2001 interim results australia and new zealand banking group limited 26 april 2001

2001 Interim ResultsAustralia and New Zealand Banking Group Limited

26 April 2001

Results highlights

• NPAT from continuing operations $907m - up 18%

• EPS up 13% to 55.8 cents

• ROE of 19.6%, up from 17.8%

• Costs flat - cost income ratio down to 49.4%

• Credit quality sound:– ELP charge down to 35 bp’s – Total non-accruals down– Specific provisions flat

• Profit on sale of holding in St George $99m ($65m after tax), offset by write downs in investments ($84m)

• Improved disclosure - financial information provided for each business unit

Note: Comparisons are against half year ended March 2000 (including Grindlays)


26 April 2001

Peter MarriottChief Financial Officer

Strong income growth, with good progress across the board

700

800

900

1,000

1,100

930

2H 2000 2001 1H

2H 2000 Continuing

Abnormal/ Discontinued

Items 104

826

Interest Income

84

Non-Interest Income

76

Profit on sale of St George

65

Provisioning (14)

Write downs(84)

Expenses(34)

Tax(12)

895907

Discontinued(12)

2001 1H Continuing

Eftpos NZ acquisition and GST ($26m)

$m

“Unusual” items – St George profit offset by write downs in investments

• St George - $99m profit ($65m after tax)– regulatory issues- not critical to strategy– attractive price

80

130

180

230

280

Oct-00 Dec-00 Feb-01 Apr-01

• Panin - $43m writedown#

– long term growth prospects remain positive

• E*Trade - $21m writedown#

– online broking service provides core customer offering

• Other - $20m writedown#

– a number of small eCommerce related investments

Panin Share Price

0.30

0.80

1.30

1.80

2.30

Oct-00 Dec-00 Feb-01 Apr-01

E*Trade Share Price

# - no tax relief on these writedowns

$

IDR

Income drivers*

%

3.22

3.683.56

3.35 3.23

2.622.81

3.12

3.48 3.45

1.911.901.901.731.64

1

2

3

4

Mar-99 Mar-00 Mar-01

PFS

International

CFS

351 372

496560

14017344

32126

143

1H 2000 1H 2001

Lending Fees

Other Fees

FX

Trading

Other

Margins stabilised in first half

Non-interest income continues to grow

• Benefit from differential between 90d BBSY and cash rate

• Greater focus on improving margins

• Driven by higher non-lending fee income

• FX profits higher, reflecting AUD volatility

* For continuing businesses

1000

1500

2000

2500

3000

3500

Sep-97

Mar-98

Sep-98

Mar-99

Sep-99

Mar-00

Sep-00

Mar-01

45

50

55

60

65

70ExpensesIncome

CTI

Cost-income ratio on track to meet target of mid 40’s

• Reduction in Cost Income ratio driven by revenue growth and cost control

• Approximately $65m of restructuring provision used

– two year program, with benefits principally 2002 and beyond

• eTransformation will continue to drive costs down

$m CTISale of Grindlays

0

20

40

60

80

100

120

140

160

180

200

Wealth

Pacific

Cap

ital Markets

Asia

Investm

ent M

gm

t

Foreig

n E

xchan

ge

Asset Fin

ance

Sm

all Busin

ess

Tran

saction S

ervices

Card

s

Corp

orate

Stru

ctured

Finan

ce

Institu

tional

Mortg

ages

Gen

eral Ban

king

Good profit growth across most businessesMar 00 v Mar 01

Personal

Corporate

International and subsidiaries

$m

80% of businesses delivered revenue growth greater than expense growth

10

15

20

25

30

35

40

45

50

-10

-15

5

-5

-10-15-20-25 -5 10 15 20 25 30

5General Banking

Pacific

Small Business Wealth

GCM

Corporate

Mortgages

Cards

GSF

GFX

Asia

Asset Finance

Investment Management

expense growth

%*

revenue growth

%*top third

middle third

bottom third

ROE

Institutional

GTS

*based on pcp

Personal portfolio

• Mortgages and Cards reinforce value of our specialisation strategy

• Clear opportunities for customer businesses to replicate success of product businesses

• Significant market share growth opportunities remain

– creation of Metrobanking and Regionalbanking

– a 1% increase in market share for customer businesses worth $100m+ revenue

Profit Breakdown

Mort27%

Cards14%

Wealth3%

Region18%

Metro27%

Small Bus11%

250

450

650

850

1050

1250

Sep-99 Mar-00 Sep-00 Mar-01

Interest Income

Other Income

Expenses

$m

Corporate portfolio – fee income driving profit growth

• Five of six businesses delivered profit growth greater than 10%

• “Non-traditional” income for Corporate Banking grew 40%+ on annualised basis, largely by executing Wall St to Main St strategy

Profit Breakdown

GTS15%

GCM7%

Corp18%

GSF24%

GFX11%

I nst25%

250

300

350

400

450

500

550

600


Interest Income

Other Income

Expenses

$m

International & Subsidiaries – risk reducing, profits up

• Asset Finance reconfiguring back office platform to deliver substantial efficiencies

• Negative profit growth for Investment Management due to tax changes and increased growth spend

• Asia showing positive signs, on track to record significant profit growth for the full year

Profit Breakdown

Asset Finance35%

Asia23%

Pacific16%

Inv Mgmt26%

11.1

20.4

12.7

10.0

14.1

24.4

26.0

28.8

43.852.0

13.75.0

15.5

3.03.0

7.4

4.05.1

Sep- 99 Sep- 00 'March- 01

AAA to BBB+

BB+ to BB

BB-

B to CCC

Non-accrual

BBB to BBB-

Asian Credit Quality

Total non-accrual loans continue to fall, but increase in Australia

1662

1543

13911295

872

727699657

900

428

0

300

600

900

1200

1500

1800

1997 1998 1999 2000 2001 1H0.0%

0.5%

1.0%

1.5%

2.0%Gross Non-Accrual Loans (LHS)

Net Non-Accrual Loans (LHS)

$mNon-Accrual Loans/Loans & advances (RHS)

Historic

858

59

749

8972

495

651681

457

0

200

400

600

800

1000 Mar-00

Sep-00

Mar-01

Aust InterNZ

Geographic

Gross Non-Accrual Loans$m

Current provisioning in line with expectations

-40

-20

0

20

40

60

80

100

120

140

Mar-00

Sep-00 Mar-01 Mar-00 Sep-00 Mar-01 Mar-00 Sep-00 Mar-01

Personal Corporate Int & Sub.

Actual SP v ELP charge

ELP charge

SP charge

$m

• ELP is a function of volume (on and off balance sheet), risk grade profile, and level of security

• Specific Provisions tend to be less volatile in Personal businesses and track more closely to ELP

Arrears analysis indicates no systemic deterioration

% personal lending assets over 60 days in arrears

0.00

0.50

1.00

1.50

2.00

2.50

Mar-00 Sep-00 Dec-00 J an-01 Feb-01 Mar-013.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

Mar-00 Sep-00 Dec-00 J an-01 Feb-01 Mar-01

Business FDAs

Housing Loans

RILs*

Overdrafts

Credit Cards

Personal Loans

%%

• Small upturn in arrears in Jan-Feb

largely reversed during March

• Arrears broadly in line with same period last year

• Increase in credit card arrears reflects seasonal influences

• Personal loan arrears continue to increase in % terms due to reducing book

* Residential Investment Loans

Corporate book holding up well, despite a few one off “issues”

Risk actively managed

• Quarterly strategy reports prepared for all high risk accounts

• June to October 2000 - all BB rated accounts within Corporate reviewed in expectation of downturn

• New accounts > $3m to be referred “one level higher”

11.7% 12.3% 11.7%

18.2% 19.1% 19.4% 20.3%

26.7% 26.9% 27.4%

37.9%

5.3% 4.1%4.0% 3.6%

9.3%

26.4%

38.4% 38.9%38.4%


AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

Corporate risk grade profile

>B = B, B-, CCC& non-accrual

Group risk grade profile continues to improve

17.3% 17.3% 15.6%

19.2%15.8%

14.6%

41.5%45.3% 49.7%

16.2%

14.1%

14.7%

50.5%

14.8% 16.2% 16.9%

Sep 1998 Sep 1999 Sep-2000 Mar-01

$114.6bn $141.0bn$134.9bn$126.5bn

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

ELP (bp’s)

• Risk grade profiles by division and geography in appendix

45 43 38 35

7.2%

5.4%3.9%

3.8%


Credit quality is sound in some of our larger industry exposures - Australia

Lending Assets (AUDm)% of Portfolio (RHS scale)% in CCR 7D-8G (RHS scale)

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 010.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep-98 Mar-01

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 010.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 010.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 010.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 010.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Real Estate Operators & Dev.

Manufacturing Retail Trade

Agriculture Accomm. Cafes & Restaurants

Construction

% in CCR 9-10 (RHS scale)x

Provisioning levels remain strong

500

700

900

1100

1300

1500

1700

1373

241

(181)

27 1460

1012

2000 1H 2001 APRA Guideline

s

ELP charge

Net SP transfer

FX impact

ELP - Economic Loss Provision

SP - Specific Provision

$m

Surplus448

1.06

0.97

1.02

0.98

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

ANZMar-01

CBADec-00

NABJun-00

WBCJun-00

GP/Lending Assets*%

* includes acceptances

represents 3 years

expected losses

Capital management will continue

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

Mar-99 Mar-00 Mar-01100

110

120

130

140

Tier 1Inner Tier 1

RWA's

% $b

7.77.9

7.5

7.4

6.7 6.96.5

6.4Progress• $413m in share buybacks in the

half year• New framework for allocating

capital for operating risk implemented

• Capping of DRP/BOP

Capital ManagementPhilosophy:• Maintain capital consistent with

ANZ’s AA status and peer group ratings

– Tier 1 (6.5 - 7.0%)– Inner Tier 1 (6.0%)7.3

6.2


26 April 2001

John McFarlaneChief Executive Officer

We are performing well and on track to deliver on our 3 year commitments

Measure

EPS growth

ROE

Cost-income ratio

Inner Tier 1

Credit rating

3 Year Commitment

> 10%

> 20%

mid 40’s

6%

maintain AA category

Achievement

13%

19.6%

49.4%

6.2%

maintained

• We have also committed to improving customer satisfaction, and will publicly report our progress

• Specialisation

– 16 Business Units within 3 portfolios, plus corporate centre

– Separate financial reporting for each Business Unit

• eTransformation - the eBank with a human face

– Leading internet banking penetration

– Highest profit per employee

• Perform Grow and Breakout

– Active resource allocation - Expenses, Capital, Balance Sheet, Talent

– Investment focused on lower risk, higher growth activities

Implementation of our strategy is progressing well

New strategy delivering value - majority of businesses with double digit earnings

growth

Business Unit

MortgagesCardsInstitutionalAsiaStructured FinanceGeneral BankingCapital MarketsForeign ExchangeTransaction ServicesCorporate BankingSmall BusinessAsset FinancePacificWealth ManagementInvestment Management

1H 2001$m

11258883185

191244054654847211134

1H2000$m

5834671169

181163246614546221543

Change$m

542421201610888431-1-4-9

Change%

937131

181236502517772-5-27-21

We are developing a track record for building

growth businesses

-100

0

100

200

300

400

500

600

700

Mar-00 Jun-00 Sep-00 Dec-00 Mar-018

10

12

14

16

10

11

12

13

14

15Mortgage market

share

FM inflows (LHS)

Deposit

market share (RHS)

15

20

25

30 Share of credit card spend

3.4

3.6

3.8

4.0

4.2

Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00

Personal customers - Australia

%%

%m

$m

95 0096 97 9998 01 95 0096 97 9998 01

Most businesses expected to grow above market over next 2-3 years

High

Medium

Low

Below Market

At Market Above Market

Market Growth

BU Growth

Mortgages

Cards

Small BusinessMetro

Banking

Wealth Management

Corporate

Institutional

GCM

GFX

GSF

GTS

Asset Finance

Investment Management

Pacific

Asia

Note: Size of bubble approximates relative profitcontribution

Regional Banking

Corporate

Personal

Int. & Subsidiaries

45

47

49

51

53

55

57

59

61

63

65

1997 1998 1999 2000 1H 2001

NAB

CBA

WBC

ANZ

Cost management delivers competitive advantage and funds to invest in growth businesses

Clear leadership on Cost Income ratio

Target

Mid 40’s

eTransformation

lower costs/AVAhigher productivity

• competitive advantage

• capacity to invest in growth

eTransformation - enhancing the customer experience

39.1

32.0

23.5

13.7

0

5

10

15

20

25

30

35

40

45

ANZ WBC NAB CBA

8%

11%

8%

10%

9%

9%

11%

14%25%

24%24%

8%24%

13%

2%

Oct-96 Mar-01

Branch Withdrawals

Branch Deposits

Credit Card

Direct Entry

Phone/Internet Banking

Cheques

EFTPOS

ATM

Internet banking users as % of main relationships

%Transaction activity

Source: JP Morgan & Roy Morgan Research

eTransformation – examples of real, tangible benefits internally

Project Benefits

“Manage my leave” 95% reduction in processing costs

Web enablement - rollout of IP network to all points of representation

Cost neutral, but 100 times capability increase

Common Administration SystemEstimated benefits ~$40m

eTrain - online trainingProvides staff with online access to training courses, including an eMBA

We continue to actively manage and reduce risk

0%

20%

40%

60%

80%

100%

ANZ1991

ANZ1996

ANZ2001

CBA NAB WBC

Lending Profile by Asset Type*

business

consumer

• Exiting higher risk businesses

• More emphasis on lower risk businesses

• Corporate balance sheet deliberately constrained – focus on fee income

• Risk based approach embedded through EVA

* CBA as at 31/12/00, NAB & WBC as at 30/9/00

Being the eBank with a human face

• Put our customers first with an experience that delights

• Focus on creating value for our shareholders

• Lead and inspire our people

• Breakout, be bold and have the courage to be different

• Earn the trust of our people and the community

Our breakout approach is differentiating us

Strategy

Staff

Customers

eTransformation

Risk

• Specialised businesses• First class execution (no surprises)

• 86% of managers on individual contracts• 12% rise in staff satisfaction

• Establishment of Customer Charter, Customer Advocate and distinctive customer and community initiatives

• Leading cost income ratio• Highest internet banking penetration

• Leading financial disclosure & transparency• EVA embedded in culture

New customer and community initiatives

• Fee free, over-the-counter services for older customers (aged 60+)

• A new Customer Charter setting out clear service standards effective from 1 October 2001. A key feature of the Charter will be a financial donation payable by ANZ to a charity of the customer’s choice if ANZ does not meet its complaint resolution standards

• Appointment of a senior Customer Advocate to ensure the satisfactory resolution of customer issues and complaints.

• Improvements and greater funding for ANZ’s community relations program

• Paid leave for staff who volunteer for community service

The economy - signals are mixed….

0

1

2

3

4

5

6

7

Sep-9

7

Sep-9

8

Sep-9

9

Sep-0

0

5000

6000

7000

8000

9000

10000

11000

12000

13000

87 89 91 93 95 97 99 01

House approvals

15

17

19

21

23

25

27

29

31

33

J un-97

J un-98

J un-99

J un-00

Newspaper Job Ads

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

98 99 00 01

Retail Sales

Starting to show signs of life

00

0’s

per

week

Mth

ly %

ch

.

Year ended

Year ended, excluding dwellings and Olympics

Real GDP Growth incl. and excl. housing and Olympics (est)

%

We are starting to see a rebound in housing

approvals

ANZ job ads series suggests unemployment levels approaching 7.5%

…. but we are cautiously optimistic

• Sharp slowdown in H2 2000– overstates weakness of underlying economic activity - we continue

to expect a solid cyclical rebound in 2001-02

• Fundamentals remain healthy– usual preconditions for recession in Australia (rising inflation and

interest rates) notably absent

• Risks remain– weakened global growth, rising inventory levels, subdued business

sentiment and falling job advertisements

• But monetary and fiscal conditions remain supportive – after slowing to only 2% in 2000-01, growth forecast to rebound to

3.2% in 2001-02

Outlook

• System credit growth forecasts*

– housing 12.4%

– personal 11.1%

– business 6.5%

• Personal to exceed system credit growth

• Corporate credit growth - continuing higher quality focus

• Margin compression will continue

• Costs flat

• Challenges ahead, however we are well placed to continue to perform well, and achieve our targets over the medium term

* forecast for year ending 30 September

Summary

• We are performing well

• Cost management momentum – eTransformation has just begun…

• Risk reduction continues

• Our new strategy is creating value and better positioning us for growth

• We are differentiating ourselves through our Breakout program

We are on track

to achieve

our goals

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 GentryHead of Investor Relations

ph: (613) 9273 4185 fax: (613) 9273 4091 e-mail: [email protected]

Copy of presentation available on

www.anz.com

Risk grade profile by division

11.7% 12.3% 11.7%

18.2% 19.1% 19.4% 20.3%

26.7% 26.9% 27.4%

37.9%

5.3%4.1%

4.0%3.6% 9.3%

26.4%

38.4% 38.9%38.4%


Corporate

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

36.6% 36.9% 40.9%

32.1% 30.2% 29.1%28.4%

10.7% 9.4%10.1%

13.4%

38.9%

10.4%

9.7% 15.9%12.3%


International & Subsidiaries

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

12.7% 12.7% 12.0%

7.6% 7.1% 7.1% 6.9%

77.0% 77.8% 78.5%

3.8% 2.9%3.0% 2.9%11.5%

75.7%

0.16%0.20% 0.24%0.20%


Personal

AAA to BBB+

BBB to BBB-

BB + to BB

BB-> B

11.2% 8.8% 6.7%8.3%


Risk grade profile by geography*

14.7% 10.6%

15.2% 17.8%17.0%

18.4%19.8%

43.6%

10.1% 9.6% 7.1%5.5%

37.0%

23.0%

50.6%

Sep-99 Sep-00 Mar-01

International

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

29.8%29.7% 29.1%

18.2% 21.3% 21.1%

14.5% 15.3%

9.3% 4.3% 4.6%

17.9%

30.2%24.8% 29.9%


New Zealand

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

28.0% 26.8% 25.8%

24.6% 24.2% 25.1%

23.5% 24.6%

20.9%

5.2% 4.6%4.7%

21.1%

21.1% 19.8%


Australia

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

* Excludes housing


ELP Charge = Loan Amount x

Probability loss x Loss Given default

Plus

ELP charge will vary from year to year based on:• changes in lending volumes• change in risk grade profile• security levels• product and geographic mix

Economic Loss Provisioning

An adjustment to ensure the GP balance is sufficient to cover:

• Volatility around expected loss (using statistically quantified variance)

• Remaining term of loan portfolio

• Balance sheet growth

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

GP % net lending assets

General Provision balance

P&L Charge Actual SP’s

Actual Losses are funded from the General Provision

System credit growth forecasts

-10

-5

0

5

10

15

20

25

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Business

Housing

Personal

Total

Summary of forecasts - Australia

Real GDP growth 4.7 3.7 2 3¾

Inflation 1.5 4.5 3¾ 1½

Unemployment (Dec) 7.0 6.6 7½ 6½

Current account deficit (%GDP) -5.8 -4.0 -2.3 -3.3

Housing starts (‘000) 157 148 116 136

90-day bill yield (% pa, Dec) 5.48 6.20 4.75 5.1

10-year bond yield (% pa, Dec) 6.64 5.50 5.4 6.1

1999 2000 2001 2002

Calendar years

Sources: ABS; RBA; Economics@ANZ.

A$ (US cents, Dec) 65.8 55.8 52.0 60.0

2001 interim results australia and new zealand banking group limited 26 april 2001

Documents

strong income growth

good profit growth

profit growth greater

revenue growth greater

cost income ratio

costincome ratio

income drivers

customer businesses