Australia and New Zealand Banking Group Limited Peter Marriott, Chief Financial Officer Ross Glasscock, Executive Treasurer, Group Wholesale Funding Rick Moscati, Executive Treasurer, Balance Sheet Management Shaun Coughlan, Executive Treasurer Global Money Markets January 2003 1
Outline 1. Group Overview 2. Strategy and Business Overview 3. Financial/Operating Performance Overview 4. Term Debt Funding Strategy 5. Summary 6. Supplementary Information 2
ANZ Group Overview One of the four major Australian banks Established in 1835 Full range financial service provider Distinctive specialist business strategy 17 separate businesses Assets (as at FYE 2002) Market Cap. (as at 31/12/02) A$183.1bn.(US$102.8bn.) A$26.1bn.(US$14.7bn.) Tier 1 Capital Ratio 7.9% Credit Ratings AA-/Aa3 (Stable) 3
Highlights Performing well - record profit of $2,168m * EPS Growth 17% ROE 21.6% Cost Income ratio 46.0% 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 2003 of 10% EPS growth * Before gains from significant transactions 4
Outline 1. Group Overview 2. Strategy and Business Overview 3. Financial/Operating Performance Overview 4. Term Debt Funding Strategy 5. Summary 6. Supplementary Information 5
Building a credible track record $m NPAT 2400 2168 1900 1747 1870 1480 1400 1024 1106 900 400 24 22 20 18 16 14 12 10 % ROE 17.2 15.9 17.6 19.3 20.2 21.6 1997 1998 1999 2000 2001 2002 1997 1998 1999 2000 2001 2002 65 % 60 55 50 45 40 Income/Expenses Cost - Income Ratio $b 8 7 6 5 4 3 2 1 0 250 200 150 100 50 0 Total Shareholder Return 198 100 171 101 137 84 1997 1998 1999 2000 2001 2002 1997 1998 1999 2000 2001 2002 6
Leading reputation for disclosure and transparency Profit and Loss statements for all 17 Business Units Enhanced disclosure on : Critical accounting policies Special purpose and off balance sheet vehicles Deferred acquisition costs, software assets, and deferred income Accounting for derivates and hedging Excellent disclosure on credit quality External recognition, including awards for: Best communication of shareholder value Best management of continuous disclosure Best results/analyst briefings 7
Our growth philosophy unchanged but primary focus on organic out-performance Organic out-performance Portfolio reshaping Transformational moves Extend specialisation Restoring Customer Faith 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 8
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 ING ANZ JV Institutional & ANZIB Leverage leading relationship position Leverage business integration synergies 9
2003 Targets : EPS growth target is stretching 2001 2002 * 2003 Target EPS growth 10% 17% 10% ** ROE 20.2% 21.6% 20% Cost-income ratio 48.0% 46.0% 45% ACE Ratio 5.9% 5.7% 5.25% - 5.75% Credit rating AA- AA- AA- * excluding gains from significant transactions ** on 13 December 2002 ANZ indicated the first two months were weak falling short of our target primarily due to challenges in our credit card business. Action has been taken to improve performance over the remaining months of the year, although ANZ s 10% earnings per share target is now more stretching. ANZ however remains broadly comfortable with the consensus of market expectations for 2002-03 earnings of circa 8%. 10
Outline 1. Group Overview 2. Strategy and Business Overview 3. Financial/Operating Performance Overview 4. Term Debt Funding Strategy 5. Summary 6. Supplementary Information 11
A solid result, driven primarily by revenue growth 2,400 2,300 $m Non Interest Income 223 Significant transactions 154 2322 2,200 2,100 2,000 Interest Income 185 Expenses (61) Provisioning (79) Tax & OEI 30 2168 Tax rate change $79 1,900 1,800 1870 Tax on higher profit $(49) 1,700 1,600 1,500 2001 2002 2002 Before one-offs 12
Healthy underlying income growth $m 6900 6800 6700 6600 6500 6400 6300 6200 6100 6000 6406 2001 72 Sale of FM to ING ANZ JV 41 Acquisitions & FX Impact 6375 Adjusted revenue base 6.3% 6.9% 439 Underlying growth 6814 2002 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 13
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 14 2002 NPAT $m 0 100 200 300 2 nd half NPAT $m NPAT increase NPAT decrease Prior period NPAT 0 100 200 300
Provisioning charge reflects conservative management ELP Charge $m bp s ELP portfolio level adjustment continued 350 300 250 200 150 100 50 0 258 252 256 45 Mar- 99 42 Sep- 99 ELP adjustment ELP $ ELP BP's 40 Mar- 00 246 241 36 35 Sep- 00 Mar- 01 290 42 Sep- 01 301 42 Mar 02 309 43 Sep- 02 80 70 60 50 40 30 20 10 0 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 15
Cumulative ELP well above specific provisions $m GP top up $m 3500 700 3000 600 2500 500 2000 400 1500 300 1000 200 500 100 0 1997 1998 1999 2000 2001 2002 ELP (LHS) SP (LHS) Cumulative difference (RHS) Cum + $250m top up (RHS) 0 16
Consumer portfolio continues to improve 3.00 % Arrears > 60 days 2.50 2.00 1.50 1.00 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 0.50 Small Business 0.00 Mortgages Mar-01 Jun-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Cards & Personal Loans Personal & SME Businesses - Overall (excl Asset Finance, Pacific, Asia) 17
Mortgage outlook slight deterioration % 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Jan- 01 60 50 40 30 20 10 60 day arrears improving May- 01 Home Loan Res Inv Loan Sep- 01 Jan- 02 May- 02 Sep- 02 House prices well below % change previous peaks Jan- 03 Sydney Melbourne ANZ has not allowed FHOG to be the source of minimum equity requirement Behavioural scores remain stable Scorecards tightened in 2001, 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, 100% of customers could meet a 1% rise in interest rates, and 97.2% could meet a 2% increase without rearranging affairs 0-10 -20 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 18
Domestic corporates in good shape, some concerns in ANZIB offshore $40.8bn C&IB, Asia & GTS Risk Grade Profile* $38.7bn $39.4bn ANZIB Risk Grade Profile* $15.9bn $15.0bn $14.2bn AAA to BBB+ 34.9% 32.8% 37.7% 47.3% 42.1% 44.4% 26.8% 28.8% 26.3% 30.0% 33.3% 29.9% BB+ to BB BBB to BBB- BB- > BB- 22.9% 23.0% 22.3% 11.1% 11.1% 10.6% 4.3% 4.3% 3.1% 12.9% 15.3% 13.2% 3.8% 3.4% 2.5% 6.4% 6.8% 8.7% Sep-01 Mar-02 Sep-02 Sep-01 Mar-02 Sep-02 B+ to CCC 3.0% 3.2% 2.4% 4.5% 2.7% 4.1% Non-accrual 1.3% 1.1% 0.7% 1.9% 4.1% 4.6% >BB- = B+ B, B-, CCC & non-accrual * Risk grade profile by outstandings 19
Specific provisions again impacted by large corporate collapses Provisions $m Single 400 350 300 250 200 customers 100% 90% 80% 70% 60% 50% < $5m 2 nd half Specific Provisions by size 1 customer 150 100 50 0 Mar- 98 Sep- 98 Mar- 99 Sep- 99 Mar- 00 Sep- 00 Mar- 01 Sep- 01 Mar- 02 Net specific provisions - $m (LHS) % International SPs (RHS) ELP charge - $m (LHS) Sep- 02 40% 30% 20% 10% 0% $5m - $10m $10m - $20m 2 customers 1 customer $20m - $50m >$100m Only 4 customers with specific provisions greater than $10m 20
Non-accrual loans have decreased due to domestic reductions Historic Geographic $m 1800 1500 1200 1662 Gross Non-Accrual Loans (LHS) 1543 Non-Accrual Loans/ Loans & advances (RHS) 1391 1260 1203 1.5% $m 1000 800 651 623 Gross Non-Accrual Loans 78% % of total lending assets 13% 792 1999 2000 2001 2002 9% 869 681 643 900 600 900 657 699 770 628 1.0% 600 400 523 388 300 Net Non-Accrual Loans (LHS) 0.5% 200 50 80 59 37 0 1998 1999 2000 2001 2002 0.0% 0 Aust NZ Inter 21
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 22
Overall - provisioning levels strong 200 % Provisions/Non Accrual Loans % 1.20 GP/RWA s 180 1.15 160 140 1.10 1.05 1.06 120 100 80 1.00 0.95 0.90 0.96 0.90 60 0.85 0.82 40 0.80 20 0.75 0 0.70 ANZ Australia Canada Germany France UK ANZ Sep 02 CBA Jun 02 NAB Sep 02 WBC Sep 02 Source: CSFB 23
ANZ s adjusted common equity to RWA in line with peer average 6.25% 5.75% 5.25% 4.75% 4.25% 3.75% 3.25% ACE/RWA Target range ANZ NAB CBA WBC* ACE ratio at top end of target range Increasing possibility of buybacks over the next 12 months Valuable resource to be managed effectively and efficiently Commitment to maintaining AA- /Aa3 credit rating Maintain close dialogue with both rating agencies Tier 1 7.9% 7.8% 6.8% 6.5% 24 Notes Excludes mortgage servicing rights. Calculation excludes the fact that the Australian banks GP/RWAs is approx. 40bp higher than the average of the UK and Canadian banks. * WBC adjusted for acquisitions and buyback
Outline 1. Group Overview 2. Strategy and Business Overview 3. Financial/Operating Performance Overview 4. Term Debt Funding Strategy 5. Summary 6. Supplementary Information 25
Determining the term debt funding requirement 65% 60% 55% 50% 20% 15% Customer Funding Indicator Sep-2000 Sep-2001 Mar-2002 Jun-2002 Sep-2002 CFI Minimum Term Funding Indicator Importance of stable funding base Analysed domestic and offshore peer group Businesses required to meet a self funding ratio CFI (customer to total funding) Wholesale funding ratio TFI (term wholesale funding to term lending) Securitisation as a balance sheet tool 10% 5% 0% Sep- 1996 Sep- 1997 Sep- 1998 Sep- 1999 Sep- 2000 Sep- 2001 Sep- 2002 TFI Minimum 26
Term wholesale funding objectives Maintain continued access to major international debt capital markets Continue diversification by markets, investors, currency and structures Promote recognition of the ANZ s credit credentials through regular debt investor presentations Periodic benchmark issues Build liquid yield curves Promote transparency of issuance 27
The strategy to date has worked Highest penetration of investors of any of our domestic peers Diverse investor base Strong correlation between successfully executed public issuance and reverse enquiries received Most proactive of Australian major banks to regularly update domestic and offshore debt investors Access during difficult market conditions Credit line availability Rating agencies focus on liability management 28
Benefits of a consistent and widely communicated strategy Presented to in excess of 200 investors over three years More than 90 new investors in ANZ fixed rate debt Creditable spread performance despite volatile markets Spread to Euribor (bps) 40 35 30 25 20 15 10 5 0 70 65 60 55 50 45 40 35 30 Spread to Euribor (bps) Nov-01 Jan-02 Mar-02 May-02 Jul-02 Sep-02 ANZ 5.5% 23-Feb-05 (LHS) ANZ 4.875% 07-Feb-07 (LHS) ANZ 5.125% 07-Mar-06 (LHS) iboxx Bank Index (RHS) 29
ANZ s term funding requirement and strategy for 2003 A$7 billion term debt funding requirement - subject to global economic activity - predominantly senior debt - will consider subordinated debt - securitisation dependent on maintenance of CFI targets A$2 billion raised since 1 st October 2002 Maintain a prudent approach to management of the liability portfolio - avoiding maturity concentration and roll over risk Issuance preference for senior debt - one to five year maturities - aim to achieve a weighted average maturity of four years Focus on reverse enquiry MTNs - 50/50 mix between private placement and public issuance - willingness to meet investor needs - timely response 30
Achievable, based on previous experience Financial Year 2001 AUD USD HKD GBP JPY EUR Financial Year 2002 AUD USD HKD GBP EUR NOK SGD NZD CAD 100% 100% 90% 80% 70% Public 90% 80% 70% Public 60% 60% 50% 50% 40% 30% Private 40% 30% Private 20% 20% 10% 10% 0% 0% 31
Well diversified profile to avoid maturity concentration and roll over risks 6,000 AUD Issues USD Issues HKD Issues EUR Issues JPY Issues GBP Issues NZD Issues Other 5,000 4,000 Objective WAM of 4 years 3,000 2,000 1,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011+ 1 Other currencies include CHF, SGD, NOK and CAD 32
Potential to issue Lower Tier II Capital ratios 10% 5% 0% ANZ CBA NAB WBC Tier 2 2.78% 4.58% 3.76% 3.72% Hybrid 0.97% 0.49% 1.08% 0.36% ACE 5.74% 4.73% 5.37% 4.80% Adjusted Common Equity 6% Average (excl. ANZ) 5% 4% Opportunity to restructure capital composition Underweight Lower Tier II relative to domestic peer group Amortisation of subordinated debt portfolio under APRA guidelines Last issued Lower Tier II in Europe in 1997 3% ANZ CBA NAB WBC SGB 33
Outline 1. Group Overview 2. Strategy and Business Overview 3. Financial/Operating Performance Overview 4. Term Debt Funding Strategy 5. Summary 6. Supplementary Information 34
Summary Solid result in more challenging times, driven by healthy income growth and leading efficiency levels Credit quality strong in Australia, but some offshore issues we are dealing with Remain well provisioned Responsible capital management philosophy Leadership in disclosure and transparency Commitment to regular and disciplined wholesale term debt issuance 35
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 www.anz.com or contact Philip Gentry Head of Investor Relations ph: (613) 9273 4185 fax: (613) 9273 4091 e-mail: gentryp@anz.com 36
Outline 1. Group Overview 2. Strategy and Business Overview 3. Financial/Operating Performance Overview 4. Term Debt Funding Strategy 5. Summary 6. Supplementary Information 37
38 Additional information on strategy
New customer initiatives getting real traction 000 s 200 180 160 140 120 100 80 60 40 20 0 Opened 159 Closed Net new account openings up 165%* 127 Net 32 165% Opened 181 Closed 96 Net 85 Key indicators show Restoring Customer Faith program is beginning to deliver Indicators Vic 2H 2002 Other States Revenue growth 5.1% 4.0% Staff advocacy 65% 62% Customer satisfaction 6.8 6.6 FUM growth 8.0% 6.2% 2001 prior corresponding period 2002 30 weeks since launch * Victoria RCF pilot 39
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 40
Consumer portfolio significant opportunity for ANZ in domestic markets % 50 40 30 20 10 0 % 60 50 40 30 20 10 0 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 ING ANZ JV Continue product innovation Utilise CRM capabilities Target market share growth of 1% pa in key markets 41
Corporate portfolio positioned for upturn, targeting fee income 15 10 5 0-5 -10 % 1990 1992 System Business Credit Growth* 1994 1996 1998 2000 2002 2004 2006 Capture expected stronger lending growth from SMB and middle market corporates Focus on fee income in institutional business 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Corporate Portfolio Revenue Mix 43 57 35 65 Today 2005 Aspiration Non-Interest Interest 42 * Forecasts economics@anz
C&IB successfully managing the transition to lower balance sheet intensity 700 600 500 NIACC growth greater than profit growth 14% 26% 510 642 250 200 Higher lending fees, flat balance sheet 50 45 40 35 400 300 331 377 150 100 30 25 20 200 15 100 50 10 5 0 NPAT NIACC 0 1999 2000 2001 2002 0 2001 2002 Lending Fees Balance Sheet 43
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 44
We will continue to shift the portfolio towards more attractive segments Source of profit - today High 5-10% 15-20% Market Attractiveness Small Bus Consumer Banking Wealth Mortgages ANZIB Cards Corporate High Market Attractiveness Source of profit ~2005 5-10% < 10% ~80% Low Weak 25-35% Asset Finance 35-45% Strong Low Weak ANZ Position Strong Current ANZ Position 45
46 Additional information on results
A diversified portfolio performing well Personal Customers 2002 NPAT Change from 2001 573 47 9% 2002 NPAT $m Corporate Businesses 527 61 13% ANZIB 311 23 8% Mortgages 246 10 4% Small Med Business 157 27 21% Consumer Finance 149 50 51% 2002 NPAT increase Asset Finance 102 10 11% 2002 NPAT decrease 2001 NPAT Group Treasury 124 49 65% 0 200 400 600 800 47
% 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 - Interest margins stable, lending and deposit volumes up 3.93 3.06 2.83 2.25 1.21 1.16 Sep- 00 Interest Margins Mar- 01 Sep- 01 Mar- 02 3.20 2.84 2.79 1.61 1.15 Sep- 02 2.35 $b 100 90 80 70 60 50 40 30 20 Average Lending & Deposit Volumes 61.6 57.2 53.9 46.0 45.3 43.6 83.0 92.8 88.6 Mortgages Business Deposits Corp Bkg Bus Mortgages Personal ANZIB Asset Fin Group Sep-01 Mar-02 Sep-02 * Business Lending includes Corporate, ANZIB and Small Business Segments 48
Cost income ratio on track to meet target of 45 2200 $m CTI (%) 70 Peer average impacted by funds management acquisitions 2000 1800 1600 1400 Expenses Cost Income Ratio Peer Average CTI* 65 60 55 50 $31m expense reduction from sold businesses Effective half on half cost growth of 1.8% We will invest more in growth areas, particularly personal businesses 1200 1000 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 45.5 Sep-02 45 40 2000 $361m restructuring provision fully utilised, ongoing $60m+ charge likely * Source: CSFB 49
We will continue to carefully manage cost growth relative to revenue growth Underlying cost growth trending upward Balancing earnings 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% + Higher amortisation and depreciation Increasing growth investment outcomes with investment in growth Surplus earnings targeted for investment Cost-income ratio to trend downward 0.00% 1H 01 2H 01 1H 02 2H 02 50
Underlying expense growth of 2.3% 2.3% $m 3160 72 3153 3140 3120 3100 3080 3060 3040 3020 3092 31 20 3081 Computer expenses increased by 16%, reflecting: depreciation and amortisation charges up 30% software purchases up 28% 3000 2001 ING ANZ JV Acquisitions & FX Impact Adjusted 2% Underlying Growth 2002 Adj 51
Software capitalisation generational change in core infrastructure Sales and Service Platform (SSP) Replaces telling system from early 80s Common Administration System (CAS) Replaces GL, HR, payroll, fixed asset register, accounts payable, procurement Vision Plus Replaces existing card system in operation since the mid 80 s 52 $m $m 120 100 80 60 40 20 0 Post Y2K catch-up Software Capitalisation 1H00 2H00 1H01 2H01 1H02 2H02 1H03 (F) 2H03 (F) 1H04 (F) 2H04 (F) Amortisation (LHS) Capitalisation (LHS) Balance (RHS) 500 400 300 200 100 0
53 Additional credit quality information
House prices unemployment a key driver Change in Sydney House Prices (%) 60 50 40 30 20 10 0-10 1981 Sydney house prices v change in unemployment 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001-3 -2-1 0 1 2 3 4 Change in NSW unemployment (inverted scale) Change in Sydney House Prices (%) 60 50 40 30 20 10 0-10 1981 Sydney house prices v change in interest rates 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001-8 -6-4 -2 0 2 4 Change in mortgage rates (inverted scale) -20 5-20 6 Sydney House Prices Change in Unemployment Sydney House Prices Change in Mortgage Rate 54
Key drivers of house prices expected to remain benign % % 12 Unemployment 18 Mortgage rates 11 10 9 8 7 6 5 4 90 92 94 96 98 00 02 04 16 14 12 10 8 6 4 90 92 94 96 98 00 02 04 Source: economics@anz 55
GFX CF&A SME Specific provisions in most businesses lower than expected losses Specific Provisions Sep 02 v Sep 01 400 350 300 250 200 150 100 50 $m SP ELP SP s v ELP Sep 02 Year Mortgages Personal GSF Asset Finance 356 0 180 $m 160 140 120 100 GFX CF&A SP ELP SME Mortgages Personal Banking GSF SP s v ELP Sep 01 Year Asset Finance CBB CF 80 CBB 60 40 Consumer Finance 20 0 0 50 100 150 Lower SP $m Higher SP GFX CF&A SME Mortgages Personal Banking GSF Asset Finance CBB CF 56
New non-accruals dominated by 2 large customers over each of the past 2 years Historic Geographic $m 1,500 1,200 1,395 New Non-Accrual Loans (LHS) New Non-Accrual Loans/Loans & advances (RHS) 1,029 2 Customers 1,357 1,285 1.5% 2 Customers $m 900 800 700 600 New Non-Accrual Loans 900 931 1.0% 500 400 300 600 200 0.5% 100 300 0 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 0 1998 1999 2000 2001 2002 0.0% Aust/NZ UK/US Asia Other Inter 57
Fallen Angels phenomenon continues March 2001 ratings for Full Year 2002 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% 58
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% 50% BBB to BBB- 21.2% $1.2b BB+ to BB BB- >BB- 8.7% 6.7% Total Limits (AUD) B+ to CCC Non Accrual $0.5b $0.4b Sep-02 >BB- = B+ B, B-, CCC & non-accrual 0.8% $5.5b 1.9% $0.1b 4.8% $0.3b # of customers 49 *Risk grade profile by limits 4 3 12% Aust/NZ (97.6% Investment Grade) Americas (69.3% Investment Grade) UK/Europe (71.1% Investment Grade) Asia (34.5% Investment Grade) 59
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% $2.0b US Energy Portfolio 25% 53% BB+ to BB 32% $0.7b 24% $2.3b 16% $0.36b BB- 1% 36% $0.8b >BB- 8% $0.8b 16% $0.36b (AUDm) Sep-02 # of customers Sep-02 Total Limits $9.6bn 78 $2.2bn B+ to CCC 4.8% $0.46b 12 12.2% $0.27b Non Accrual 3.2% $0.3b 5 4.0% $0.09b # of customers 26 5 2 Aust/NZ (77.5% Inv Grade) Americas (43.5% Inv Grade) UK/Europe (64.6% Inv Grade) Asia (61.0% Inv Grade) Middle East (98.0% Inv Grade) 60 >BB- = B+ B, B-, CCC & non-accrual *Risk grade profile by limits
Top 10 exposures significantly reduced S & P Rating Top 10 committed exposures 140% Top 10 exposures as % of ACE AA- 130% AA+ 120% AAA 110% BBB+ 100% A 90% AA- 80% AA- 70% AAA 60% BBB+ 50% A- 40% 0 250 500 750 1,000 1,250 Sep 01 Sep 02 Funded Unfunded excludes non-recourse and uncommitted facilities 61 Limits represent total 7 month limits excluding uncommitted and non-recourse, net of credit derivatives
Offshore lending assets decreasing as a proportion of total lending assets 100% 90% 80% 70% 15% 16% 16% 14% 11% 11% 9% 12% 13% 13% 15% 15% 13% 13% 60% 50% 40% 30% 20% 10% 70% 69% 70% 73% 77% 76% 78% 0% 1996 1997 1998 1999 2000 2001 2002 Australia NZ International 62
Increased industry diversification 18.0% 16.0% 14.0% 12.0% 10.0% % of Group Lending Assets (Aust/NZ) Policy Cap 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 1993 2002 63
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 Health & Community Services 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 Cultural & Recreational Services 2.0bn 1.5bn 1.0bn 0.5bn 8.0% 6.0% 4.0% 2.0% 0.0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 14.0% 1.0bn 12.0% 0.8bn 10.0% 0.6bn 0.4bn 0.2bn Forestry & Fishing 0.0bn Sep-99 Sep-00 Sep-01 Sep-02 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Mining 3.0bn 15.0% 2.5bn 2.0bn 10.0% 1.5bn 1.0bn 5.0% 0.5bn 0.0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 Personal & Other Services 1.0bn 4.0% 3.5% 0.8bn 3.0% 0.6bn 2.5% 2.0% 0.4bn 1.5% 0.2bn 1.0% 0.5% 0.0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 Communication Services 1.0bn 6.0% 0.8bn 5.0% 4.0% 0.6bn 3.0% 0.4bn 2.0% 0.2bn 1.0% 0.0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 64
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 Finance - Other 6.0% 4bn Transport & Storage 5.0% 3bn Utilities 3.0% 3bn 2bn 1bn 5.0% 4.0% 3.0% 2.0% 1.0% 3bn 2bn 1bn 4.0% 3.0% 2.0% 1.0% 2bn 1bn 2.5% 2.0% 1.5% 1.0% 0.5% 0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 5bn Finance Banks, Building Soc etc. 0bn 0.0% 0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 Sep-99 Sep-00 Sep-01 Sep-02 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 0.0% 0bn 0.0% 0.0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 Sep-99 Sep-00 Sep-01 Sep-02 Sep-99 Sep-00 Sep-01 Sep-02 65
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 12.0% 6bn 10.0% 8.0% 6.0% 4.0% 2.0% 0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 10bn 8bn 6bn 4bn 2bn Real Estate Operators & Dev. Manufacturing 12.0% 6bn 10.0% 8.0% 6.0% 4.0% 2.0% 0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 4bn 2bn 6.0% 4bn 5.0% 3bn 4.0% 3.0% 2bn 2.0% 1bn 1.0% 0bn 0.0% 0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 Sep-99 Sep-00 Sep-01 Sep-02 4bn 2bn Retail Trade Wholesale Trade 6.0% 4bn 5.0% 3bn 4.0% 3.0% 2bn 2.0% 1bn 1.0% Agriculture Business Services 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0bn 0.0% 0bn 0.0% Sep-99 Sep-00 Sep-01 Sep-02 Sep-99 Sep-00 Sep-01 Sep-02 66