International

1
International - Move to Growth Phase
Elmer Funke KupperHead of International
Division 18 July 2000
2
International - Move to growth phase

• Last year, we presented a three year agenda to
  Simplify and Focus International. The first
  phase is nearing completion
• Implemented risk reduction program
• Simplified positions and extracted value in one
  move
• Freed up capital and management for growth agenda
• With the focus shifting to growth, new positions
  will be built in the Pacific and Asia
• In the Pacific, we will extend our leadership
  position to new geographies and continue to drive
  operational improvement
• In Asia, following the crisis, we have small and
  lower risk positions. We will re-energise these
  positions and direct new investment towards
  eCommerce
• Implementation of the growth agenda will take two
  years, and a deal pipeline has been established

3
Risk reduction program largely completed
Impact Grindlays Sale on Risk Profile
Specific Provisions International
One Name
Assets in countries rated below Single A
82
299m
247m
48
75m
Grindlays
ANZ Post Completion
1998
1999
1H2000
ELP ()
1.58
1.38
1.13
H2000
4
Simplification completed in one move

• Asia - Selective Investment
• Japan, Korea
• Trade, money centre
• Three Chinas
• 4 branches
• South East Asia
• Singapore, Indonesia, Philippines, Vietnam,
  Malaysia, Thailand

M
M
M
P
N
N
M
N
N
D
R
D
D

• Grindlays transaction
• 10.2b assets, 79m 1H earnings
• Simplifies network in one move
• Extracts immediate value at 2.3 times NAV and
  14.6 times earnings
• Completion on track for 3rd quarter 2000

D
D
D
N
D
M
D
R
N
R
D
M
D
D
N
D
D
D
D
D
D

• Pacific Extend leading position
• South Pacific well covered
• 41 branches
• 20-60share

D
5
International - Move to growth phase

• Last year, we presented a three year agenda to
  Simplify and Focus International. The first
  phase is nearing completion
• Implemented risk reduction program
• Simplified positions and extracted value in one
  move
• Freed up capital and management for growth agenda
• With the focus shifting to growth, new positions
  will be built in the Pacific and Asia
• In the Pacific, we will extend our leadership
  position to new geographies and continue to drive
  operational improvement
• In Asia, following the crisis, we have small and
  lower risk positions. We will re-energise these
  positions and direct new investment towards
  eCommerce
• Implementation of the growth agenda will take two
  years, and a deal pipeline has been established

6
Two growth agendas
Starting Position
Strategic Response

• Replicate leading market positions
• Organic growth or acquisition in new geographies
• Rapid deployment of successful management model
• Continue to drive operational improvement

• Markets
• Large in number, individually small
• Modest growth
• Highly concentrated few players
• Similar market/management models
• ANZ
• Leading position in eight markets
• Strong track record
• NPAT 1H2000 22m

Pacific

• Build existing positions
• Re-energise network points
• Build Panin into top 5 retail bank
• Invest in new growth
• Target mass affluent as they get online
• Partner to complement ANZs strengths in
  e-commerce and monoline businesses (eg cards)

• Markets
• Individually large, more fragmented
• Recovery under way
• Emerging mass affluent
• Rapid growth in online economy
• ANZ
• Network positions in 11 countries
• Early investment in Panin Bank
• NPAT 1H2000 15m

Asia
7
Pacific Consolidate existing leadership
Leadership Positions
Continuous Improvement
Results (NPAT)

• Customer segmentation - Prime Banking in Fiji,
  PNG
• Products - funds mgmt, insurance, asset finance
• Electronic channels ATMs, EFTPOS
• Fee income automation
• Going forward
• Continue to invest in new channels and products
• Review opportunities to regionalise operations

Fiji Vanuatu Samoa Solomon Islands American
Samoa Tonga Cook Islands PNG
1 1 1 2 2 2 1 3
44m
37m
2000
1999
Consumer

• Assets 81
• Liabilities 80
• NPAT 85

First half annualised
8
Impact of recent events in pacific
Real GDP Growth
NPAT contribution
10
100 766m
22m
Solomons
5
46
Other Islands
68
0
54
Fiji/Solomon
32
-5
Fiji
Lending Assets 2000
Profit After Tax H2000
-10
'90
'92
'94
'96
'98
f00
9
Extending leadership to new markets
10
Size of the pacific opportunity
11
Asia Dealt with the credit crisis as predicted
New Non Accrual Loans
Net Specific Provisions
One name
277m
270m
228m
118m
101m
51m
1998
1999
H2000
1998
1999
H2000
Coverage ()
86.0
67.2
70.0
12
Re-energise Asia
Economic Recovery in Region
Grow the Business in Selected Areas

• Build Strategic Assets
• Trade finance
• Network customers
• Relationship banks
• Key project sectors
• Maintain Policy on Non-Strategic Assets
• USD wholesale banking
• Interbank lending
• Participations

• ANZ represented in
• Japan
• South Korea
• China
• Hong Kong
• Taiwan
• Singapore

• Indonesia
• Philippines
• Thailand
• Malaysia
• Vietnam

13
Indonesia Patience in building position
Inflation Improved
annual change
Panin Bank
Food

• Profile
• Assets 2.6bn (Dec 1999 full year)
• Pre provisions NPAT 107m
• 29 shareholding by ANZ
• Currently number 8 Non-State Bank- 106 branches
  mainly in Jakarta/Java

Consumer Prices
All Items

• Going forward AUD20m investment in retail banking

Currency/Stock Market Remains Weak
Rupiah
Index
Jakarta SE Composite Price Increase (RHS)

• New ATMs
• Phone banking/National Call Centre
• Refurbish branches
• New branches in Jakarta

Rupiah per USD Inserted Scale (LHS)
14
Key to new Asia growth are mass affluent

• There is a largely untapped opportunity to
  provide financial services to the emerging mass
  affluent consumers
• eCommerce provides a more cost efficient and low
  risk way of targeting this potential ANZ is a
  leader in eCommerce
• The need for speed, access to markets and risk
  sharing means that we need to combine the
  strengths of ANZ with those of others in the
  region
• We have joined forces with OCBC from Singapore to
  develop the regional business, which we expect to
  launch early 2001
• The business model recognises the weaknesses of
  existing pure online propositions and includes
  specific responses to these

15
Mass affluent market is emerging
Japan
Korea
China 3
Hong Kong
Wired Emerging Affluent

• Adults in urban areas
• Annual income over approx. US10,000
• Connected to the Internet

Taiwan
Thailand
Philippines
Malaysia
Singapore
Indonesia
16
Online use is taking off
Internet Take-up Zone
Internet Penetration of Households ()
25
Singapore
Australia
20
Based on US experience, B2C financial services
takes off when internet penetration hits
10-20 Broking and Net Banking are the early
Killer Apps
Japan
Hong Kong
Taiwan
Korea
15
Malaysia
10
Indonesia
Thailand
5
Philippines
China
Vietnam
0
GDP / Capita (USD '000)
0
10
20
30
40
Implication e-Commerce opportunities are
starting to emerge in each country
17
Online customers are attractive
Online customers cheaper to acquire (index)
Online customer more attractive
Offline ( 100)
Online
259
500
185
169
116
100
100
Offline
Online
AverageProfitability
Number of products
Average Deposit Balance
AverageLoanBalance
Source ANZ customer base
18
Pipeline under development
Leading Financial Portal
Internet Service Provider
Online Stockbroking

• Regional e-based financial institution

B2B and B2C Enabling
Retail Alliances
Banking front end
19
OCBC/ANZ partnership makes sense
Country
OCBC
ANZ
OCBC Profile
June 2000 USDm Total Assets 33,562 Market
Capitalisation 7,751 NPAT, Dec 1999 full
year 415 Market Share (Spore) 17.9
China
5
2
Hong
Kong
3
1
Indonesia
JV
Panin
Japan
1
2
Korea
1
1
1 Rep.
Malaysia
25
Office
Partnership Benefits
Philippines
1
1
Complementary licences, strategic fit Both
banks embrace the e-space at home Shared vision
of opportunity across Asia
Singapore
44
1
Taiwan
1
1
1 Rep.
Thailand
1
Office
1 Rep.
Vietnam
2
Office
20
Leveraging ANZs strengths

• No. 1 in Australia
• Domestic partnership through Qantas Telstra Visa
  Card
• International partnership with Star TV

Credit Cards

• Highest penetration of customers banking with
  anz.com
• Continuously expanding product suite, eg. eauto,
  pay anyone, my ANZ
• Key alliances - ETrade, Freenet, MultiEmedia,
  Medweb

Consumer eCommerce

• Leader in electronic banking to corporates, ANZ
  Online, FX Online
• B2B solutions - eGate, eProcurement with MRO.com,
  corProcure
• Development of FX Online web based platform

Corporate eCommerce
21
International - Move to growth phase

• Last year, we presented a three year agenda to
  Simplify and Focus International. The first
  phase is nearing completion
• Implemented risk reduction program
• Simplified positions and extracted value in one
  move
• Freed up capital and management for growth agenda
• With the focus shifting to growth, new positions
  will be built in the Pacific and Asia
• In the Pacific, we will extend our leadership
  position to new geographies and continue to drive
  operational improvement
• In Asia, following the crisis, we have small and
  lower risk positions. We will re-energise these
  positions and direct new investment towards
  eCommerce

• Implementation of the growth agenda will take two
  years, and a deal pipeline has been established

22
International program phasing
Target
Profit Improvement Program Launched
Grindlays Transaction Announced
Complete Simplify and Focus
Strategic Review Completed/ Elmer Funke
Appointed
Completion Grindlays Transaction
Indian Mgmt Strengthened
Profit Decline Halted Growth Visible
6/99
9/99
3/00
9/00
1/01
eAsia Team Established
Panin Bank Rights Issue

• Drive Growth
• Agenda
• Pacific new markets
• Asia eGrowth

BOOM.COM Investment
Launch Internet Banking Indonesia
Customer Launch OCBC Joint Venture
Acquisition Amerika Samoa Bank Announced
eCommerce Joint Venture with OCBC Announced

• JV Alliances
• Pacific new markets strategy

23
Summary
Complete Simplify and Focus
Extend Pacific Leadership
Invest in Asian eGrowth

• Implemented risk reduction program
• Simplified International positions in one move
  with Grindlays sale completion on track
• Freed up capital and management

• Replicate leading market positions
• Organic or acquisition
• Deploy successful management model
• Continue to drive operational improvement
• Agenda defined and under way

• Re-energise existing positions
• Network points
• Panin Bank
• Invest in eGrowth
• Target mass affluent
• Partner to complement strengths
• Joint Venture announced

24
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