Corporate Financial Services - Leveraging our leadership position

for specialisation and growth

Roger DavisHead of Corporate Financial Services

18 July 2000

ANZ Corporate: leveraging our leadership position

• Portfolio of Specialist Product and Customer Businesses with strong to dominant market positions

– Strong performance

– Customer centricity

– Product excellence

• Significant Growth Opportunities:

– Capital markets

– Business eCommerce

– Leveraging the middle-market franchise

CFS: a major contributor to the bank’s earnings

Corporate

0

100

Corporate

Corporate

Financial Markets

Asset Finance

Capital Markets

Institutional

Structured Finance

Transaction Services

%$738m

$311m

CustomerBusinesses

0

100

200

300

400

Mar-99 Sep-99 Mar-00

CFS: financial performanceProfit

Costs

1.001.201.401.601.802.00

Mar-99 Sep-99 Mar-00

45

50

55Income% %

Net Interest Margin (LHS)

Non Interest Income (RHS)

40

45

50

55

Mar-99 Sep-99 Mar-00

1.0

1.5

2.0% %

Cost to Income (LHS)

Cost to Assets (RHS)

$m

Provisioning$m

0

50

100

150

Mar-99 Sep-99 Mar-00

Actual Credit Costs Economic Credit Costs

Share of Primary Relationshipswith Middle-Market Companies

0%

10%

20%

30%

ANZ NAB WBC CBA

Source: 1999 Roberts Research

0

10

20

30

40

50

CFS: a leader in Corporate Banking

Share of Significant Relationshipswith Large Corporates

ANZ WBC NAB CBA

#1 Best Bank in Australia US Global Finance Magazine 1999

#1 Domestic Commercial Paper Asia Money 1999

#1 Arranger/Co-Arranger - Greater Asia Capital Data Loan 1999

#1 Arranger - Asia Pacific Project Finance International 1999

#1 Interest Risk Management BRW/KPMG Poll 1998

#1 FX House All Round Excellence Asia Money 1999

#1 AUD/USD Currency Options Bank Risk Magazine 1999

Source: 1999 Greenwich Associates

%

Asset Finance

GSF

RAROC

Economic Capital

Global FX

GlobalTrans

GCM

Lower

Higher

Institutional

Corporate

Fin.Products

CFS: a balanced portfolio of service andasset businesses

A customer focus and product centric business

Institutional Corporate

6 Product Businesses 3 Customer Segments

6

6.5

7

7.5

8

8.5

1995 1996 1997 1998 1999

Source: Corporate Banking Roberts Research Group

Overall Satisfactionwith Bank

Esanda*

ANZNABCBAWBC

Financial Markets

Capital Markets

Structured Finance

Global Transaction

Services

Business eCommerce

Asset Finance

Market Penetration - Large Corporates

Source: Greenwich Associates

Customer centricity: Institutional Banking

21%

Share of Corporate Profit

01020304050

ANZ NAB CBA WBC

Strategies

• Leverage industry specialisation

• Leverage strong market position to become an adviser

• Maintain focus on customer profitability and effective use of balance sheet

• Build e-Commerce capability

-60 -10 40 90 140

Customer EVA DecilesMar-00

%

0%

10%

20%

30%

ANZ NAB CBA WBC

Customer centricity: Corporate Banking

• Deepen share of wallet

• Build broader fee-based business - ie “Wall Street to Main Street” selling

• Build e-Commerce solutions

• Cross sell retail products

18%

StrategiesMarket Penetration - Middle Market

Share of Corporate Profit Customer EVA Deciles*

0%

10%

20%

30%

40%

50%

0

20

40

MotorCars

CommVehicles

TotalMotorVehicles

Other TotalMarket

% share (est.)

New

Busine ss W

ri ting s

market sharewritings

Esanda

Ford Credit

CBFC

GMAC

St George

Strategy

• Improve sustainability of core franchise

• Radically transform the business

• Accelerate growth program

Source: KPMG, Financial Reports, Roy Morgan, Esanda

Customer centricity: Asset Finance

14%

Share of Corporate Profit Motor Vehicle Deal VolumesAustralia

Source: ABS, AFJ, Esanda

$b (est.)

CFS: market leader in customer satisfaction

6

6.5

7

7.5

8

8.5

1995 1996 1997 1998 1999 6 6.5 7 7.5 8 8.5

WBC

NAB

CBA

ANZ

Tailoring solutions to our clients' business needs

6 6.5 7 7.5 8 8.5

WBC

NAB

CBA

ANZ

Coordinating specialist resources to service our clients’ business

6 6.5 7 7.5 8 8.5

WBC

NAB

CBA

ANZ

Satisfying our international trade specialist clients

Source: Roberts Research Group - 1999 Customer Satisfaction Research

Satisfaction with Relationship Manager

ANZ

NABCBAWBC

A focused customer and product centric business

Institutional Corporate

6 Product Businesses 3 Customer Segments

6

6.5

7

7.5

8

8.5

1995 1996 1997 1998 1999

Source: Corporate Banking Roberts Research Group

Overall Satisfactionwith Bank

Esanda*

ANZNABCBAWBC

Financial Markets

Capital Markets

Structured Finance

Global Transaction

Services

Business eCommerce

Asset Finance

10%

Product centricity: Global Transaction Services

Customer Perception - Global Trade ServicesAustralasia Region, January 2000

010203040506070

Source : Brendan Wood International

ANZ

NABWBC

CBACitibank HSBC

Share of Corporate Profit

No. 1 Trade Services provider in Australasia 2000 (BWI)

No. 1 in sub-Custody in Australasia 2000 (GI)Leader in major transaction banking servicesLeader in AUD/NZD Correspondent Banking

League Tables• Continue to re-engineer the cost base• Increase % of STP• Replace inefficient processing systems• Insource where we have scale and

sustainable competitive advantages• Build value added solutions

& products• Embrace e-Commerce in payments

Strategy

%

0%

10%

20%

30%

40%

50%

0

20

40

MotorCars

CommVehicles

TotalMotorVehicles

Other TotalMarket

% share (est.)

New

Busine ss W

ri ti ng s

market sharewritings

Esanda

Ford Credit

CBFC

GMAC

St George

Strategy

• Improve sustainability of core franchise

• Radically transform the business

• Accelerate growth program

Source: KPMG, Financial Reports, Roy Morgan, Esanda

Product centricity: Asset Finance

14%

Share of Corporate Profit Motor Vehicle Deal VolumesAustralia

Source: ABS, AFJ, Esanda

$b (est.)

Initiatives• Further strengthen client relationships• Continue to maintain a diversified portfolio across

sectors and geography with strong ECA support• Increase focus on structured, high margin

solutions • Expand corporate finance and ECA activity in Asia

• Exploit the cooperative agreement with SCB in MESA

Product centricity: Global Structured Finance

League Tables

No 1 Arranger 1999, Asia PacificNo 1 Arranger 1999, Asia and AustraliaNo 1 Arranger, South Asia 1997 to Date

Indian Loan House of the year, 1999 No 1 Arranger, Export Credit Business,

Australia, 1999 (EFIC)No 1 Advisor Petrochemicals (PFBL 1999)No 1 Advisor Leisure (PFBL 1999)

16%

Share of Corporate Profit

Source: Project Finance Intl, Global Finance, Capital Data Loanware, IFR Asia, EFIC

Key Activities

• Industrial Transportation• Project Finance• Corporate Finance• Export Credit• Leasing and Tax

Initiatives• Continue to focus on sales • Continued expansion of product range• Continue to develop Global capability• Centralisation of global infrastructure• Increased penetration of FX Online in Australia

and overseas

Product centricity: Financial Markets

League Tables

Best FX Bank, Australia 1999 Top 10 World FX Bank 1999 Best FX Bank of the Year World No 1 FX Options AUD, 1999 Best of Breed Treasury Banker Swaps and Options (Asiamoney 2000)

0

50

100

150

200

250

Oct-98 Apr-99 Oct-99 Apr-00

14%

Share of Corporate Profit FX Cumulative Trading Revenues$m

Initiatives• Credit Derivatives and Equity Derivatives• Securitisation • Development of new channels into Middle Market and Retail• Secondary market offshore • Partnership with Lehman Brothers• ANZ bonds issue web site

Product centricity: Capital Markets

League Tables

No 1 Domestic Commercial PaperDerivatives/Risk Management House of the YearNo 2 Lead Manager, Corporate BondsNo 3 Best Lead Manager, Securitisation, No 3 Australia/New Zealand MTNS

020

406080

100120

Oct-98 Apr-99 Oct-99 Apr-00

5%

IR Derivative Cumulative Trading RevenuesShare of Corporate Profit

Cumulative Daily Revenue $m

ANZ Corporate: leveraging our leadership position

• Portfolio of strong Product and Customer Businesses with strong to dominant market positions

– Strong performance

– Customer centricity

– Product excellence

• Growth Opportunities:

– Capital markets

– Business e-Commerce

– Leveraging the middle-market franchise

Growth initiatives

Goal: to double profit from 1999 to 2004

• On track after 12 months

• No silver bullets but rather a continued reliance on consistent double-digit growth initiatives across CFS

• Three key areas of activity are worth highlighting:– Capital markets – B2B– Middle market:

Growth: credit derivatives

0

5

10

15

1999 2000 2001 2002

$b

Key Points

• The Securities Trading Business will use credit derivatives to achieve the following CFS objectives:

– to enhance diversification of credit portfolios

– to trade forward expectations or inconsistencies of credit-risk pricing, and

– to allow new sources of investment capital to be committed to credit risk

Australian Credit Derivatives Market

Growth: equity derivatives

0

2

4

6

8

1995 1996 1997 1998 1999

Key Points

• Increasing penetration • Growth is expected in innovative equity

product • ANZ Capital Markets has a strong and

highly profitable track record • ANZ captured 6% market share with its

first series of issues

0

2

4

6

8

1995 1996 1997 1998 1999

Australian Exchange Traded Options Market$b

Australian Warrant Market$b

0

500

1000

1500

2000

2500

1995 1996 1997 1998 1999 2000

Growth: private equity funding

Key points

• Equity investment capability of A$75m. • Strict investment criteria• Not well serviced by existing players • Leverage ANZ market position • Potential revenue of around $25-30m over 3 years

Australian Private EquityFunds Under Management

$m

Growth: increase product penetration in middle-market

Initiative Average Customer& Associated

Wallet ($k Revenue)

CurrentCapture

(%)

TargetedCapture

(%)

Lending $81 80 81

Traditional CorpBanking

$61 56 70

InvestmentBanking/Corp Fin

$15 21 60

FM/Personal $19 20 60

Total $176 60 72

Total Avail Wallet $990mm 49 60

Mid Market Wallet $2.25bn 22 26

Estimated $80+ million revenue target over three years

Source: FPRG, CPA, Roberts Research

Capital Markets deals for the middle-market

Middle market product penetration

10.5 11.4 13.5

6.9 7.77.9

05

10152025

1H99 2H99 1H00

Status

• Steady increase in revenues from selling FX products and Capital Markets products to middle-market customers:

– Revenue from Capital Markets products in 1H00 grew 14.5% versus 1H99

– Revenue from FX products in 1H00 grew 28.6% versus 1H99

$m

Product Penetrationin Middle Market

FX Products Cap Mkts Products

e-Commerce momentum

B2B

Corporate Banking Portal

(FXOnline)

eProducts(eGate, Identrus)

B2B Portal(eProcurement)

Growth: business e-Commerce

Australian OnlineTotal Revenue Estimates (A$b)

0

50

100

150

200

250

300

98 99 00 01 02 03 04 05 06 07 08 09 10

Total Online Revenues (A$b) Business-to-

business(B2B)

Business-to-consumer(B2C)

Growth: FX online

440750

2500

5000

Jun-00 Sep 00(Proj)

Sep 01(Proj)

Sep 02(Proj)

Registered Users

29000 35000

70000

140000

Jun-00 Sep 00(Proj)

Sep 01(Proj)

Sep 02(Proj)

Transaction Volume

• Automated real time dealing• JV with Reuters

• Leverage ANZ dominant FX position• First mover advantage• 35% share of the FX online market

Key Points

Growth: eGate

Key Points• ANZ eGate is a secure internet payment gateway• $500m market opportunity.• Operational March 2000 • eGate Version 2 soft release

September 2000 (multi currency)• Future versions will include escrow

and eCheques• Major customers wins

05

1015202530

Feb-00 Apr-00 Jun-00

eGate Customers

Actual Target

Growth: eProcurement

• Internet marketplace • Added value through integration of financial services• Leveraging corProcure initiative• Currently in beta test with 10-20

clients• JV with MR & O• Leverage customer base• Collaborative approach

Browse Suppliers’catalogues and performtransactions in real time

Workflow Approval Routing

Desktop Requisition

Maintenance, Repair,and OperatingSupplies and Services

Distributed Buyers

Supplier MarketplaceBusiness System Integration• Inventory• Purchasing• Accounting•Human Resources

Key Points

Growth: eauto.com.au

Summary: leveraging our corporate leadership position

• Goal: To double Corporate Financial Services’ profit by 2004

• Our growth plans will be predicated on a range of key initiatives from across the business

• Crucial to these efforts will be our success in

– building share in the Middle Market

– expanding our Capital Markets initiatives

– building a B2B platform

• These initiatives are expected to generate $300m in revenue over the next 3 years

CFS - A Growth Business

• We have strong to leadership positions in:

– Middle-market– Large corporates– Financial markets– Capital markets– Structured finance– Trade banking– Asset financing

Leverage our strong market position

• Fully exploit:

– Powerful ANZ brand integrity– Large and attractive customer base

• Transition e-commerce initiatives into vibrant and viable businesses:

– ANZ eGate– ANZ eProcurement (eg MRO.com, corProcure)– ANZ B2B Portal

Nurture e-commerce franchise