Investor Presentation. Australia and New Zealand Banking Group Limited November 2002

Transcription

1 Investor Presentation Australia and New Zealand Banking Group Limited November 22

2 Outline Result review Overview Revenue/Costs Credit Quality Delivering for all stakeholders Strategy Outlook 2 Investor Presentation

3 Delivering on our commitments Performing well - record profit of $2,168m * Exceeded all targets * EPS Growth 17% ROE 21.6% Cost Income ratio 46.% Strong capital position, well provisioned Record staff satisfaction up 16% to 78% Exciting Restoring Customer Faith pilot Specialised business strategy operating well Stretch target for 23 of 1% EPS growth * Before significant transactions 3 Investor Presentation

4 Building a credible track record $m NPAT % ROE % Income/Expenses $b Total Shareholder Return Investor Presentation

5 A diversified portfolio performing well Personal Banking Australia Mortgages Institutional Banking Transaction Services Small Med Business Corporate Banking Personal Banking NZ Consumer Finance Asset Finance Foreign Exchange Structured Finance Group Treasury Wealth Management Corp Finance & Advisory Asia/Pac Personal Banking Capital Markets ING JV/ANZ FM 5 Investor Presentation 22 NPAT $m nd half NPAT $m NPAT increase NPAT decrease Prior period NPAT 1 2 3

6 Provisioning charge reflects conservative management Mar Sep- 99 ELP adjustment ELP $ ELP Charge $m bp s ELP BP's 4 Mar Sep- Mar Sep Mar Sep ELP portfolio level adjustment continued reflecting ongoing global economic uncertainty calculated as one notch downgrade across GSF portfolio Domestic ELP rate declining ELP adjustment likely to continue until international defaults stabilise 6 Investor Presentation

7 Consumer portfolio continues to improve 3. % Arrears > 6 days Consumer sector in good shape, with continuing low levels of unemployment Mortgage arrears at record lows unlikely to be sustainable Ongoing focus on collections management Scorecards remain tight.5 Small Business. Mortgages Mar-1 Jun-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-2 Feb-2 Mar-2 Apr-2 May-2 Jun-2 Jul-2 Aug-2 Sep-2 Cards & Personal Loans Personal & SME Businesses - Overall (excl Asset Finance, Pacific, Asia) 7 Investor Presentation

8 Mortgage outlook slight deterioration % Jan- 1 6 day arrears improving May- 1 Home Loan Res Inv Loan Sep- 1 Jan- 2 May- 2 House prices well below % change previous peaks Sep- 2 Sydney Melbourne ANZ has not allowed FHOG to be the source of minimum equity requirement Behavioural scores remain stable Scorecards tightened in 21, resulting in higher quality borrowers Unemployment, a key driver of default, continues to trend downwards Scenario analysis at 95% confidence suggests loss not exceeding 4-6 bp over next 12 months, compared with ELP of 5 bp Based on uncommitted monthly income at time of application, 1% of customers could meet a 1% rise in interest rates, and 97.2% could meet a 2% increase without rearranging affairs 8 Investor Presentation

9 Domestic corporates in good shape, some concerns in ANZIB offshore $4.8bn C&IB, Asia & GTS Risk Grade Profile* $38.7bn $39.4bn ANZIB Risk Grade Profile* $15.9bn $15.bn $14.2bn AAA to BBB+ 34.9% 32.8% 37.7% 47.3% 42.1% 44.4% 26.8% 28.8% 26.3% 3.% 33.3% 29.9% BB+ to BB BBB to BBB- BB- > BB- 22.9% 23.% 22.3% 11.1% 11.1% 1.6% 4.3% 4.3% 3.1% Sep-1 Mar-2 Sep % 15.3% 13.2% 3.8% 3.4% 2.5% 6.4% 6.8% 8.7% Sep-1 Mar-2 Sep-2 B+ to CCC 3.% 3.2% 2.4% 4.5% 2.7% 4.1% Non-accrual 1.3% 1.1%.7% 1.9% 4.1% 4.6% >BB- = B+ B, B-, CCC & non-accrual * Risk grade profile by outstandings 9 Investor Presentation

10 $m Non-accrual loans have decreased due to domestic reductions Historic Gross Non-Accrual Loans (LHS) Net Non-Accrual Loans (LHS) Non-Accrual Loans/ Loans & advances (RHS) % 1.%.5% $m Geographic Gross Non-Accrual Loans % of total lending assets 78% 13% 9% % Aust NZ Inter 1 Investor Presentation

11 Overall - provisioning levels strong % 2 Provisions/Non Accrual Loans % 1.2 GP/RWA s ANZ Australia Canada Germany Source: CSFB France UK.7 ANZ Sep 2 CBA Jun 2 NAB Mar 2 WBC Mar 2 11 Investor Presentation

12 Outline Result review Overview Revenue/Costs Credit Quality Delivering for all stakeholders Strategy Outlook 12 Investor Presentation

13 Delivering on our commitments to shareholders Specialised business units performing well 14 of 16 recorded higher profits year on year Specific provision unusually high, but cumulative specifics well covered by cumulative ELP from inception in 1997 Major new governance and transparency initiatives Substantially enhanced disclosure on capitalised expenses, asset quality, options expense, compensation Upgraded audit policy introduced Recognition for disclosure and transparency Remuneration practices substantially reformed 13 Investor Presentation

14 % Delivering for staff, and increasingly a preferred employer Staff satisfaction up Strong employment brand positions Satisfaction ANZ Regard ANZ Values Graduate Applications 14 Investor Presentation

15 New customer initiatives getting real traction s Opened 159 Net new account openings up 165%* Closed 127 Net % Opened 181 Closed 96 Net 85 Key indicators show Restoring Customer Faith program is beginning to deliver Indicators 2H 22 Vic Other States Revenue growth 5.1% 4.% Staff advocacy 65% 62% Customer satisfaction FUM growth 8.% 6.2% 21 prior corresponding period 22 3 weeks since launch * Victoria RCF pilot 15 Investor Presentation

16 Current performance issues addressed Issue Offshore credit losses Response Reductions in credit limits Re-focus strategically NZ consumer satisfaction Greater local autonomy and resourcing Roll out Restoring Customer Faith Consumer Finance 2 nd half Management reorganisation Restructure programs Technology project benefits Wind down of major projects Appointed MD major programs JV performance below plan Accelerate integration Capital return hedged 16 Investor Presentation

17 Clear strategic investment priorities Asia/ Pacific Global Businesses Options Refocus Invest in options for longer term Lower risk orientation Eliminate concentrations Domestic Businesses Grow Invest for growth and position 17 Investor Presentation

18 Opportunities for growth Opportunity Personal Banking Approach Full rollout Restoring Customer Faith Expand network in growth locations Corporate & SME Investment spending budgeted Leverage business integration synergies New Zealand Autonomous customer organisation Rollout Restoring Customer Faith Wealth Management Maintain high investment spending Lower profit volatility from JV Institutional & ANZIB Leverage leading relationship position Leverage business integration synergies 18 Investor Presentation

19 Key priorities for 23 Rollout Restoring Customer Faith, reconnect with community Complete JV integration. Leverage distribution opportunity Reposition cards and mortgages for tougher environments Narrow focus of offshore activities to reduce risk Capture share of cyclical upswing in corporate lending and SME Implement three major strategic cost programs, fewer projects Accelerate shift in performance culture and identify and develop the next generation of leaders 19 Investor Presentation

20 23 targets stretching but unchanged * 23 Target EPS growth 1% 17% 1% ROE 2.2% 21.6% 2% Cost-income ratio 48.% 46.% 45% ACE Ratio 5.9% 5.7% 5.25% % Credit rating AA- AA- AA- *excluding significant transactions 2 Investor Presentation

21 Summary delivering on our commitments Exceeded targets in a difficult year Specialisation strategy working Becoming employer of choice Increasingly delivering for customers and the community 23 target 1% EPS growth Risks being addressed Moving from perform to perform and grow 21 Investor Presentation

22 Copy of presentation available on

23 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 23 Investor Presentation

24 Supplementary Information Pack Australia and New Zealand Banking Group Limited November 22

25 Additional information on strategy 25 Investor Presentation

26 Our growth philosophy unchanged but primary focus on organic out-performance Organic out-performance Portfolio reshaping Transformational moves Extend specialisation Grow customer numbers Increase share of wallet Drive productivity Invest in high growth areas Build specialist capabilities Exit weak positions Risk reduction Step changes in positioning Creating new growth options Proactively shaping industry Our targets Revenue growth materially higher than expense growth Take business units to sustainable leadership positions Build a range of strategic options 26 Investor Presentation

27 Consumer portfolio significant opportunity for ANZ in domestic markets % % Share of Customers* ANZ CBA NAB WBC Wallet Share* ANZ CBA NAB WBC * source: Roy Morgan Research Priorities Deliver on promise of Restoring Customer Faith Improve community perceptions Deliver on JV Continue product innovation Utilise CRM capabilities Target market share growth of 1% pa in key markets 27 Investor Presentation

28 Corporate portfolio positioned for upturn, targeting fee income % System Business Credit Growth* Capture expected stronger lending growth from SMB and middle market corporates Focus on fee income in institutional business 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Corporate Portfolio Revenue Mix Today 25 Aspiration Non-Interest Interest 28 Investor Presentation * Forecasts economics@anz

29 C&IB successfully managing the transition to lower balance sheet intensity NIACC growth greater than profit growth 14% 26% Higher lending fees, flat balance sheet NPAT NIACC Lending Fees Balance Sheet 29 Investor Presentation

30 Asia/Pacific create low risk growth options East Asia and the Pacific are our priorities Focus on modest, low risk options in the Asian consumer sector Leverage Panin experience and our core capabilities Strengthen position in the Pacific East Asia Pacific 3 Investor Presentation

31 We will continue to shift the portfolio towards more attractive segments Source of profit - today High 5-1% 15-2% Market Attractiveness Small Bus Consumer Banking Wealth Mortgages ANZIB Cards Corporate High Market Attractiveness Source of profit ~25 5-1% < 1% ~8% Low Weak 25-35% Asset Finance 35-45% Strong Low Weak ANZ Position Strong Current ANZ Position 31 Investor Presentation

32 Executive options will only reward out-performance against market Price Executives rewarded for value premium after allowing for market growth Each 1/2 year the options will be issued at the prevailing weighted average five day price Standard TSR Option strike price ANZ share option indexed by movement in the S&PAB2I (The value below this line is passed to executives under a conventional option) S&P2BAI ANZ Share Price Year 1 Year 2 Year 3 Year 4 Year 7 etc 32 Investor Presentation

33 Additional information on 22 results 33 Investor Presentation

34 % Interest margins stable, lending and deposit volumes up Sep- Interest Margins 1.16 Mar- 1 Sep- 1 Mar Sep $b Average Lending & Deposit Volumes Mortgages Business Deposits Corp Bkg Bus Mortgages Personal 34 Investor Presentation ANZIB Asset Fin Group Sep-1 Mar-2 Sep-2 * Business Lending includes Corporate, ANZIB and Small Business Segments

35 Healthy underlying income growth $m ANZ/JV 41 Acquisitions & FX Impact 6375 Adjusted revenue base 6.3% 6.9% 439 Underlying growth Income Drivers Mortgage outstandings up $8.9b, partly offset by $2.7b decline in Corporate lending assets Deposits up $8b, with an equal increase in both Personal and Corporate Margins were flat over the year at 2.77%, although second half slightly higher than first half Lending fees up 11%, principally driven by corporate businesses Non lending fees up 8%, with strong transaction volumes in consumer finance a major contributor 35 Investor Presentation

36 Cost income ratio on track to meet target of $m CTI (%) Expenses Cost Income Ratio Peer Average CTI* Peer average impacted by funds management acquisitions $31m expense reduction from sold businesses Effective half on half cost growth of 1.8% Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar- Sep- Mar-1 Sep-1 Mar Sep We will invest more in growth areas, particularly personal businesses 2 $361m restructuring provision fully utilised, ongoing $6m+ charge likely * Source: CSFB 36 Investor Presentation

37 Additional credit quality information 37 Investor Presentation

38 House prices unemployment a key driver Change in Sydney House Prices (%) Sydney house prices v change in unemployment Change in NSW unemployment (inverted scale) Change in Sydney House Prices (%) Sydney house prices v change in interest rates Change in mortgage rates (inverted scale) Sydney House Prices Change in Unemployment Sydney House Prices Change in Mortgage Rate 38 Investor Presentation

39 Key drivers of house prices expected to remain benign % % 12 Unemployment 18 Mortgage rates Source: economics@anz 39 Investor Presentation

40 Scenario analysis from ANZ economics Housing credit growth Business credit growth / / / / 2/1 21/2 22/3 23/4 24/5 25/ / / / / 2/1 21/2 22/3 23/4 24/5 25/6 Main Case Stronger Case Weaker Case - Domestically Driven Weaker Case - Globally Driven 4 Investor Presentation

41 Assumptions underlying scenario analysis Main case Global economy: moderate rebound in global economy Moderate tightening in policy - 5 bps over the next 12 months Moderating house price gains (3-5%) Housing investment falls, consumption slows, but business investment picks up Stronger case Global economy: as per main case Monetary policy as per main case Ongoing house price gains (8-12% growth) Consumption & business investment continue to grow firmly Credit growth strong Weaker case - domestically driven Global economy: as per main case 3x5bp interest rate rises up to Mar quarter 23 Negative 3% house prices Flow through to weaker employment, business investment and housing construction and turnover which in turn feed through to Credit and deposit volumes Weaker case globally driven Global economy sharply weaker - double dip US recession Interest rates cut to 4.% Negative 6% house prices (peak to trough) Negative employment growth, mild recession, much weaker business investment which in turn feed through to Credit and deposit volumes Source: economics@anz 41 Investor Presentation

42 Fallen Angels phenomenon continues March 21 ratings for Full Year 22 new non accrual loans BB 1% B 4% CCC 9% Speed of collapse difficult to model We continue to diversify the portfolio SCCL s further reduced and refined BBB + to BBB- 86% 42 Investor Presentation

43 Specific provisions again impacted by large corporate collapse Provisions $m Single customers 1% 9% 8% 7% 6% 5% 2 nd half Specific Provisions by size < $5m 1 customer Mar- 98 Sep- 98 Mar- 99 Sep- 99 Mar- Sep- Mar- Sep- Mar- Sep Net specific provisions - $m (LHS) % International SPs (RHS) ELP charge - $m (LHS) 4% 3% 2% 1% % $5m - $1m 2 customers 1 customer $1m - $2m $2m - $5m Only 4 customers with specific provisions greater than $1m >$1m 43 Investor Presentation

44 Global telecommunications portfolio in reasonable shape Telco Risk Grade Profile* Exposure by geography 3% AAA to BBB+ 62.6% $3.4b 83.8% investment grade 35% 5% BBB to BBB- 21.2% $1.2b BB+ to BB BB- >BB- 8.7% 6.7% Total Limits (AUD) B+ to CCC Non Accrual Sep-2 44 Investor Presentation $.5b $.4b >BB- = B+ B, B-, CCC & non-accrual.8% $5.5b 1.9% $.1b 4.8% $.3b # of customers 49 *Risk grade profile by limits % Aust/NZ (97.6% Investment Grade) Americas (69.3% Investment Grade) UK/Europe (71.1% Investment Grade) Asia (34.5% Investment Grade)

45 Global energy portfolio some issues, but containable Global Energy Portfolio* Exposure by geography AAA to BBB+ 46% $4.5b 9% 9% 4% BBB to BBB- 21% $2.b US Energy Portfolio 25% 53% BB+ to BB BB- >BB- 24% 8% >BB- = B+ B, B-, CCC & non-accrual 45 Investor Presentation $2.3b $.8b 1% 32% 16% 36% 16% $.7b $.36b $.8b $.36b Sep-2 # of (AUDm) Sep-2 # of customers customers Total Limits $9.6bn 78 $2.2bn 26 B+ to CCC 4.8% $.46b % $.27b 5 Non Accrual 3.2% $.3b 5 4.% $.9b *Risk grade profile by limits 2 Aust/NZ (77.5% Inv Grade) Americas (43.5% Inv Grade) UK/Europe (64.6% Inv Grade) Asia (61.% Inv Grade) Middle East (98.% Inv Grade)

46 Offshore SCCLs now in place 1% Comparative SCCL Customer Limits Lending type SCCL % for offshore Corporates (excl. GSF) indicative based on BBB- grading 1% Capped at AUD 3m 8% 75% 6% Capped at AUD 1m 25% > 1% Security < 1% 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 45m for > 1% Security and AUD 2m for < 1% Security 46 Investor Presentation

47 Cumulative ELP well above specific provisions $m GP top up $m ELP (LHS) SP (LHS) Cumulative difference (RHS) Cum + $25m top up (RHS) 47 Investor Presentation