Investor Discussion Pack

Transcription

1 Investor Discussion Pack November 29 Mike Smith Chief Executive Officer

2 Snapshot Proud banking heritage spanning 17 years A top 1 listed company on the ASX (market cap A$6b), with 39, shareholders Largest listed company in New Zealand, largest Australian bank in Asia and a leading bank in the Pacific AA rated bank on S&P long term ratings Well capitalised with a strong liquidity position Over 2 years of banking experience on the management board ~37, Full Time Equivalent employees (FTE) 1

3 Progress report on Our journey to becoming a Super Regional bank 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 2

4 Super Regional strategy will drive increased earnings diversification Where our profits will come from Stronger Asia-Pacific 1 contribution will result in more balanced profit profile ANZ 27 2 Australia 69% of all ANZ profit NZ 22% Asia/Pacific 7% ANZ Strategic Direction Australia ~6% of all ANZ profit NZ ~2% Asia/Pacific 1 ~2% What will drive growth Australia opportunity to deepen customer relationships (improving cross sell), both retail and commercial New Zealand maintaining existing strong position, better harness cost synergies Asia Pacific - Main focus is on organic growth supplemented with in-fill mergers and acquisitions Institutional restructure is driving improved results, focussing on core strengths in traditional banking 1. Post restructure September 29 Asia/Pacific also includes Europe & America 2. Excludes group centre, 2% in 27 3

5 Focused approach to the Asia region Strategic Imperative Top 4 foreign bank Greater China India Franchise Significant Major bank (top 4) Vietnam, Malaysia, Indonesia Network Enhancement Network clients, product and liquidity hubs Singapore, Tokyo, Hong Kong Next Wave Hold position in short-term Cambodia, Laos, Philippines, Korea, Thailand 4

6 Customer Deposits by geography (A$b) Australia New Zealand Asia Pacific, Europe & America 15.7% 4.1% Total Group 13.9% 3.% (.7%) (.4%) 35.3% 2.9% Sep 8 Mar 9 Sep 9 Sep 8 Mar 9 Sep 9 Sep 8 Mar 9 Sep 9 Sep 8 Mar 9 Sep 9 Retail Commercial Institutional Wealth 5

7 Net loans and advances 1 by geography (A$b) Australia New Zealand Asia Pacific, Europe & America Total Group (1.2%) (3.1%).3% (2.1%) (2.9%) (2.5%) (11.3%) (16.2%) Sep 8 Mar 9 Sep 9 Sep 8 Mar 9 Sep 9 Sep 8 Mar 9 Sep 9 Sep 8 Mar 9 Sep 9 Retail Commercial Institutional Other 1. Includes acceptances 6

8 Net Loans and Advances by product line (A$b) Group Net loans and advances 1 (A$b) Retail NLA s 1 (A$b) Cards & Other Mortgages Australia Mortgages NZ & Offshore 2 Cards & Other Commercial 144 Sep 29 Commercial / Institutional NLA s 1 (A$b) Australia NZ & Offshore Institutional / Large Corporate Commercial (incl. SME) Asset Finance Rural / Regional Commercial 1. Includes acceptances. 2. Includes Wealth. 7

9 The Balance Sheet Capital, Funding, Liquidity, Provision coverage

10 Strong Balance Sheet Tier 1 Capital ratio increased to 1.6% (pro forma post RBS assets and ING is 9.5%) Pro forma Core Tier-1 capital ratio increased to 7.9% (1.3% FSA) Total Provision coverage of 1.97% of Credit RWAs Customer funding increased to 55% Short term wholesale funding further reduced to 17% Raised $26bn of new wholesale term funding Prime Liquidity portfolio maintained >$6bn, provides in excess of 12 months cover for offshore wholesale debt ANZ s strong credit ratings (AA, S&P/Aa1 Moody s) maintained throughout the GFC. Strong Collective Provision balance.73%.94% 1.13% 1.6% 1.31% Sep 7 Mar 8 Sep 8 Mar 9 Sep 9 1. Includes acquisition of RBS assets and INGA & ING (NZ) Joint venture 7.7% Strong capital position 1.8% 1.8% 5.9% 6.4% 1.6% 1.6% 9.% 7.9% 1.3% Sep-8 Mar-9 Sep-9 Sep 9 pro Core Tier 1 1 forma Hybrid Tier 1 1.6% FSA Sep 9 pro 1 forma Funding composition improved Category 8.2% 1.6% 9.5% Funding composition 11.9% Volume change Sep 8 Sep 9 AUD bn Customer 5% 55% 27 Term w sale 21% 2% (2) Equity & hybrids 7% 8% 5 Short term w sale 22% 17% (2) 9

11 Capital position has been significantly strengthened throughout the year notwithstanding recent M&A activities Target operating range Sep-8 Mar-9 Sep-9 Sep-9 pro forma 1 FSA Sep- 9 pro forma 1 OSFI Sep- 9 pro forma 1 Core Tier % - 6.5% 5.9% 6.4% 9.% 7.9% 1.3% 1.1% Tier 1 7.5% - 8.% 7.7% 8.2% 1.6% 9.5% 11.9% 11.8% Total Capital 1.5%+ 11.1% 11.% 13.7% 12.4% 14.6% 14.8% Strengthening capital position Capital positioned has been strengthened via: 3 ordinary equity raisings totalling $5.7bn: Institutional Share Placement $2.5bn Share Purchase Plan $2.2bn Final 28 DRP underwrite $1.bn Organic capital generation of $1.3bn RWA reduction Even after capital committed to the RBS assets and the INGJV, capital position remains strong Capital Management Agenda Maintain strong capital profile and buffers: Future business opportunities Risk of economic shocks despite improving global economic outlook Developing global regulatory environment requiring higher quantity and improved quality of capital Modest reliance on hybrid capital (~15% Tier-1) provides scope to raise hybrid capital in a cost effective manner 1. Includes acquisition of RBS assets and INGA & ING (NZ) Joint venture. 2 Core Tier 1 = Tier 1 excluding hybrid Tier 1 instruments 1

12 Strong Tier-1 position, ANZ well placed for growth opportunities Capital Position (Tier-1 Ratio) 11.9 Portfolio growth & mix: Risk migration: Portfolio data review: 36bp increase 34bp reduction 52bp increase (.22) 1.56 (.34) (.76) (.59).54 (.3) 7.71 Tier-1 management target range 7.5 and bp 175bp Sep-8 NPAT Dividend/ DRP RWA movement Other1 Ord Share Issuance Prudential changes Hybrid Call Sep-9 RBS acquisition ING JV acquisition Sep-9 Pro-forma Sep-9 FSA Pro-forma 1. Includes Associates, Net Deferred Tax Assets, Pensions, Capitalised Costs, MTM gains on own name included in profit, FX, non-credit RWA growth 11

13 Core Tier-1 position also strong Capital Position (Core Tier-1 Ratio) 1.3 Portfolio growth & mix: Risk migration: Portfolio data review: 31bp increase 3bp reduction 44bp increase (.29) (.76) (.59).45 (.23) 5.91 Core Tier-1 operating range between 6. and bp 2bp Sep-8 NPAT Dividend/ DRP RWA movement Other1 Ord Share Issuance Prudential changes Sep-9 RBS acquisition ING JV acquisition Sep-9 Pro-forma Sep-9 FSA Pro-forma 1. includes Associates, Net Deferred Tax Assets, Pensions, Capitalised Costs, MTM gains on own name included in profit, FX, non-credit RWA growth 12

14 Strategic approach to increasing capital throughout the Global Financial Crisis A$b Capital Raisings Institutional placement Hybrid redemption Hybrid Share purchase plan 4. DRP 1 Core DRP 1 Hybrid conversion Hybrid net issue DRP 1 1H8 2H8 1H9 2H9 2H9 Total 1. Underwritten DRP 13

15 Tier 1 and Core Tier 1 ratios are higher under the FSA calculation Capital differences arise principally because FSA: 12.% Requires no deduction for net accrued dividends 11.5% 11.% 1.5% RWA Capital FSA Requires no deduction for certain capitalised expenses and deferred tax assets Calculates expected loss vs provisions on a gross basis before tax Has a more favourable treatment for Associate investments (including ING JV), and insurance and funds management subsidiaries RWA differences arise principally due to: 1.% 9.5% APRA APRA setting a 2% floor on the downturn LGD for mortgages (as compared with the 1% minimum set by the FSA) FSA not requiring Interest Rate Risk in the Banking Book to be a Pillar I requirement 9.% Differences in the treatment of specialised property lending, equity and margin lending products Tier 1 Ratio 14

16 Reconciliation of ANZ s capital position to FSA Basel II guidelines (based upon INGJV as a subsidiary) APRA regulations are more conservative than current FSA regulations, in that APRA requires: A 2% Loss Given Default floor for mortgages (FSA: 1% floor) Interest Rate Risk in the Banking Book (IRRBB) to be 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 payments (net of dividend reinvestments) to be deducted from Tier-1 (FSA: no deduction) 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 deduction (FSA: permits proportional consolidation under certain circumstances) Core Tier-1 (%) Tier-1 (%) Total Capital (%) Sep-9 pro forma 2 under APRA standards RWA (Mortgages, IRRBB) ING Funds Management and Life Co businesses Final dividend accrued net of DRP & BOP Expected Losses v Collective Provision Insurance subsidiaries Investment in Associates Other Total adjustments Sep-9 pro forma 2 FSA equivalent ratio Other includes Net Deferred Tax Assets, Capitalised Expenses, Deferred Income and roundings 2. Includes acquisition of RBS assets and INGA & ING (NZ) Joint venture 15

17 Improved funding metrics although term funding costs remain elevated Short-term wholesale funding reducing Customer deposit volumes increasing Sep-8 Mar-9 Sep-9 Hybrids & SHE Total customer funding Term debt residual >1yr Term debt residual <1yr Short term wholesale ($bn) Funding composition improved 22% 18% 17% 7% 6% 5% 14% 15% 15% 5% 54% 55% 7% 7% 8% Term debt maturity profile Senior Term Subordinated Govt. Guaranteed FY1 FY11 FY12 FY13 FY14 >FY14 Only 3% of total funding is sourced from offshore 1 short term markets 1. Represents funding issued by Australia or New Zealand in offshore wholesale markets 2: including all liquid assets Reliance on short term wholesale funding further reduced to 17% Funding from equity, customer and wholesale debt (with remaining maturity >1yr) increased to 78% of all funded assets 2 ~$26bn of wholesale term debt issued in FY9 Maintained access to all major global funding markets Average tenor of new term issuance in FY9 was 3.9 years Funding costs remain elevated by historical standards Majority of FY9 issuance was in Government Guaranteed (GG) format. Going forward we expect most new issuance to be nonguaranteed Forward maturities and required issuance volumes consistent with 29 and remain manageable ANZ continues to build and maintain strong, long-term relationships with global wholesale debt investors 16

18 Liquidity position strengthened further Liquid asset position remains strong ($bn) Portfolio diversified by geography Mar 9 & Sep 9 positions support >12 months offshore wholesale funding maturities Mar-8 Sep-8 Mar-9 Sep-9 Prime Liquidity Portfolio Other cash & liquid assets Other eligible securities 5% 2% 3% 31% 3% 41% 15% Australia Internal RMBS (Aus) New Zealand Internal RMBS (NZ) Asia United States UK Strong liquidity portfolio credit quality (Sep-9) Long Term Counterparty Credit Rating 1 Market Value 2 AUD $bn Cumulative % of portfolio No. of parties AAA % 51 AA+ 3 78% 4 AA % 11 AA % 9 A+.3 99% 5 A.3 1% 4 Total Prime liquid asset portfolio maintained at $6bn Covers >12mth offshore w sale funding maturities Prime Liquidity Portfolio and other eligible securities are cash deposits, and securities eligible for repo, with a major central bank Strong credit quality, 99% portfolio AA- or better Well diversified by geography & counterparty Additional liquid assets in the form of cash at banks, interbank lending & securities in trading and investment portfolios (not included in the prime liquidity portfolio) 1. Where available, based on Standard & Poor s long-term credit ratings 2. Market Value net of the repo discount (initial margin) applied by the relevant central bank 17

19 Managing the Group s earnings denominated in non-aud currencies NZD is currently the most significant single currency revenue exposure USD and Asian local currency revenues are increasing as a proportion of total group revenue FY9 revenues have been translated at an average AUD/USD rate of.73 The majority of ANZ s non-nzd foreign currency revenue streams have a high correlation to AUD/USD A combination of macro and specific currency hedges against the risk of adverse currency movements may be considered appropriate, however aside from New Zealand no hedges are currently in place AUD strength against the USD presents a significant headwind for future earnings growth; potential FY1 negative EPS impact of 4-5% (based on current exchange rates) FY9 reported profit before tax by currency 17% 15% 68% AUD NZD USD & Others NZD currency hedging position FY9 NZD earnings were hedged at 1.19 Future year hedges cover anticipated revenue streams. Partial hedges in place for FY1 & 1.19 to

20 AUSTRALIA, NZ & ASIA ECONOMIC TRENDS

21 Summary of forecasts: Australia and New Zealand Australia New Zealand GDP Inflation Unemployment Current A/C (% GDP) Cash rate year bonds AUD/USD N/A N/A N/A N/A AUD/NZD N/A N/A N/A N/A Credit Housing Business Other Source - ANZ economics team estimates. Based on 3 September bank year. 2

22 Australia one of very few developed economies to avoid recession Australia has had a much softer landing than our developed economy counterparts The domestic economy/financial system well placed pre-downturn Significant, pre-emptive & effective policy action Strong population growth China rebound/commodities Recent data encouraging, but short-term headwinds Household income expected to fall in 9/1 as stimulus wanes Drag from earlier commodity price bust Rising interest rates Housing transition from first home buyers, rising interest rates? Commercial property prices falling, potential for vacancies to rise Rising unemployment albeit much lower levels than anticipated 21

23 Recent data flow has been encouraging $bn, sa Retail trade 17.5 Jan-8 Jul-8 Jan-9 Jul-9 Consumer sentiment 125 index Jan-8 Jul-8 Jan-9 Jul Housing finance (ex-refin.) $ billion annualised Jan-8 Jul-8 Jan-9 Jul-9 index Business confidence Jan-8 Jul-8 Jan-9 Jul-9 22

24 But economy to slow again before renewed life later in 21 Household consumption Dwelling investment quarterly % change quarterly % change Business Investment Real GDP 6. quarterly % change Sources: Bloomberg, Datastream and ANZ quarterly % change

25 Australian growth likely to return to trend growth by 211 GDP growth Unemployment rate 6 % annual change Forecasts 12 % Forecasts 5 4 Trend Sources: ABS and ANZ 24

26 Index The labour market experience through the downturn has been comparatively mild so far Employment through cyclical downturns - Total employment indexed to peak Early 198s (Jan-82) Early 199s (Jul-9) Early 2s (Aug-) Current (Oct-8) Sources: ABS, ANZ Months from 'peak' 25

27 Encouraging signs in labour market Monthly change (trend, s) Labour force and Employment Employment Labour force Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul Monthly change (trend, s) Unemployment Unemployment rate Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 %

28 but hours worked has fallen as employers resist layoffs, therefore employment rebound could be muted Employment vs. hours worked 6 YoY % change Employment - persons hours worked -4 Sources: ANZ, ABS

29 New Zealand economy has emerged from recession and is now gaining forward momentum The New Zealand economy is underpinned by a sound macroeconomic framework An independent inflation targeting central bank, freely floating exchange rate and a transparent fiscal policy set over a medium term timeframe are the main pillars of the framework The recession experienced since early 28 was the longest since the 197s, reflecting: The build up of structural imbalances during the previous expansion phase A correction to the housing market, which started in 27 and intensified over 28 and early 29 Drought conditions, which led to reduced agriculture production in early 28 A deep global downturn across our major trading partners The economy emerged from recession in the second quarter. Forward momentum is building with economic activity set to expand at a modest pace. Close attention is now being paid to the composition of growth as the economy rebalances. For a sustained and durable recovery to take hold, it has to be export led. The need for households to rebuild their balance sheet means consumption growth will be subdued. New Zealand s future is fundamentally linked to the Asian region. Excluding Japan, Asia now accounts for 28 percent of NZ s exports. China is now our 3rd largest trading partner, and five of NZ s top 1 export destinations are from the region. 28

30 Latin America Africa Middle East United States Finland Portugal Asia Sweden World Greece Austria Italy Japan Canada New Zealand Germany Australia Spain Euro area Netherlands France Denmark United Kingdom Belgium Ireland Iceland The New Zealand banking system is sound New Zealand banks well capitalised Banking sector not highly leveraged compared to other countries 14 % of Risk Weighted Assets 8 Bank debt as % of GDP 12 Total capital ratio Tier 1 capital ratio Tier 2 capital ratio Sources: RBNZ; IMF October 28 Global Financial Stability Report; RBA; Central Bank of Ireland: ANZ 29

31 Australia Luxembourg New Zealand Iceland Denmark Korea Ireland Finland Spain Sweden Norway Switzerland Poland Netherlands United Kingdom Austria Canada Germany Euro area Portugal Hungary France United States Total OECD Belgium Greece Italy Japan Solid support factors remain and longer-term prospects for New Zealand are good Commodity prices have corrected, but are starting to rebound Well capitalised banking system 1,3 1,2 1,1 1, Index Terms of trade (LHS) ANZ World Commodity Price Index Infrastructure spending is also increasing NZ Capital stock to NZ GDP Index % of risk weighted assest Total capital ratio A healthy government balance sheet despite deficits Gross public debt as % of GDP (28) Tier 1 capital Tier 2 capital Sources: Statistics NZ, NZ Treasury, Bloomberg, OECD, ANZ 3

32 New Zealand maintains a diversified export sector, weighted towards agriculture GDP composition Exports are diversified by product Government 4.9% Finance & Business 21.4% Personal Services 12.3% Communicatio n 6.3% Agriculture 4.8% Transport 4.7% Fishing, Forestry & Mining 2.2% Manufacturing 13.5% Electricity, Gas & Water 1.8% Construction 4.7% Wholesale 7.4% Retail 7.5% and by country Services 21.9% ASEAN 9.9% Ag & Seafood 8.1% Crude 2.7% Manufacturing 23.2% Dairy 16.6% Meat 8.% Other Food 7.7% Forestry & Wood 9.% Exports 32% of GDP Other 28.7% Australia 22.4% Sources: Statistics NZ, ANZ US 11.% Japan 7.8% UK 4.1% China 8.1% Euro-zone 8.1% 31

33 Iceland Greece Portugal Spain New Zealand Turkey Ireland Hungary Poland Australia Slovak Republic United States Belgium Italy Czech Republic United Kingdom France Total OECD Mexico Korea Euro area Canada Denmark Finland Austria Japan Germany Sweden Luxembourg Netherlands Switzerland Norway Addressing internal structural imbalances 2 1 % of GDP Large current account deficit High household debt % of disposible income Household debt to disposable income Poor household savings % of disposible income Quarterly household savings rate Excessive reliance on housing % of total h/hold assets 6 Housing as a % of total household assets Sources: Statistics NZ, RBNZ, Bloomberg, OECD, ANZ 32

34 The New Zealand economy is being supported by policy stimulus % The Official Cash Rate has been slashed 9-day bank bill Our projections and this has flowed though into mortgage rates Basis points 2-yr mortgage rate compared with 2 years prior (LHS) Fixed mortgages with less than 12-mths until reset (RHS) NZ$b Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul % of GDP The fiscal purse has been opened Expansionary Fiscal impulse 8 7 But a rebounding NZD is still somewhat problematic Index Contractionary Sources: Statistics NZ, RBNZ, NZ Treasury, Reuters, ANZ Budget 29 forecasts 5 4 NZ TWI

35 The New Zealand economy is now stabilising. Cyclical sectors, such as housing, are strengthening Net % Confidence picking up NBBO own activity Bungy cord for the housing market ' (s.a.) REINZ house sales Financial conditions loosening Annual % change GDP (LHS) Index -2 FCI (adv 1 months, -4 inverted, RHS) ' Less NZ ers leaving Arrivals Departures Net migration Sources: Statistics NZ, REINZ, ANZ 34

36 With stabilisation, attention now turns to the quality and durability of the rebound % of GDP Need to improve external deficits Net International Investment Position (RHS) Annual current account (LHS) Sources: Statistics NZ, ANZ % of GDP A switch in the mix of growth is required Index (Jun-87=1) Non-tradable sector Tradable sector Productivity performance needs to arrest its trend decline Compound annual growth rate (%) Labour productivity '8-'95 '85-'9 '9-'95 '95-' '-'5 '5-'8 Deposit rates highlight the deleveraging backdrop Interest rate (%) Top retail deposit rate (across major banks) Wholesale curve Years to maturity 35

37 Change is now a key buzzword across the economy Developments on a number of fronts include: A new RBNZ liquidity requirement for NZ registered banks that effectively requires banks to fund 75 percent of their balance sheet from retail deposits or wholesale funding with terms in excess of 1 year. This is aimed at reducing the vulnerability of the NZ financial system to global shocks. New rules have been put in place for Non-Bank Deposit Takers that see them come under the greater prudential focus of the RBNZ. A Tax Working Group has been set up and is identifying issues that need to be considered when setting medium-term tax policy. Some of the topics to be considered include: the structure of personal income tax, GST and capital gains tax. A review of the Resource Management Act (RMA). The RMA has been singled out as a reason for the lack of investment in key infrastructure needs across the country due to the time and costs involved. 225 taskforce has been set up (chaired by former RBNZ Governor Don Brash) to look at the ways and initiatives that can be put in place to see the economy catch-up to Australia by 225. Overseas investment rules have been simplified, and the business migration scheme has been revamped to make investing and attracting business and entrepreneurial migrants easier. Steps taken to unlock NZ s natural resource endowments. All of these developments will take time to deliver real-time benefits but the process is underway. 36

38 Structural rebalancing for NZ is very much linked to the Asia region 25 2 Exports to Asia growing fastest Index (2=1) Asia (ex Japan) China is already growing in importance as an export market % of total 4 2 Merchandise exports to China The rest 6 China has significant room to grow its domestic economy % of GDP (nominal) Household consumption Sources: Statistics NZ, Bloomberg, ANZ 37

39 Asian region - expected to perform better than much of the developed world China India NIE's Hong Kong Korea Singapore Taiwan ASEAN Indonesia Malaysia Philippines Thailand Vietnam Total Total (ex China & India) Recovery depends on consumers in the US and Europe Asia s supply side, including the overall health of the banks, is largely intact Sources: CEIC, ANZ Economics 38

40 Fiscal and monetary policy stimulus has gained traction in China 1.3 Million Units Motor vehicle sales 6 Steel production and Australian iron ore imports MT/mt h Steel production (lhs) MT/mt h Imports of Australian iron ore (rhs) Sources: Bloomberg, Datastream. 39

41 China is on a very rapid growth path China s tiered city structure (23 and 225) 23: 45 tier 1-3 cities 225: 147 tier 1-3 cities 2 large economic zones 358 cities in total 11 cities ~ 15 million 18 cities ~ 1 million Source: BHP 4

42 Ongoing urbanisation will be a key driver of growth % of population in urban areas China s projected urban growth 9 8 % million people Urban Population (LHS) % Urban (RHS) % urban of total Europe C & S North Oceania Asia China America America Source: UN, ANZ Economics & Markets Research 41

43 Primary energy consumption per capita This will continue to have a profound impact on demand across all commodities Primary energy consumption and GDP per capita, Tonnes of oil equivalent United States China 217 Korea Japan Australia 2 1 China India US$ Real GDP (at PPP) per capita (199 US$) Sources: Groningen Growth and Development Centre Total Economy Database; BP Statistical Review of World Energy (26); Economics@ANZ. 42

44 AUSTRALIA & NEW ZEALAND MORTGAGE MARKET DATA

45 Population accelerating to record highs while home building slumps towards record lows Population growth vs dwelling completions Annual population gain (LHS) Annual dwelling completions (RHS) Sources: ABS, ANZ Economics and Markets Research 1 44

46 Demographic pressure to reduce persons per household Persons per household 2.8 Number persons per household would require 375K extra homes to meet demographic demand million houses assuming constant headship rates by age Sources: ABS, ANZ Economics and Markets Research 45

47 Housing demand/supply imbalance remains Housing market balance: Australia Completions Underlying demand Shortage -5-1 Surplus Sources: ABS, ANZ Economics and Markets Research 46

48 Pent-up demand is rising in all states, most significant in New South Wales months production NSW Vic Qld Sources: ABS, ANZ Economics and Markets Research Pent-up housing demand by state SA WA Tas

49 The supply imbalance has prompted the rental market to tighten and rents to rise sharply National rental vacancy rate House rents %; 4 qtr ma Sydney Melbourne ABS average rents Residex "Advertised " rents Perth Adelaide Brisbane Hobart 4.6 %p.a Sources: Economics@ANZ; REIA 48

50 Prerequisites for a solid housing upturn are in place Critical housing shortage Improved buyer sentiment Rising prices Rising rents But Tight rental markets pushing rents sharply higher Inadequate building will place further upward pressure on rents Good affordability conditions Rising mortgage rates from early 21 will create significant headwinds as will the exit of first homebuyers Substantial roadblocks to supply Real rents annual % change Sources: ABS, ANZ Economics and Markets Research

51 House prices softened but did not fall appreciably 65 6 Australia - median house price by city $ Sydney (5.9%*) Melb. (8.4%*) Perth (4.4%*) Hobart (5.4%*) Bris. (5.6%*) Adel.(3.7%*) Sources: ABS, ANZ Economics; *year to Sep 29 5

52 Recovery in dwelling prices has been broadly-based index Jan 27=1 * year to date Australian dwelling prices Bottom 2% (+7.5%) Middle 6% (+8.2%)* Top 2% (+8.2%) Sources: RP Data, Economics@ANZ 51

53 Significant inflows of first homebuyers and upgraders with investors becoming more active now Housing finance commitments (excl. refin.) First homebuyer Non-first homebuyer 2, no./month 38, no./month 18, 36, 16, 34, 14, 32, 12, 1, 8, 3, 28, 6, 26, 4, 24, 2, 22, 2, Sources: ABS, ANZ Economics 52

54 First-home buyers were the catalyst to price rises Housing finance commitments 4 35 ' 45 4 % of total annualised Upgraders Upgraders (excluding refinancing) Investors Refinancing First-home buyers 5 First-home buyers Sources: ABS, ANZ Economics 53

55 The household sector was well placed to accumulate debt with two-thirds having little or no debt million households 7% of homes with less than a 4% servicing ratio Over 55 years old - 54 years old Debt servicing ratio the lending boom was concentrated on existing homeowners who traded up to bigger and better houses and bought investment properties. Many of these were people in the 4s and 5s who previously had low levels of debt. Deputy Governor of Reserve Bank of Australia Ric Battellino. Zero < 4 < 8 < 12 < 16 < 2 < 24 < 28 < 32 > 32 Debt servicing ratio 54

56 Mortgage rates have reduced substantially, providing cash flow relief to households 12 % 11 1 Floating rates year fixed 6 2-year fixed

57 In New Zealand property markets have recovered off lows and house prices are starting to rise Stratified Median NZ House prices 55 5 $' Auckland (+9.%*) Wellington (+8.7%*) NZ (+5.3%*) 3 Canturbury (+1.2%*) Other South Island (+1.5%*) Sources: REINZ, ANZ *12 months to September 29 using REINZ Stratified House Price Index 56

58 While floating mortgage rates remain at 4 year lows, longer term fixed mortgage rates have started to rise 12 % 11 1 Floating rates year fixed 2-year fixed Sources: RBNZ, ANZ 57

59 Credit Quality

60 Thousands RWA reduction from reducing EAD 1 and portfolio refinement, partly offset by portfolio deterioration, significantly impacting expected loss Movement in Credit Risk Weighted Assets ($b) 25.8 (9.4) 6.3 (13.7) Regulatory Expected Loss movements ($m) (19) (4.2) ,51 (84) Impacted by 5.5% reduction in EAD Data refinement in Slotting Corporate, Retail and Standardised Basel II Asset Classes Impacted by portfolio deterioration, primarily Corporate / SME Sep-8 Portfolio growth & mix Risk Migration Portfolio Data Review FX impacts Sep-9 Sep-8 Portfolio growth & mix Risk Migration IP Portfolio Data Review FX impacts Sep-9 Sep 8 Mar (5.7) NB HOH changes do not add to YOY due to changes in mix Mar 9 Sep (13.3) 1. (7.8) (7.9) Sep 8 Mar 9 3, (65) 1 4,18 Mar 9 Sep 9 4,18 (23) (29) 4,529 1:Exposure at Default is also referred to as Regulatory Credit Exposure 59

61 EAD reduction impacted by derivatives, reduction in off balance sheet exposures, portfolio management, exchange rates and data refinement EAD($bn) (5.5%) $bn (7.7%) (2.6%) Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Corp/Corp SME Bank & Sovereign Residential Mortgage QRR & Other Retail Specialised Lending Other CRWAs Standardised EAD Basel II Asset class movements Sep 9 vs Sep 8 8% 4% Largest reduction in absolute terms down $33.1b (16.9%) Sep 9 vs Sep 8-17% -4% -15% -18% -3% -14% Sep 9 vs Mar 9 3% -4% -1% -3% -19% -13% 6

62 Credit Risk Weighted Asset reduction primarily from declining asset volumes, exchange rate movements and data refinement Credit Risk Weighted Assets ($bn) $bn (8.4%) 3 (1.9%) (4.8%) Credit RWA Basel II Asset class movements Sep 9 vs Sep 8-9% 9% 5% -2% -8% 4% % Sep 9 vs Mar Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Largest reduction in absolute terms, down 11.2bn (8.8%) Sep 9 vs Sep 8-15% -41% 2% 1% -4% -6% -13% Corp/Corp SME Bank & Sovereign Residential Mortgage QRR & Other Retail Specialised Lending Other CRWAs Standardised 61

63 IP charge by Region and Segment: Increased impact from New Zealand and Middle Market Total IP Charge Segment IP charge by region 1 By Region Commercial IP by region 1,531 1, H7 1H8 2H8 1H9 2H9 Australia New Zealand APEA 2H7 1H8 2H8 1H9 2H9 Australia New Zealand APEA By Segment 1, ,283 Consumer IP by region H7 1H8 2H8 1H9 2H9 Consumer Commercial Institutional 2H7 1H8 2H8 1H9 2H9 Australia New Zealand APEA 1: Note: Institutional IP not shown: 87% in Australia (FY8), 96% in Australia (FY9) 62

64 Breakdown of FY9 collective provision charge $m Lending Risk Impacts Cycle & Concentration Mix APEA (ex Insto.) & Group Australia Division $235m Group Total Group Centre (2) 251 (1) (13) (3) (26) New Zealand Division (2) (6) Institutional (144) 1-1 (56) (183) 63

65 Collective Provision: Group remains well provisioned Collective Provision balance / Credit RWA s (%) 1.4% 1.2% 1.%.8%.6%.4%.72%.94% 1.13% 1.6% 1.31% Total Provision balance ($m) 4,526 4,83 3,496 1, ,341 2,262 2, ,992 2,34 2,821 2,742 3, Sep 7 Mar 8 Sep 8 Mar 9 Sep 9 CP Balance IP Balance Credit Risk Weighted Assets ($b).2%.% Sep 7 Mar 8 Sep 8 Mar 9 Sep Provision Coverage Total provision balance / Credit RWAs Sep 7 Mar 8 Sep 8 Mar 9 Sep 9.96% 1.36% 1.39% 1.58% 1.97% 1H8 2H8 1H9 2H9 64

66 9 Days Past Due: Rate of growth has slowed.5%.45% 9 Days Past Due as a % of Gross Lending Assets less Non Performing Loans.44%.46% Australian Consumer Portfolio 9 days past due / GLA (%) 2.% 1.5% 1.%.4%.35%.3%.25%.2%.15%.1%.5%.% Well Secured Not well secured.3%.18%.21% 2H7 1H8 2H8 1H9 2H9.5%.% 2.% 1.5% 1.%.5%.% Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Retail Mortgages Consumer Cards New Zealand Consumer Portfolio 9 days past due / GLA (%) Reduction partially reflects greater migration of loans to impaired Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Retail Mortgages Consumer Cards 65

67 Impaired facilities: moving through the cycle, Institutional slowing, greater impact in middle market and NZ consumer Institutional impaired facilities by Region H8 2H8 1H9 2H9 Commercial impaired facilities by Region ($m) ($m) 1H8 2H8 1H9 2H9 Consumer impaired facilities by Region ($m) H8 2H8 1H9 2H9 Australia New Zealand APEA NPCCD Restructured NPCCD: Net Non Performing Commitments & Contingencies Non Performing Loans (by single names) $5m - $9m <$5m $1m - $19m $2m - $49m Institutional $5m - $99m > $1m Impaired Loans (Top 5 industries) Bus. Services Health & CS Manufacturing Finance & Insurance Property Services Construction W sale Trade Agriculture Finance & Insurance Manufacturing Commercial 66

68 Watch & Control lists: Control list stabilising, new names onto the watch list slowing in second half Watch 1 & Control List by limits (indexed) Sep 8 Oct 8 Nov 8 Business Services 4% Watch list by industry Number of Groups (%) Other 17% Agriculture, Forestry & Fishing 3% Dec 8 Jan 9 Feb 9 Mar 9 Apr 9 May 9 Jun 9 Jul 9 Transport & Storage 4% Retail Trade 7% Manufacturing 9% Wholesale Trade 14% Property Services 15% Watch list 1 An alert report of customers with characteristics identified which could result in requirement for closer credit attention Watch list reduced since March 29 from easing risk concerns, debt reductions, equity raising and improved trading results Aug 9 Sep Watch List Limits Control List Limits Control List A report of high risk accounts which may or may not have defaulted The number of new names on the control list has stabilised over the past 6 months 1. Watch list parameters have changed to watch lists disclosed in previous publications. Current watch list has been restated back to September 28 for direct comparability purposes 67

69 Risk Grade Profiles and large industry exposures Group risk grade profile by Exposure at Default Institutional risk grade profile by Exposure at Default 4.4% 5.7% 6.3% 9.% 8.9% 8.8% 13.5% 13.% 12.6% 13.6% 13.8% 13.4% 59.5% 58.6% 58.9% 23% 5% 5% 6% 12% 5% 12% 5% 12% 16% 17% 17% 64% 61% 61% Sep 8 Mar 9 Sep-9 AAA to BBB BBB- BB+ to BB BB- >BB- Top 5 industries by EAD (% of total portfolio) 4% 4% 5% 5% 3% 6% 7% 5% 8% 8% 6% 7% 15% 16% 12% Sep-8 Mar-9 Sep-9 AAA to BBB BBB- BB+ to BB BB- >BB- Sep 8 Mar 9 Sep-9 Finance & Insurance Property Services Manufacturing Agri. Forest Fishing Wholesale Trade 68

70 Australian Mortgage portfolio well diversified with good underwriting standards Consumer lending represents 58% of gross loans and advances for the group 75% of the portfolio in Australia and balance primarily in New Zealand 95% of portfolio is residential mortgages with an average loan size of $25k No sub prime exposures Australian mortgage portfolio QLD NSW WA TAS VIC SA NT ACT Mortgages Australia Loan to Valuation profile 83% of owner occupied and 88% of investment loans have a dynamic LVR of 8% or less Diversified mortgage flows across channels FLOWS FUM 19% 17% 17% 19% 16% 45% 38% 37% 44% 46% 37% 45% 46% 37% 38% -6% 61-75% 76-8% 81-9% 91%+ LVR at origination Sep 8 LVR at origination Sep 9 Current LVR Sep 8 Current LVR Sep 9 1H8 2H8 1H9 2H9 Sep 9 Broker Network Specialist / other 69

71 Australia - consumer lending delinquencies have remained at manageable levels Australia Mortgages 9 day delinquencies by State (% of GLA) 2.% 2.% Consumer Cards 9+ day (% of outstandings) 1.5% 1.5% 1.% 1.%.5%.5%.% Sep-6 Sep-7 Sep-8 Sep-9 ACT NSW QLD SA TAS VIC WA.% Sep-6 Sep-7 Sep-8 Sep-9 Low Rate Loyalty Proprietary 7

72 Australia Retail credit card portfolio tracking inside prior year trends Consumer Cards Utilisation (% of limit) Consumer Cards 3+ Day Arrears Month on books (Indexed as at FY5) 1 6.% Index 12 5.% 1 4.% 8 3.% 6 2.% 4 Reflects tighter credit standards 1.% 2.% Mar-6 Dec-6 Sep-7 Jun-8 Mar-9 Low Rate Commercial Loyalty Proprietary Portfolio

73 Commercial industry exposures $b $b Exposure at default EAD (LHS) % of Group portfolio (RHS) % in non performing (RHS) 1 % in high risk (RHS) 1 Agriculture, Forestry & Fishing Sep-8 Mar-9 Sep-9 Manufacturing Sep-8 Mar-9 Sep-9 15% 1% 5% % 15% 1% 5% % $b $b Mining Sep-8 Mar-9 Sep-9 Electricity, Gas & Water Supply Sep-8 Mar-9 Sep-9 15% 1% 5% % 15% 1% 5% % Wholesale trade $b 4 15% 3 1% 2 1 5% % Sep-8 Mar-9 Sep-9 Retail trade $b 4 15% 3 1% 2 1 5% % Sep-8 Mar-9 Sep-9 1. Percentage of the industry portfolio Exposure at Default 72

74 Commercial industry exposures $b $b $b Exposure at default EAD (LHS) % of Group portfolio (RHS) % in non performing (RHS) 1 % in high risk (RHS) 1 Commercial property Property and business services 2 Sep-8 Mar-9 Sep-9 Construction Sep-8 Mar-9 Sep-9 Finance and insurance Sep-8 Mar-9 Sep-9 15% 1% 5% % 15% 1% 5% % 2% 15% 1% 5% % $b Sep-8 Mar-9 Sep-9 $b Sep-8 Mar-9 Sep-9 $b Sep-8 Mar-9 Sep-9 73 Transport and storage Other 1. Percentage of the industry portfolio Exposure at Default, 2. excludes Commercial property see separate category, 3. Includes Education, Accommodation, Cafes & Restaurants, Communication Services, Government Administration & Defence, Health & Community Services, Cultural & Recreational Services, Personal & Other services, Unknown and Non-classified 15% 1% 5% % 15% 1% 5% % 2% 15% 1% 5% %

75 Commercial Property Exposure Commercial Property Exposure GLA by Region Commercial Property Exposure by Sector Australia Offices Retail Residential - land subdivision Industrial 1H8 2H8 1H9 2H9 Australia New Zealand APEA Commercial property exposure of $26.2bn, a decrease of 8% on prior year Portfolio remains at 8% of total Gross Lending Assets This is well inside 1% cap ANZ has imposed on commercial property lending in Australia and New Zealand The offices sector makes up 25% of total commercial property exposure New Zealand Tourism and Leisure Other Offices Retail Residential - land subdivision Industrial Tourism and Leisure Other 74

76 199s commercial property downturn characterised by significant oversupply vs other downturns with the exception of WA & QLD 4% Supply Pipeline as a % of Total Stock Australian CBD Office Market 35% 3% 25% 2% 15% 1% 5% % Sydney Melbourne Brisbane Perth Adelaide 1982 Recession 1991 Recession 21 Slowdown 29 Recession Source: Jones Lang LaSalle 75

77 New Zealand: Provisioning levels increasing as the impacts of recession percolate through the economy Provisions have grown from low levels NZ Geography (NZDm) H7 2H7 1H8 2H8 1H9 2H9 New IP Recoveries CP The NZ economy experienced 5 quarters of recession before recording.1% economic growth in the June 29 quarter. This recession has been the most severe NZ has seen since the mid 197s. Provisioning has increased significantly as impacts of credit cycle move through the economy. While provisioning has risen, write-offs remain relatively low. Workouts are taking longer to finalise in the absence of refinancing options. Asset values (particularly housing) have stabilised. Collective provisions increased NZ$159 to ensure appropriate coverage for potential losses across the portfolio Contribution to Collective Provision Charge (NZ$m) Scenario Volume Risk FY7 FY8 FY9 Individual Provision Charge Analysis Category IP Charge Net Write-off NZDm bps NZDm Bps Personal Housing SME Rural Commercial/Insto Unsecured Total

78 New Zealand mortgage portfolio beginning to stabilise Number of PLA Notices issued 1 and mortgagee sales concluded Interest rate reductions benefiting consumers switching from fixed to floating rates PLA Issued (LHS) Spread between 2 year fixed mortgage rate and corresponding rate 2 years prior Forecast 16 Mortgagee Sale Concluded (RHS) 5 2 Mortgages with <1y to rate reset s Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 1. PLA notice = property law action notice. Customer has 45 days to repay arrears owing after which bank can proceed to mortgagee sale. NZ has no equivalent to the Australian mortgagee in possession process. 77

79 New Zealand: Impaired Assets have increased however arrears have reduced 9 Days Past Due largely secured Non-performing loans Personal Housing Business Rural SME Unsecured NZ$445m 92% has security coverage H7 2H7 1H8 2H8 1H9 2H9 2.% 1.5% 1.%.5%.% Non-Performing Loans (LHS) % of GLA (RHS) Institutional UDC Well diversified and well secured book Rural Commercial & Corporate Gross Loans and Advances Retail & Wealth Unsecured 8% <4% Secured 3% 4-6% Secured 2% Fully Secured 75% 6-8% Secured 3% 8-1% Secured 9% Non-performing loans (NPL s) have increased across all portfolios. Rural segments, particularly dairy farmers, are now a more significant proportion of new NPL s. Given the high proportion of NPL s secured by property and the lack of refinancing options, recovery or rehabilitation involves a considerable work-out period. Arrears have reduced across most portfolios over the last quarter particularly in consumer and personal mortgages. Initiatives in customer credit education and early intervention strategies are having a beneficial impact on Retail arrears volumes and values. 78

80 New Zealand: Commercial credit quality holding up but rural showing deterioration. Rural portfolio remains very well secured. Commercial credit quality maintained despite poor economic conditions Average Commercial Customer Credit Rating Mar 8 Jun 8 Sep 8 Dec 8 Mar 9 Jun 9 Sep 9 Rural C&CB UDC Commercial and Corporate Banking. Property Credit quality shows decline in CCR 1-4 with increase in CCR 7-1 (NZ$b) 2,113 2,265 2,277 2,358 1,576 1,69 Jun 8 Sep 8 Dec 8 Mar 9 Jun 9 Sep 9 CCR 7-1 CCR 6 CCR 5 CCR 4 CCR 1-3 Rural portfolio remains well secured Loan to Valuation Ratio <5% 5-65% 65-8% 8%+ 28% 46% 18% 8% Rural credit quality has reduced over the last year however a recent lift in dairy payouts is expected to provide some stability. Strength of the NZ dollar represents a continued headwind to the sector. Commercial segments also experiencing tough domestic conditions with single product and single market customers vulnerable to financial stress. Economic conditions are expected to remain difficult over the next year. Commercial property values are softening however tenancy levels remain relatively strong. 92% of portfolio has an LVR<8% At fair market (current) value 74% of the portfolio has an LVR of 65% or better. 79

81 29 Full Year Results

82 Overview of the 29 result Full Year 29 ($m) Growth 29 vs 28 Underlying Profit 1 3,772 1% Revenue 1 14,367 17% Expenses 1 (6,68) 12% Provisions 1 (3,56) 46% Statutory Net Profit After Tax 2,943 (11%) EPS cents (4%) Full Year Franked Dividend (interim 46cps, final 56cps) 12 cents (25%) Customer Deposits 233,141 14% Net Loans and Advances incl. Acceptances 345,769 (1%) 1. All figures other than NPAT and full year dividend are underlying. 81

83 Geographic performance - Highlights Underlying Profit by geography 2 ($m) Australia Strong contributions from both Retail and Institutional Asia Pacific, Europe & America Partnerships and the Institutional business the major contributors New Zealand Challenging domestic economic conditions impacted results Institutional division Institutional revenue up 37% driven by both customer flows and trading revenue Australia APEA New Zealand Institutional division Up 81% 513 Down 32% 1,41 Up 82% 2,56 Up 13% 1. Asia Pacific, Europe & America. 2. Institutional is a global line of business and is also included within Australia, New Zealand and APEA regions. 82

84 Solid underlying business performance, timing of costs and higher provisions impacting second half Group Underlying Profit FY9 vs FY8 ($m) 1, (662) (966) 3, ,426 17% 12% 46% 7% (98) 3,772 (829) 2,943 Underlying profit up 1% Sep 28 Reported Non Core Sep 28 Underlying NII Other Income Operating Expenses Provisions Income Tax, OEI Sep 29 Underlying Non Core Sep 29 Reported Group Underlying Profit 2H9 vs 1H9 ($m) Mar 9 reported Non Core Mar 9 underlying NII Other income Operating expenses Provisions Income Sep 9 tax & underlying minorities Non core Sep 9 reported 1, ,98 3% 5% 6% 13% (5%) 1,864 (338) 1,526 83

85 Statutory profit reconciliation 2H9 1H9 FY9 FY8 YOY Growth Profit ($m) 1,526 1,417 2,943 3,319 (11%) Adjustments to Statutory Profit - Top up of NZ conduits tax provision (196) - (196) - - Economic Hedging fair value gains/losses (79) 461 (248) Other Cash Profit 2, ,383 3,29 12% Other Non Core Items - One ANZ restructure Both impacted by credit (4) (79) (83) - - ING New Zealand settlement spreads (24) (97) (121) - - Credit Intermediation Trades 595 (664) (69) (371) - Non Continuing businesses / Other (2) (114) (116) (26) Underlying Profit 1,864 1,98 3,772 3,426 1% 84

86 Geographic businesses delivering solid performance in Australia and significant growth in Asia Pacific, NZ impacted by difficult conditions 29 Pre Provisions Profit ($m) 29 Net Profit After Tax ($m) Australia 5,728 up 18% Australia 2,56 Up 13% 1 1, profit APEA APEA up 7% up 81% 29 increase 29 decrease New Zealand 1,456 up 5% 2 3 New Zealand 513 down 34% 2H9 Performance (vs 1H9) 2H9 Pre Provision profit 1. Asia Pacific, Europe & America. 2. New Zealand 29 PBP NZD 1,783m; 2H9 vs 1H9 PBP down 2%. 3. New Zealand 29 NPAT NZD 628m; 2H9 vs 1H9 NPAT down 73% 2H9 NPAT Australia 17% 36% APEA 25% 31% New Zealand 23% 75% 85

87 Global Markets and Asia Pacific key contributors to increase in total income Total Income ($m) 14,367 17% 12,295 7,327 7,4 6,315 1,125 5,98 1,66 46% of FY9 growth Markets Income (including NII) ($m) FY9 growth: 77% ,66 1,125 1,645 1,658 Excluding markets FY9 up 1% 1H7 2H7 1H8 2H8 1H9 2H9 Markets sales Markets trading 4,329 4,544 Growth in Asia offsetting lower New Zealand income (Total income %) % 68% 1H8 2H8 1H9 2H9 Net Interest (ex Markets) Other Income (ex Markets) Markets income 14% 1% 21% 18% Australia New Zealand APEA 86

88 Asia Partnerships a key contributor to growth in other income Underlying other income ($m) $m 4,44 4, ,199 2,241 2,218 2, Refer Markets comments $m Composition of Other 1 5 Flat growth 29 vs % increase 29 vs H8 2H8 1H9 2H9 Fee income FX earnings Trading securities Other FX Impact 1H8 2H8 1H9 2H9 Asia Partnerships INGA / NZ Other 87

89 Accounting noise Asset & funding mix Funding costs Deposits Assets Markets Equity Mix Other Margins moving back to pre crisis levels Net Interest Margin (NIM) Full Year 29 (bp) adjusted 3.5 (12.2) (27.9) Re-pricing impacts (1.4) (3.7) Second Half 29 16bp NIM excluding Accounting noise Basis points 2H6 2H7 2H8 2H9 Group NIM Group risk adjusted NIM 88

90 Thousands Strong deposit growth and subdued lending position a result of environmental drivers, strategic and portfolio initiatives Customer deposit and lending growth (29 vs 28) (%) Total Group Australia Division NZ Division (NZD) APEA Division 1 Global Instit. (1%) (1%) (11%) (18%) Customer Deposits 1% 1. Includes Institutional APEA under Matrix reporting 7% 14% 16% Average Net Loans up 9% 23% 35% Net Loans and Advances including acceptances Institutional Lending growth returning to more normalised levels $b (NLA incl Acceptances $b) 29% CAGR H7 2H7 1H8 2H8 1H9 2H9 8% CAGR 89

91 Expense growth directed to growth markets and to drive superior returns, costs contained in New Zealand and Australia division Contribution to 29 cost growth 12.3% Revenue growth Cost growth Jaws APEA 1 3.8% Investment in network, support functions and staff to deliver growth agenda FX Adjusted 32% 3% 2% FX Adjusted Institutional 2 3.5% Investment in rebuild and refocus program, remuneration increases 29% 2% 9% Australia Division 2.1% Front line staff and systems, salary inflation 9% 4% 5% Group Centre NZ Division FX Impact 1.3%.3% 1.3% Infrastructure & transformation spending Costs well contained - +$71m - FX Adjusted (4%) 2% (6%) 2H9 expense growth exceeded first half, impacted by timing of performance based payments 1. Asia Pacific, Europe & America, including Institutional. 2. Excluding Asia Pacific, Europe & America. 9

92 Provision charge composition changing with the credit cycle - moved towards middle market, significant increase in New Zealand Total Provision Charge ($m) Individual Provision Charge ($m) 77% 119% 88% 5% 13% 1,621 1, , Wholesale > 1m Wholesale < 1m Commercial Consumer secured Consumer unsecured 1, , , H7 2H7 1H8 2H8 1H9 2H9 1H7 2H7 1H8 2H8 1H9 2H9 Australia New Zealand APEA 91

93 Balance sheet well positioned for the current economic environment Collective Provision Balance / Credit RWAs (%) Collective Provision Charge returning towards a more normalised level ($m).73%.94% 1.13% 1.6% 1.31% 818 No net release from Concentration / Economic Cycle provisions across year Sep 7 Mar 8 Sep 8 Mar 9 Sep 9 Total Provision Coverage Total Provision Balance / Credit RWAs FY6 FY7 FY8 FY9 Lending Growth Risk Profile Sep 7 Mar 8 Sep 8 Mar 9 Sep 9.83% 1.7% 1.39% 1.58% 1.97% Portfolio Mix Economic Cycle Other Concentration 92