2 0 0 0 Annual Results Australia and New Zealand Banking Group - - PowerPoint PPT Presentation

2 0 0 0 Annual Results

Australia and New Zealand Banking Group Limited 26 October 2000 John McFarlane Chief Executive Officer

Page 2

2 0 0 0 Annual Result

• Strong result – better than expectations

– $1,703m up 15% – $885m second half up 8.2% on first half

• We delivered on all our commitments

– Financial performance – Rebalancing the portfolio – Reducing risk

• Restructuring program accelerates strategy

– Sensible application of surplus capital – EPS accretive – Superior to buyback alternative

Page 3

Results sum m ary

• Operating profit after tax before abnormals:

– Full year: $1,703 million, up 15% – Second half: $885 million, up 15.8% on 1999, and 8.2% on first half 2000

• Earnings per ordinary share up 15% to $1.04
• Return on ordinary shareholders’ equity of 18.3% , up from

17.2%

• Final dividend 35 cents, up 5 cents with 100% franking. Full

year dividend 64 cents, up 14%

• $361m restructuring charge to accelerate new strategy
• Net abnormal profit $44 million - Grindlays profit largely
• ffset by restructuring and other provisions
• Costs flat. Cost income ratio down to 51.7% from 54.4%

Page 4

Our three year com m itm ents to shareholders

• Achieve superior financial perform ance

– Deliver double-digit earnings growth – Improve return on equity – Bring down our cost income ratio to 53%

• Re-balance our portfolio

– Increase proportion of Personal business – Enhance leadership position of Corporate – Simplify and focus our International business – Build momentum in eCommerce

• Reduce risk

Page 5

W e have delivered superior financial perform ance

1171 1175 1480 1703 400 600 800 1000 1200 1400 1600 1800 1997 1998 1999 2000 $m

NPAT

CAGR 13.3% 18.3 16.9 15.5 17.2 10 12 14 16 18 20 1997 1998 1999 2000

%

ROE

51.7 54.5 60.9 63.1 45 50 55 60 65 1997 1998 1999 2000

Cost Income Ratio

100 100 84 135 20 40 60 80 100 120 140 160 1997 1998 1999 2000

Total Shareholder Return

Page 6

W e have re-balanced our portfolio

302 772 547 647 251 149

1997 2000

NPAT Loans & Advances

PFS CFS International 41577 65264 46861 45684 7966 5930

1997 2000 27% 50% 23% 49% 41% 10% 56% 39% 5% 43% 49% 8%

• Includes Grindlays
• Excludes Group

Page 7

Portfolio breakdow n - indicative

International Personal Corporate Other 100

Cards Wealth Mgmt Mortgages Funds Mgmt General Banking Small Business Corporate Foreign Exchange Asset Finance Capital Markets Institutional ANZIB Financial Services Transaction Services

1 0 0 %

* Excluding Grindlays ($127m)

$1,703m* 40m*

$772m $647m International

Customer Businesses

100 %

Personal Corporate

Page 8

W e continue to reduce risk

43 39 36 20 25 30 35 40 45 ANZ 1999 ANZ 2000 ANZ 2000

• ex

Grindlays

ELP Factors

bp’s

1997 1998 1999 2000

Market Risk ( Av. VaR)

A$m 23 23 5.4 4.4

• Beta reducing towards 1.0, in line with peer average

Page 9

W e didn’t get everything right – firm action taken

• Personal loan portfolio
• International provisioning from historical book
• Panin writedown to market
• Took action to put historical Grindlays issues behind us

Page 10

Accelerating our transform ation program

• Standardisation and rationalisation of

IT and processing platforms

• Rationalisation and upgrading of

EFTPOS network

• Transformation of Branch Network
• Improving efficiency in Asia/ Pacific

by rationalising IT platforms and centralising back office processing

• Establishing new business platform

for Esanda

3 5 I nitiatives across our portfolio

• f businesses including:

Expected cost reduction

$ 3 0 0 m

Page 11

Building for the future - recap on our strategy

Proposition

• Specialists will

win over conglomerates

• Corporations

need to embrace new technologies

• Value depends
• n performance

and growth Strategy

• Reconfigure ANZ

as a portfolio of 21 specialist businesses

• An e-Bank with

a human face

• Drive results

whilst investing in growth businesses

Perform and Grow e-Transform Specialise

I m plications

• Specialist

approach to customer and product businesses

• Transform the

way we do business by using IP technology

• Meet

expectations, fund growth by cost reduction

Page 12

Portfolio strategy should reflect degree of globalisation and leverage real capabilities

Impact of globalisation ANZ’s capability

FX Institutional Banking Mid Corporate GSF Custody Capital Markets Trade Esanda B2B General Banking Small Business Mortgages Cards B2C now Later Not yet Less developed At par Local leader Regionally distinctive Globally distinctive Soon Wealth Management Funds Management

Page 13

e-Payments Gen Banking Corporate FM Mortgages GSF Esanda Wealth FX Institutional

Different businesses need different strategies

Low Low High High

Invest for rapid growth

• Defend position

and return

• Grow selectively

Create new businesses

• Optimise performance
• Identify new growth

products

ROE Market Growth Business size by NPAT

Small BusCap Mkts Cards e-Asia GTS

Page 14

Balancing the autonom y of each business w ith strong leadership from the centre

• Prime accountability for

profit and value

• Freedom to pursue
• pportunities within

agreed boundaries

• Operate using agreed set
• f platforms, systems

and shared services

• Transfer pricing based
• n market - no cross

subsidisation

• Drive group strategic

direction and set policy

• Portfolio management

and resource allocation

• Cross-Business Unit

synergies

• Control and oversight of

risk, brands and technology

Business Unit Corporate Centre

Page 15

Personal Financial Services

Peter Haw kins

General Banking W ealth Managem ent Sm all Business Mortgages Cards Funds Managem ent

anz.com systems CRM SSP brand risk management

Them e Drive sales and efficiency Invest to grow Aggressively rebuild Maintain profitable growth Accelerate growth Reinvigorate and grow Priorities

• Advanced

marketing/ segmentation

• Straight

through processing

• Lower cost to

serve

• Expert

advice

• Open

architecture

• “Wrap”

facility

• Seamless

access

• Build

profitable market share

• Relationship

based proposition

• Redesign end-

to-end processes

• Maintain

distribution strength

• Straight

through processing

• “Best of

breed” delivery platform

• Data mining
• Exploit

growth

• pportunities
• Leverage

distribution channels

• Optimise

products/ capabilities

• Double FUM

by 2003 Accountabilities PFS 5 0 % Group 5 0 %

Page 16

ANZ in the m edium term

• Material reallocation of

resources

• Substantial e-transformation

reducing costs and focused service

• Performance optimised

– EPS, ROE, investment – capital management

• Transformational cultural

change

• Substantial portfolio shifts
• Narrower, more focused

portfolio with leading positions

• Increased investment in

high growth business

• Modern performance

culture

• Higher stock rating

ANZ in 1 - 2 years ANZ in 3 - 7 years

Page 17

Goals going forw ard

• EPS growth above peer average (target 10+ % )
• ROE over 20%
• Cost-income ratio comfortably in the 40’s
• Inner Tier 1: 6%
• Maintain AA category credit rating

2 0 0 0 Annual Results

Australia and New Zealand Banking Group Limited 26 October 2000 Peter Marriott Chief Financial Officer

Page 19

Highlights

Earnings growth of 15% (13.3% compound) Return on equity 18.3% (17.2% ) Cost income ratio 51.7% (54.5% ) Grindlays sold, realising net profit after tax of $404m after related provisions Income up 6% , costs flat, ELP down 4bp’s to 39bp’s $2bn returned to shareholders in the form of dividends and share buyback Dividends returned to 100% franking Restructuring charge to accelerate transformation program

Page 20

Drivers of perform ance ( excluding abnorm als)

3.05 2.87

Margins

54.5 51.7

Cost/Income

0.43 0.39

Provisions/NLA

17.2 18.3

ROE

2.41 2.30

Net Interest/Assets

0.97 1.03

ROA

17.7 17.8

"Leverage"

1.57 1.56

Other Inc./Assets

2.17 2.00

Cost/Assets

0.34 0.30

Provisions/Assets

1 9 9 9 2 0 0 0

Page 21

Good progress across the board

$1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 $1,900

1480 1999 2000 2000 Net interest income 146 Lending fee 48 Other fee 111 Other income 47 Debt provisioning 8 Costs (14) Tax & outside interests (123) Profit before abnormals 1703 Abnormals 44 Net profit after abnormals 1747

Page 22

I ncom e drivers

3.60 3.51 3.19 3.14 2.55 2.64 2.60 2.67 1.90 1.84 1.91 1.72

1.00 1.50 2.00 2.50 3.00 3.50 4.00 Mar-99 Sep-99 Mar-00 Sep-00

PFS International* CFS 679 727 1022 1133 340 342 175 174

1999 2000

Lending Fees Other Fees FX Trading MOS Other

Margins stabilised in second Half Non-interest incom e show ed healthy im provem ent

• Smaller differential between

90d BBSY and Cash Rate

• Greater focus on improving

margins

• Driven by higher fee income
• FX and trading profits lower,

reflecting lower volumes

* Includes Grindlays

Page 23

Cost-incom e ratio continues to decline

45 50 55 60 65 70 1997 1998 1999 2000

NAB CBA WBC ANZ

Target - comfortably in the 40’s * *

* estimate of market expectations for 2000

51.7 63.1

Page 24

Costs are flat and a new baseline is established for 2 0 0 1

$2,500 $2,600 $2,700 $2,800 $2,900 $3,000 $3,100 $3,200 $3,300

3300 (288) 3314 46 (50) 18 1999 3268 74 3100 GST & EFTPO S NZ Sale of Grindlays Sold businesses

• Investment

to build business prior to sale & FX effects

• Higher

restructuring costs

• Increased

marketing spend

• Higher profit

share

Baseline 2000 2000 1999 Adjusted Grindlays GST & acquisitions

Page 25

Sale of Grindlays re-balances the Group’s portfolio

1.03 1.02 1.27

ROA

2.3 3.91 2.22

1.5 1.6 2.8

2.00 3.35 1.92 0.30 0.72 0.28

NI I / Assets Cost/ Assets Other I ncom e/ Assets ELP/ Assets

2.87 3.33 2.76

Margins

51.7 50.0 51.9

Cost/ I ncom e

39 113 36

ELP ( bp’s)

• Reduces lending in

Middle East and South Asia by $4.8b

• Reduces loans by

3.9% but reduces non-investment grade loans by 6.8%

• Exposure to

countries rated below A reduced by $8.5b

• Capital released

being addressed by current buyback

Group 2000 Grindlays Continuing

Page 26

Strong organic asset grow th

50,000 70,000 90,000 110,000 130,000 150,000 170,000 190,000 210,000 1995 1996 1997 1998 1999 2000 ANZ CBA NAB WBC

Asset grow th has been strong w ithout m aterial acquisitions Australian Assets $m

Page 27

Non-accrual loans stable despite asset grow th

1662 1543 1391 872 699 657 900 428 200 400 600 800 1000 1200 1400 1600 1800 1997 1998 1999 2000 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%

Gross Non-Accrual Loans (LHS) Net Non-Accrual Loans (LHS)

$m

Non-Accrual Loans/ Loans & advances (RHS)

Historic

870 59 623 50 681 651 100 200 300 400 500 600 700 800 900 1000

1 9 9 9 2 0 0 0

Aust. Inter. NZ

Geographic

$m

Page 28

Overall book continues to im prove

18 16 16 15 49 53 14 13

3 3

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1999 2000 AAA to BBB+ BBB to BBB- BB + to BB BB- > B

Australian Lending Asset Profile

28.4 31.7 36.2 40.6 41.8 43.6 45.5 48.4 10 20 30 40 50 60 70 80 90 100 Mar-99 Sep-99 Mar-00 Sep-00 Ot her Mort gages $b

Australian Loans & Advances

• Investment grade 66% of book
• Diversified portfolio
• Minimal exposure to

media/ telco’s

• Mortgages now represent 46%
• f book, up from 40% in

March 1999

Page 29

Credit quality is sound in our largest industry exposures - Australia

Lending Assets (AUDm) % of Portfolio (RHS scale) % in CCR 7D-8G (RHS scale) 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Sep- 00 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Sep- 00 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Sep- 00 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Sep- 00 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Sep- 00 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 0bn 2bn 4bn 6bn 8bn 10bn Sep- 98 Sep- 00 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

Real Estate Operators & Dev. Manufacturing W holesale Trade Agriculture Accom m . Cafes & Restaurants Construction

Page 30

Specific provisions: Corporate offsets personal loans problem

50 100 150 200 250 300 1 2 3 9 6 1 7 1 2 0 1 2 2 1 1 2 5 2 1 4 4 1 1 3 4 2 5 4 8 4 1 4 0

Daewoo Personal Loans

ELP NSP Personal Financial Services Corporate Financial Services I nternational

1 9 9 9 2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9 2 0 0 0 A single “B” exit account

Sold Businesses

Page 31

PFS specific provisions w ere driven by personal loans and credit cards

Credit Cards

40 63 2.1 2.8 10 20 30 40 50 60 70 1999 2000 1.5 1.8 2.1 2.4 2.7 3

• Loss rate 2.3%
• Average margin > 5%

SP $m Av Volume $b 76 18 1.2 0.8 10 20 30 40 50 60 70 80 1999 2000 0.0 0.5 1.0 1.5 2.0

Personal Loans

• Loss rate approximately 6% against

expected loss rate 3.5%

• Average margin 5-6% (excludes fees

which cover approval costs)

• Loss on product ~ $15m after tax
• Hence specific provisions largely offset

by margin but product design and controls upgraded to bring losses back in line with expectations

SP $m Av Volume $b

Page 32

Asian credit quality im proves significantly despite tw o large specific provisions

77 56 25 10 20 30 40 50 60 70 80 90 13.7 11.1 15.5 7.4 20.4 12.7 14.1 24.4 28.8 43.8 3.0 5.1 1999 2000

Asian Specific Provisions Risk Grade Profile

• Specific Provisions

relate to two unusual losses

• ‘B’ exposures now only $130m
• Investment grade 68% of book
• Expected losses declined significantly

from 1.4% to 0.5%

AAA to BBB+ BB+ to BB BB- B to CCC Non-accrual BBB to BBB- $m Daewoo A single ‘B’ exit account $2.9b $4.3b

Page 33

Provisioning levels strengthen

500 700 900 1100 1300 1500 1700 1900 2100 2.7 3.1 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 1999 2000

1395 502 (383) (51) (90) 1373 967 1999 2000 APRA Guidelines ELP charge Net SP transfer FX impact Sale of Grindlays ELP - Economic Loss Provision SP - Specific Provision

General Provision ELP charge*

* ex Grindlays for 2000 Times $m Surplus 406

Page 34

The result incorporated several abnorm al item s

200 400 600 800 1000 1200 Jun- 98 Oct- 98 Feb- 99 Jun- 99 Oct- 99 Feb- 00 Jun- 00 Oct- 00

Panin JSX

Net gain on sale of Grindlays businesses Strategic business and transformation restructuring provision Panin writedown Litigation provision Tax rate change Revaluation of property Sale of Colonial shares Net abnormal gain 404 Cr 245 Dr 81 Dr 33 Dr 64 Dr 30 Cr 33 Cr 44 Cr

After tax

$m

Average purchase price

Page 35

Abnorm als - Grindlays transaction

Net sales proceeds 1,225 Provisions raised on sale 575 Income tax 246 Net profit 404 I ndem nities

• ‘Indian scam’ matters
• US$80m Pakistan cross border risk for 12 months
• US$186m indemnity covers 80% of losses on certain

customer accounts. Receive fee equal to ELP

• Standard tax indemnities

$m

Page 36

W e have used the financial capacity from the Grindlays sale to accelerate restructuring program s spread across 3 5 separate initiatives

Drivers

• Specialist

businesses, eTransformation, and funding growth

• Cost income

ratio comfortably in the 40’s

Selected Program s

• Reconfigure metropolitan

branch network in line with needs and demographics

• Re-engineer Esanda operation
• Simplify Asian business platform

& operations

• IT platform rationalisation for

eWorld

• General Banking sales and

service platform Tw o year program

• Provision relates to costs of

‘dismantling the old’ and investment spend will be covered by normal operations

Benefits

• Approximately $300m

lower costs

• Enhance customer

service and revenue

• Greater flexibility
• Platform for further

eTransformation

• Invest savings in

growth businesses subject to EPS growth targets

• Leaves capacity in

routine $80-100m pa restructuring for further programs

Page 37

Capital m anagem ent w ill continue

5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 Mar-99 Sep-99 Mar-00 Sep-00 100 105 110 115 120 125 130 135 140 Tier 1 I nner Tier 1 RWA's % $b 7.7 7.9 7.5 7.4 6.7 6.9 6.5 6.4

Progress

• $1014m of buyback
• Capping of DRP/ BOP to reduce

dilution

• Remaining $500m buyback in

progress

• Restructure more EPS accretive

than buyback

Capital Managem ent Philosophy:

• Capital scarce resource to be

managed effectively and efficiently

• Maintain capital consistent with

ANZ’s AA status and peer group ratings – Tier 1 (6.5 - 7.0% ) – Inner Tier 1 (6.0% )

Page 38

Goals going forw ard

• EPS growth above peer average (target 10+ % )
• ROE over 20%
• Cost-income ratio comfortably in the 40’s
• Inner Tier 1: 6%
• Maintain AA category credit rating

Page 39

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

w w w .anz.com

• r contact

Philip Gentry Head of Investor Relations ph: (613) 9273 4185 fax: (613) 9273 4091 email: gentryp@anz.com

Page 40

Copy of presentation available on w w w .anz.com