ANZ 2009 Annual General Meeting
Chairman’s Address

Good morning. My name is Charles Goode and as your Chairman, it is my pleasure to welcome
you to ANZ’s 41st Annual General Meeting.
I would also like to welcome those of you joining us through our webcast on anz.com.
We are very pleased to be holding our Annual General Meeting in our home city of Melbourne.
As a quorum is present, I now formally declare this Annual General Meeting of Shareholders
open.
I propose to take the Notice of Meeting as read.
If you need a copy of the Notice, please ask one of the attendants. Minutes of the last
meeting, and copies of the Annual Report, are available in the registration area.
At our meeting today, I will talk about changes to the Board; provide an overview of ANZ’s
performance in 2009; and our view of the year ahead.
I'll then ask ANZ’s Chief Executive Officer, Michael Smith to address you.
After Michael speaks, there will be the opportunity for questions, or comments, on any matter
related to our business.
After the questions we will move to discussion on the items of business before today’s meeting.
I will ask you to vote on these resolutions by way of poll.
At the end of the meeting, the Directors and our senior management, would like to meet withyou and talk about ANZ, over a cup of tea or coffee in the foyer.
Now let me introduce your Directors and the Chief Financial Officer.
We have ten Directors, nine of whom are independent non-executive Directors.
You can read details on their skills and experience, and the Board Committees on which they
serve in our Annual Report.
On your far left is Peter Hay who joined the board in November last year.
Then Ian Macfarlane. Ian chairs the Risk Committee.
Then Alison Watkins. Alison also joined the board in November last year and is Chairman of
the Human Resources Committee.
And next to me is Michael Smith, the Chief Executive Officer.

On my left is Peter Marriott. Peter is the Chief Financial Officer.
Then John Morschel. It is proposed that John will succeed me as Chairman early next year. He
is Chairman of the Governance Committee and a member of each of the other Board
Committees.
Next is Jerry Ellis. Jerry retires at the conclusion of this meeting after 14 years as a Director. I
will say more about Jerry shortly.
Next is David Meiklejohn. David is Chairman of the Audit Committee.
Then Lee Hsien Yang, who joined the Board in February 2009.
most respected business leaders.

Hsien Yang is one of Asia’s

He is the Chairman of Fraser and Neave, a Director of Singapore Exchange Limited, and wasformerly Chief Executive Officer of Singapore Telecommunications.
Next is Dr Greg Clark. Greg chairs our Technology Committee.
As this is Jerry Ellis’ final shareholder meeting, I would like to make special mention of his
contribution to ANZ since he joined the Board in 1995.
Jerry has served on most Board committees. In particular, he has served on the Risk
Committee for 12 years, chairing it from 2001 to 2006.
He is a person of the highest integrity and has brought to the Board an intellectual rigour, abroad view of issues and a deep understanding of the management of a large company. Jerry
brought a focus to health and safety which can easily receive less attention than it deserves ina financial services group.
Jerry has made an outstanding contribution, not only to ANZ but to Australia during his longcareer.
On behalf of all shareholders, and his colleagues on the Board, I wish to take this opportunity,
to acknowledge, and to thank Jerry for his very substantial contribution, and to wish him andhis wife Ann, good health and happiness.
Turning now to the ANZ executives: on the stage behind me, from your left are: Bob
Santamaria, General Counsel; Shane Buggle who was our Group General Manager Financeduring the year; and John Priestley, Company Secretary.
And also here today, are Michelle Hinchliffe and Mitch Craig from KPMG, our external auditors.
Later, Michael Smith will introduce the rest of the senior management team to you and talkabout their roles and experience.
This is the last Annual General Meeting of ANZ that I will have the honour of chairing after 18
years as a director and 14 years as your Chairman.
The Board has proposed that my successor will be John Morschel, one of Australia’s mostrespected business leaders.

2John joined our board in 2004. He has had a long career as an executive and as a director andchairman of major Australian and international companies.
He has extensive experience in the finance and property industries, as well as
telecommunications, building materials, and resources. John has already made a significant
contribution to the Board and I believe he will make an excellent Chairman of ANZ.
Let me now make some comments on the past year.
2009 was the most difficult year for financial services for many decades. After the collapse of
Lehman Brothers, financial markets all over the world began to collapse at rates not seen sincethe 1930s.
There was a breakdown in confidence in the global financial system and banks were not lending
to each other. The banking system is the lubricant that keeps the world’s economic engine
running. The crisis threatened a seizure of the global economy with the gravest consequences.
This danger was recognised by governments and central banks throughout the world and there
was an unprecedented, global, co-operative response to the crisis.
This rapid policy response saw the worst averted and most of the world move into a more solid
position.
In Australia, the Reserve Bank reduced interest rates from 7.25 per cent to 3 per cent andmade liquidity readily available to the banks.
Our Government joined moves made in other developed economies to guarantee bank deposits
and banks’ wholesale borrowings.
It provided a fiscal stimulus of $68 billion, or 5.7 per cent of Gross Domestic Product, in a
package of measures involving housing, education and infrastructure expenditure.
This crisis did impact on Australia lowering our annual growth rate from 3.7 per cent per
annum over the previous 15 years to an estimated 0.5 per cent. But Australia came throughthis global financial crisis better than other OECD countries.
The main reason for Australia’s resilience was that the country was in very good shape when
the crisis arose.
We had a Government budget surplus of 1.7 per cent of GDP in 2007-2008 and no net
Government borrowings. In 2007, the economy grew at nearly 4 per cent and high interest
rates had curbed earlier exuberance and provided scope for rates to be lowered.
We had a housing industry with no over-supply; strong commercial banks; a strong trading
relationship with Asia, particularly with China and Japan.
Australia also had the benefit of a good institutional framework from Government, the Reserve
Bank and the bank regulator, APRA.
A second reason for Australia’s resilience is that the responses of both the Reserve Bank and
the Government were prompt and significant, although there are some questions as to thelasting benefits of some of the Government’s expenditure.

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A third reason is the strong demand that continued for our resources, particularly from China.
A further factor contributing to Australia’s economic resilience is our compulsory
superannuation system. This provided a stream of investment savings that was available tosupport substantial equity raisings as corporate Australia reduced its dependence onborrowings.
It appears that we are coming out of this world financial crisis with unemployment in Australia
up from 4 per cent to 6 per cent; and Government net debt that might rise to 10 per cent ofGDP.
I am not worried about a Government debt of this size, which is very low on an international
comparison. We are very fortunate in Australia, compared to citizens of other countries suchas the United States and the United Kingdom, who are looking at the prospect of higher
taxation.
There has been a lot of discussion in Australia about the government bank guarantee.
While the major Australian banks were in a very strong financial position, competing borrowers
around the world were receiving guarantees from their governments which put our banks at amajor disadvantage.
The Australian Government provided a facility to guarantee the new wholesale borrowings ofAustralian banks which represent around 25 per cent of their total term wholesale funding.
This guarantee was not free. The Australian banks have paid the Government more than $1
billion for these guarantees - none of which have been called or are likely to be called.
Our Government also guaranteed deposits of the banks even though deposits were not leaving
the Australian system to go to other countries.
This was not requested by the major Australian banks but I assume it was introduced tomaintain the composition of the Australian banking system for competitive reasons and as aprecautionary move in case the world financial crisis worsened.
As financial markets improve the major Australian banks are increasingly raising theirwholesale borrowings without using the Government guarantee, which we expect will bewithdrawn in the near term.
ANZ has not needed to use the guarantee on a public term debt transaction since June thisyear.
Also, we expect in due course to see the withdrawal of the domestic guarantee on bankdeposits, which we do not consider necessary. It may well be that it will be followed by aguarantee scheme for deposits with a much lower ceiling than at present.
While the financial crisis has had a relatively mild impact in Australia, in the northernhemisphere the effects have been very severe and have only improved to a limited extent.
As recent events in Dubai demonstrated, equity and other markets remain very fragile andsensitive to further shocks.

4What is important, is that through the crisis, the position of the major Australian banks became
stronger and today they stand out as amongst the safest and best capitalised banks in theworld.
ANZ maintained its AA-credit rating making it one of only 11 banks remaining in the world witha AA-rating.
So, given the extraordinary environment, ANZ produced solid results in 2009.
Our statutory net profit after tax of $2.9 billion was 11 per cent lower than the previous year.
Due to a 16 per cent increase in the weighted average number of shares on issue, earnings per
share were down by 23 per cent.
However we increased our underlying profit after tax by 10 per cent to $3.8 billion. Earnings
per share on this basis fell by 4 per cent.
This underlying profit excludes what we consider to be significant one-off costs associated withdiscontinued businesses; non-cash accounting hedging losses; the credit intermediation
provisions; the increase in tax provisions relating to New Zealand conduit transactions; the loss
in New Zealand related to the selling of certain ING New Zealand products; and the costs of amajor restructuring of the Bank to focus on our customers.
The global financial crisis and the near recession in Australia led to much lower loan demand,some de-leveraging by businesses and individuals, and pricing to reflect risk and to recoverhigher funding costs.
Our mortgage lending in Australia increased by 10 per cent, our commercial lending wassteady, and institutional lending reduced by 20 per cent reflecting reduced demand as a resultof the subdued economic environment and a refocusing of our loan book. Overall our lending
book was steady for the year.
Looking at our underlying profit performance by geography: Australia performed well in thecircumstances, Asia Pacific performed strongly, New Zealand was very disappointing and there
was good progress in the turnaround of Institutional. Within the Institutional business Global
Markets had a particularly good year.
We maintained a positive approach to growing our business, with income rising faster thancosts. Underlying income rose by 17 per cent and expenses by 12 per cent. Our underlying
cost to income ratio fell from 44 per cent to 42.2 per cent.
The major impact on profit, however, was our provisions for doubtful debts. These increased
from $2 billion to $3 billion. The individual provisions increased from $1.1 billion to $2.8 billion
while the collective provision charge fell by around $600 million due to the crystallisation ofsome losses with balances moving from the collective provision to individual provisions.
The impaired loans at year end had risen from $1.8 billion to $4.4 billion. However, we believe
the worst is behind us in providing for doubtful debts.
The year ended with our balance sheet in a healthy state.
per cent of credit-risk weighted assets.

The collective provision was 1.31

During the year we took further steps to manage our capital position and funding programs toensure we were strongly positioned given the difficult financial and economic conditions.
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In May, we undertook a fully underwritten $2.5 billion institutional share placement.
In July, we completed a Share Purchase Plan for retail shareholders which saw us issue afurther $2.2 billion of ordinary equity.
Over 40 per cent of our retail shareholders participated, making it one of the most successful
Share Placement Plans undertaken by an Australian company. The new shares were issued at$14.40 – the same price as paid in the Institutional Placement – and this compares to ANZ’sshare price yesterday of $21.58 providing a strong return to participating shareholders.
Including the Dividend Reinvestment Plan, ANZ raised $6.6 billion of ordinary equity and theGroup ended 2009 as one of the world’s best capitalised banks.
ANZ’s Tier 1 capital ratio was 10.6 per cent at the end of 2009 compared to 7.7 per cent a year
earlier.
Adjusting for the acquisitions that we announced during the year, some of which have not been
completed yet, and the recent $2 billion preference issue, the pro-forma Tier 1 ratio is 10 percent.
Our customer deposits increased from 50 per cent to 55 per cent of our funding.
As a result, our reliance on domestic wholesale funding was reduced from 18 per cent to 15 per
cent, and on international wholesale funding from 25 per cent to 22 per cent, while hybrids andshareholder funds increased from 7 per cent to 8 per cent.
We raised our wholesale funding requirement for the year of $25.8 billion well ahead ofschedule.
We have a strong liquid position with liquidity assets of $34 billion, excluding Residential
Mortgage Backed Securities, or 10 per cent of our loans and advances. This liquidity increases
to $60 billion if we include Residential Mortgage Backed Securities.
As I mentioned earlier, our Standard & Poors’ AA-rating continues. It is satisfying that four of
the 11 banking groups in this category worldwide are the leading Australian banks.
Turning to the dividend, let me say that no chairman likes to report a reduction in the dividendrate.
The global financial crisis, and some issues particular to our Bank, have seen our shares on
issue increase by 34 per cent over the last two years, while earnings per share have fallen by
42 per cent.
In 2008 we maintained our dividend rate but in 2009 we reduced the dividend by 25 per centto $1.02 per share fully franked. This is a payout ratio of 83 per cent.
As profits recover, shareholders can expect an increase in the dividend rate although we will beseeking to return over the longer term to our traditional payout ratio of 60 to 65 per cent.
One of the benefits of the financial crisis was that it helped us make three valuable strategicacquisitions.

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We paid around $600 million to buy certain banking operations of the Royal Bank of Scotland in
Singapore, Indonesia, Hong Kong, Taiwan, Vietnam and the Philippines. This will speed our
expansion in the East Asian region while complementing our own operations.
Since 2002, we have had a 49 per cent interest in ING Australia and ING New Zealand.
companies operate a wealth management platform and provide life and risk insurance.

These

In October 2009 we were able to move to 100 per cent ownership at a cost of $1.8 billion. This
will allow us to have a clearer strategy and more a cohesive management of the business.
It also increases our investment in wealth management, a field in which we have been
underweight compared with other major Australian banks.
The acquisition gives ANZ total funds under management of $45 billion and a strong
distribution network with around 1,700 aligned financial advisors in Australia, relationships with
non-aligned partners and the existing ANZ network.
We have also been able to increase our involvement in rural and regional Australia through theacquisition from AWB of the Landmark loan and deposit books for net book value.
This acquisition involves $2.4 billion in loans, $300 million in deposits and 10,000 agribusinesscustomers.
At ANZ, at the operating level we have continued to take very strong action to address someproblems we have had to face, due to the practices and cultural issues remaining from earlier
periods.
One well publicised issue was the discovery of loans to specialised margin lending firms that
subsequently faced difficulty.
In one case, Opes Prime, ANZ and Merrill Lynch agreed a settlement with creditors of thecompany by making a payment of around $253 million. In another, Primebroker, the matter isstill subject to legal cases.
In New Zealand there was a question of mis-selling by the Bank of certain ING New Zealandproducts which resulted in a settlement with customers.
Also in New Zealand, the Inland Revenue Department is taking all the major banks to Court
over tax allegedly due on certain conduit transactions in the year 2005 and earlier.
The amount involved for us is around $330 million net of indemnities from Lloyds Banking
Group plc in respect of the New Zealand business we bought from it in 2003.
Separately, our markets business entered into some structured credit trades between 2004 and2007.
During the worst of the global financial crisis, credit spreads widened considerably and this led
to provisions for credit intermediation losses in 2008 of $530 million. During the first half of2009 these provisions increased to $1.3 billion and then reversed back to $584 million by theend of 2009.
While these trades extend for many years to come, we hope that with the improvement in theworld economic and financial landscape we have seen the worst from these exposures.
7We have taken decisions either not to write new business, or to sell a number of businesses
including custody services, private equity, and credit intermediation trading.
Michael Smith and his team have worked hard to change the culture.
We have refocused on the fundamentals of banking practice while retaining the positiveelements of the previous culture.
The change in our culture has been from:•one which became more suited to fair-weather conditions, to one that can withstand all
weathers;•

from an organisation based on specialist silos to one working together as One ANZ;•

from seeing risk management as being a barrier and a cost, to it being the key part of theway we do business;•from short-term performance to longer-term performance;•from tactical to strategic planning; and•from a focus on earnings per share, return on equity and cost-to-income ratio to a focus on
the overall power of the Bank to achieve its goals with a strong capital position and goodliquidity.

Our commitment to longer term planning is seen in our increased technology spend with theactivation of a number of projects that had been under consideration for some years.
Moving now to our external relationships.
I think all shareholders can be proud of ANZ’s commitment to the communities in which we
operate.
During the year both the Bank and our staff as individuals provided financial and other support,
in the wake of natural disasters including the bushfires in Victoria, the earthquakes in China
and Indonesia, the Pacific tsunami, and typhoons in the Philippines and the Greater Mekong
Region.
I am particularly pleased with the progress of our Saver Plus program. This program wasdeveloped by ANZ and the Brotherhood of St. Laurence to support those Australians who areoften excluded from mainstream banking including women on low incomes and single parents.
Saver Plus has already helped more than 5000 people to save with matched contributions
provided by ANZ. The Australian Government recently allocated $13.5 million to expand the
Saver Plus program.
Turning to our staff.
We have 38,000 staff working in 32 countries around the world who have done an excellent job
in very difficult conditions this year.

8On your behalf, I would like to thank them and ask Michael Smith to pass on our appreciation.
In regard to achievements this year, I am very pleased to report that we improved our healthand safety performance. Our lost time injury frequency rate in Australia was reduced from 2.4
lost time injuries per million hours worked to 1.9. And there was a similar reduction in New
Zealand.
During the year we strengthened our management team with the appointment of Shayne
Elliott, as Group Managing Director Institutional; Joyce Phillips as Head of Strategy andMarketing; Philip Chronican as CEO Australia; and Anne Weatherston as Chief Information
Officer, as well as a number of senior appointments associated with our Asian expansion.
We are also strongly committed to diversity.
Our staff at all levels reflect the diversity of the cultures and countries in which we operate.
There is also an increasing number of women in senior roles at ANZ.
Our most senior executive committee is the Management Board. This is currently made up of
twelve people. Two years ago we had no women on this committee. Today we have three withanother woman, Anne Weatheston joining in early 2010.
We have a reconciliation action plan that has led to the employment of 220 indigenous trainees
and our disability action plan has seen us employ 36 Australians with disabilities.
There has been a lot of discussion on remuneration policies internationally and in Australia.
Our practices are explained in the remuneration report and you will see we are generally in linewith current recommended policies.
On customer performance, I am pleased to report that this year we received the Most Satisfied
Customers in Australia Award and the Socially Responsible Bank of the Year Award from theindependent rating firm Canstar Cannex.
For the third consecutive year we were the leading bank globally in the Dow Jones
Sustainability Index.
Our commitment to sustainability is reflected in our new six Green Star head office building at
Docklands in Melbourne which will house 6,500 staff.
It is the largest commercial single occupancy building in the Southern Hemisphere and it will
reduce the buildings in which we have occupancy in Melbourne from 13 to 8.
We have made or are making similar investments to upgrade many of our premises around theworld.
Turning now to banking regulation.
The global financial crisis is likely to lead to a plethora of new regulations to reinforce thecapacity of the banking system to weather any future crisis.

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We realise from the financial crisis that the globally inter-connected financial system, which has
been progressively deregulated over recent decades, is much more susceptible to derailment
than had been thought.
It is clear that regulators need to look at the whole system as well as individual banks and takea broader view of the structure. Further, liquidity, which was not mentioned in Basel Two
regulations, needs a prominent focus.
New regulations internationally are likely to require:•higher overall Tier 1 capital;•

a focus on minimum Tier 1 and Inner Tier 1 capital under moderate and severe stress tests;•

an overall gearing ratio; and•an array of liquidity test requirements.

Regulators are likely to apply much more differentiation in the capital required to support
individual types of assets.
The regulators are unlikely to re-introduce the Glass Steagell Act which separated investmentbanking from commercial bank activities.
They are however, likely to significantly increase the capital required to hold trading assets forstructured products and non-conventional derivatives.
The global derivative market has been shown to be opaque especially in respect to counterparty risk and highly dangerous to the stability of the financial system.
We need a global move to standard derivative contracts that can be traded on a well capitalised
clearing house supported by the financial system.
There will also be the identification of banks that constitute a systemic risk, with requirements
for greater monitoring and higher capital, a “living will” of how the authorities might dismember
a troubled bank which is systemically important, and agreed procedures for co-operation
between the authorities of various countries in regulating such banks.
Various countries may well require international banks to have designated capital and liquidity
under those countries’ supervision, and we may see many international branch operations
required to be separately incorporated.
I hope the accounting standards will be revised to allow banks to increase their collective
provision in good years, to be drawn down in poor years, rather than the current pro-cyclicalaccounting where in a recession year banks have to increase individual doubtful debt provisions
and at the same time increase their collective provision.
Further, regulators may move to specify a range for the appropriate level of Tier 1 capital,
depending on where we are in the economic cycle, so that it becomes acceptable for a bank to
draw down on a strong capital position in a recessionary year.

10In applying the expected worldwide push for increased regulation to Australia, our authorities
need to recognise that the Australian banking system has just come through a one-in-onehundred-year stress test in admirable shape.
The need for major regulatory change is considerably smaller in Australia than in the UnitedStates, the United Kingdom or Europe.
It would be a pity if our banks in Australia were to be handicapped by having to make changes
as drastic as those which are apparently needed by the severely weakened banking systems
overseas.
Regulators also need to recognise that increased capital and liquidity requirements will raise
the cost and reduce the availability of funds that banks have available to provide loans thatfacilitate the growth of our economy.
Already, ANZ deals with over 100 separate regulatory bodies globally and the annual cost to us
of managing relationships with regulators and associated fees exceeds $100 million annually.
Caution and balance must be applied when introducing new requirements, and any suchrequirements need to be phased in gradually as the economy returns, over time, to its former
robust state.
Australian banking has long been characterised by a situation where customer deposits fall wellshort of loans with the difference raised in the wholesale market both domestically andinternationally.
The Government should identify aspects of the current tax laws that discourage the holding ofbank deposits relative to savings through superannuation, and find ways of remedying this
distortion.
Turning to the outlook for the year ahead.
The recovery in the world economy is likely to be slow, as it is facing de-leveraging by businessand consumers, higher capital requirements for banks, higher interest rates, and higher taxes.
However, there is good evidence that the Australian and New Zealand economies arerecovering well and the Asian economies are showing strong growth.
The financial markets are also recovering and the volume of lending should pick up. Increased
competition is however likely to restrain the further recovery in interest margins arising fromre-pricing maturing loans.
At ANZ the level of provisions for doubtful debts should fall in the year ahead and moresignificantly in 2011.
Net profits should be higher but we have an increase of 14 per cent in the average weighted
number of shares on issue which will adversely affect the growth in earnings per share.
Our capital is strong with a Tier 1 ratio of 10 per cent after allowing for acquisitions we haveannounced and the recent $2 billion preference issue.
In the new regulatory environment, we will need higher capital than we have historically held,
and with our expansionary aspirations, I cannot see capital buy-backs.
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Many factors will affect the profit outlook in the year ahead, including headwinds such as
uncertainty about whether our Global Markets business can continue to perform as well; acontinued high level of doubtful debts in New Zealand; the adverse impact of a higher
Australian Dollar; and a 14 per cent higher number of shares to be serviced.
However, we have tailwinds from the recovering economies in Australia, New Zealand and theregion providing scope for improved lending growth; steady to improved interest margins; andthe prospect of lower overall provisions for doubtful debts.
We have a strong management team led by an exceptional Chief Executive Officer; a sound,well-thought out strategy to be a super regional bank; a solid capital position and strong
liquidity.
Our bank is being directed and managed for the medium and longer term and the outlook is for
an improvement in profits in 2010 and for a strong 2011.

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