2003 Interim Results Australia and New Zealand Banking Group Limited 24 April 2003

Transcription

1 2003 Interim Results Australia and New Zealand Banking Group Limited 24 April 2003

2 Agenda John McFarlane Introduction Peter Marriott Result review Portfolio performance Credit quality Other issues John McFarlane Strategy Outlook Interim Results

3 John McFarlane Chief Executive Officer 24 April 2003

4 2003 Interim Results v Mar 02 NPAT EPS Cash EPS Interim Dividend Net Specific Provisions $1,141m 72 cents 74 cents 44 cents $259m 8.7% 8.6% 10.4% 12.8% 29% Before Significant Items NPAT EPS Cash EPS $1,141m 72 cents 74 cents 7.0% 6.8% 8.7% Interim Results

5 A reasonable result Good underlying business performance Cards issue cost $27m after tax Risks down Specific provisions down 29% New non-accruals down 50% Net non-accruals down 28% Significant historical tax issue settled 1st half normally cyclically lower than 2nd On track for 8% full year NPAT result * * Excluding significant transactions Interim Results

6 Peter Marriott Chief Financial Officer 24 April 2003

7 Outline Result review 1H03 Overview Revenue Expenses Doubtful debt provisions Portfolio performance Credit Quality Other issues Interim Results

8 $m Result driven by asset & deposit growth, non-interest income impacted by one offs 1,300 1,250 1,200 1,150 Interest Income 87 Non Interest Income (35) Expenses (27) Provisioning Tax & OEI , * 1,050 1, NPAT 3.5% headline basis 3.7% cash basis Sep-02 Mar-03 * Sep-02 excludes significant items Interim Results

9 $b Higher interest income, driven by strong asset growth Average Lending & Deposit Volumes % Interest Margins Mortgages Business* Deposits* Sep-01 Sep-02 Mar-02 Mar-03 *Business Lending includes Corporate & Small Business, and Institutional Segments. Deposits includes Esanda retail debentures - Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Corp & Small Bus IB Mortgages Asset Fin Personal Group Interim Results

10 1,400 1,375 1,350 1,325 1,300 Underlying non-interest income reasonable, but dominated by one-offs H02 cards underaccrual JV impact (10) under- Cards accrual (14) (38) Higher loyalty costs # (16) Card repricing 8 E*Trade writedown (6) Panin bond sales 16 FX M ment 9 Personal fee changes (9) Underlying growth ,275 Includes loss of $17m in SFI fees 1,250 Sep-02* * Sep-02 excludes significant items # higher loyalty costs reflects change in pricing, and does not include higher volume impact Mar Interim Results

11 $m 1,620 1,600 1,580 1,560 1,540 1,520 1,500 Expenses well controlled, cost income ratio flat 1575 Sep-02 JV impact (6) FX impact 11 Underlying growth Mar-03 Growth spend held back due to lower income growth Underlying half on half cost growth of 1.4% Includes $10m increase in software amortisation Restructuring costs of $32m taken, in line with previous half Continued focus on reengineering business as usual costs Interim Results

12 Provisioning charge reflects conservative management ELP Charge $m bp s ELP rate down 3bp s Mar Sep- 99 ELP adjustment ELP $ ELP BP's 40 Mar Sep- 00 Mar Sep Mar Sep Mar reflecting strong mortgage growth & improved risk profile ELP Portfolio adjustment continued accruing higher level of ELP, reflecting ongoing global economic uncertainty Interim Results

13 Outline Result review Portfolio performance Credit Quality Other issues Interim Results

14 A diversified portfolio performing well Institutional Banking Personal Banking Mortgages Transaction Services SME Consumer Finance New Zealand Treasury Asset Finance Corporate Banking Wealth Management Asia Pacific Foreign Exchange Structured Finance Corp Fin & Advisory Capital Markets INGA JV* Mar 03 Sep Change 11% 3% 6% 9% 8% -34% 7% -20% 11% 4% -2% 31% 0% -18% 3% 9% large 1 st half NPAT $m NPAT increase NPAT decrease Prior period NPAT * Excludes funding costs Interim Results

15 $m Consumer Finance challenges, but good underlying performance Improved underlying performance (NPBT)* 1H00 2H00 1H01 2H01 1H02 2H02 1H03 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% Growth in Acquiring share Issuing (spend) Outstandings Acquiring (spend) 1H00 2H00 1H01 2H01 1H02 2H02 1H03 Diversifying revenue* 6% 4% Aust Issuing 9% Aust Acq 11% 51% Personal Loans NZ Issuing 19% NZ Acquiring Other Issues Loyalty schemes increasingly costly to operate Reduction in interchange and loyalty costs likely to impact 2004 NPAT by not more than $40m * Adjusted for under-accrual of loyalty points Interim Results

16 Mortgages well placed to benefit from shift to mortgage brokers % Growing presence Broker penetration of mortgage market Australia UK US 80% of broker originated customers new to ANZ 92% purchase additional ANZ products (89% for network originated customers) And we are well placed to participate Low cost income ratio efficient processing platform + Leading broker distribution model, with high quality MIS + Award winning products + Brokers strongest in states where ANZ has weaker branch presence Interim Results

17 $m Institutional & Investment Banking a leading franchise Interim Results Consistently strong NPAT growth Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Institutional Capital Markets Structured Finance Trans Services FX Corp Fin & Adv 382 % More focused single customer limits Domestic & core MNC Maximum 60% of equivalent domestic limits Offshore Corporate Maximum secured lending (80% of 60%) Maximum unsecured lending (25% of 60%)

18 Corporate and SME well positioned for upswing in business lending A very strong Corporate franchise ANZ Market Share* CBA NAB WBC ANZ Customer Satisfaction* CBA NAB WBC Market advantage with Wall St to Main Street capability Strong cross selling Focus around total customer value to Group * Roberts Research 2002 (customers with turnover between $10m-$100m) Investment in SME has yielded strong balance sheet growth without loss of credit standards $b FUM (loans & deposits) 2H01 3% 1H02 6% 2H02 6% 1H03 Enhanced customer service proposition Risk grade profile has improved over past 6 months 80% of portfolio fully secured Disciplined business execution and a stronger performance culture Investment in an expanded business footprint customer facing staff up 10% Interim Results

19 $m Personal banking impacted by margin squeeze on deposits and fee changes 185 Sep-02 Deposit Volumes 18 Deposit Margins Interim Results (10) New A/c fee structure & honour fee impact (9) * Includes tax impact Sales Commissions 4 Software Amortisation (6) Other * Mar-03 Overall 16 bp decline in margins due to Lower interest rates over the half Increased flows to higher rate deposit products such as TDs Fees lower due to new transaction account fee structure and lower honour fees RCF rolled out in NSW & Vic, remainder of States over calendar 2003

20 but strong account and deposit growth 000 s Access Accounts 000 s Deposits ($b) H '02 2H '02 1H '03 0 1H00 2H00 1H01 2H01 1H02 2H02 1H03 Opened (LHS) Closed (LHS) Net (RHS) New accounts up 14% Closed accounts down 15% Net new accounts up 229% New deposit strategy launched in Aug Interim Results

21 JV performance good insurance and expense performance, offset by FM $m ING Australia NPAT* Life Insurance business performing well due to improved service, efficiency, and claims management (29) 31 Subdued equity market conditions continue to impact Funds Management business Improved capital investment returns, combined with hedge delivering cash rate of return 0 5 months to Sep 02 Semiannualised Life Insurance Funds Management Capital Investment Costs Tax 1H03 Synergies being extracted in line with expectations * Movements on a semi-annualised basis Interim Results

22 $m Valuation supports carrying value of investment in INGA JV Carrying Value 1 May Unrecognised profit on sale of ANZ FM 248 Opening proforma value 1,839 Synergies and cost savings in INGA 360 (approx) Expected value % 26% EY ABC Valuation Carrying value 31 March Reduction in expectations Interim Results

23 Outline Result review Portfolio performance Credit Quality Consumer > Arrears > Mortgages Corporate > Domestic > US Energy portfolio > Global Telco portfolio > Top 10 exposures Specific provisions Non-accrual loans Provisioning coverage Other issues Interim Results

24 Arrears profile close to historical lows 4.0% 3.5% 3.0% % Arrears > 60 days Small to Medium Enterprises Mortgages Cards Consumer sector in good shape, with continuing low levels of unemployment and low interest rates 2.5% Total Personal & SME Businesses* Mortgage arrears remain very low 2.0% 1.5% 1.0% Ongoing focus on collections management Upwards movement in cards arrears expected, will be carefully managed 0.5% Scorecards remain tight 0.0% Mar-01 Sep-01 Nov-01 Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 * excl Asset Finance, Pacific, Asia Interim Results

25 Mortgages portfolio healthy * 0.45% 0.40% 0.35% 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% Mar-02 High quality arrears profile Australia & NZ 60 Days Past Due RILS Australia & NZ O/O Australia & NZ TPMI Australia May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 35% 30% 25% 20% 15% 10% 5% 0% Increasing flexibility to service mortgage Uncommitted Monthly Income at Application < $250 < $ < $750 < $1000 < $1500 > $ % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Strong LVR profile $b LVR at origination Dynamic LVR 0-60% 61-75% 76-80% 81% Equity Loans remain modest Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Equity RIL O/O Interim Results * Charts are for Australia only excluding Origin

26 Domestic corporates well placed % 160 Domestic corporates remain lowly geared Reflected in healthy risk grade profile * 41.0bn 41.4bn 43.2bn 140 Gearing ratio AAA to BBB 34.5% 37.2% 35.0% (Debt to Equity) # 120 Series break BBB % 26.9% 27.8% 80 BB+ to BB 21.5% 21.7% 24.0% BB- 60 <BB- 10.0% 4.4% 9.9% 10.4% 3.4% 3.7% 40 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 # source: ABS Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar '02 Sep '02 Mar '03 B+ to CCC 3.2% 2.5% 2.9% CCC and Lower 1.2% 0.9% 0.8% * Institutional & Corporate Australia & NZ Interim Results

27 US energy portfolio some issues, remains containable AAA to BBB BB+ to BB BBB- BB- Total Limits $2.1bn 32% $0.7b 16% $0.4b 36% $0.7b Total Limits Excl O&G $2.0bn 35% $0.7b 18% $0.4b 29% $0.6b Total Limits Excl O&G $2.0bn 33% $0.7b 18% $0.4b 21% $0.4b 16% $0.3b Committed Limits $1.9bn 33% $0.6b 18% $0.4b 21% $0.4b 16% $0.3b Total Outstandings $1.2bn 23% $0.3b 13% $0.1b 26% $0.3b 23% $0.3b $913m in projects $332m in Corporate lending >BB- 16% $0.3b 18% $0.3b 12% $0.2b 12% $0.2b 15% $0.2b (AUD) Sep-02 Sep-02 Mar-03 Mar-03 Mar-03 No of cust Total 30 B+ to CCC 12.3% 13.0% 3.8% 3.9% 4.0% 2 Non Accrual 4.0% 4.2% 8.0% 8.2% 11.2% 3 >BB- = B+ B, B-, CCC & non-accrual Interim Results Excludes uncommitted facilities Includes utilised guarantees and market related products

28 Deterioration in global electricity sector has stabilised EDF% KMV Median Expected Default Frequency BB+ BBB- BBB BBB+ North America Europe Deterioration in US and European utility sectors largely occurred prior to our 2002 Annual Results announcement In 2002, S&P ratings actions in US power industry resulted in 182 downgrades, against 15 upgrades A First half 2003 has seen some evidence of stabilisation AA 0.01 AAA Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar Interim Results

29 Global Telco portfolio no material issues expected Total Limits $5.5bn Total Limits $4.7bn Committed Limits $3.9bn 63% $3.4b AAA to BBB+ 67% $3.1b 63% $2.5b Outstandings $2.3bn (AUD) 21% $1.2b 9% $0.5b 7% $0.4b Sep-02 BBB to BBB- BB+ to BB BB- >BB- 15% $0.7b 17% $0.6b 16% $0.4b 5% $0.2b 5% $0.2b 6% $0.1b 3% $0.2b 3% $0.1b 5% $0.1b 10% $0.5b Mar-03 12% $0.5b Mar-03 55% $1.3b 18% $0.4b Mar-03 No of cust total 41 B+ to CCC 1.9% 6.8% 7.8% 11.1% 5 Non Accrual 4.8% 3.5% 4.3% >BB- = B+ B, B-, CCC & non-accrual Interim Results

30 Top 10 exposures further reduced S & P Rating Top 10 committed exposures 140% Top 10 exposures as % of ACE A+ 130% BBB+ 120% AA+ 110% A 100% BBB+ 90% AAA A+ BBB Position of top 10 exposures as at Sep 02 80% 70% 60% A 50% AA- AUDm % Sep 01 Sep 02 Mar 03 Funded Unfunded Limits represent total 7 month limits excluding uncommitted and non-recourse, net of credit derivatives excludes non-recourse and uncommitted facilities Interim Results

31 Specific provisions down 29% no large single provisions Provisions $m Significant impact from single customers % 90% 80% 70% 60% 1 st half Specific Provisions by size < $5m Grindlays credit indemnity 2 customers $20m - $50m % Mar- 98 Sep- 98 Mar- 99 Sep- Mar Sep- 00 Mar- 01 Sep- 01 Mar- 02 Net specific provisions - $m (LHS) % International SPs (RHS) ELP charge - $m (LHS) Sep- Mar % 30% 20% 10% 0% 3 4 customers customers $5m - $10m No major individual specific provisions during the half $10m - $20m Interim Results

32 $m Non-accrual loans continue to fall, reflecting overall health of portfolio Gross Non-Accrual Loans (LHS) Net Non-Accrual Loans (LHS) Interim Results Historic Non-Accrual Loans/ Loans & advances (RHS) Mar % 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00% $m Mar Aust Geographic Gross Non-Accrual Loans NZ Inter

33 New non-accruals down 50% on March 2002 $m 900 Geographic New Non-Accrual Loans $m 300 New non-accrual loans by source Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Aust/NZ UK/US Asia Other Inter 0 1H02 2H02 1H03 Energy Domestic Corporate Asset Finance Consumer Finance Other Offshore Other Interim Results

34 Existing and future problem loans well provided for 60% SP/NALs % 1.20 GP/RWA 50% 48% % 39% % 31% 31% % % % ANZ Mar 03 CBA Dec 02 NAB Sep 02 WBC Sep ANZ Mar 03 CBA Dec 02 NAB Sep 02 WBC Sep Interim Results

35 Outline Result review Portfolio performance Credit Quality Other issues Dividend policy Capital levels Outlook Interim Results

36 Dividend payout ratio likely to trend upwards A progressive lift in the payout ratio likely over next three years towards high 60 s $0.50 $0.45 $0.40 $0.35 $0.30 $ Interim Dividend has doubled in six years % 68% 66% 64% 62% 60% Expect to maintain 100% franking $0.20 $0.15 $0.10 $ % 56% 54% 52% $ % Interim Div (LHS) Payout Ratio (RHS) Interim Results

37 ANZ s capital position remains strong % 6.75 Drivers of ACE ratio Earnings Dividend Peer Comparison ACE/RWA (0.47) Other (0.04) RWA growth (0.29) Target range Sep-02 Mar-03 Buybacks likely if ACE ratio above target range ANZ (Mar- 03) CBA (Dec- 02) NAB (Sep- 02) WBC (Sep- 02) Interim Results

38 Outlook for second half Australian & NZ economies to perform relatively well, despite weakness in offshore markets Mortgage growth to be more subdued, moving towards 8-12% pa growth rate, offset by moderate rebound in business lending Specific provisions below ELP Cost growth rate to increase, but remain lower than revenue growth rate with resultant improvement in costincome ratio Second half outlook favourable, delivering approximately 8% full year NPAT growth Interim Results

39 Summary A respectable result, with good underlying momentum Strong interest income driven by asset growth Non-interest income impacted by one-offs Expenses well controlled Majority of portfolio performing well Credit quality strong in Australia, offshore issues containable Remain well provisioned, with strong capital position Payout ratio likely to increase over next three years, with DPS growth greater than EPS growth On target for approximately 8% full year NPAT growth Interim Results

40 John McFarlane Chief Executive Officer 24 April 2003

41 Distinctive strategy and track record 4 clear themes going forward Core themes TSR (base $100) $1,200 ANZ relative TSR Leverage real capabilities to build sustainable strategic position $1,000 Grow value by creating a rich portfolio of specialised businesses Become one of the most efficient and best-managed banks in the world $800 $600 $400 ANZ Peers* Bold and different, leveraging a unique performance culture and business approach $200 $ YTD * CBA, NAB, WBC Interim Results

42 Leverage real capabilities to build sustainable strategic position Leverage specialisation as distinctive strategy Leverage leading product capability to increase share Leverage superior cost position To give customers the best deal To give shareholders sustainable and growing returns Leverage ANZ s emerging and distinctive human face Unique positioning against peers Gain traction in earning the trust of the community Interim Results

43 A rich portfolio of specialised businesses - material improvement in last 2 years High Source of profit More sustainable portfolio foundation Market Attractiveness Low Asia Small Bus Personal Banking ING JV/ Wealth Mortgages Cards Pacific Institutional & Investment Banking Corporate Asset Finance Each business has clear differentiated approach Systematically building capabilities to establish future growth options Weak Interim Results Current ANZ Position Strong

44 Grow value by creating a rich and diversified portfolio of specialised businesses High Market Attractiveness Asia Small Business ING JV/Wealth Personal Banking Mortgages Institutional Consumer Finance Pacific Corporate Asset Finance Optimise portfolio for sustainability, growth and return Raise revenue productivity in Personal Banking Lift performance and productivity in Wealth Management Develop sustainable post-interchange cards strategy Regain position in Small Business Develop Institutional while reducing risk concentrations Leverage specialised distribution in Mortgages Advance customer franchise in NZ through local approach Turn Asset Finance into a sustainable growth proposition Create a portfolio of growth options Low Weak ANZ Target Position Strong Invest in high growth domestic franchises Leverage capabilities with partners in Asia-Pacific Interim Results

45 Applying the lessons from Grindlays - a distinctive Asian strategy is emerging Asia is important Geographic proximity Growing political and economic linkages Represents 49% of Australia s merchandise trade 34% of Australia s services trade Substantialcapital flows ANZ already has a network in Asia Develop Options Acquire a portfolio of low cost, low risk options Work with local partners who have customers & distribution network Combine Local & ANZ strengths to create additional value Develop Portfolio ANZ Learning and Local Knowledge Develop linkages across portfolio Leverage product strengths Portfolio approach no more than 5-10% of ACE Grow Portfolio 2006 onwards Potentially participate in local consolidation Continue to add value Interim Results

46 Aim to make ANZ one of the best managed and most efficient banks in the world Make execution a distinctive capability Accelerate revenue and productivity momentum in businesses Rebalance higher risk segments Simplify operations and technology infrastructure $m World class efficiency CTI (%) year beta 1.6 Lower relative risk Expenses Cost Income Ratio Peer 2 year Beta* ANZ 2 year Beta Difference Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan Interim Results * CBA, NAB, WBC

47 Bold and different, leveraging a unique performance culture and business approach Distinctive (Top decile) Superior (Top quartile) Australian average* Systematic improvement Aim to be distinctive financial values People Financial Operational Rewards & recognition Opportunities Values Build on preferred employer status Gain shareholder and community recognition Coordination and control Motivation Raise our game in execution to minimise surprises Interim Results * Benchmark comprises 33 of Australia s Top 50 companies

48 A reasonable result Headline earnings up 8.7% Cash EPS pre-significant items up 8.7% Interim dividend up 12.8% Good underlying business performance offset by $27m Cards issue Major progress in resolving risk issues Specific provisions down 29% Tax settlement achieved On track for 8% fullyear NPAT* Comfortable with similar 2004 outlook Dividend growth higher than earnings Clear and distinctive strategic approach *excluding significant transactions Interim Results

49 Copy of presentation available on

50 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 or contact Philip Gentry Head of Investor Relations ph: (613) fax: (613) gentryp@anz.com Interim Results

51 2003 Interim Results Supplementary Information Pack Australia and New Zealand Banking Group Limited 24 April 2003

52 Additional information on businesses & strategy Interim Results

53 Asset Finance a leading position, & developing new momentum $m NPAT H01 2H01 1H02 2H02 1H03 Reengineering undertaken in recent years now paying off Significant reductions in unit processing costs achieved delivering strong competitive position $000 s NPAT/FTE 1h02 2h02 1h Interim Results

54 New Zealand greater autonomy and a mandate to reinvest NZ $m Performance tapering off NPAT 1H01 2H01 1H02 2H02 1H03 Greater investment required Increased training, and greater number of sales specialists Strengthen brand and increase community involvement Upgrade branch network, and open new branches in key geographic growth centres Interim Results

55 Personal significant opportunity, but clear challenges remain Metro NPAT 6% 1H02 2H02 1H03 Metro 62% Personal Banking Australia NPAT Rural 38% Rural NPAT 20% 1H02 2H02 1H03 Underweight position RCF rolled out to Victoria & NSW, to roll out to other states Strong product capability More traction required on improving customer proposition Rural Banking completed roll out of local market model Good progress in devolving responsibility to front line Strong focus on community involvement Increased focus on agribusiness Interim Results

56 Asia - circa 450 lending relationships with 85% investment grade BEIJING & SHANGHAI, CHINA SEOUL, KOREA One of a small group of fully licensed foreign banks Restricted transactions with locals expected to be lifted gradually with WTO membership 40 Lending Relationships, 95% Inv Gr HONG KONG Leading Australian/NZ bank Focus to expand Trade Finance business Excess liquidity driving margins down to dangerously low levels 60 Lending Relationships, 82% Inv Gr HANOI & HO CHI MINH, VIETNAM Leading foreign bank in Vietnam Only Australian/NZ bank Fastest-growing Asian operation 50 Lending Relationships, 72% Inv Gr MALAYSIA & THAILAND Representative offices Regional Trade Finance support FI & correspondent banking Strategic for Asia & network Trade 34 Lending Relationships, 52% Inv Gr TOKYO & OSAKA, JAPAN Largest Australian/NZ Bank 14,000 customers with deposit base of $700m 38 Lending Relationships, 83% Inv Gr TAIPEI, TAIWAN Only Australian/NZ bank Highly regulated/competitive environment Largest number of corporate relationships in Asia 60 Lending Relationships, 68% Inv Gr MANILA, PHILIPPINES Top Ten foreign bank Only Australian/NZ bank 50 Lending Relationships, 53% Inv Gr SINGAPORE Centre for GSF operations in ANZ Asia Striving to carve a niche in the market amongst global banks operating here 4,000 customers/deposit base of $2b 60 Lending Relationships, 87% Inv Gr Interim Results REGIONAL OFFICE, SINGAPORE Product Support Finance & Planning Credit/Risk Corporate Portfolio Management Human Resource JAKARTA, INDONESIA Leading JV bank 130,000 cards issued 26 Lending Relationships, 69% Inv Gr

57 A selective asset writing strategy in Asia Customer Category Global MNCs Regional MNCs Financial Institutions Major Local Corporates Middle Market Corporates SMEs Customer Description Parent Investment Grade Typically listed on local exchange Subsidiaries in network countries per Cross Border Risk Policy (10/99) Parent Investment Grade Typically listed on local exchange (Top 50 blue chip ) Typically externally rated Well-established and high quality FIs In top 20 FIs in country Strong correspondent banking relationships Top ranking, typically listed on local exchange and recognised as blue chip Investment Grade Significant foreign currency earnings in freely negotiable currencies Market capitalisation typically in excess of USD200m. Potential for significant non interest income, deposit, trade, FX or network opportunities Not target market Not target market Small exceptions for Trade where collateralised, eg. Vietnam Current/Target customer list represents: established high quality names/groups, including Asian conglomerates, that have survived Asian crisis; recent CPM shadowing review has validated this; core relationships; network business for Australia/NZ and Asia; good product penetration potential; leveraging relationships across Asia network Interim Results

58 Continuing to develop our culture % High staff satisfaction maintained H03 Over 10,000 of our people have experienced Breakout program Dec-01 Mar-02 Jun-02 Sep-02 Mar Interim Results

59 Additional credit quality information Interim Results

60 Mortgages low representation in inner city Sydney and Melbourne 35% 30% 25% 20% Market Share by location Range of major peers Tightened assessment criteria for inner city investment properties Delinquency profile of inner city borrowers in line with average 15% 10% 11% 5% ANZ share 6% 0% Sydney Inner City * limited sample size # source: Roy Morgan Melbourne Inner City* Interim Results

61 Group risk grade profile ANZ Group - Outstandings $142bn $143bn $149bn $158bn AAA to BBB 15.7% 13.6% 14.7% 14.3% BBB- 51.4% 53.9% 54.0% 53.8% Total investment grade as at Mar-03: $107.7bn or 68.0% of the portfolio BB+ to BB 14.9% 14.7% 14.3% 14.9% BB- >BB- 14.1% 14.1% 13.7% 13.8% 3.9% 3.7% 3.3% 3.2% Sep-01 Mar-02 Sep-02 Mar-03 B+ to CCC 3.0% 2.8% 2.5% 2.5% Non Accrual 0.9% 0.9% 0.8% 0.7% Interim Results

62 Institutional & Corporate Risk Grade Profiles Institutional Banking (Outstandings) Corporate Banking Aust. (Outstandings) 14.3% 14.1% 16.0% 16.3% AAA to BBB 42.8% 44.3% 46.3% 45.5% 25.4% 25.1% 26.6% 26.7% BBB- 28.1% 27.1% 25.1% 22.8% 33.9% 34.7% 35.0% 38.2% BB+ to BB BB- >BB- 17.3% 17.5% 16.9% 18.5% 7.5% 6.8% 7.3% 8.4% 4.3% 4.3% 4.4% 4.8% Sep-01 Mar-02 Sep-02 Mar-03 B+ to CCC 2.7% 2.3% 2.6% 3.1% Non Accrual 1.6% 2.0% 1.8% 1.7% 17.3% 18.0% 17.0% 14.6% 9.1% 8.1% 5.4% 4.2% Sep-01 Mar-02 Sep-02 Mar % 6.4% 4.1% 2.8% 1.7% 1.7% 1.3% 1.4% Interim Results

63 GFX Specific provisions in most businesses lower than expected losses Specific Provisions 1 st Half 2003 v 2 nd Half $m SP ELP SP s v ELP 1 st Half 2003 CF&A SME Mortgages Personal SFI Asset Finance 0 GFX $m CF&A SP ELP SME Mortgages Personal Banking SFI Asset Finance SP s v ELP 2 nd Half 2002 CBB CF 80 CBB 60 Consumer Finance Lower SP $m Higher SP -20 GFX CF&A SME Mortgages Personal Banking SFI Asset Finance CBB CF Interim Results

64 Offshore SCCLs now in place 100% Comparative SCCL Customer Limits Lending type SCCL % for offshore Corporates (excl. GSF) indicative based on BBB- grading Capped at AUD 300m 80% 75% 100% 60% Capped at AUD 100m 25% > 100% Security < 100% Security Australia/New Zealand OffShore Corporates Direct Exposure (Including on and Off Balance sheet) Indirect or Contingent Exposure Market Related Exposures GSF Direct Exposures capped at AUD 450m for > 100% Security and AUD 200m for < 100% Security Interim Results

65 Offshore lending assets decreasing as a proportion of total lending assets 100% 90% 80% 70% 15% 16% 16% 14% 11% 11% 9% 8% 12% 13% 13% 13% 15% 13% 15% 13% 60% 50% 40% 30% 20% 10% 70% 69% 70% 73% 77% 76% 78% 79% 0% Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Mar-03 Australia NZ International Interim Results

66 Increased industry diversification 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Commercial Property Manufacturing Retail Trade Finance - Banks Wholesale Trade Agriculture Business Services Finance - Other Cultural & Rec services Accomm, Pubs, Clubs Transport & Storage Other % of Group Lending Assets (Aust/NZ) Policy Cap 1993 Mar Interim Results

67 Industry exposures Australia & NZ x Lending Assets (AUDm) % of Portfolio (RHS scale) % in CCR 7D-8G (RHS scale) % in CCR 9-10 (RHS scale) 2.0bn 1.5bn 1.0bn 0.5bn 0.0bn Health & Community Services Sep-00 Sep-01 Sep-02 Mar % 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2.0bn 1.5bn 1.0bn 0.5bn 0.0bn Cultural & Recreational Services Sep-00 Sep-01 Sep-02 Mar % 1.0bn 12.0% 0.8bn 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 0.6bn 0.4bn 0.2bn 0.0bn Forestry & Fishing Sep-00 Sep-01 Sep-02 Mar % 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Mining Personal & Other Services Communication Services 3.0bn 15.0% 1.0bn 4.0% 1.0bn 6.0% 2.5bn 2.0bn 1.5bn 1.0bn 0.5bn 10.0% 5.0% 0.8bn 0.6bn 0.4bn 0.2bn 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.8bn 0.6bn 0.4bn 0.2bn 5.0% 4.0% 3.0% 2.0% 1.0% 0.0bn Sep-00 Sep-01 Sep-02 Mar % 0.0bn Sep-00 Sep-01 Sep-02 Mar % 0.0bn Sep-00 Sep-01 Sep-02 Mar % Interim Results

68 Industry exposures Australia & NZ x Lending Assets (AUDm) % of Portfolio (RHS scale) % in CCR 7D-8G (RHS scale) % in CCR 9-10 (RHS scale) 4bn 3bn 2bn 1bn Finance - Other Transport & Storage Utilities 6.0% 4bn 5.0% 3bn 5.0% 4.0% 3bn 4.0% 2bn 3.0% 3.0% 2bn 2.0% 2.0% 1bn 1bn 1.0% 1.0% bn Sep-00 Sep-01 Sep-02 Mar % 0bn Sep-00 Sep-01 Sep-02 Mar % 0bn Sep-00 Sep-01 Sep-02 Mar bn Finance Banks, Building Soc etc. 6.0% 3bn Accommodation, Clubs, Pubs etc. 6.0% 2.0bn Construction 6.0% 4bn 3bn 2bn 1bn 5.0% 4.0% 2bn 3.0% 2.0% 1bn 1.0% 5.0% 1.5bn 4.0% 3.0% 1.0bn 2.0% 0.5bn 1.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0bn Sep-00 Sep-01 Sep-02 Mar % 0bn Sep-00 Sep-01 Sep-02 Mar % 0.0bn Sep-00 Sep-01 Sep-02 Mar % Interim Results

69 Industry exposures Australia & NZ x Lending Assets (AUDm) % of Portfolio (RHS scale) % in CCR 7D-8G (RHS scale) % in CCR 9-10 (RHS scale) 12bn 10bn 8bn 6bn 4bn 2bn 0bn 10bn 8bn 6bn 4bn 2bn 0bn Real Estate Operators & Dev. Sep-00 Sep-01 Sep-02 Mar-03 Manufacturing Sep-00 Sep-01 Sep-02 Mar % 6bn 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 12.0% 6bn 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 4bn 2bn 0bn 4bn 2bn 0bn Retail Trade Sep-00 Sep-01 Sep-02 Mar-03 Wholesale Trade Sep-00 Sep-01 Sep-02 Mar % 4bn 5.0% 3bn 4.0% 3.0% 2bn 2.0% 1bn 1.0% 0.0% 0bn 6.0% 4bn 5.0% 3bn 4.0% 3.0% 2bn 2.0% 1bn 1.0% 0.0% 0bn Agriculture Sep-00 Sep-01 Sep-02 Mar-03 Business Services Sep-00 Sep-01 Sep-02 Mar % 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Interim Results