VIC 1.00% 0.50% 0.00% 1.50% Sep-07 Sep-08 Sep-09 Sep-10 Australia Commercial 90+ day delinquencies 1.00% 0.30% 0.50% 0.00% Sep-07 Sep-08 Sep-09 Sep % Business Banking Commercial & Agri. Sep-07 Sep-08 Sep-09 Sep-10 Esanda Small Business Risk 79

80 Australia Mortgages g Portfolio Statistics All lending is on a full recourse basis 40% Approvals require demonstrated serviceability 30% ~830,000 loans on book 65% of portfolio owner occupied lending 0% Average loan size at origination ~$226k Average LVR at origination - 63% Average dynamic LVR 46% Dynamic Loan to Valuation Ratio % Portfolio Sep 2009 Sep % Sep % 12% 4% 20% 10% 103 No subprime mortgages LoDoc 80 loans (80% LVR) make up less than circa 1.3% of portfolio and closed to new flows 104 Index % 61-75% 76-80% 81%-90% 91%+ Dynamic LVR Band Application Quality Average Score New Applications Mar 08 = Risk 80

81 New Zealand Risk Performance Total Impaired Assets and as % Gross Lending Assets 1.89% 2.13% 1.24% 0.64% 0.34% Total Provision Charge Individual Provision Collective Provision 1,000 (NZ$m) (NZ$m) 639 1,220 1,837 2, % 0.80% 90+ Days Arrears Mortgages Commercial Rural % 2H08 1H09 2H09 1H10 2H10 Impaired Assets (NZDm) % Gross Lending Assets 0.00%

82 Credit Intermediation Trades Position as at 30 Sep 2010 Counterparty Rating No. Notional purchased protection principal amount (US$m) Mark to Market (US$m) Credit Risk on Derivatives (US$m) Life to Date Credit Risk on Derivatives (A$m) Notional Principal Amount on corresponding Sold Protection (US$m) AAA/Aa3 2 3, ,554 BB-/Ba1 1 3, ,100 Withdrawn Rating / No rating 3 3, ,759 Defaulted Monoline Other costs Position 30 September , ,414 Position 31 March , , The last bought protection trade from the defaulted monoline matured in September Other costs are cumulative life to date costs which include realised losses relating to restructuring trades to reduce risks which were unhedged due to default by the purchased protection counterparty and realised losses on termination of sold protection trades. It also includes foreign exchange hedging losses. Risk 82

83 Credit Intermediation Trade Portfolio A$b Credit Intermediation Trades US$b Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mark to Market AUD (LHS) Credit Valuation Adjustment AUD (LHS) Notional Sold Exposure USD (RHS) Cumulative Credit Risk on Derivative expense for the Credit Intermediation Trade portfolio as at 30/9/2010 was $515m (down $5m from 31/3/2010) The relative stability in credit markets and the reduced level of credit exposure outstanding has resulted in lower volatility in both MTM and CVA over the past 6 months MtM and CVA remain subject to volatility in both credit spreads and exchange rates During FY10, ANZ exited a number of sold protection exposures reducing the total notional value of the sold protection o outstanding to USD 8,414m (30/9/09 USD 10,950m) ANZ will look for opportunities which may arise to reduce our remaining sold protection exposure ANZ has strong levels of protection under the sold protection trades with an average attachment point of ~ 15.0% for the 12 CDO s ~ 33.2% for the 6 CLO s ANZ has USD 9,879m in bought protection outstanding including USD 1.5bn of bought protection for which ANZ has no remaining underlying sold protection exposure The last bought protection trade with the defaulted monoline insurer matured in September 2010 leaving 6 counterparties with which ANZ has bought protection positions in place Risk 83

84 Commercial Property Credit Exposure Commercial Property Exposure GLA by Region (AUDb) Commercial Property Exposure by Sector 7.5% of Group GLA s Australia Offices Retail Residential Industrial Tourism Other New Zealand Offices Retail Residential Industrial Tourism 1H08 2H08 1H09 2H09 1H10 2H10 Other Australia New Zealand APEA 84

85 Investor Discussion Pack AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED November 2010 Economics

86 Record population growth coupled with undersupply 450, ,000 Population growth vs. dwelling completions Annual population gain (lhs) , , , , , ,000 Annual dwelling completions (rhs) Sources: ABS, ANZ Economics and Markets Research 86

87 Housing shortage has reached unprecedented levels Housing market balance Underlying demand Completions Cumulative Shortage Surplus Sources: ABS, ANZ Economics and Markets Research 87

88 Recovery in dwelling prices has been broadly-basedbased Pi i d l Australian dwelling prices 125 Price index value Top 20% Middle 60% 110 Bottom 20% Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Source: RP Data Rismark 88

89 Changing g composition in those seeking finance approvals Housing finance approvals (value) $b/mth First Home Buyers Investors (excl refinancing) Upgraders (excl refinancing) Sources: ABS, RBA, ANZ Economics and Markets Research 89

90 Distribution of debt rather than the aggregate debt is a key factor Increased household debt has been directed towards residential property, not personal consumption And has been taken up by higher income households with the capacity to service Source: RBA paper Aspects of Australia s finances 15 June

91 Complexion of household debt Household debt up but also total assets held by households Debt largely used to acquire assets Financial assets (i.e. ex housing) now equivalent to 2.75 years of income up from 1.75 years of income in the early 1990 s Increased debt mostly taken on by households in the strongest position to service it (high income quintile) Households in the top two quintiles account for 75% of all outstanding debt Bottom two income quintiles account for 10% of household debt Source: RBA paper Aspects of Australia s finances 15 June