investor march 2009 - anz · investor discussion pack march 2009 7 source: bcg, team analysis . 1....

AUSTRALIA AND NEW ZEALANDBANKING GROUP LIMITED

March 2009

Mike Smith – Chief Executive Officer

Alex Thursby – CEO, Asia Pacific

Jill Craig – GGM Investor Relations

InvestorDiscussion Pack

Investor Discussion Pack March 2009 2

ANZ Key Facts


Snapshot

Proud banking heritage spanning 170 years

A top 10 listed company on the ASX (market cap ˜A$36b), with ˜390,000 shareholders

Largest listed company in NZ, largest Australian bank in Asia and a leading bank in the Pacific

One of only 11 AA rated banks in the world, recently listed as one of the “20 safest banks globally” by Global Finance Magazine, February 2009

Well capitalised with a strong liquidity position

Over 250 years of banking experience on our management board

~37,000 Full Time Equivalent employees (FTE)


Leveraging opportunities throughout the region

Asia Pacific:

Institutional Client focus:

• Asian regional corporates, Banks and Investors

• Local corporates in Strategic and Franchise markets

• Australian and New Zealand corporates trading/investing in Asia

• Well-rated European and US corporates trading/investing in Asia

Retail Customer focus:• Affluent (ANZ)

• Mass affluent (Partners)

• SMEs (ANZ and Partners)

Our Base

• Strong domestic franchise and client base in Australia and NZ

• Presence in 26 key markets in the Asia Pacific region


ANZ - increasing earnings diversification

Where our profits will come from … Stronger Asia-Pacific contribution will result in more balanced profit profile

ANZ 2007

ANZ Future

Australia 69% of all ANZ profit

Australia ~60% of all ANZ profit

NZ 22%

NZ ~20%

Asia/Pacific ~20%

Asia/Pacific 7%

Other 2%

Other ~2%

What will drive domestic growth

• Personal – great track record, opportunity to deepen customer relationships (improving cross sell).

• Institutional – restructure driving improved results

• New Zealand –strong position, but can strategically grow share and better harness cost synergies

What will drive Asian growth

• Main focus on organic growth supplemented with in-fill mergers and acquisitions

Partnerships

Asia Institutional

Asia Retail


Focused approach to Super Regional Strategy

Strategic Imperative

Top 4 foreign bank• Greater China• India

Franchise Significant

Major bank (top 4)• Vietnam, Malaysia, Indonesia

Network Enhancement

Network clients, product and liquidity hubs• Singapore, Tokyo, Hong Kong

Next Wave

Hold position in short- term• Indochina: Cambodia, Laos,Philippines, Korea, Thailand


1Includes Indonesia, Vietnam, Malaysia, Thailand, Philippines Source: BCG, team analysis

15 19

69

15212

18

15

43

16

29

3

2

2007 2012F

GreaterChina (excl. HK)

HongKong

India

129

264

Australia

Singapore

SE Asia1

3750

112

20110

16

12

27

9

163

2

2007 2012F

GreaterChina (excl. HK)

HongKong

India

180

313

AustraliaCAGR6%

CAGR13%

SingaporeSE Asia1

CAGR5%

CAGR17%

RetailInstitutional

The “Double Benefit”:

• Asia projected GDP growth significantly higher than Australia / NZ

• Financial services wallet forecast to grow at 2.5 times GDP

• Targeting profitable revenue pools

• Significant deposit base (propensity to save)

USD bn

The Double Benefit -GDP and banking wallet growth

Asia’s banking wallet growth dominated by Greater China and India


ANZ is actively managing for new reality: Strengthening the balance sheet, increasing capital and provisioning

*Assets held for liquidity management purposes, including internal securitisation (March 08 and Sep 08 including post balance date, pre reporting date internal securitisation). The Group holds additional portfolios of liquid, trading and investment securities. ^ 2008 & 2009 RWAs calculated using Basel II methodology, prior period numbers reflect Basel I#Adjusted for non-core items (i.e. significant items and non-core income arising from use of derivatives in economic hedges and fair value through profit and loss)

Balance Sheet

• Collective provisions set above 1% of credit RWA’s

Capital – Tier One 8.4%*

• Proactive in raising capital

• Increased liquidity

Company Structure – “One ANZ”

• Driving efficiency improvements

• Flatter more responsive structure

• Specific re-engineering of Institutional

• Led by highly experienced team

6.7% 6.9%7.7%

8.4%

Sep 07 Mar 08 Sep 08 Jan 09

20.1 30.453.9 55.4


Cash and other liquid assetsLiquidity portfolio

0.73%0.94%

1.13% 1.09%


Basel I Basel II Basel II Basel II

Tier 1 Ratio

Liquid Asset Portfolio* ($bn)

Provision coverage (CP/CRWAs^)


114.0128.8

6.67.4

85.9

71.7

12.5

11.6

Sep 07 Sep 08

AUS (A$ bn)

205

237

16%

42.4 45.3

1.1 1.2

31.435.3

Sep 07 Sep 08

NZ (A$ bn)

7683

9%

1.0 1.7

18.6

0.2 0.3

10.2

Sep 07 Sep 08

Offshore (A$ bn)

12

21

75%

Group (A$ bn)

Composition of Gross Loans & Advances

Housing Cards Business Lending (including overdrafts)

Hire Purchase & Lease Finance

157.4 175.8

139.9

346

7.98.9

113.4

Sep 07 Sep 08 Jan-09

293

341

16%2%


65.474.2

Sep 07 Sep 08

7.0 8.8

4.1

6.9

Sep 07 Sep 08

32.6 34.6

5.86.0

Sep 07 Sep 08

105.0117.6

74.4

85.6

221

1.5

1.8

Sep 07 Sep 08 Jan-09

64.672.7

Sep 07 Sep 08

42%

Personal ($bn)

13%

74

65

Asia Pacific ($bn)

Institutional ($bn)

NZ ($bn)

Group ($bn)

16

11

13%

73

65

6%

4138

13%

205

181

*

*Reconciling item between Group and sum of divisions is Group Centre *Institutional excludes Asia Pacific Institutional

Customer deposits by business line

Non-commercial / Non-Institutional

Commercial / Institutional

Group Centre

8%


A leader in customer satisfaction(Main Financial Institution 6 months rolling avg*)

Continuing to grow main bank relationship share ***

Market Share Gap

Number 2 in customer numbers(Traditional Banking customer share**)

Continuing to grow footprint

0

4

8

12

16

20

2H07 1H08 2H08 Jan-09

ANZ Peer Avg

Australian Personal business strong focus on customers

*Source: Roy Morgan Research – Aust MFI Pop’n aged 14+, % Satisfied (Very or Fairly Satisfied), 6 mth moving average**Source: Roy Morgan Research – Traditional Banking includes customers aged 14+ with accounts, loans or cards. 12 mth moving average***Source: Roy Morgan Research – Aust Pop’n aged 14+, All Financial Services customer and have a MFI, 12 mth moving average

2.8% 2.5% 2.1%

Sep 2006 Sep 2007 Sep 2008

Branches 785 820 821

ATMs 1,887 2,287 2,496

FTE 11,835 12,767 13,132

10

14

18

22

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

ANZ Peer 1 Peer 2 Peer 3 Peer 4

Peer 1: 37.6% in Jan 09

%

55

60

65

70

75

80

85


ANZ Peer 1 Peer 2 Peer 3 Peer 4

%

%2.1%


New Institutional organisational structure

Strong and improving cross sell…No. 1 Cross Sell Bank status maintained

Cross Sell Effectiveness1 (%)

Customer franchise remains strongNo. 1 Relationship Bank status maintained

Relationship Market Penetration1 (%)

…and strong customer penetration across product lines

(FY08 customer revenue)

Peer 2

2007

ANZ Peer 1 Peer 3

2008

*Information sourced from Peter Lee Associates – 2008 Large Corporate and Institutional Relationship Banking Survey

GMD Institutional

GeographiesAus, NZ, Asia, Europe, US

ClientsRelationship Banking

Products Transaction Banking & Specialised Lending,

Markets,Balance Sheet Management

EnablementFinance, Strategy, HR,

Risk, Ops, Tech

64 65 60 61

45 49 44 4737 36 37 35

19 19 13 16

50

6868

54 58 52

7170

'07 '08 '07 '08 '07 '08 '07 '08Peer 2

Total customersSignificant customersLead customersANZ Peer 1 Peer 3

61

%

58

%

47

%

49

%60

%

59

%

48

%

43

%

'07 '08 '07 '08 '07 '08 '07 '08

0%

20%

40%

60%

80%

100%

Inst/FI Corp

Other ANZ divisions

Working Capital

Markets

ANZ Capital

Corporate Finance

Relationship Lending

Institutional - Business restructured around strong customer franchise


Retail Banking Market Share

• Maintained market share in mortgages lending during the 2008 financial year

• High customer satisfaction

• Leading market position in small business

• Increase in deposit growth remains a key focus

ANZNB has leading market positions

Rural - strong position

• Out performed the market in 2008

• Well positioned for growth in key rural segments

• Driven by exposure to growing dairy sector

Retail & Rural Banking Share of Lending1

Institutional

• #1 Lead Foreign Exchange Dealer2

• #1 Lead Interest Rate Derivatives Dealer2

• Lead Domestic Transactional Bank2

• #1 Provider of Trade Services2

• #1 Domestic Bond Issuance3

• INFINZ Bank of Year 2005, 2006, 2007 Source:1. Share of system (banks and non-bank financial institutions) - RBNZ C5; 2.: Peter Lee Associates Large Corporate and Institutional New Zealand Surveys 2008; 3. insto League Tables 2008; 4. TNS Conversa Business Finance Monitor, $2m-$150m turnover businesses, December 2008

15%

20%

25%

30%

35%

40%

45%

Dec-06 Dec-07 Dec-08

Housing

Consumer Finance

Rural Lending

Corporate and Commercial Banking

• Dominant market position (36% share)4

with market leading product offering


Strengthening the Balance Sheet – Capital, Funding,

Liquidity, Provisions


UK & Europe27%

US19%

Australia & NZ42%

Asia12%

0

5

10

15

20

25

30

FY09 FY10 FY11 FY12 FY13 >FY13

A$bn

As at Sep 08 As at Feb 09

Over 70% of FY09 term funding completed in first 5 months of the year

Funding profile – Feb 09

Term maturity profile lengthened Wholesale funding by Geography – Feb 09

Funding profile

Year Volume> 1year

Term(yrs)

2007 $19bn 3.2

2008 $24bn 2.9

2009 forecast $21bn n/a

2009completed

$16bn 4.0

Forecast FY09 term funding cost 100bp higher than FY08

6%

15%

7%

52%

16%

4%

Term Debt (maturity >12m)

Term Debt (residual maturity < 12m)

Commercial Bills

Hybrids, Pref Shares & Equity

Short Term Wholesale Debt

Group Customer Funding


Strong capital position compares favourably with domestic and international peers

Tier 1 Mar 08

Cash

Earn

ing

s

Ord

inary

Div

.

RW

A G

row

th

New

Hyb

rid

s &

1

H0

8 d

iv U

’wri

te

Oth

er*

0.50

(0.18)

7.710.05

0.26

(0.40)

6.84

0.43 (0.16)

20

09

Div

iden

d n

et

of

DR

PTier 1 Sep 08

Adj. Tier 1 Sep 08

(pro forma)

ANZ adj’std Tier 1 underFSA Jan 09

Basel II Capital Position(Tier 1 ratio)

Volume, risk and methodology changes

10.52

* ‘Other’ includes FX impacts, ING JV and associates, non-core profit, sundry share issuance, capitalised expenses and pensions.^other includes reclassification of RWAs within categories, IRRBB movements (12bp impact) and FX

Includes $1.08bn CPS issue and $0.6bn Private Placement

0.90

0.38

2H

08

div

iden

d u

nd

erw

rite

Earn

ing

s n

et

of

hyb

rid

s

Gro

wth

RW

A &

EL r

isk im

pact

s

Oth

er^

(0.23)

(0.23) 0.23 8.398.35

AP

RA

ch

an

ges

Tier 1 Jan 09


ANZ capital position strengthened - compares favourably with local peers, UK FSA and Canadian OSFI regulation

Capital Management Agenda:• Tight management of capital profile

• Actions taken in 2008 included DRP underwrites, conversion of ANZ StEPS to ordinary equity, issuance of tier 1 hybrids. Proposed reduction of 2009 dividend by 25%

• Increased modelling of different economic scenarios on capital ratios

• Focus on risk/rewards within Basel II environment

>14%>14%11.3%11.1%10.1%10.3%Total Capital

11.2%10.5%8.4%7.7%6.8%6.9%Tier 1

9.2%8.5%6.5%5.9%5.3%5.2%Core Tier 1*

Basel IIBasel II pro forma

Basel IIBasel IIBasel II

ANZ OSFIANZ FSAJan 09**Sep 08Mar 08Sep 07

* ‘Core Tier 1’ = Tier 1 excluding hybrid Tier 1 instruments

** Includes DRP underwriting

Tier 1 proforma

Tier 1 +CP +IP#

ANZ 8.39% 9.57%

Domestic peers* 8.35% 9.22%

ANZ FSA 10.52% 12.03%

Well positioned to absorb losses


Tier 1 and Core Tier 1 ratio’s are higher under FSA regulation comparisons

Capital differences arise principally due to FSA:

•Not requiring a deduction for accrued dividend and net of the associated DRP

•Not requiring a Tier-1 deduction for certain capitalised expenses and deferred tax assets

•Calculating expected loss vs provisions on a gross basis, before considering any tax effect whereas APRA require general reserves for credit losses (net of tax) to be compared with expected loss

•Having a more favourable treatment for Associate investments (including ING JV), and insurance and funds management subsidiaries

RWA differences arise principally due to:

•APRA setting a 20% floor on the downturn LGD for mortgages (as compared with the 10% minimum set by the FSA)

•FSA not requiring Interest Rate Risk in the Banking Book to be a Pillar I requirement

•Differences in the treatment of specialised property lending; equity and margin lending products


Government guaranteed debt issuance by AUS banks

Source: ANZ and Bloomberg

$0

$5

$10

$15

$20

$25

8/12/08 15/12/08 22/12/08 29/12/08 5/1/09 12/1/09 19/1/09 26/1/09 2/2/09 9/2/09

week beginning

AU

D $

bn

$0

$10

$20

$30

$40

$50

$60

$70

AU

D $

bn

Weekly Amt Issued, lhs Cumulative Amt, rhs


1,9922,167

1,940 1,992

2,821

384273

286 270

675

2004 2005 2006 2007 2008

IP balance

CP balance

Collective provision balance coverage above 1% of Credit RWAs

Increase in Collective provisioning primarily on

the Institutional / commercial portfolio

Impacted by change from AGAAP to IFRS accounting standards

818m* increase

#2004 number are on AGAAP accounting standard basiis..*excludes adjustment for exchange rate fluctuations

Institutional $672m

Personal $53m

Asia Pacific $10m

NZ $83m

CP/ CRWAs 0.99% 0.86% 0.81% 0.73% 1.13%

#


Economic cycle adjustment • For deterioration in global credit

markets and slowing NZ economy (includes Inst. $180m, NZ $36m)

Concentration risk• Higher single name risk for Financial

Institutions and property portfolios within Institutional

Risk Profile• Downgrades in Institutional, portfolio

movements New Zealand

Volume Growth• Increase across all divisions

Portfolio mix & Other• Includes oil shock roll-off

131197

17 12

200

-85-68

145

6

-6 -36-68

300

225Economic Cycle Adj.

Concentration

Other*

Portfolio Mix

Risk Profile

Lending Growth

818

83

Collective Provision (CP)

FY07 FY08

$m

* Other comprises Group Items, scenario impact including the modelled unwind of the oil price shock provision (raised in 2005) and non continuing businesses

69

FY06

Increase in the CP in 2008 reflected changes in the credit environment with $525m for economic cycle & concentration risk


Australia & NZ – economic trends and government policy responses


Australia * New Zealand *

2008 2009 2010 2008 2009 2010

GDP 3.0 -0.3 0.4 1.7 -2.9 1.1

Inflation 4.2 2.5 2.9 5.1 1.3 2.4

Unemployment 4.3 5.8 7.5 4.2 6.8 7.5

Current A/C (% GDP) -5.4 -3.4 -6.5 -8.6 -6.7 -6.9

Cash rate 7.0 2.25 2.0 7.5 2.5 3.0

10 year bonds 4.3 3.7 4.7 5.8 4.3 5.5

AUD/USD 0.79 0.56 0.58

AUD/NZD 1.18 1.30 1.32

Credit (YOY % change) 10.0 3.4 4.5 9.6 1.6 2.7

- Housing 8.9 6.0 8.2 6.8 1.5 2.4

- Business 13.2 1.1 0.9 10.0 1.0 3.0

- Other 2.2 -2.7 2.0 4.0 0.6 2.6

Summary of forecasts: Australia and New Zealand

* Based on 30 September bank year


• Australia’s real economic growth has averaged 3.3% since 1990 compared to 2.7% for the US

• Monetary policy aims to keep inflation within a 2% to 3% range on average over the course of the business cycle. The Government is committed to keeping the Budget in balance over the course of the economic cycle. Both these targets have been achieved over the past 10 years

• Well diversified economy with the 3 largest industries (property and business services; manufacturing and mining) accounting for 30% of output. The 10 largest industries account for 68% of output

• Although mining dominates our exports, it only accounts for around 8% of GDP

• Employment is more concentrated than output with the five largest industries accounting for around 55% of total employment

• Our export markets are diversified although Asia is the largest export destination. Exports account for approximately 23% of GDP

• Our banking system is dominated by the 4 large commercial banks. The asset exposure of the banking system is largely domestic corporations and households

• The main shift in the asset structure of the banking system has been the increased prominence of housing related assets, which now account for just under 50% of the banks loan assets

The structure of the Australian economy and banking system


Australia’s economy is well diversified

Source: Australian Bureau of Statistics (ABS)

Industry contribution to GDP - 2008

0 2 4 6 8 10 12 14

Personal &other services

Accommodation, cafes & restaurants

Electricity, Gas & Water

Communication services

Agriculture

Government admin & defence

Education

Wholesale trade

Transport & storage

Retail trade

Health & community services

Construction

Finance & insurance

Mining

Manufacturing

Property & business services

% of GDP


Consumer confidence while lower has been holding up relatively well to date

Sources: WBC/MI and Datastream

60

70

80

90

100

110

120

130

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Index

Long-term average


-40

-30

-20

-10

0

10

20

30

90 93 96 99 02 05 08 11-5

-4

-3

-2

-1

0

1

2

3$bn

As a % of GDP(right scale)

$ bn(left scale)

% of GDP

MYEFO

The Australian policy response has been both rapid and substantial…

• The government budgeted a surplus of close to $22bn in 2008/09 in May

• Two stimulus packages later they expect a deficit of $22bn

• Oct-14, $10.4bn stimulus package backed up with $42bn in Feb. to shore up domestic economic growth

Key spending in new package:

• $12.7bn one off payments for families/farmers

• $14.7bn for school building

• $6.6bn public housing

• $3.9bn home insulation

• $2.7bn business tax breaks

Sources: 2008-09 Budget Paper No. 1, Statement 13, Table 1 (and previous issues).

Commonwealth ‘underlying’ cash balance


One of the largest stimulus packages in the world

Fiscal stimulus (% of GDP)

Source: ANZ estimates

0

2

4

6

8

10

12

14

16

Chin

a

US

India

Aust

ralia

Ital

y

Glo

bal

Japan

New

Zea

land

Spai

n

Ger

man

y

Kore

a

UK

Tai

wan

Fran

ce

% o

f G

DP

*Chinese stimulus over 5 years


Australian general government net debt is expected to increase to 5.2% of GDP in 2011-12 – still low by international standards

Sources: OECD, Commonwealth Government, ANZ calculations

-200

-150

-100

-50

0

50

100

150

Japan

Ital

y

Bel

giu

m

Gre

ece

United

Sta

tes

Hungar

y

Port

ugal

Euro

are

a

Ger

man

y

United

Kin

gdom

Fran

ce

Aust

ria

Net

her

lands

Spai

n

Can

ada

Pola

nd

Irel

and

Slo

vak

Rep

ublic

Sw

itze

rlan

d

Au

stra

lia

Cze

ch R

epublic

Den

mar

k

New

Zea

land

Sw

eden

Luxe

mbourg

Kore

a

Finla

nd

Norw

ay

Net debt projections 2010


Budget surplus/deficit, 2008 Government net debt, 2008

…leaving Australia well placed to continue to use fiscal policy to support economic activity

-6

-4

-2

0

2

4

6

Kore

a

Sw

eden

Aust

ralia

Spain

Canada

Germ

any

Japan

Italy

France UK

US

% of GDP

Deficit

Surplus

-60

-40

-20

0

20

40

60

80

100

Kore

a

Sw

eden

Aust

ralia

Spain

Canada

UK

France

Germ

any

US

Japan

Italy

% of GDP

Note: data shown are for the ‘general government’ sector, ie including State and local governments but excluding government business enterprises. Source: OECD, Economic Outlook 83, June 2008,


Rapid, pre-emptive monetary policy easing has supported the economy

1

2

3

4

5

6

7

8

9

10

01 02 03 04 05 06 07 08

% pa

RBA official cash rate

Mortgage interest rates

• The RBA has now cut its official cash rate by 4% in just six months (it took almost six years for them to raise it by as much)

• Larger-than-expected movements in October, November and February underscore the RBA’s capacity to respond decisively to deteriorating economic conditions and its willingness to do so

• Although inflation remains well above the 2-3% target the RBA is explicitly judging that lower commodity prices and weaker economic activity will reduce the inflation risk

• Further cuts will take place in 2009 and it now looks likely that the cash rate will fall to a low of 2.0% by H2 2009

Sources: Thomson Financial; ANZ.

Interest Rates


Sources: Thomson Financial; ANZ.

Monetary policy having a greater impact in Australia than elsewhere – rate cuts are getting through to consumers

• Policy rates have been slashed across the globe

• But in many countries rate cuts are not ‘getting through’ to mortgage holders – particularly to existing mortgages

• Australia is the standout in terms of pass though due to:

• High proportion of variable loans

• Mortgage rate priced off 90 day bill rate (cf 30 year bond rate in US)

• Financial sector far healthier hence can afford to ‘pass on’ official interest rate cuts


Australia relatively well placed

• Rapid & substantial policy response – capacity for more

• Starting point ‘fundamentals’ solid

• Strong finance sector

Housing supported by intractable supply shortage

• Supply inadequate/pent up demand

• Limited ‘sub-prime’ fallout

• Full recourse lending

• Dramatic improvement in affordability (policy pass-through)

Summary: Very tough year ahead for global economy, Australia impacted but relatively well placed


The New Zealand banking system is sound

0

2

4

6

8

10

12

95 96 97 98 99 00 01 02 03 04 05 06 0708

% of Risk Weighted Assets

Sources: RBNZ; IMF October 2008 Global Financial Stability Report; RBA; Central Bank of Iceland; ANZ.

Tier 1 capital ratio

Tier 2 capital ratio

Total capital ratio

New Zealand banks well capitalised Banking sector not highly leveraged compared to other countries

0

100

200

300

400

500

600

700

800

Latin A

meri

caAfr

ica

Mid

dle

East

United S

tate

sFin

land

Port

ugal

Asi

aSw

eden

Worl

dG

reece

Aust

ria

Italy

Japan

Canada

New

Zeala

nd

Germ

any

Aust

ralia

Spain

Euro

are

aN

eth

erl

ands

Fra

nce

Denm

ark

United K

ingdom

Belg

ium

Irela

nd

Icela

nd

Bank debt as % of GDP


-3

-2

-1

0

1

2

3

4

5

6

7

82 84 86 88 90 92 94 96 98 00 02 04 06 0810

Annual avg % change

The recession in the New Zealand economy has extended into 2009 and conditions remain difficult

Early 1980s global

recession

Early 1990s global

recessionAsian crisis Tech

bust

Global financial

crisis

Sources: Statistics NZ; Bloomberg; ANZ.

New Zealand real economic growth New Zealand major trading partner growth

-4

-3

-2

-1

0

1

2

3

4

5

6

7

01 02 03 04 05 06 07 08 09 10

%

Quarterly % change

Annual % changeRBNZ March forecasts


The NZ dollar will play an important role in providing a buffer to the global downturn

NZ dollar trade weighted index NZ financial conditions leading index

Sources: Statistics NZ; Bloomberg; ANZ.

40

45

50

55

60

65

70

75

80

96 97 98 99 00 01 02 03 04 05 06 07 08

Index

-3

-2

-1

0

1

2

3

4

5

6

7

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

98.6

98.8

99.0

99.2

99.4

99.6

99.8

100.0

100.2

100.4

100.6

100.8

Ann % chg Index(inverse)

GDP (LHS)

Financial conditionsindex (adv 9 mths, RHS)


Meat, 8.00%

Other Food, 7.70%

Forestry & Wood, 9.00%

Manufacturing, 23.20%

Services, 21.90%

Crude, 2.70%

Ag & Seafood, 8.10%

Other, 23.4%

Diversified export sector, weighted towards agriculture.

ASEAN 10.6%

Australia 23.1%

UK 4.0%

China 6.2%Japan 8.5%

US 10.6%

Euro-zone 9.1%

Other 23.4%

Finance & Business 20.8%

Government 4.7%

Electricity, Gas & Water 1.8%

Wholesale 7.7%

Manufacturing 14.1%

Personal Services 11.9%

Agriculture 4.7%

Fishing, Forestry &

Mining 2.3%

Communication 6.2%

Retail 7.6%

Construction 4.7%

Transport 4.8%

…and by country

GDP composition

Exports 32% of GDP

Exports are diversified by product…

Sources: Statistics NZ; ANZ.


0

2

4

6

8

10

12

86 88 90 92 94 96 98 00 02 04 06 08 10

A rising unemployment rate and falling rural incomes will weigh on the economic outlook this year

Sources: Statistics NZ; ANZ.

%

Unemployment rate set to rise from cyclical lows

Terms of trade to decline, but remain high by historical standards

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

86 88 90 92 94 96 98 00 02 04 06 08

Index

ANZ CommodityPrice Index (scaled)

Terms of Trade


Significant fiscal and monetary stimulus already in the pipeline with more to come

-2

-1

0

1

2

3

4

97 99 01 03 05 07 09 11 13

% of GDP

Expansionary

Contractionary

Sources: The Treasury; RBNZ; ANZ.

Fiscal impulse Official Cash Rate

0

1

2

3

4

5

6

7

8

9

00 01 02 03 04 05 06 07 08 09 10

%


0

20

40

60

80

100

120

140

160

180

200

Aust

ralia

Luxem

bourg

New

Zeala

nd

Icela

nd

Denm

ark

Kore

aIr

ela

nd

Fin

land

Spain

Sw

eden

Norw

ay

Sw

itze

rland

Pola

nd

Neth

erl

ands

United K

ingdom

Aust

ria

Canada

Germ

any

Euro

are

aPort

ugal

Hungary

Fra

nce

United S

tate

s Tota

l O

ECD

Belg

ium

Gre

ece

Italy

Japan

A better starting position – low net debt

-10

0

10

20

30

40

50

60

72 76 80 84 88 92 96 00 04 08 12

% of GDP

Net Debt

Underlying Operating Balance

* Forecasts based on Treasury’s December 2008 Update downside scenarioSources: The Treasury; OECD Economic Outlook December 2008; ANZ.

Treasuryforecasts*

Fiscal position to deteriorate but off a low base

Gross public sector debt very low compared to other countries

Gross public debt as % of GDP (2008)


Tax cuts, lower mortgage rates and petrol prices are already providing a boost to household incomes

Sources: RBNZ; Ministry of Economic Development; ANZ.

Mortgage Interest Rates Retail Petrol Prices

4

5

6

7

8

9

10

11

00 01 02 03 04 05 06 07 08

% Floating

2-year fixed

5-year fixed

80

100

120

140

160

180

200

220

03 04 05 06 07 08

NZ cents per litre


AUSTRALIA & NZ MORTGAGE DATA


Australian housing market fundamentals are solid, driven by very strong underlying demand

Sources: Australian Bureau of Statistics; Economics@ANZ.

25

45

65

85

105

125

145

165

185

205

225

87 89 91 93 95 97 99 01 03 05 07

'000 (annual moving total)

2.4

2.5

2.6

2.7

2.8

90 92 94 96 98 00 02 04 06

'000 (annual moving total)

Net permanent & long-term settler arrivals

Persons per household


-80-60-40-20

020406080

100120140160180200220240

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Housing market balance: Australia

Shortage

Underlying demand

Surplus

Completions

Solid demand/inadequate supply is driving pent-up housing demand to record (potentially intractable) levels

Sources: Australian Bureau of Statistics; Economics@ANZ

‘000

Investor Discussion Pack March 2009

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Zero < 4 < 8 < 12 < 16 < 20 < 24 < 28 < 32 > 32

O-54 years old

Source: Unpublished ABS HES data 03-04, Economics@ANZ

Over 55 years old

Debt servicing ratio

The household sector was well placed to accumulate debt with two-thirds having little or no debt

“the lending boom was concentrated on existing homeowners who traded

up to bigger and better houses and bought

investment properties.Many of these were people

in the 40s and 50s who previously had low levels of

debt.”

Deputy Governor of Reserve Bank of Australia

Ric Battellino

70% of homes with less than a 4% servicing ratio

million households


-4

-3

-2

-1

0

1

2

3

4

5

90 93 96 99 02 05 08

% change

Source: RBA, ABS, ANZ

Real disposable income per HH after mortgage interest payments

deducted

Interest burden has risen but ‘income after interest paid’ has also grown strongly in real terms

HH income after interest paid

0

2

4

6

8

10

12

14

16

90 92 94 96 98 00 02 04 06 08

%

HH debt-servicing ratio

Burden rising with interest rates and debt accumulation

But “left-over” income per HH was solid


5

6

7

8

9

10

11

12

13

14

15

16

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

% of disposable income

20 year average

Source: RBA, ABS, ANZ

Dramatic interest rate cuts will see the household debt service ratio halve by mid-2009…

Household debt service ratio


-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

18

85 88 91 94 97 00 03 06 09

%

Household saving ratio

Sources: ABS, Economics@ANZ

Household saving ratio set to recover dramatically in the years ahead


0123456789

1011121314151617181920

02 03 04 05 06 07 08 09

annual % change

10 year average

… household cash flow will also be buoyed by fiscal stimulus and falling petrol prices

Source: ABS, RBA

70

80

90

100

110

120

130

140

150

160

02 03 04 05 06 07 08 09

cents per litre

HH disposable income Petrol price


…there are early signs that the market is responding


-30

-15

0

15

30

45

60

75

90

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Ann. % change

Housing finance growth

Finance approvals and interest rate cuts

Interest rate cutting cycles

Investor Discussion Pack March 2009

Housing finance approvals

Sources: Australian Bureau of Statistics, ANZ

-8

-6

-4

-2

0

2

4

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

monthly % change (trend)

QLD

Victoria

ACT

NSW

-8

-6

-4

-2

0

2

4

6

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

monthly % change (trend)

WATas.

SA

NT

With all states except WA improving


Recent gains driven by owner occupiers including first home buyers but boosted by first home owners scheme

0

1

2

3

4

5

6

7

8

9

10

11

12

00 01 02 03 04 05 06 07 08

$m per month (trend)

Owner occupied

Investor


Housing finance commitments (excl. refin.)


The supply imbalance has prompted the rental market to tighten and rents to rise sharply

Sources: Economics@ANZ; REIA

6.7

5.9

12.3

12.5

10.0

5

10.1

5.4

12.2

6.6

8

11.8

0 5 10 15 20

Hobart

Brisbane

Adelaide

Perth

Melbourne

Sydney

ABS averagerents

Residex"Advertised"rents

%p.a.0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

%; 4 qtr ma

National rental vacancy rate House rents


20

25

30

35

40

45

86 88 90 92 94 96 98 00 02 04 06 08 10 12


20 year average

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

86 88 90 92 94 96 98 00 02 04 06 08 10 12

ratio'rent'

'buy'

Source: ABS, REIA, ANZ

With the moves in affordability favouring home purchase over rental

16

17

18

19

20

21

22

86 88 90 92 94 96 98 00 02 04 06 08 10 12


20 year average

ANZ rent or buy indicatorHouse purchase affordability

Rental affordability


50

100

150

200

250

300

350

400

450

500

550

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

$000

Sydney (-4.1%*)

Melb. (-3.2%*)

Bris. (-1.4%*)

Perth(-6.7%*)

Hobart (-3.1%*)

Adel.(+2%*)

House prices

Sources: ABS, Economics@ANZ

House prices have softened – but haven’t fallen appreciably

* year to December 08


50

100

150

200

250

300

350

400

450

500

92 94 96 98 00 02 04 06 08

$'000

NZ(-6.6%*)

Auckland(-5.3%*)

Wellington (-5.6%*)

Otago(-7.9%*)

Canturbury (-7.5%*)

Median NZ House prices(3-mth-ave)

* Peak to February 2009 levels Sources: REINZ, Economics@ANZ

In New Zealand property markets began to fall in 2007 and further declined in 2008


New Zealand property market trends

-10

-5

0

5

10

15

20

25

91 93 95 97 99 01 03 05 07 092

4

6

8

10

12

House sales (adv 3 mths, RHS)

House prices (3-mth avg, LHS)

Annual % change '000 (s.a.)

New Zealand housing market

Source: ANZ, Real Estate Institute of NZ


-300

-250

-200

-150

-100

-50

0

50

100

150

200

250

Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-090

10

20

30

40

50

60

70

NZ Mortgages with less than 1 year until reset (RHS)

Difference between 2-year fixed mortgage rate from 2 years prior (LHS)

BpsNZDbn

Forecast

48% of ANZ National’s fixed rate book will reprice in next 12 months (80% of the book are on fixed rate mortgages)

Interest rate reductions have started to benefit consumers in early 2009


Mortgage rates have reduced substantially, providing cashflow relief to households

4

5

6

7

8

9

10

11

12

97 98 99 00 01 02 03 04 05 06 07 08 09

Floating rates

2-year fixed

%

5-year fixed


Credit Quality


Australian Mortgage portfolio remains well diversified with good underwriting standards

•Well diversified mortgage portfolio by state and distribution channel

•˜ 70% of portfolio is funding customer primary residences

•Average loan size is $205,000, average loan balance $173,000

•˜ 60% of the portfolio has 40% or greater equity in their property (i.e. LVR 60% or less)

•˜ 85% of owner occupied loans and ˜ 90% of investment have a dynamic LVR ratio of 80% or less

•NO subprime mortgages. •LoDoc 80% loans make up less than 2% of the portfolio and closed to new flows.

Aus. Mortgage profile by state & product

Aus. mortgage profile by channel (% of portfolio by distribution channel)

Aus. Mortgages LVR Profile (Retail)

• 59% owner occupied

• 32% investment

• 9% lines of credit

37% 39%

47% 44% 43%

16% 19% 18%

37%

1H08 2H08 Feb-09

Broker Network Specialist

ACT, 2% NSW, 27%

NT, 1%

QLD, 20%

SA, 6%

TAS, 2%

VIC, 26%

WA, 16%

0%

20%

40%

60%

80%

100%

0-60% 61-75% 76-80% 81%-90% 91%+

LVR at origination Jan-08LVR at origination Jan-09

Current LVR Jan-08Current LVR Jan-09


Mortgages Retail 90+ Days Arrears Bankruptcy numbers by State^

Cards Retail 90+ Days Arrears Consumer Finance Collections FTE (indexed as of 1H06)

Collections teams increased and scorecards further tightened to manage arrears levels in the consumer space

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%


Jan 09 0.33%

0.0%

0.4%

0.8%

1.2%

1.6%


Jan 09 1.03%

0

1,000

2,000

3,000

4,000

Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

NSW/ACT VIC/TASQLD SA/NTWA

0

50

100

150

200

250

1H06 2H06 1H07 2H07 1H08 2H08

FTE Index

^ITSA


New Zealand Mortgages^ 60+ Day Delinquencies (% of GLA)

New Zealand Mortgages

Number of PLA Notices issued* and mortgagee sales concluded

Average LVR for New Zealand Mortgages based on Origination

• Dec-08 By Outstanding Balance = 62.16%• Sep-08 By Outstanding Balance = 62.49%• Sep-07 By Outstanding Balance = 62.99%

This chart shows the LVR profile of the whole Retail mortgage portfolio using current balance and property values at the time the lending was originated.

New lending approved >80% LVR now represent less than 5% of approvals

0%

20%

40%

60%

0-60% 61-70% 71-80% 81%-90% 91%+

LVR at origination Sep-07LVR at origination Sep-08LVR at origination Dec-08

New Zealand mortgage portfolio stress driven by the impact of fixed mortgage rates

0

50

100

150

Feb-08 May-08 Aug-08 Nov-08 Feb-09

PLA

0

2

4

6

8

Mort

gag

e Sal

e Concl

uded

PLA Issued (LHS)Mortgagee Sale Concluded ( RHS)

^ANZ Retail excludes Wholesale * PLA notice = property law action notice. Customer has 45 days to repay arrears owing after which bank can proceed to mortgagee sale. NZ has no equivalent to the Australian mortgagee in possession process * Average LVR excludes mortgages for which an LVR cannot be calculated

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

Sep-05

Mar-06

Sep-06

Mar-07

Sep-07

Mar-08

Sep-08


Mortgages Retail 90+ Days Arrears Falling housing prices

Cards Retail 90+ Days Arrears •Arrears continue to increase, more pronounced in the secured book

•Property values continue to track down; interest cuts and supply factors expected to be mitigants.

•Credit standards have been adjusted and arrears management resources increased to reflect the weakening economic environment.

•Proactive customer management program, includes specialist financial support and active calling for early identification of potential stress.

New Zealand - Consumer arrears trends are within expectation for this point in the cycle

0.0%

0.4%

0.8%

1.2%

1.6%

Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09

0.0%

0.4%

0.8%

1.2%

1.6%


Jan 09 0.70%

Jan 09 1.25%

-3-2-1012345

92 94 96 98 00 02 04 06 08-10%-5%

0%5%10%15%

20%25%

Net migration (adv 12 mths, RHS)House Prices (3 Month Avg, LHS)

000’s


Interest cover ratio ‘Profit share’ of national income

Debt-equity ratio (gearing) Real unit labour costs

The Australian corporate sector entered this part of the cycle in a strong financial position

0

2

4

6

8

72 76 80 84 88 92 96 00 04 08

Ratio of gross operating surplus ofcorporate trading enterprises tointerest paid

Still high byhistorical

standards

Note: Australian non-financial corporate sector finances.Shaded areas denoted recessions.Sources: Australian Bureau of Statistics; Reserve Bank of Australia; ANZ.

50

75

100

125

150

175

88 92 96 00 04 08

%Low by

historicalstandards

-6-4-202468

72 76 80 84 88 92 96 00 04 08

% change from year earlier (trend) Sharp decline(cf. lead-upto previousdownturns)

15

20

25

30

72 76 80 84 88 92 96 00 04 08

Gross operating surplus ofcorporate trading enterprises(as a % of GDP)

Record high(and still rising)


Increase in Non Performing Loans and 90 Days Past Due Loans weighted to secured portfolios

Commercial Non Performing Loans by Geography

Consumer Non Performing Loans by Geography

90 Days Past Due well up, majority on the secured book

0

200

400

600

Sep-05 Sep-06 Sep-07 Sep-08

Australia New Zealand Offshore0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

FY05 FY06 FY07 FY08

% of GLA

Majority of NPL in secured portfolio in Aus and NZ (incl $76m in mortgage portfolio and $71m Esanda)

0

300

600

900

1,200

1,500

Sep-05 Sep-06 Sep-07 Sep-08

Australia New Zealand Offshore

$mSecurity profile

Well secured

Not well secured

$m


3724 25 16 15

2120394546

Manuf WholesaleTrade

PropertyServices

BusinessServices

RetailTrade

23.3% 21.6% 21.2%

21.8% 19.9% 19.9%

37.1% 41.5% 39.1%

2.5% 3.5% 4.6%15.3% 13.5% 15.2%

$103bn

AAA to BBB

BBB-

BB+ to BB

BB->BB-

$86bn $111bn

Sep-07 Mar-08 Sep-08

BASEL IIBASEL Iupgrade

downgrade

Group - GLAs Institutional Banking & Financial Institutions

Risk Grade Migration Summary by Customer Groups (FY08)

Institutional - GLAs Corporate Risk Grade Migration Summary by Customer Groups (FY08)

Collections teams increased and scorecards further tightened to manage arrears levels

16.4% 15.1% 15.1%

56.5%

14.3% 14.3%

11.2%

54.4% 53.3%

5.4%5.0%1.9%11.9%11.2%14.0%

BB+ to BB

>BB-

204 12 7 3

3921

12 13 6

Finance &Insurance

PropertyServices

Manuf. Mining Electricity,Gas, Water

AAA to BBB

BBB-

BB-

$339bn$308bn $358bn

Sep-07 Mar-08 Sep-08

BASEL II BASEL I

upgrade

downgrade


Commercial Property exposure less than 10% of total loan book

Commercial Property(% of lending book)

• Commercial property exposure is approximately $27bn or 8% of total lending book

• Commercial property lending cap of 10% of Gross Lending Assets is in place on Australian, New Zealand and combined books

• Australian LPTs make up less than 25% of Commercial property exposures

• Overall gearing to the LPT sector is typically sub 50%

75.6%

21.6%

2.8%

InternationalNew Zealand

Australia

Geographic split of Commercial property portfolio

0bn5bn

10bn15bn20bn25bn30bn35bn

Sep-07 Mar-08 Sep-080.0%2.0%4.0%6.0%8.0%10.0%12.0%

Lending Assets % of Portfolio% in CCR 7-8 %CCR 9-10


Australian property portfolio by Sector - Aug 08

New Zealand property portfolio by Sector - Aug 08

Commercial Property exposure by sector

Offices

Retail

Industrial

Tourism and Leisure

Other*

Residential Land

subdivision

Office

Residential subdividion

and residential

other

retail

Industrial

Tourism and Leisure

Other^

Non property purposes

* Major categories of “other” includes high rise, retirement villages, vacant land, non property, other residential

^ Major categories of “other” includes Land – Commercial, High Rise Residential and non classified


90 days past due largely secured (Sep 08)

Non-performing loans

• Arrears and non-performing loans have increased primarily in the secured portfolios with consumer and small business arrears having experienced the largest lift

• This rise reflects financial stress in the household sector due to higher costs of living and reduced income levels – reduction in overtime, bonuses, working hours, redundancies

• Household cashflow pressures are expected to moderate with the steep reduction in official interest rates although rising unemployment over the next year will have an impact on credit quality

New Zealand - arrears and impaired assets have increased from historical lows

0

50

100

150

200

250

300

350

400

450

1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1Q090.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

Non-Performing Loans % of Gross Lending Assets (RHS)

Interest rate reductions expected to benefit consumers in 2009

%NZD m

Secured Lending

92%

Unsecured Lending

8% Dec-08

PersonalHousing

Business

Rural

SME

Unsecured

NZD430.5m


Increase in watch & control lists – reflects increased vigilance in a weakening environment

Watch and Control list* (indexed data)

Diverse industry focus on watch list (Watch list by industry - Number of groups %)

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Watch ListLimits

Control ListLimits Manufacturing

Property services

Retail Trade

Wholesale trade

Agriculture , Forestry & Fishing

Finance & insurance

Construction

Transport & Storage

Accomm., Cafes &

restaurant s

* Watch List: an alert report of customers with characteristics identified which could result in requirement for closer credit attention; Control list: a report of high risk accounts which have or may defaulted


Credit Intermediation Trades Overview


Sold Protection• Credit intermediation trades entered

into between 2004 & 2007• No mortgages as reference assets• Significant subordination (first loss

protection)• CDS protection was sold to bank

counterparties

• Reference Assets – 38 structures, mix of CDO, CLO and Bonds/ FRNs

Bought Protection•All CDO and CLO structures are highly subordinated, NO first loss to ANZ on any structure

•CDS protection purchased over the same structures to mitigate risk

•8 counterparties (some of which are monolines)

•One financial guarantor defaulted during FY 08. Credit spreads increased on the remaining guarantors reducing the market value of the protection

Credit Intermediation Trades - Background

Difference between market value of sold and bought protection is reflected as Credit Risk on Derivatives. At end this was US$425m.

This is expected to be substantially recovered over time

Net cover


Credit Intermediation Trade Structures

Type of structure

Portion of Notional

Mark to Market

No. of structures

No of names

Average Remaining

Life (Years)

Attach/Detach Average

Synthetic

CDO

$8.9bn $1,105m 20 ˜ 650 6 Attach Avg 19%

Detach Avg 43%

CLO $1.3bn $105m 10 ˜ 700 11 Attach Avg 29%

Detach Avg 100%(Super Senior)

Other (bonds)

$1.0bn $143m 8 4 - -

Total $11.2bn $1,353m 38 - - -

CDOs - 20 transactions that reference synthetic, all of which are rated investment grade . 75% of the underlying reference assets are investment grade corporates with concentrations (approximately 30% each) in consumer goods/services and financials, with the remainder diversified across 8 other industry sectors.

CLOs – 10 transactions that reference CLO trades, all structures are super-senior (i.e. detach at 100%). The underlying assets largely are largely senior-secured loans issued by corporates with high concentrations (approximately 25% each) in consumer goods/services and industrial sectors with the remainder diversified across 10 sectors.


Data used in stress test• Moody’s historical corporate default

rates going back to 1920*• Analysed cumulative default rates and

likelihood of breaching attachment point of each CDO & CLO

Conclusion•Only in Great Depression scenario did any tranches breach attachment points

•Even using that scenario majority of trades still remaining safe

•Total realised cash losses approx ~US$400m under the stress scenario and only if financial guarantors default as well (i.e. double default event)

Weighted Average Remaining Subordination

Stress test on Credit Intermediation trades analysing likelihood of cash losses

0%

5%

10%

15%

20%

25%

1920 1930 1940 1950 1960 1970 1980 1990 2000

Weighted Average Remaining Subordination

On ‘average’ subordination remains positive but some trades would be in

loss totalling ~US$400m

* Data set included all companies analysed/rated by Moody's


2009 Trading Update(released 26/2/09)


Underlying business performing well

• Underlying business performing well – cash earnings# for FY09 expected to be around FY08 levels despite difficult environment

• Asia Pacific division up strongly, good revenue# trends in Institutional driven by markets business, Australian income and margin trends positive

• Income# growth up 16% on pcp (FX adjusted), increased Group Net Interest Margin, expense growth up 14% (FX adjusted) on pcp largely driven by one off costs (5%), growth in Asia Pacific (4%) and remediation work in Institutional

• Roadmap set in early 2008 to strengthen the balance sheet via increased tier one capital, significant liquidity and adequate provisioning has positioned ANZ well to deal with the new market reality

Tier 1 Ratio

Liquid Asset Portfolio* ($bn)

Provision coverage (CP/CRWAs^)

6.7% 6.9%7.7%

8.4%


20.1 30.453.9 55.4


Cash and other liquid assetsLiquidity portfolio

0.73%0.94%

1.13% 1.09%


*Assets held for liquidity management purposes, including internal securitisation (March 08 and Sep 08 including post balance date, pre reporting date internal securitisation). The Group holds additional portfolios of liquid, trading and investment securities. ^ 2008 & 2009 RWAs calculated using Basel II methodology, prior period numbers reflect Basel I#Adjusted for non-core items (i.e. significant items and non-core income arising from use of derivatives in economic hedges and fair value through profit and loss)

Basel I Basel II Basel II Basel II

#


Australia and New Zealand volumes and margins

* Geographic basis, including Institutional, ^ FX adjusted

Australia* Overview New Zealand* Overview

• Strong YTD customer deposit growth, with new customer deposits broadly in line with new lending

• Australia and Institutional divisions NIM benefiting from repricing, partially offset by increased deposit competition

• Difficult conditions continue leading to a decline in growth in both lending and deposit volumes.

• Higher cost of funds, deposit competition and prepayments negatively impacting margins

Aus Net Loans & Advances* (% growth HoH)

NZ Net Loans & Advances*^ (% growth HoH)

Aus Customer Deposits* (% growth HoH) NZ Customer Deposits*^ (% growth HoH)

0%3%6%9%

12%15%

2H07 1H08 2H08 Jan-09 YTD

0%2%4%6%8%

10%

2H07 1H08 2H08 Jan-09 YTD

0%

2%4%

6%

8%

2H07 1H08 2H08 Jan-09 YTD

-2%

0%

2%

4%

6%

2H07 1H08 2H08 Jan-09 YTD


Group portfolio

90 days past due Provision charge ($m)

% of Gross Lending Assets

Impaired Loans* ($m) •Past due growth broadly spread, majority in the secured book

•Higher provision levels than 2008 but in line with market consensus of $2.4 to $2.5 billion

•Institutional credit losses tracking around 2008 levels with broader portfolio impacts as well as the impact from large single names

•Consumer provisions increasing principally in Consumer Finance and Esanda

•NZ provisions could approach double that of 2008 reflecting tougher economic conditions

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

FY06 FY07 FY08 Dec-08

0

1,000

2,000

3,000

4,000

FY06 FY07 FY08 Jan-09

Restructured Items

NPLs

Majority relates to large single names transferred to impaired in 2008

0

200

400

600

800

1,000

4 mth to Jan2008

4 mth Avg 2008 4 mth to Jan2009

* Excludes unproductive facilities


Mortgages Retail 90+ Days Arrears Mortgages Aus. LVR Profile (Retail)

Cards Retail 90+ Days Arrears •Maximum Loan to valuation ratios for new applications reduced from 95% to 90% on the mortgage portfolio

•LoDoc80 product removed for new applications

•Both redraw and limit utilisations have continued to decrease over the past 4 months

•Since Sep 08 customers paying above minimum repayments have doubled to 74%

•Arrears levels continue to trend slightly upwards although remain below peer reported averages

Australian - Consumer portfolio

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%


0.0%

0.4%

0.8%

1.2%

1.6%


Jan 09 0.33%

Jan 09 1.03%

0%

20%

40%

60%

80%

100%

0-60% 61-75% 76-80% 81%-90% 91%+

LVR at origination Jan-08LVR at origination Jan-09

Current LVR Jan-08Current LVR Jan-09


Mortgages Retail 90+ Days Arrears Falling housing prices

Cards Retail 90+ Days Arrears •Arrears continue to increase, more pronounced in the secured book

•Property values continue to track down; interest cuts and supply factors expected to be mitigants.

•Credit standards have been adjusted and arrears management resources increased to reflect the weakening economic environment.

•Proactive customer management program, includes specialist financial support and active calling for early identification of potential stress.

New Zealand - Consumer portfolio

0.0%

0.4%

0.8%

1.2%

1.6%


0.0%

0.4%

0.8%

1.2%

1.6%


Jan 09 0.70%

Jan 09 1.25%

-3-2-1012345

92 94 96 98 00 02 04 06 08-10%-5%

0%5%10%15%

20%25%

Net migration (adv 12 mths, RHS)House Prices (3 Month Avg, LHS)

000’s


Structured Credit intermediation trades update

Counterparty rating No. Notional Principal Amount (USD m)

Mark to Market (USD m)

Credit Risk on Derivatives^

(USD m)

AAA/Aaa 4 8,871 1,396

724

(@ FY08 $425)

BB/B3 1 387 43

BBB+/A3 1 86 10

CC/Caa1 1 286 42

Defaulted Monoline 1 1,333 316

Total Position to end January 09 8 10,963 1,806 724

FY 2008 Credit Risk on Derivatives USD 425m

YTD (Jan 2009) Credit Risk on Derivatives USD 299m

2009 YTD (Jan 2009) after tax charge AUD 370 m after tax

Collateralised issues / Credit protection intermediation activities

^ Credit Risk on derivatives is an adjustment to the MTM of derivatives, to reflect the credit rating of the counterparty, credit spreads and other factors. # includes movement in exchange rates net of hedging

#


Calculation of Credit Risk on Derivatives charge for Credit Intermediation trades

ANZ’s credit intermediation trades involved back to back sold and purchased protection in the form of CDS.

For accounting purposes, the CDS are marked to market which involves adjusting the value of the purchased protection for the counterparty risk of the provider. This is reported in the P&L as “Credit Risk on Derivatives”.

In many ways it is similar to a collective provision for non defaulted exposures, or the individual provision where the provider of the purchased protection has defaulted. The key differences being the degree of estimation of the exposure and the need to use current market inputs because derivatives are at fair value.• There are 8 counterparties (including ACA) providing “bought protection” to ANZ in relation to the

intermediation trades.• Two of these are CDPCs (“Credit Derivative Product Companies”) and the remainder are monolines of

which one (ACA) has defaulted. The CDPCs are currently rated AAA by S&P.• The starting point for the calculation of the amount exposed to credit risk is the Mark-to-Market

(‘MTM’) for the underlying credit intermediation trades. The MTM calculation estimates the current market value of the purchased and sold protection at a particular date on the underlying trades. This effectively becomes the current value of the credit risk if there was no purchased protection. Unlike a loan this is not a static number.

• The next step is to apply a probability of default to the bought protection counterparties. This is based on the market price of credit for the counterparty credit rating. This amount is adjusted to reflect expected recovery amounts.

• For monolines there are observable credit spreads. For CDPCs ANZ must use an internal model as there are no observable credit spreads.


Credit RWAs

$260,674m*

Increase of $9,924m (+3.9%) in Dec 08 qtr with 2.6% due to growth in portfolio, 2.0% for FX and 0.2% due to change in risk profile, with low growth as a result of transfer of large exposures to Eligible Provisions

Total RWAs

$281,351m

Increased by $5,917m (+2.1%) largely from volume growth, FX and some deterioration in credit quality, notably in Corporate Asset Class (including several large corporate accounts), partly offset by reduction in IRRBB to zero#

Regulatory Credit exposures

$566,124m

Total Credit Risk Exposure increased by $28,522m (+5.3%) largely due to derivative mark-to-market changes, FX and volume growth in mortgages

Impaired Loans / Facilities

$3,267m

Impaired loans / facilities increased $594m largely from the Institutional Division, with an increase in the Australia Division mainly in Esanda

90+ days Past Due Loans

$1,264m

90 Days past due increased by $204m, primarily from Australia Division’s Mortgages portfolio with increased financial pressure and reduced exit options

Individual provision balance $901m

IP balance increased $226m, reflecting the deteriorating environment. Write-offs were mainly in Australia Consumer Finance, Esanda and Institutional

Credit RWA movements* ($bn)

Reg. Expected Loss & Eligible Provisions

Sep-08 Dec-08 Jan-09

Basel EL Amount (incl IP) 3,052 4,181 4,325

Total Eligible Provisions

GRCL (tax effected) 1,919 1,916 1,940

IP 799 879 948

Surplus/(Deficit) applies to Capital 50/50 Tier 1/ Tier 2 (334) (1,386) (1,437)

Movement in surplus / (Deficit) 315% 4%

APS 330 Pillar 3 December quarterly disclosures

2.23.63.15.0

6.5

250.8

1.2260.7 261.9

Sep08

Dec08

Jan09

* including securitisation, equity exposures and other assets, ^includes reclassifications of assets within categories # due to the increase in embedded gains on Investment Term of Capital providing an offset to repricing and yield curve risk as measured by VaR

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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.comor contact

Jill CraigGroup General Manager Investor Relations

ph: (613) 9273 4185 fax: (613) 9273 4899 e-mail: [email protected]

investor march 2009 - anz · investor discussion pack march 2009 7 source: bcg, team analysis . 1....

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