National Australia Bank Positioned for Growth

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National Australia BankPositioned for Growth
Richard McKinnon, Chief Financial Officer

• July 8 , 2002

national.com.au
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Agenda
1. The National today
2. Competitive advantages in Banking
3. Wealth Management in the National
4. Targets and Summary
3
The National today

• We are focused on integrated financial services
  in Australia,NZ, Great Britain and Ireland
• Positioning for Growth provided room for
  investment while maintaining earnings momentum
• We are targeting 12 cash earnings per share
  growth in 2003 and 2004
• While investing in Wealth Management in Australia
  and UK and banking across the group to underpin
  future growth
• We have an active ongoing share buy-back
• HomeSide risk reducing with MSR sale

4
We have a clear strategic intent by business and
region
Australia
NZ
UK/RoI
Asia / US

• Universally recognised as the top FS provider in
  Australia
• No. 1 in business and agri-business banking
• No. 1 in premium and private segments

• To provide market leading integrated financial
  services
• Targeted operating strategies across franchises
• Leverage product including wealth management and
  wholesale

• Maintain a leading position in the NZ market
• No 1 or 2 in market share in business and in
  retail banking
• Increased wealth management market share

• Not Applicable

Banking

• Leading business partner outsource provider
• No. 1 in Retail FUM and in Group
  Personal insurance
• A leading provider of outsourced corporate
  super employee benefit solutions

• A recognised investment platform with multi
  channel distribution capability
• Top 10 in retail funds flow
• Best practice bancassurer
• Better than industry standard benchmark
  performance for WM penetration

• Best practice bancassurer
• Better than industry standard benchmark
  performance for WM penetration
• Top 2 Fund Manager
• Top 2 in Life Insurance

• Continue emerging market strategy
• Hong Kong - Top 10 life insurer
• Thailand - Top 5 Coy by 2005 in new business
• Indonesia - Grow Value

Wealth Management

• To be recognised by clients as a high quality and
  innovative financial services partner
• No. 1 Wholesale Bank

To grow a relationship based business to support
core clients in selected markets

• To be recognised by clients as a high quality and
  innovative financial services partner
• No. 1 Wholesale Bank

To continue to service the needs of our core
clients and pursue niche opportunities in
selected markets
Wholesale
5
We have a simplified structure with a strong and
diverse leadership team
Managing Director CEO Frank Cicutto
EGM WholesaleFinancialServices Ian Scholes
CEOBNZPeter Thodey
EGM FinancialServices AU Ian MacDonald
EGM FinancialServicesGB Ireland Steve Targett
EGM WealthManagement Peter Scott
EGM FinancialServices AU Ian MacDonald
EGM FinancialServicesGB Ireland Steve Targett
EGM WholesaleFinancialServices Ian Scholes
EGM WholesaleFinancialServices Ian Scholes
EGM FinancialServices AU Ian MacDonald
EGM FinancialServicesGB Ireland Steve Targett
OPERATIONAL
EGMPeople Culture Peter McKinnon
EGMRisk Management Chris Lewis
EGM Corporate Development Mike Laing
CFO Richard McKinnon
EGM Corporate Development Mike Laing
EGMRisk Management Chris Lewis
EGMRisk Management Chris Lewis
EGM Corporate Development Mike Laing
CIO Ian Crouch
CIO Ian Crouch
CIO Ian Crouch
CIO Ian Crouch
SUPPORT

• 3 external appointments

• 5 EGMs in new roles

6
Our fist half result shows strong earnings
momentum

• Record Net Profit 2.256 billion
• Profit 11.4 up on Mar 01 and 13.1 up on Sep 01
• ROE up 110bp to 20.1
• ROA up 15bp to 1.23
• Dividend per share up 5cto 72c
• Additional 1 billion buy-back

Net profit excluding significant items
M's
Half Years
7
..and strong performances in core business units
Growth in Business Unit Net Profit
Ms
1000
Mar-01
Sep-01
Mar-02
750
500
250
0
Financial Services
Wealth
Wholesale



Management
Australia
Europe
NZ
8
Positioning for Growth provided robust organic
growth plans for 2003 and beyond
Positioning For Growth

• Strategic focus
• Leverage past investments capabilities
• Capture growth opportunities
• Revitalise organisation

• 370M p.a. cost reduction by 2004
• Increased revenues with 1380 new positions
• Over 400M of investment in Wealth Management and
  Europe
• Cultural change program

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1. The National today
2. Competitive advantages in Banking
3. Growth opportunity in Wealth Management
4. Targets and Summary
10

We have strong market positions and distinct
competitive advantages in banking .

• Leading relationship banking capabilities
• Leading market positions in Australia (SME and
  Premium), New Zealand and Northern Ireland
• Multiple specialised distribution platforms
  aligned to customer needs and value potential
• Integration of product specialists and service
  delivery
• Global best practice Customer Relationship
  Management

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Financial Services Australia holds a dominant
position in Business Banking
NATIONAL BANK'S SHARE (PENETRATION)
MARKET DEFINITION SIZE

• Turnover over 100m
• 1,200 companies

Wholesale
CORPORATE
61
MIDDLE MARKET

• Turnover over gt5m - lt100m
• 24,500 companies

42
BFSA

• Turnover over lt5m
• 506,000 companies

SMALL BUSINESS
28

• Turnover over lt5m
• 545,000 companies
• No employees

SOLE PROPRIETORS
Total Number of National Business customers
305,000 (30)
Total Number of Business customers in Australia
1,076,700
Source Greenwich Associates
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and is the leader at meeting customer needs
PRIME BANK CUSTOMERS - SHARE OF WALLET SERVED
BY PRIME BANK
PRIME BANK CUSTOMERS VS TOTAL MARKET PENETRATION
()
42
96
94
29
29
26
92
30
19
88
18
17
WBC
CBA
ANZ
NAB
ANZ
WBC
CBA
NAB
Source Greenwich Associates
13
Financial Services Australia is also the leader
at meeting personal customers needs
Average number of products
Premium Customers Share of Wallet
47
2.5
2.5
45
45
2.4
2.2
32
ANZ
CBA
WBC
NAB
CBA
ANZ
WBC
NAB

• Wealthier customer base on segmented platforms
• Long standing CRM capabilities
• Broadest distribution channels

Source Roy Morgan Research Dec 2001
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We have long standing and superior capabilities
in customer relationship management

• Needs identification is cornerstone of
  relationship management approach
• National Leads and CRM capabilities are key
  component
• Developed over past decade

Best CRM Strategy, Nov 2001, Presented by
Institute of Financial Services UK British
Telecom
2001 NCDM Excellence Award Presented by US
National Centre for Direct Marketing
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We are taking transferring capability to our
European business
Regional market share, of personal current
accounts
Regional customers, million
2.3
25
17
1.1
16
0.6
YB
CB
NB
YB heartland
CB Natural Marketing area
NB Natural Marketing area

• Financial Services Europe has produced CAG of
  12.5 in local currency over last 5 halves

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Credit risk management is a core strength
Asset Composition - March 2002
WFS Composition by Equivalent SP Rating March
2002
WFS Sub-
Investment Grade
WFS
Investment
Investment
84
4
19
BFS Secured
26
PFS
Unsecured
3
BFS
Unsecured
PFS Secured
5
20
PFS Partly
BB to BB-
Secured
BFS Partly
12
B to B
Secured
12
B- to CCC
3
11
1
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1. The National today
2. Competitive advantages in Banking
3. Growth opportunity in Wealth Management
4. Targets and Summary
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In Wealth Management we differentiate ourselves
from our competitors by

• Manager of Managers investment approach
• Advice based distribution philosophy
• A focused strategy across - Australia, Europe and
  Asia
• A diverse portfolio of businesses
• Multiple distribution channel management
• Customer base - bank client base potential

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Strong track record with Manager of Manager
approach
We have achieved 29 annual growth in retail net
funds flow since 1998 in Australia
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Our strategic intent is to lead the evolution of
the model to holistic financial planning...
Tax Management, Estate Management, Risk Management
Wealth
Debt Cashflow Management
Asset Allocation, Investment Strategy
Asset/ Product Selection, Transactions, Reporting
25
30
Wealth Accumulation
Wealth Consumption
Retirement
Source Hypercompetition, Credit Suisse,
November 2001
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...across the markets in which we operate
Horizon 3
Horizon 2
Growth
HK/Indonesia/ Thailand
Horizon 1
GB/Ireland
Australia/NZ
Time
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The Wealth Management business continues to
evolve to meet market needs
1995 1998 2000/2001 2002/Future
Business Partner and Outsource Provider
Investment Advice Platforms
Life Co
Fund Manager

• Integration of WM Businesses
• Acquired Deutsche FP and JANA
• 360 dealership infrastructure
• Launch UK Investment and Advice Service
• Sale of non-core businesses

• Enhance Advice Platform
• Move towards Holistic Advice Model and IFS
• International Expansion

• MasterKey, FlexiPlan
• Re-engineered distribution and advice capability
• Sale of non-core businesses

• Process Simplification
• Product Simplification

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Target Business Model - Generic
Aligned Self-Employed Advisers
Salaried Advisers
External Dealerships
Dealerships
Advice
Direct
Business Coaching
Practice Management and Advice Support
Administration and Servicing -
Seamless Integration
Strategic Advice Platform
Consolidated Reporting for Advisers and their
clients across
Investment
Debt Solutions
Other Securities
Related Advice
Insurance
Solutions
Solutions
Solutions
Solutions
Embedded
Advice
Direct securities,
Life
Estate Planning
Investment
General, health
Mortgages,
personal and
Providers
Tax
Internal and
Choice
External
margin lending
non-custodial
and risk
Management
assets
providers
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The U.K. wealth management market represents a
significant expansion opportunity for the National
Smaller market 1.1 million customers
Significant banking share in small market 0.6
million customers
Small share of large primarily retail
markets 2.3 million customers
1
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We have commenced building our offer and advice
capability...
Launched Financial Planning and Investment
Service in November 2001
Bank Based
Internal IFAs
External IFA Relationships
Advice
Dealerships
Business Coaching
Practice Management and Advice Support
Capability exists
Administration and Servicing -
Platform
Strategic Advice
Seamless Integration
Consolidated Reporting for Advisers and their
clients across
Investment
Insurance
Debt Solutions
Other Securities
Related Advice
Solutions
Solutions
Solutions
Solutions
Embedded
Advice
External Providers
Internal and
Direct securities,
Life
Estate Planning
Investment
Mortgages,
personal and
General, health
Choice
Tax
margin lending
non-custodial
and risk
Management
assets
providers
Undertaken a significant re-engineering program
of Insurance business
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with positive early results

• In process of implementing long-term vision for
  Wealth Management in the UK
• Launched Financial Planning and Investment
  Service in November 2001
• Committed further investment to expand advice
  proposition to the UK intermediated advice channel

Growth since launch 11
GBPm
UK Funds under Management
580
560
540
520
500
Dec-01
Jan-02
Feb-02
Mar-02
Apr-02
Source Association of Unit Trusts and
Investments Funds (AUTIF)
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Target UK Business Model 2005
Bank Based
Internal IFAs
External IFA Relationships
Advice
Dealerships
Business Coaching
Practice Management and Advice Support
Capability
Administration and Servicing -
Platform
Strategic Advice
Seamless Integration
Consolidated Reporting for Advisers and their
clients across
Investment
Insurance
Debt Solutions
Other Securities
Related Advice
Solutions
Solutions
Solutions
Solutions
Embedded
Advice
External Providers
Internal and
Direct securities,
Life
Estate Planning
Investment
Mortgages,
personal and
General, health
Choice
Tax
margin lending
non-custodial
and risk
Management
assets
providers
28
1. The National today
2. Competitive advantages in Banking
3. Growth opportunity in Wealth Management
4. Targets and Summary
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Group Targets to 2004

• Cash EPS Growth
• 2001/02 Between 7 - 10
• (includes impact from HomeSide)
• 03 and 04 Greater than 12
• Return on Equity gt 18 p.a.
• EVA Growth gt 5 p.a.
• Capital Management
• Maintain capacity for active capital management

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Summary

• Clear strategic focus
• Strong earnings momentum driven by relationship
  banking and wealth management capabilities
• Unique growth opportunities in wealth management
  and Europe
• Reducing risk profile with MSR sale
• Capital generation strong. Ongoing buy-back.
• Positioning for Growth outcomes will enhance
  momentum

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Disclaimer
The preceding material is a presentation of
general background information about the
Nationals activities current at the date of the
presentation, July 8, 2002. It is information
given in a 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.
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