20082012

Contents
Super Regional Building Blocks

1

Global Financial Crisis – Remediation
and Opportunity

2

Establishing a Real Franchise in Asia

4Strengthening Australia, New Zealandand the Pacific

6Adapting to the Lower Growth Environment

8Delivering On Our Promises

8AN Z ’ s S U P ER REGIONAL s t r at e g y f i v e - YEAR P r o g r e ss RE P ORT

ANZ’s Super Regional Strategy
is clear, consistent and aligned
to the growth opportunities
in Australia, New Zealand andAsia Pacific
Super Regional Building Blocks
Five years ago, at the start of the 2008 financial year, ANZ
embarked on a strategic transformation which recognisedthat there was a unique opportunity to create value forshareholders by becoming a super regional bank – a bankof global quality with regional focus.

From early in the 2008 financial year, ANZ began a series offundamental changes to enable us to successfully execute
our strategy.

The move recognised that a once-in-a-century shift wasunderway in the global economy as growth opportunities
moved from the developed economies of the West to Asian
economies and China in particular.

Implicit in the Board’s appointment of Mike Smith as
Chief Executive Officer in late 2007, was a recognition
that ANZ would not be successful in building a significant
international business without a different sort ofmanagement team.

Despite the size of the opportunity and significance ofAustralia’s trade and investment links with Asia, ANZ’s shareswere initially marked down reflecting market scepticism about
the opportunity in Asia.
Five years later, as Australia has opened its eyes to Asia’s
importance, ANZ’s super regional strategy has growing
momentum and the Group’s share price is now performing
well against our domestic peers with investors ranking
ANZ highly for its long term growth strategy.
The scale of transformation at ANZ over that time has beensignificant, based on five key themes and a systematic andcoordinated program of action in every area of the bank.

1.

Super Regional Building Blocks – changes put in place
early to enable us to successfully execute our strategy.

2.

Global Financial Crisis (GFC) Remediation andOpportunity – addressing legacy issues requiring
significant remediation while also taking advantage ofopportunities resulting from the GFC.

3.

Establishing a Real Franchise in Asia – how we moved
from having a presence in Asia to establishing a realbusiness in the region.

4.

Strengthening Australia, New Zealand and the Pacific– building strategic advantage in our core domestic
businesses through a focus on strategic growth
opportunities, business simplification and connectivity.

5.

Adapting to the Lower Growth Environment – thechanges underway to ensure we are successful ina lower growth world with materially higher bankcapital requirements.

Management, People and Culture

From 2007 onwards, ANZ recruited senior international
bankers and Asian insiders capable of executing our strategy– a team which investors now recognise as world class.
We also introduced a new management model focussed
on geographies and customer segments rather than theindividual product focus of the past.
At the same time, we have undertaken a multi-year program
to shift ANZ’s culture and to invest in the training anddevelopment of our people to help focus more strongly
on performance.
Strengthening Capital, the Balance Sheetand Liquidity
ANZ was not in as strong a position as we would have liked as
the early signs of the GFC emerged in late 2007. Management
began to systematically improve ANZ’s capital position, ourbalance sheet including provision coverage and funding
diversity, and our liquidity position.
Capital has increased by around $11 billion since 2007 with
the Group’s Common Equity Tier 1 capital ratio at 10.0% at theend of 2012 on a Basel III internationally harmonised basis.*
The bank has been strengthened by significantly raising ourcollective provision charge and increasing the proportion offunding from deposits which has increased from 50% of ANZ’s
funding base at the end of 2007 to 61% at the end of 2012.
Liquid assets have also increased to be more than five times
what they were in 2007.

* ANZ’s interpretation of the regulations documented in the BaselCommittee publications; ‘Basel III: A global regulatory framework formore resilient banks and banking systems’ (June 2011) and ‘International
Convergence of Capital Measurement and Capital Standards’ (June 2006).

1

AN Z ’ s S U P ER REGIONAL s t r at e g y f i v e - YEAR P r o g r e ss RE P ORT

Global Financial Crisis –Remediation and Opportunity
New Technology Roadmap
To enable our super regional strategy, ANZ needed a newroadmap for technology which defined an enterprise‑wide
perspective and a technology leadership team to implement
it. While there is still much to do, having put a new technology
management team in place in 2010, we have established anagreed approach to technology and we have delivered good
progress. This includes:- A significant program to upgrade our legacy technology
infrastructure to deliver improved systems security, stability
and standardisation, and to respond to growing demand,scale and complexity in the business.
- Consolidation of our new customer base in Asia on the backof acquisitions.

These building blocks placed ANZ on a much stronger footing,however the onset of the global financial crisis during 2008
posed a number of challenges requiring significant and, attimes, painful remediation.
This involved a focus on addressing customer and reputational
issues arising from non-core businesses. Subsequently, ANZ
exited a number of these businesses including custodian
services, securities lending, private equity and institutional
stockbroking.
Recognising the weaker economic environment and theneeds of our super regional strategy, we also strengthenedrisk management with experienced professionals appointed
to key leadership roles and through enhanced risk policies
and processes throughout the bank.

- Providing flexible, multi-device, scalable, responsive andintegrated services.

As business conditions tightened, we have also simplified
the way we run the bank and including putting in place
a multi-year process of driving strategic cost reduction.
This has involved reducing the layers of middle management
and investing in our offshore operations and technology
centres in Bangalore and establishing new centres in Manila
and Chengdu.

Establishing a strong sense ofidentity and purpose

Our financial strength also allowed us to look at the global
financial crisis as a time of opportunity.

At the December 2007 Annual General Meeting, ANZ set out
a clear five-year roadmap to source 20% of earnings from
Asia Pacific, Europe and America (APEA), and a new set of
aspirations for our businesses in Australia and New Zealand.
In 2011, we extended that roadmap with an aspiration tosource 25 to 30% of earnings from APEA by 2017.

- We acquired Asian assets from the Royal Bank of Scotland
in Taiwan, Singapore, Indonesia, Hong Kong, The Philippines
and Vietnam, giving us 54 additional branches, $4 billion
in loans and $9 billion in deposits from a base of
approximately two million clients.

- Building enterprise capability including facilitating a realtime customer experience for payments and delivery of new
cross-border systems in trade, cash management, capital
markets and foreign exchange.

We have also aligned our shareholder base with our strategy
by seeking more international investors who are attracted
to our super regional strategy. In 2007, 19% of shares were
owned by international investors. This has increased to 27%
at the end of 2012.
A robust and consistent set of values was also introduced
across the business and a new brand and visual identity wascreated for the Group that was relevant in Asia and consistentthroughout the region.
At the same time, we have continued our focus on corporate
responsibility. Our contribution to the community has been
guided by our corporate responsibility framework andhas included a significant investment in building financial
capability. ANZ was recognised as Global Sector Leader inthe Dow Jones Sustainability Index in 2007, 2008, 2009, 2010
and 2012.

2- We purchased the remaining 51% of our wealthmanagement joint venture with ING in Australia and
New Zealand for $1.8 billion.
- We acquired the deposit and lending books of Landmark
from AWB, boosting our presence in agribusinessin Australia.
The financial crisis and subsequent retreat from Asia by
weakened European and US banks also created significant
opportunities for organic growth by using our strong credit
rating and balance sheet strength to step in and win quality
business with quality customers.
The end result is that ANZ came out of the financial crisis
as a stronger bank than we went into it. Today, ANZ is oneof the best capitalised banks in the world and one of only asmall number of banks rated AA or better.

Today we are one of the best
capitalised banks in the world andone of only a small number ofbanks rated AA or better.

3

Establishing a
Real Franchise in Asia
In addition to the opportunities for growth presented by thecrisis, meaningful expansion could not occur without also
undertaking a strategic build-out of our footprint in Asia.
While ANZ had an established presence in Asia in 2007, ourcountry representation was often small and based on limitedbanking licences. This has required significant investment
to build banking capability, introduce new technology,
and to obtain regulatory approval for licences to provide
a wider range of services to customers. Some highlights
have included:- Increasing our presence in China through local
incorporation in 2011 and opening new outlets andbranches in Beijing, Shanghai, Guangzhou and Chongqing,a Rural Bank in Liangping and an operations centre in
Chengdu. Total staff numbers have now reached 700
compared to 100 in 2007. We also have two partnershipinvestments with Shanghai Rural Commercial Bank and the
Bank of Tianjin.
- Growing to become one of the largest international banksin Indonesia with 1,900 people working in 28 branches.
This compares to just two branches and 150 people in 2007.
We have also strengthened our partnership with Panin Bank
with our stake increasing to 39%, up from 30% in 2007.

4- Expanding in The Philippines by obtaining a universalbanking licence. We also have a successful credit card joint
venture with Metro Bank and a major operations hub in
Manila which now employs around 1,400 people.
- Locally incorporating in Vietnam, paving the way to expand
the branch network and services with 750 employees now
and 9 outlets.
- Re-commencing operations in India with the opening of abranch in Mumbai while also continuing to invest in ANZ’soperations and technology centre in Bangalore where
we have 5,600 staff and contractors compared to around
1,800 in 2007.
We have also seen growth in other countries in Asia, forexample in Japan and in Korea. In Taiwan we now have
1,400 employees working in 18 branches. In our two
regional commercial hubs, in Hong Kong we employ around
1,100 people, up from 30 in 2007, and in Singapore we employ
2,000 people, up from 150 in 2007. We also have an importantpartnership with Malaysia’s AmBank in which we hold a 24%
stake, up from 19% in 2007.

AN Z ’ s S U P ER REGIONAL s t r at e g y f i v e - YEAR P r o g r e ss RE P ORT

Throughout our international network, including the Pacific,
our expansion has been underpinned by a concerted
investment in upgrading premises to the standard of aninternational bank and to accommodate larger numbersof staff. This includes new signature offices in Singapore,
Hong Kong, Shanghai and Port Moresby as well as
investments in upgrading branches across the region.
Throughout this period we have emphasised the growth of
our ANZ-owned and ANZ-branded business. This includes thedivestment of some non-strategic partnerships. For example
selling our mobile banking business in Cambodia in 2011and exiting our 10% stake in Vietnam’s Sacombank in 2012.
With the unfavourable capital treatment of these partnerships
under Basel III, partnership investments are something thatwill be kept under active review.

The end result is that ANZ has built a significant businessin Asia and the Pacific with 2.6 million customers, up from
925,000 in 2007. Our customers in Asia are supported
by 9,100 employees, and 94 branches and points ofrepresentation compared to just 30 branches in 2007.
This has seen ANZ emerge as a leading international bankin the region; in 2012 ANZ was ranked as a top five Corporate
Bank in Asia by Greenwich Associates; five years ago ANZ
ranked outside the top 20.
With this growth, earnings from our APEA businesses haveincreased more than three-fold since 2007 to $976 million
in 2012.

5

AN Z ’ s S U P ER REGIONAL s t r at e g y f i v e - YEAR P r o g r e ss RE P ORTStrengthening Australia,
New Zealand and The Pacific
A cornerstone of the super regional strategy is continuing
to strengthen our position in Australia, New Zealand andthe Pacific.
Australia
Our focus in Australia has been on growth in traditionalbanking in retail deposits and mortgages, wealth solutions,and commercial banking. We have achieved this with a focus
on careful risk management including minimising growth inriskier mortgages and dynamically managing mortgage
loan-to-value ratios during the crisis.
We have strengthened our position through two acquisitions –moving to full ownership of the ING wealth joint-venture andthe purchase of Landmark’s rural lending and deposit book.
Significant programs have also been delivered to remediate
processes, particularly mortgage processing, and to drive
business simplification and efficiency. This has included
re-engineering and offshoring of technology andoperations functions.
In addition to growing market share in key segments, oursuper regional strategy is seeing us build greater connectivity
between our domestic businesses and our network in Asia.
In Retail, we have built a competitive advantage for ANZ to be
the bank of choice for customers coming to Australia from Asia
Pacific. This includes branches providing specialised services
to international customers, for example to Asian students
coming to Australia or providing mortgages for Chinese
citizens wanting to acquire property in Australia. We have also
leveraged our regional network in Commercial where morethan two-thirds of our customers have connections to Asia.
This includes a focus on growth in trade finance and markets
solutions such as foreign exchange.
In Institutional, we have focussed on our strengths in natural
resources, agriculture, infrastructure and financial institutions– segments that are directly linked to Asia’s growth. We havealso seen substantial growth in the areas we’ve invested in
to support that strategy – in foreign exchange, trade andcash management.
ANZ also took the lead to better manage decisions
about interest rates and margin outcomes in Australia byannouncing in late 2011 that we would review our interest
rates, independent of movements to the cash rate by the
Reserve Bank of Australia.
Over the past five years, ANZ has upgraded its premises inAustralia, rationalising offices in Melbourne and opening a
new 6-Star Green Star global head office. New office premises
have also opened in Adelaide and Brisbane, and in Sydney wewill move to new premises in 2013.

6

To capitalise on the momentum in the Australian business,a five-year $1.5 billion investment program was announced
in 2012 to upgrade ANZ’s distribution network, simplify
products and processes, provide customers with additional
mobile and flexible banking options, and introduce initiatives
to support local communities.
New ZealandIn New Zealand, ANZ has a leading market position across
Retail, Wealth, Commercial and Institutional with more than
two million customers – around 50% of New Zealanders.
In a lower growth environment with more limited
opportunities, we have been undertaking a majortransformation in New Zealand to simplify our business,
reduce costs and improve the banking experience forour customers.
This has involved driving efficiencies through streamlining
head office functions and processes. More recently this has
included completing the transition to one management
structure across both our ANZ and The National Bank
brands, one customer approvals process, moving to one setof products and a major technology program to move to
Systematics, The National Bank’s technology system.
In late 2012, we announced that after almost ten years ofoperating ANZ and The National Bank in New Zealand, the twobrands would progressively be brought together as ANZ. This
major change is being supported by a $100 million investment
over two years to ensure ANZ has a well-positioned andattractive branch network for customers in existing andnew communities. ANZ’s head office in Auckland is also
undergoing a major refurbishment.
We have also renewed our focus on targeted growth
opportunities. In Retail for example, we are connecting
New Zealanders travelling and migrating to Australia, thePacific and Asia, and targeting growth in mortgages in thestrategically important Auckland region. In Commercial
and Institutional, we have extended our market leadershipby leveraging our international network to support
New Zealand’s large export sector, particularly in agriculture.
the Pacific
ANZ is the leading bank in the Pacific providing banking
services to approximately half a million customers in
12 countries across Retail, Wealth, Commercial andInstitutional. Our focus has been on continuing to support
customers through our 52 branches and on the developmentof opportunities associated with growing trade andinvestment linkages with Australia, New Zealand and Asia.
This has required us to continue to invest in the Pacificrecognising the critical role we play in the region’s ongoingcommercial and social development while also continuing
to improve operational efficiency.

7Adapting to the Lower
Growth Environment
While we have been continuing to build on our strengths in
our major domestic markets of Australia and New Zealand,and exploiting growth opportunities in Asia, we haverecognised that the global economy will be weaker forsome time.
The magnitude of the shift that the banking industry is facing
is significant around the world. There will not be a returnto the use of debt that we saw in the lead up to the global
financial crisis. It means that banking will no longer be a‘leverage play’ on the economy and will more closely follow
growth in the real economy. We are actively adapting ANZ
to this environment.
While every part of the Australian and New Zealand economy
grew strongly prior to the financial crisis, we now have amulti-speed economy and many businesses and consumers
have been deleveraging or borrowing less. At the same time,
funding costs are higher and we are having to work muchharder to maintain margins.
Since 2007, increased regulation and growth in our businesshas required us to hold almost twice as much capital. Despite
these challenges, our financial strength, our focus on growthmarkets and our attention to productivity has seen us
maintain a return on shareholder’s equity of around 15 to 16%– among the best of any bank globally.
Nevertheless, to maintain our performance in thesechallenging times, it is clear we need a greater emphasis
on productivity and on capital efficiency in order to deliver
shareholders better earnings per share growth. This means:- More actively managing capital across our portfolio of
businesses so we continue to build out our super regional
strategy in the most capital efficient way. And with theregulatory need to hold more capital, this mind-set
is increasingly important when we think about whatbusinesses and activities we’ll prioritise, what we will
maintain and what we will exit.
- Re-engineering the way we operate to shift ANZ’s historic
higher cost, higher growth paradigm and drive a long-termsustainable cost advantage particularly by using the uniqueflexibility provided by our operations and technology hubs.
At the same time we will continue our focus on unlocking thepotential of our super regional strategy. This will involve:- Continuing to develop a distinctive geographic footprint
and business mix.
- Maintaining a rigorous, value-based analysis of businesses,
proposed investments and operational plans with each of
our businesses seeking to return above the cost of capitaland targeting better returns.
- Ensuring we have the best funding mix and strongest
balance sheet of our local peer banks with a strong risk
management focus and well-diversified funding profile.

8

Finally, we recognise that the economic contribution we maketo society has to be more than financial profits.
It includes the jobs we create, the salaries we pay and theinvestment we make in the skills of our people. It also includes
the taxes we pay, the support we give to businesses that
supply us and the products we provide to satisfy the needsof our customers.
We are continuing to invest in significant programs of activity
as part of our social responsibility framework to ensure ANZ
has responsible practices and that we contribute to educationand employment opportunities.
This includes a range of community programs that increasefinancial capability and literacy, that help bridge urban andrural divides and increase urban sustainability.

Delivering on our Promises
ANZ’s super regional strategy is clear, consistent and aligned
to the economic opportunity in the Asia Pacific region.
In the past five years we have dramatically transformed
ANZ creating:- A business portfolio diversified by geography, by businessand by industry focus.
- Options and choices to deliver differentiated revenue
growth – choices that are not available with adomestic‑only strategy.
- Operations and technology hubs that continue to support
our productivity agenda and generating on going
efficiencies given the more constrained conditions.
This has seen us deliver on our promises to the market with
21% of revenue now from APEA including Australia and
New Zealand revenue derived from APEA. This comprises
16% of Group revenue that is derived from APEA compared to
8% in 2007, and a further 5% of revenue reported in Australia
and New Zealand that is generated from international clients.
Since 2007, this transformation has seen ANZ move frombeing a largely domestic bank to an integrated and growing,regionally focusses international bank that is increasingly
delivering differentiated value and performance toshareholders, customers, staff and the community.

CONTACTS
MEDIA

INVESTOR RELATIONSANZ Centre Melbourne
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Docklands VIC 3008 Australia

Level 10, 833 Collins Street
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Telephone: +61 3 9273 5555
Email: media.relations@anz.com
Group General Manager Corporate
Communications: Paul Edwards

Telephone: +61 3 8654 7682
Facsimile: +61 3 8654 8886
Email: investor.relations@anz.com
www.shareholder.anz.com
Group General Manager Investor
Relations: Jill Craig

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