2000 Annual Results

1
2000 Annual Results

• Australia and New Zealand Banking Group Limited
  26 October 2000
• John McFarlane
• Chief Executive Officer

2
2000 Annual Result

• Strong result better than expectations
• 1,703m up 15
• 885m second half up 8.2 on first half
• We delivered on all our commitments
• Financial performance
• Rebalancing the portfolio
• Reducing risk
• Restructuring program accelerates strategy
• Sensible application of surplus capital
• EPS accretive
• Superior to buyback alternative

3
Results summary

• Operating profit after tax before abnormals
• Full year 1,703 million, up 15
• Second half 885 million, up 15.8 on 1999, and
  8.2 on first half 2000
• Earnings per ordinary share up 15 to 1.04
• Return on ordinary shareholders equity of 18.3,
  up from 17.2
• Final dividend 35 cents, up 5 cents with 100
  franking. Full year dividend 64 cents, up 14
• 361m restructuring charge to accelerate new
  strategy
• Net abnormal profit 44 million - Grindlays
  profit largely offset by restructuring and other
  provisions
• Costs flat. Cost income ratio down to 51.7 from
  54.4

4
Our three year commitments to shareholders

• Achieve superior financial performance
• Deliver double-digit earnings growth
• Improve return on equity
• Bring down our cost income ratio to 53
• Re-balance our portfolio
• Increase proportion of Personal business
• Enhance leadership position of Corporate
• Simplify and focus our International business
• Build momentum in eCommerce
• Reduce risk

5
We have delivered superior financial performance

ROE
m
NPAT
CAGR 13.3
Total Shareholder Return
Cost Income Ratio
6
We have re-balanced our portfolio
Loans Advances
NPAT
10
5
8
39
41
23
49
50
56
49
43
27
PFS CFS International

• Includes Grindlays
• Excludes Group

7
Portfolio breakdown - indicative
772m
647m
1,703m


100
Small Business
Other
Institutional
Corporate
Corporate
General Banking
Personal
Transaction Services
Asset Finance
Wealth Mgmt
Capital Markets
International
Mortgages
Foreign Exchange
Funds Mgmt
ANZIB Financial Services
Cards
40m
0
Personal
Corporate
Asia
Pacific
Excluding Grindlays (127m)
International
Customer Businesses
8
We continue to reduce risk
ELP Factors
Market Risk (Av. VaR)
bps
Am
23
23
5.4
4.4

• Beta reducing towards 1.0, in line with peer
  average

9
We didnt get everything right firm action taken

• Personal loan portfolio
• International provisioning from historical book
• Panin writedown to market
• Took action to put historical Grindlays issues
  behind us

10
Accelerating our transformation program
35 Initiatives across our portfolio of businesses
including

• Standardisation and rationalisation of IT and
  processing platforms
• Rationalisation and upgrading of EFTPOS network
• Transformation of Branch Network
• Improving efficiency in Asia/Pacific by
  rationalising IT platforms and centralising back
  office processing
• Establishing new business platform for Esanda

Expected cost reduction 300m
11
Building for the future - recap on our strategy

• Proposition
• Specialists will win over conglomerates
• Corporations need to embrace new technologies
• Value depends on performance and growth

• Strategy
• Reconfigure ANZ as a portfolio of 21 specialist
  businesses
• An e-Bank with a human face
• Drive results whilst investing in growth
  businesses

• Implications
• Specialist approach to customer and product
  businesses
• Transform the way we do business by using IP
  technology
• Meet expectations, fund growth by cost reduction

Specialise
e-Transform
Perform and Grow
12
Portfolio strategy should reflect degree of
globalisation and leverage real capabilities
now
FX
Institutional Banking
GSF
Funds Management
Trade
Soon
B2B
Capital Markets
Esanda
Custody
Cards
Impact of globalisation
B2C
Mortgages
Later
Wealth Management
Mid Corporate
General Banking
Not yet
Small Business
Less developed
At par
Local leader
Regionally distinctive
Globally distinctive
ANZs capability
13
Different businesses need different strategies
Business size by NPAT
Invest for rapid growth
Create new businesses
e-Payments
FM
GSF
High
e-Asia
Wealth
Cards
GTS
Market Growth
FX
Institutional
Cap Mkts
Corporate
Small Bus
Low

• Defend position and return
• Grow selectively

Gen Banking

• Optimise performance
• Identify new growth products

Esanda
Mortgages
Low
High
ROE
14
Balancing the autonomy of each business with
strong leadership from the centre
Business Unit
Corporate Centre

• Prime accountability for profit and value
• Freedom to pursue opportunities within agreed
  boundaries
• Operate using agreed set of platforms, systems
  and shared services
• Transfer pricing based on market - no cross
  subsidisation

• Drive group strategic direction and set policy
• Portfolio management and resource allocation
• Cross-Business Unit synergies
• Control and oversight of risk, brands and
  technology

15
Personal Financial Services Peter Hawkins
Accountabilities PFS 50 Group 50
General Banking
Wealth Management
Small Business
Mortgages
Cards
Funds Management
Theme
Drive sales and efficiency
Invest to grow
Aggressively rebuild
Maintain profitable growth
Accelerate growth
Reinvigorate and grow

• Advanced marketing/ segmentation
• Straight through processing
• Lower cost to serve

• Expert advice
• Open architecture
• Wrap facility
• Seamless access

• Build profitable market share
• Relationship based proposition
• Redesign end-to-end processes

• Maintain distribution strength
• Straight through processing

• Best of breed delivery platform
• Data mining
• Exploit growth opportunities

• Leverage distribution channels
• Optimise products/ capabilities
• Double FUM by 2003

Priorities
anz.com
systems CRM SSP brand risk
management
16
ANZ in the medium term
ANZ in 1 - 2 years
ANZ in 3 - 7 years

• Material reallocation of resources
• Substantial e-transformation reducing costs and
  focused service
• Performance optimised
• EPS, ROE, investment
• capital management
• Transformational cultural change

• Substantial portfolio shifts
• Narrower, more focused portfolio with leading
  positions
• Increased investment in high growth business
• Modern performance culture
• Higher stock rating

17
Goals going forward

• EPS growth above peer average (target 10)
• ROE over 20
• Cost-income ratio comfortably in the 40s
• Inner Tier 1 6
• Maintain AA category credit rating

18
2000 Annual Results

• Australia and New Zealand Banking Group Limited
  26 October 2000
• Peter Marriott
• Chief Financial Officer

19
Highlights

• Earnings growth of 15 (13.3 compound)
• Return on equity 18.3 (17.2)
• Cost income ratio 51.7 (54.5)
• Grindlays sold, realising net profit after tax of
  404m after related provisions
• Income up 6, costs flat, ELP down 4bps to
  39bps
• 2bn returned to shareholders in the form of
  dividends and share buyback
• Dividends returned to 100 franking
• Restructuring charge to accelerate transformation
  program

20
Drivers of performance (excluding abnormals)
21
Good progress across the board
Other income 47
Costs (14)
Tax outside interests (123)
Other fee 111
Net profit after abnormals 1747
Debt provisioning 8
Lending fee 48
Profit before abnormals 1703
Net interest income 146
Abnormals 44
1480
2000
2000
1999
22
Income drivers
Margins stabilised in second Half

• Smaller differential between 90d BBSY and Cash
  Rate
• Greater focus on improving margins

Includes Grindlays
Other
Non-interest income showed healthy improvement
MOS
Trading
FX

• Driven by higher fee income
• FX and trading profits lower, reflecting lower
  volumes

Other Fees
Lending Fees
23
Cost-income ratio continues to decline
63.1


51.7
Target - comfortably in the 40s
estimate of market expectations for 2000
24
Costs are flat and a new baseline is established
for 2001
Grindlays
46
3314
(288)
(50)
18
3300
3268
GST EFTPOS NZ
GST acquisitions
Sold businesses - Investment to build business
prior to sale FX effects
Sale of Grindlays
74
3100

• Higher restructuring costs
• Increased marketing spend
• Higher profit share

Baseline 2000
2000
1999 Adjusted
1999
25
Sale of Grindlays re-balances the Groups
portfolio
NII/Assets
Margins

• Reduces lending in Middle East and South Asia by
  4.8b
• Reduces loans by 3.9 but reduces non-investment
  grade loans by 6.8
• Exposure to countries rated below A reduced by
  8.5b
• Capital released being addressed by current
  buyback

Other Income/Assets
ROA
Cost/Income
Cost/Assets
Group 2000 Grindlays Continuing
ELP (bps)
ELP/Assets
26
Strong organic asset growth
m
Australian Assets
Asset growth has been strong without material
acquisitions
27
Non-accrual loans stable despite asset growth
Historic
m
Gross Non-Accrual Loans (LHS)
Non-Accrual Loans/ Loans advances (RHS)
Net Non-Accrual Loans (LHS)
28
Overall book continues to improve
Australian Loans Advances
Australian Lending Asset Profile
b
AAA to BBB
BBB to BBB-
BB to BB
BB-
gt B

• Investment grade 66 of book
• Diversified portfolio
• Minimal exposure to media/telcos

• Mortgages now represent 46 of book, up from 40
  in March 1999

29
Credit quality is sound in our largest industry
exposures - Australia
Lending Assets (AUDm)
of Portfolio (RHS scale)
in CCR 7D-8G (RHS scale)
Manufacturing
Wholesale Trade
Real Estate Operators Dev.
Accomm. Cafes Restaurants
Construction
Agriculture
30
Specific provisions Corporate offsets personal
loans problem
Personal Loans
254
221
214
201
171
Daewoo
140
134
125
123
96
84
A single B exit account
41
1999
2000
1999
2000
1999
2000
Corporate Financial Services
Personal Financial Services
International
Sold Businesses
ELP
NSP
31
PFS specific provisions were driven by personal
loans and credit cards
Av Volume b
Personal Loans

• Loss rate approximately 6 against expected loss
  rate 3.5
• Average margin 5-6 (excludes fees which cover
  approval costs)
• Loss on product 15m after tax
• Hence specific provisions largely offset by
  margin but product design and controls upgraded
  to bring losses back in line with expectations

SP m
Av Volume b
Credit Cards
SP m

• Loss rate 2.3
• Average margin gt5

32
Asian credit quality improves significantly
despite two large specific provisions
Asian Specific Provisions
Risk Grade Profile
2.9b
4.3b
m
AAA to BBB
A single B exit account
BBB to BBB-
BB to BB
BB-
Daewoo
B to CCC
Non-accrual

• B exposures now only 130m
• Investment grade 68 of book
• Expected losses declined significantly from 1.4
  to 0.5

• Specific Provisions relate to two unusual losses

33
Provisioning levels strengthen
General Provision ELP charge
m
Times
502
(383)
FX impact
(51)
(90)
1373
1395
Net SP transfer
Sale of Grindlays
ELP charge
Surplus406
967
1999
2000
APRA Guidelines
ELP - Economic Loss Provision SP - Specific
Provision
ex Grindlays for 2000
34
The result incorporated several abnormal items
m
After tax
Net gain on sale of Grindlays businesses Strategic
business and transformation restructuring
provision Panin writedown Litigation
provision Tax rate change Revaluation of
property Sale of Colonial shares Net abnormal gain
404 Cr 245 Dr 81 Dr 33 Dr 64 Dr 30 Cr 33 Cr 44
Cr
Average purchase price
35
Abnormals - Grindlays transaction

• Net sales proceeds 1,225
• Provisions raised on sale 575
• Income tax 246
• Net profit 404
• Indemnities
• Indian scam matters
• US80m Pakistan cross border risk for 12 months
• US186m indemnity covers 80 of losses on certain
  customer accounts. Receive fee equal to ELP
• Standard tax indemnities

m
36
We have used the financial capacity from the
Grindlays sale to accelerate restructuring
programs spread across 35 separate initiatives
Drivers
Benefits
Selected Programs

• Specialist businesses, eTransformation, and
  funding growth
• Cost income ratio comfortably in the 40s

• Approximately 300m lower costs
• Enhance customer service and revenue
• Greater flexibility
• Platform for further eTransformation
• Invest savings in growth businesses subject to
  EPS growth targets
• Leaves capacity in routine 80-100m pa
  restructuring for further programs

• Reconfigure metropolitan branch network in line
  with needs and demographics
• Re-engineer Esanda operation
• Simplify Asian business platform operations
• IT platform rationalisation for eWorld
• General Banking sales and service platform
• Two year program
• Provision relates to costs of dismantling the
  old and investment spend will be covered by
  normal operations

37
Capital management will continue

• Capital Management
• Philosophy
• Capital scarce resource to be managed effectively
  and efficiently
• Maintain capital consistent with ANZs AA status
  and peer group ratings
• Tier 1 (6.5 - 7.0)
• Inner Tier 1 (6.0)

b

7.9
7.7
7.5
7.4
6.9
6.5
6.7
6.4

• Progress
• 1014m of buyback
• Capping of DRP/BOP to reduce dilution
• Remaining 500m buyback in progress
• Restructure more EPS accretive than buyback

38
Goals going forward

• EPS growth above peer average (target 10)
• ROE over 20
• Cost-income ratio comfortably in the 40s
• Inner Tier 1 6
• Maintain AA category credit rating

39
The material in this presentation is general
background information about the Banks
activities current at the date of the
presentation. It is information given in summary
form and does not purport to be complete. It is
not intended to be relied upon as advice to
investors or potential investors and does not
take into account the investment objectives,
financial situation or needs of any particular
investor. These should be considered, with or
without professional advice when deciding if an
investment is appropriate. For further
information visit www.anz.com or contact Philip
Gentry Head of Investor Relations ph (613) 9273
4185 fax [phone] email
gentryp_at_anz.com
40
Copy of presentation available on www.anz.com