Perform Grow and Breakout

1
Perform Grow and Breakout

• Presentation to
• Deutsche Bank Asia Pacific Financial Institutions
  Conference
• London, 9-10 July 2001
• Peter Marriott
• Chief Financial Officer
• Australia and New Zealand Banking Group Limited

2
ANZ - who we are

• One of the Big Four Australian banks.
• Provider of full range of financial services in
  Australia (since 1835) and New Zealand (since
  1840)
• Leadership in Corporate Banking, Credit Cards and
  Mortgage origination, a strong eCommerce position
  and an offshore network in Asia and Pacific.
• Assets A181b (US 95b)
• Market Cap A24.5b (US 12.7b)
• Profit (half year) A895m (US 470m)
• Staff 22,815
• Credit Ratings AA-/Aa3

ANZ Headquarters 100 Queen Street Melbourne
Note figures as at 31/3/01, with exception of
market cap which is as at 28/6/01
3
We are on track to deliver on our 3 year
commitments
Measure EPS growth ROE Cost-income ratio Inner
Tier 1 Credit rating
2003 Commitment gt 10 gt 20 mid
40s 6 maintain AA category
Achievement 13 19.1 49.4 6.2 maintained

• We have also committed to improving customer
  satisfaction, and will publicly report our
  progress

4
Building for the future - a distinctive strategy

• Proposition
• Entrepreneurial specialists create more value
• Corporations must embrace new technologies
• Value depends on performance, growth and breaking
  out

• Strategy
• Reconfigure ANZ as a portfolio of 16 specialist
  businesses
• An e-Bank with a human face
• Drive results, invest in growth businesses and
  create new paradigms/culture

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

Specialise
5
Transforming ANZ through Perform, Grow and
Breakout

• Focus long term destiny
• Benchmark global industry/players
• Looking for transforming moves
• Horizon 5-10 years
• Success dramatic market cap increase

Break out

• Focus specialisation and out-growing the
  market
• Benchmark competitors in each business
• Looking for breakout moves in key
• businesses (eg QTV, Origin)
• Horizon 3-4 years
• Success 4-5 moves taking share and
• worth AUD1bn market cap each

Grow

• Focus performance
• Benchmark market expectations
• Looking for six monthly delivery
• Horizon 1-2 years
• Success meet/exceed expectations
• consistently

Perform
6
We are performing well - interim results

• NPAT from continuing operations 907m - up 18
• EPS up 13 to 55.8 cents
• ROE of 19.1, up from 17.8
• Cost Income ratio down to 49.4
• Continuing operations revenue up 10, costs flat
• Credit quality sound
• ELP charge down to 35 bps
• Total non-accruals down
• Specific provisions flat - down overseas and up
  domestically
• Profit on sale of holding in St George 99m (65m
  after tax), offset by write downs in investments
  (84m)
• Improved disclosure - financial information
  provided for each business unit

7
Building a strong track record
NPAT/ROE
Cost to Income
m
NPAT m
ROE

m

Source JP Morgan Roy Morgan Research
8
Good profit growth across a diversified
portfolio Mar 00 v Mar 01
m
Personal
Corporate
International and subsidiaries
9
A strong performance culture
EVA focus
Cost Control

• Rigorous Risk v Reward discipline
• Driver based capital allocation
• Integrated model

• Part of culture
• Allocation of a scarce resource
• Ongoing re-engineering
• eTransformation
• Activity Value Analysis (AVA)

Value Aspirations
Strategies
Leading Cost Income Ratio
EVA targets
Business Unit
EVA performance
Customer
Rewards
10
We continue to actively manage and reduce risk
Lending Profile by Asset Type

• Exiting higher risk businesses
• More emphasis on lower risk businesses
• Corporate balance sheet deliberately constrained
  focus on fee income
• Risk based approach embedded through EVA

business
consumer
CBA as at 31/12/00, NAB WBC as at 30/9/00
11
Total non-accrual loans continue to fall, but
increase in Australia
Historic
Geographic Gross Non-Accrual Loans
m
Gross Non-Accrual Loans (LHS)
m
Non-Accrual Loans/ Loans advances (RHS)
Net Non-Accrual Loans (LHS)
Aust
Inter
NZ
12
Group risk grade profile continues to improve -
but some signs of turning domestically
114.6bn
141.0bn
134.9bn
126.5bn
AAA to BBB
BBB to BBB-
BB to BB
BB-
5.4
3.9
gt B
7.2
3.8
ELP (bps)
45
43
38
35
gtB B, B-, CCC non-accrual
13
Provisioning in line with expectations
.but increasing in Australia and New Zealand
m
Actual SP v ELP charge
ELP charge
SP charge
International Subsidiaries
Personal
Corporate

• Slowing domestic economy likely to increase
  specific provisions
• ELP is a function of volume (on and off balance
  sheet), risk grade profile, and level of security
• Specific Provisions tend to be less volatile in
  Personal businesses and track more closely to ELP

14
Provisioning levels remain strong
represents 3 years expected losses
m

GP/Lending Assets
ELP charge
241
FX impact
1460
27
1373
(181)
Net SP transfer
Surplus448
1012
1H 2001
2000
APRA Guidelines
ELP - Economic Loss Provision SP - Specific
Provision
includes acceptances
15
We are developing a track record for building
growth businesses


Share of credit card spend
Mortgage market share
95
00
96
97
99
98
01
95
00
96
97
99
98
01
m

m
Growing FM inflows
Personal customers - Australia
FM inflows (LHS)
Deposit market share (RHS)
16
Most businesses targeting revenue growth well
in excess of expense growth
Personal
Cards
Corporate
High
Int. Subsidiaries
GFX
Private Clients
Asia
GSF
GCM
GTS
Asset Fin
ANZ Investments
Pacific
Plan Revenue Growth 01-03 cagr
Nominal GDP Growth
Inst. Bank
Small Bus
Metro Reg Banking
Mortgages
Corporate
CostIncome falling
Low
ILLUSTRATIVE
Low
High
Plan Operating Expense Growth 01-03 CAGR
Note Bubble size approx. in proportion to 2001
forecast NPAT
17
We are developing a strong CRM capability
CAPABILITIES
INFRASTRUCTURE

• Enterprise Customer Data Mart (ECDM)
• Tranact database
• Customer scoring and decision engine
• Behavioural credit scoring systems
• Campaign Management System
• Interim front line screen delivery

• Full account and customer EVA
• Segmentation markers and profiles
• Propensity-to-buy scores
• Application/behavioural scores
• Multiple campaign management

In Place
In Pilot/ Develop- ment

• Attrition scores by customer
• Recovery scores
• Automated, event-based campaigns
• Automated prospect list delivery (My Sales)
• Optimal strategy selection by customer (longer
  term)

• Call centre, ATM, and SSP integration
• anz.com integration
• Multi-product decisioning
• Full front line screen delivery

18
Substantial growth opportunities in Personal

• System Growth
• Underlying credit growth 8-10 pa
• Market Share
• Product businesses growing customer numbers and
  market share
• Customer s increasing by 1.0m - translates to
  650m in additional revenue pa
• Increase Wallet
• Customer businesses deepening wallet share
• 650m revenue gain by matching our peers
• Created customer businesses
• Sales programs
• CRM

Total potential revenue growth - 1.5b
Customer s (m)
Peer Average
Increased wallet on higher share 160m
10
Potential revenue 650m
7.3
5
4
Potential revenue 650m
Existing revenue 2.6b
0
40
50
Share of Customer Wallet
Average share of wallet for CBA, NAB, SGB, WBC
- source Roy Morgan Research
19
In Corporate, our main focus is on growing total
wallet share
Focus on deeper
Customers
penetration of existing

• Grow wallet share
• New high value products
• New delivery mechanisms
• Improved cross-sell
• Increased sale of 3rd party products

CFS customer base
Potential
revenue 1.3b
5,000
Total wallet
FY 2000 revenue
of ANZ customer
1.7b
base 8.5b
0
20
35
Share of Customer Wallet
source internal estimate
20
Our breakout approach is differentiating us

• Specialised businesses - open architecture
• First class execution (no surprises)

• Strategy
• Staff
• Customers
• eTransformation
• Risk

• 91 of managers on individual contracts
• 12 rise in staff satisfaction
• Breakout cultural change program

• Establishment of Customer Charter, Customer
  Advocate and distinctive customer and community
  initiatives

• Leading cost income ratio
• Highest internet banking penetration

• Leading financial disclosure transparency
• EVA embedded in culture

21
Developing a breakout performance culture
Mission /aspiration
where we are where we want to be
Distinctive (Top 10)
Targets/goals
Superior (Top 25)
Average
Organisational approach
BU Performance feedback
Consequencemanagement
Rewards recognition
Opport- unities
People
Financial
Operational
Values

Coordination and control
Motivation
Average
Superior
Distinctive
Benchmark - 33 Australasian companies
surveyed over 1999-2000
22
ANZs aspiration

• A high performing company, exceeding expectations
• Revenue growth
• Cost leadership
• Risk mitigation
• EPS
• ROE

• Positioned in growth markets
• Actively managed portfolio
• Annual investment in growth ideas
• Higher than peer revenue growth

Perform
Grow
AND
Breakout

• More dynamic than competitors
• High P/E rating
• Performance culture
• Lean and agile
• The e-bank with a human face
• A breakout mentality

23
Summary

• We are performing well
• Cost management momentum eTransformation has
  just begun
• Risk reduction continues
• Our new strategy is creating value and better
  positioning us for growth
• We are differentiating ourselves through our
  Breakout program

We are on track to achieve our goals
24
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] e-mail
gentryp_at_anz.com
25
Economic outlook - cautiously optimistic
Real GDP Growth incl. and excl. housing and
Olympics (est)

Financial conditions in Australia more
expansionary than US
Contractionary
Year ended, excluding dwellings and Olympics
Expansionary

• Retail sales continue to rebound
• Housing recovery continues
• But unemployment is still rising
• Forecast GDP growth for 2001 calendar year - 2,
  rising to 4 in 2002

• Unlike the US, Australia did not experience
  contractionary financial conditions
• With domestic growth indicators strengthening,
  and early signs of rising inflation, the interest
  rate cycle has likely bottomed

26
Copy of presentation available on www.anz.com