2001 Interim Results. Australia and New Zealand Banking Group Limited 26 April 2001

Transcription

1 2001 Interim Results Australia and New Zealand Banking Group Limited 26 April 2001

2 Results highlights NPAT from continuing operations $907m - up 18% EPS up 13% to 55.8 cents ROE of 19.6%, up from 17.8% Costs flat - cost income ratio down to 49.4% Credit quality sound: ELP charge down to 35 bp s Total non-accruals down Specific provisions flat Profit on sale of holding in St George $99m ($65m after tax), offset by write downs in investments ($84m) Improved disclosure - financial information provided for each business unit Note: Comparisons are against half year ended March 2000 (including Grindlays) Page 2

3 2001 Interim Results Australia and New Zealand Banking Group Limited 26 April 2001 Peter Marriott Chief Financial Officer

4 Strong income growth, with good progress across the board 1,100 1, $m Abnormal/ Discontinued Items Interest Income 84 Profit on sale of St George 65 Non- Interest Income 76 Write downs (84) Expenses (34) Provisioning (14) Tax (12) Discontinued 907 (12) Eftpos NZ acquisition and GST ($26m) H H H 2001 Continuing Continuing 1H Page 4

5 Unusual items St George profit offset by write downs in investments St George - $99m profit ($65m after tax) regulatory issues - not critical to strategy attractive price IDR Panin Share Price Panin - $43m writedown # long term growth prospects remain positive E*Trade - $21m writedown # online broking service provides core customer offering Other - $20m writedown # a number of small ecommerce related investments # - no tax relief on these writedowns Oct-00 Dec-00 Feb-01 Apr-01 $ 2.30 E*Trade 1.80 Share Price Oct-00 Dec-00 Feb-01 Apr-01 Page 5

6 % Income drivers * Mar-99 Mar-00 Mar-01 PFS International CFS Margins stabilised in first half Benefit from differential between 90d BBSY and cash rate Greater focus on improving margins Other Trading 44 FX Non-interest income continues to grow Other Fees Driven by higher non-lending fee income Lending Fees FX profits higher, reflecting AUD volatility 1H H 2001 Page 6 * For continuing businesses

7 Cost-income ratio on track to meet target of mid 40 s $m Sale of CTI Expenses 3500 Grindlays 70 Income Sep- 97 Mar- 98 CTI Sep- 98 Mar- 99 Sep- 99 Mar- 00 Sep- 00 Mar Reduction in Cost Income ratio driven by revenue growth and cost control Approximately $65m of restructuring provision used two year program, with benefits principally 2002 and beyond etransformation will continue to drive costs down Page 7

8 Good profit growth across most businesses Mar 00 v Mar 01 $m Personal 120 Corporate 100 International and subsidiaries General Banking Mortgages Institutional Structured Finance Corporate Cards Transaction Services Small Business Asset Finance Foreign Exchange Investment Mgmt Asia Capital Markets Pacific Wealth Page 8

9 80% of businesses delivered revenue growth greater than expense growth ROE top third revenue growth %* Mortgages middle third 40 bottom third Cards Small Business GCM General Banking Asset Finance Corporate GTS Institutional Asia GFX Wealth Pacific Investment Management expense growth %* *based on pcp Page 9

10 Personal portfolio Profit Breakdown Mortgages and Cards reinforce value of our specialisation strategy Mort 27% Small Bus 11% Wealth 3% Clear opportunities for customer businesses to replicate success of product businesses Cards 14% Region 18% Metro 27% Significant market share growth opportunities remain creation of Metrobanking and Regionalbanking a 1% increase in market share for customer businesses worth $100m+ revenue $m Sep-99 Mar-00 Sep-00 Mar-01 Interest Income Other Income Expenses Page 10

11 Corporate portfolio fee income driving profit growth Profit Breakdown Five of six businesses delivered profit growth greater than 10% Inst 25% GSF 24% Non-traditional income for Corporate Banking grew 40%+ on annualised basis, largely by executing Wall St to Main St strategy $m GTS 15% GCM 7% GFX 11% Corp 18% Sep-99 Mar-00 Sep-00 Mar-01 Interest Income Other Income Expenses Page 11

12 International & Subsidiaries risk Profit Breakdown reducing, profits up Asset Finance reconfiguring back office platform to deliver substantial efficiencies Negative profit growth for Investment Management due to tax changes and increased growth spend Asia showing positive signs, on track to record significant profit growth for the full year AAA to BBB+ BBB to BBB- BB- BB+ to BB B to CCC Non-accrual Asia 23% Pacific 16% Inv Mgmt 26% Asset Finance 35% Asian Credit Quality Sep-99 Sep-00 'March-01 Page 12

13 $m Total non-accrual loans continue to fall, but increase in Australia Gross Non-Accrual Loans (LHS) 1662 Historic 1543 Non-Accrual Loans/ Loans & advances (RHS) % 1.5% $m Geographic Gross Non-Accrual Loans 1000 Mar Sep-00 Mar % Net Non-Accrual Loans (LHS) 0.5% H 0.0% 0 Aust NZ Inter Page 13

14 Current provisioning in line with expectations $m Mar- 00 Actual SP v ELP charge ELP charge SP charge Sep-00 Mar-01 Mar-00 Sep-00 Mar-01 Mar-00 Sep-00 Mar-01 Personal Corporate Int & Sub. ELP is a function of volume (on and off balance sheet), risk grade profile, and level of security Specific Provisions tend to be less volatile in Personal businesses and track more closely to ELP Page 14

15 Arrears analysis indicates no systemic deterioration % % personal lending assets over 60 days in arrears % 7.50 Personal Loans 7.00 Business FDAs Credit Cards 1.00 Housing Loans RILs* 4.00 Overdrafts Mar-00 Sep-00 Dec-00 Jan-01 Feb-01 Mar Mar-00 Sep-00 Dec-00 Jan-01 Feb-01 Mar-01 Small upturn in arrears in Jan-Feb largely reversed during March Arrears broadly in line with same period last year Increase in credit card arrears reflects seasonal influences Personal loan arrears continue to increase in % terms due to reducing book * Residential Investment Loans Page 15

16 Corporate book holding up well, despite a few one off issues Corporate risk grade profile AAA to BBB+ BB + to BB 38.4% 37.9% 38.4% 38.9% 26.4% 26.7% 26.9% 27.4% 18.2% 19.1% 19.4% 20.3% Risk actively managed Quarterly strategy reports prepared for all high risk accounts June to October all BB rated accounts within Corporate reviewed in expectation of downturn New accounts > $3m to be referred one level higher BBB to BBB- BB- > B 11.7% 12.3% 11.7% 9.3% 5.3% 4.1% 4.0% 3.6% Sep-99 Mar-00 Sep-00 Mar-01 >B = B, B-, CCC & non-accrual Page 16

17 Group risk grade profile continues to improve $114.6bn $126.5bn $134.9bn $141.0bn AAA to BBB+ 14.8% 16.2% 16.2% 16.9% BBB to BBB- 41.5% 45.3% 49.7% 50.5% BB + to BB 19.2% 15.8% 14.6% 14.7% BB- > B 7.2% 17.3% 5.4% 17.3% 3.9% 15.6% 14.1% 3.8% Sep 1998 Sep 1999 Sep-2000 Mar-01 ELP (bp s) >B = B, B-, CCC & non-accrual Page 17 Risk grade profiles by division and geography in appendix

18 Credit quality is sound in some of our larger industry exposures - Australia x Lending Assets (AUDm) % of Portfolio (RHS scale) % in CCR 7D-8G (RHS scale) % in CCR 9-10 (RHS scale) Real Estate Operators & Dev. Manufacturing Retail Trade 10bn 8bn 6bn 4bn 2bn 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 10bn 8bn 6bn 4bn 2bn 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 10bn 8bn 6bn 4bn 2bn 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0bn Sep % Mar-01 0bn Sep-98 Mar % 0bn Sep % Mar-01 10bn Agriculture 12.0% 10bn Accomm. Cafes & Restaurants 12.0% 10bn Construction 12.0% 8bn 6bn 4bn 2bn 10.0% 8.0% 6.0% 4.0% 2.0% 8bn 6bn 4bn 2bn 10.0% 8.0% 6.0% 4.0% 2.0% 8bn 6bn 4bn 2bn 10.0% 8.0% 6.0% 4.0% 2.0% 0bn Sep % Mar-01 0bn Sep % Mar-01 0bn Sep % Mar-01 Page 18

19 Provisioning levels remain strong $m ELP charge 241 (181) Net SP transfer FX impact represents 3 years expected losses Surplus 448 % GP/Lending Assets * H 2001 APRA Guidelines 0.70 ANZ Mar-01 CBA Dec-00 NAB Jun-00 WBC Jun-00 ELP - Economic Loss Provision SP - Specific Provision Page 19 * includes acceptances

20 Capital management will continue % $b Capital Management Philosophy: Maintain capital consistent with ANZ s AA status and peer group ratings Tier 1 ( %) Inner Tier 1 (6.0%) Progress $413m in share buybacks in the half year 5.0 Mar-99 Mar-00 Mar New framework for allocating capital for operating risk implemented Tier 1 Capping of DRP/BOP Inner Tier 1 RWA's Page 20

21 2001 Interim Results Australia and New Zealand Banking Group Limited 26 April 2001 John McFarlane Chief Executive Officer

22 We are performing well and on track to deliver on our 3 year commitments Measure EPS growth ROE Cost-income ratio Inner Tier 1 Credit rating 3 Year Commitment > 10% > 20% mid 40 s 6% maintain AA category Achievement 13% 19.6% 49.4% 6.2% maintained We have also committed to improving customer satisfaction, and will publicly report our progress Page 22

23 Implementation of our strategy is progressing well Specialisation 16 Business Units within 3 portfolios, plus corporate centre Separate financial reporting for each Business Unit etransformation - the ebank with a human face Leading internet banking penetration Highest profit per employee Perform Grow and Breakout Active resource allocation - Expenses, Capital, Balance Sheet, Talent Investment focused on lower risk, higher growth activities Page 23

24 New strategy delivering value - majority of businesses with double digit earnings growth Business Unit Mortgages Cards Institutional Asia Structured Finance General Banking Capital Markets Foreign Exchange Transaction Services Corporate Banking Small Business Asset Finance Pacific Wealth Management Investment Management 1H 2001 $m H2000 $m Change $m Change % Page 24

25 We are developing a track record for building growth businesses % Mortgage market share % 30 Share of credit card spend 10 $m Deposit market share (RHS) FM inflows (LHS) % m Personal customers - Australia Mar-00 Jun-00 Sep-00 Dec-00 Mar Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Page 25

26 Most businesses expected to grow above market over next 2-3 years Market Growth High Personal Corporate Investment Management Int. & Subsidiaries Asia Wealth Management GTS Cards Medium Corporate GCM GFX Institutional GSF Metro Banking Mortgages Small Business Low Pacific Regional Banking Asset Finance Note: Size of bubble approximates relative profit contribution Below Market At Market Above Market BU Growth Page 26

27 Cost management delivers competitive advantage and funds to invest in growth businesses Clear leadership on Cost Income ratio NAB CBA WBC ANZ lower costs/ava higher productivity etransformation Target Mid 40 s H 2001 competitive advantage capacity to invest in growth Page 27

28 etransformation - enhancing the customer experience % Internet banking users as % of main relationships 39.1 Transaction activity Cheques Phone/Internet Banking 24% 13% 8% Direct Entry 24% 24% Credit Card EFTPOS 14% 9% 25% 10 ATM 10% 11% 5 0 ANZ WBC NAB CBA Branch Deposits Branch Withdrawals 11% 8% Oct-96 9% 8% 2% Mar-01 Source: JP Morgan & Roy Morgan Research Page 28

29 etransformation examples of real, tangible benefits internally Project Manage my leave Benefits 95% reduction in processing costs Web enablement - rollout of IP network to all points of representation Cost neutral, but 100 times capability increase Common Administration System Estimated benefits ~$40m etrain - online training Provides staff with online access to training courses, including an emba Page 29

30 We continue to actively manage and reduce risk Lending Profile by Asset Type* 100% Exiting higher risk businesses 80% More emphasis on lower risk businesses 60% 40% Corporate balance sheet deliberately constrained focus on fee income 20% 0% ANZ 1991 ANZ 1996 ANZ 2001 CBA NAB WBC Risk based approach embedded through EVA business consumer * CBA as at 31/12/00, NAB & WBC as at 30/9/00 Page 30

31 Being the ebank with a human face Put our customers first with an experience that delights Focus on creating value for our shareholders Lead and inspire our people Breakout, be bold and have the courage to be different Earn the trust of our people and the community Page 31

32 Our breakout approach is differentiating us Strategy Specialised businesses First class execution (no surprises) Staff 86% of managers on individual contracts 12% rise in staff satisfaction Customers Establishment of Customer Charter, Customer Advocate and distinctive customer and community initiatives etransformation Leading cost income ratio Highest internet banking penetration Risk Leading financial disclosure & transparency EVA embedded in culture Page 32

33 New customer and community initiatives Fee free, over-the-counter services for older customers (aged 60+) A new Customer Charter setting out clear service standards effective from 1 October A key feature of the Charter will be a financial donation payable by ANZ to a charity of the customer s choice if ANZ does not meet its complaint resolution standards Appointment of a senior Customer Advocate to ensure the satisfactory resolution of customer issues and complaints. Improvements and greater funding for ANZ s community relations program Paid leave for staff who volunteer for community service Page 33

34 The economy - signals are mixed. % 7 Real GDP Growth incl. and excl. housing and Olympics (est) House approvals 6 Year ended Year ended, excluding dwellings and Olympics We are starting to see a rebound in housing approvals Sep-97 Sep-98 Sep-99 Sep Newspaper Job Ads Retail Sales 000 s per week ANZ job ads series suggests unemployment levels approaching 7.5% Mthly % ch Starting to show signs of life Jun- 97 Jun- 98 Jun- 99 Jun Page 34

35 . but we are cautiously optimistic Sharp slowdown in H overstates weakness of underlying economic activity - we continue to expect a solid cyclical rebound in Fundamentals remain healthy usual preconditions for recession in Australia (rising inflation and interest rates) notably absent Risks remain weakened global growth, rising inventory levels, subdued business sentiment and falling job advertisements But monetary and fiscal conditions remain supportive after slowing to only 2% in , growth forecast to rebound to 3.2% in Page 35

36 Outlook System credit growth forecasts * housing 12.4% personal 11.1% business 6.5% Personal to exceed system credit growth Corporate credit growth - continuing higher quality focus Margin compression will continue Costs flat Challenges ahead, however we are well placed to continue to perform well, and achieve our targets over the medium term * forecast for year ending 30 September Page 36

37 Summary We are performing well Cost management momentum etransformation has just begun Risk reduction continues Our new strategy is creating value and better positioning us for growth We are on track to achieve our goals We are differentiating ourselves through our Breakout program Page 37

38 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 Page 38

39 Copy of presentation available on Page 39

40 AAA to BBB+ Risk grade profile by division Personal 0.20% 0.16% 0.20% 0.24% AAA to BBB+ Corporate 38.4% 37.9% 38.4% 38.9% BBB to BBB- 75.7% 77.0% 77.8% 78.5% BBB to BBB- 26.4% 26.7% 26.9% 27.4% BB + to BB BB- > B 7.6% 7.1% 7.1% 6.9% 12.7% 12.7% 12.0% 11.5% 3.8% 3.0% 2.9% 2.9% Sep-99 Mar-00 Sep-00 Mar-01 BB + to BB BB- > B 18.2% 19.1% 19.4% 20.3% 11.7% 12.3% 11.7% 3.6% 9.3% 4 5.3% 4.0% Sep-99 Mar-00 Sep-00 Mar-01 International & Subsidiaries 9.7% 13.4% 12.3% 15.9% 10.4% 10.7% 9.4% 10.1% 32.1% 30.2% 29.1% 28.4% >B = B, B-, CCC & non-accrual AAA to BBB+ BBB to BBB- BB + to BB BB- > B 36.6% 36.9% 40.9% 38.9% 11.2% 8.8% 6.7% 8.3% Sep-99 Mar-00 Sep-00 Mar-01 Page 40

41 Risk grade profile by geography* Australia New Zealand AAA to BBB+ BBB to BBB- 21.1% 20.9% 19.8% 21.1% 23.5% 24.6% AAA to BBB+ BBB to BBB- 24.8% 17.9% 30.2% 29.9% 14.5% 15.3% BB + to BB 24.6% 24.2% 25.1% BB + to BB 18.2% 21.3% 21.1% BB- 28.0% 26.8% 25.8% BB- 29.8% 29.7% 29.1% > B 5.2% 4.6% 4.7% > B 9.3% 4.3% 4.6% Sep-99 Sep-00 Mar-01 Sep-99 Sep-00 Mar-01 International >B = B, B-, CCC & non-accrual AAA to BBB+ BBB to BBB- BB + to BB BB- > B 23.0% 43.6% 50.6% 37.0% 18.4% 19.8% 15.2% 17.8% 14.7% 10.6% 17.0% 10.1% 9.6% 5.5% 7.1% Sep-99 Sep-00 Mar-01 * Excludes housing Page 41

42 Economic Loss Provisioning GP % net lending assets 2.5% 2.0% 1.5% Actual Losses are funded from the General Provision General Provision balance ELP Charge = Loan Amount x Probability loss x Loss Given default 1.0% 0.5% P&L Charge Actual SP s Plus An adjustment to ensure the GP balance is sufficient to cover: 0.0% ELP charge will vary from year to year based on: changes in lending volumes change in risk grade profile security levels product and geographic mix Volatility around expected loss (using statistically quantified variance) Remaining term of loan portfolio Balance sheet growth Page 42

43 System credit growth forecasts Business Housing Personal Total Page 43

44 Summary of forecasts - Australia Calendar years Real GDP growth ¾ Inflation ¾ 1½ Unemployment (Dec) ½ 6½ Current account deficit (%GDP) Housing starts ( 000) day bill yield (% pa, Dec) year bond yield (% pa, Dec) A$ (US cents, Dec) Sources: ABS; RBA; Economics@ANZ. Page 44