I
Investort
Discussion
Di
i
Pack
P k
Mike Smith
Chief Executive Officer
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

Overview and strategy

ANZ has established a strong business foundation
A clear company wide focus on our super regional strategy:• Organised our business around three key geographies and our customers

p. 4-14• A strong capital and funding position

p. 15-24• Risk management

p. 25-39• The ANZ mortgage portfolio

p. 40
40-47
47

• Balance sheet managementp. 48-53• Maintaining strong businesses in our home markets:• Australia

p 54
p.
54-74
74

• New Zealandp. 102-111• Investing for strong organic growth in Asia

p. 75-86• A redefined and clear focus in our global institutional businessp. 87-101

Additional information:• 1Q12 Trading Update

p. 112-117• 2011 Financial Resultp. 118-130
3

ANZ is structured by Geography & Segment

Australia
RetailGlobalInstitutional

Commercial

Global Wealth& Private
Banking

Asia Pacific, Europe & America (APEA)
Retail(including
partnerships)pp )GlobalInstitutional

Commercial

Global Wealth& Private
Banking

New Zealand
RetailGlobalInstitutional

Commercial

Global Wealth& Private
Banking

Managed as global segments

4Coherent strategy – driving competitive advantage

Geographic opportunity• Footprintp- exposurepto Asia’s more rapid
p g
growth• Growing financial services requirements• Regional connectivity• Strong domestic markets
and businesses

Building Super Regional
capabilities

LeadingSuperpRegional
Bank• Bench strength/international talent• Innovative product capability• ‘Throw and catch’ capability and culture• Enabling technology andoperations hubs

• Global core brand, regional reach• Governance
Go e n n e andnd riski kmmanagementn gement

Cross-border customer focus• Regional customer insights• Resources, agribusiness, infrastructure• Trade and investment flows• Migration/people flows, education
5

Delivering Super Regional performance momentum
OUTPERFORM
AND TRANSFORM
OUTPERFORM
9 Move from a presence to areal business in Asia

RESTORE– 14% of Group Earnings– Beachhead in Greater China,
SE Asia, India, Mekong

9 Institutional growth

9 MaintainM ii strong ddomesticifranchises

9 Stronger risk and governanceprocesses

9 Increased management
bench strength

9 Increased internationalbanking experience

9 Create hub foundation

9 Balance sheet and capitalmanagement

2007-2009

Realise fullpotential of Super
Regional aspiration
Capturing value:• To Asia
OUTPERFORM• Within Asia
• From Asia

9 Improving balance sheet
composition
9 Improved funding diversity

2009-20106

2011-2017

Super Regional - driving long term growth anddiffdifferentiatedti t d returnstForecast GDP growth1 (% p.a, 2011-14)

UK
2.3%

Denotes two way merchandise trade flow3(2009)

FDI inward flow2 (USDb, 2009)

KR
4.0%
4
0%

EU
1.6%

2

CN
78
8.7%
Asia-Europe
Trade: US$1.0trn

IN
8.5%
TH
4.5%

Intra-Asia
Trade:$1.6trn

MLY
5.0%
SG
4.6%

35

JP
1.6%

12

TW
5.1%

3

HK
5.0%

48

VN
7.1%

8

5
PHI
4.6%

2

PNG
5.0%
5
0%

0.4

US
2.7%

Asia-US
Trade: US$0.8trn

Pacific-Asia4
Trade: US$6bn

1

17

IND
5.9%

5

Aus/NZ-Asia
Trade: US$235bn

Source: 1. Global Insight; 2. Bloomberg; 3. WTO; 4. IMF; 5. ABS and Statistics NZ.

AUS
3.2%

23

Aus/NZ-Pacific5
Trade: US$6bn
NZ
0.2
2.9%

7

Super Regional strategy is based on three corestrengths
1. Strategy aligned to Asian growth• Strong domestic franchises and establishedmarket position• Focus of expansion in higher growth Asianmarkets

GDP growth12% annual growthh10

2. Leveraging regional customer flows• Aust/NZ flows to and from Asia – 8 of top 10
Australian export markets in Asia
• Network presence facilitating growing intra-Asia
customer trade flows• Differentiated growth opportunities in Aust / NZ

8
6
4
2
0
-2
-4
-6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(f)
(f)
(f)

US

EuropeAustralia

New Zealand

Asia ex Japan

Merchandise export values by country$m

3. Strengthens balance sheet and earnings
diversity• Diversity of Group funding• Self funded balance sheet in APEA
• Strong capital and liquidity positions• Improves diversification of earnings by
geography and productIndex (Jan 2005==100), 12month rolling sum

650
550
450
350
250
150
50
05
US

8

06
Eurozone

07
UK

08

09

NZ

Japan

10
India

11
China

Super Regional connectivity provides a competitive
advantage
Growth in trade flows and direct investment between Asia
and Australia is tracking at 11% and 26% pa respectively
Surplus savings

There is approximately$75b in direct foreign
investment into Australia
from the Asian region
Commodity
consumers

Migration &Investment

Commodity
producers

Natural resources account for ~$125b or ~65%
of Australian and New Zealand exports to Asia

Linked through flows oftrade, capital and population
Key focus is to bridge gaps
across the region: Asia
generates surplus
liquidity, Australia and NZ
generate hard and soft
commodities
42% of our Corporate* clientsdepend on Asia for more than
25% of their business

Soft commodities account for ~$25b or ~12% ofAustralian and New Zealand exports to Asia

* Represents ANZ’s Australian based clients with annual turnover of $40-400m
Sources: Australian Bureau of Statistics (international direct investment positions, 2006-09), Trade Map (exports and9imports, 2007-2010)

Realising the full potential of Super Regional
2017
Aspiration

APEA sourced revenue to drive
25% - 30% of Group profit

Expanded view ofopportunity in
APEA• The more mature our business, the greater our opportunities• Increasing our footprint, customers and access to trade, liquidity

Domestic
outperformance• Regional connectivity will deliver additional revenue into

Centres of
Excellence• Hubs provide a lower and more flexible cost base – access

Focussedtechnology
investments• Technology roadmap focused on customer facing (e.g. internet

and investment flows

Australia, New Zealand, Asia and the Pacificdeeper pools of talent, provide better service with lower riskbanking, goMoney) and cross-border systems (e.g. FX, CashManagement)

10Realising the full potential of Super Regional
2017
Aspiration

APEA sourced revenue to drive
25% - 30% of Group profit• Continue to build depth in international management andPeoplepbanking experience• Well defined succession planning• Remuneration and incentives aligned to delivery of strategy andmanagement of risk

Risk
Management• Risk management as a core competency– Increased expertise across the risk function– Comprehensive set of asset writing strategies– Product and segment expertise – focus on sectors we know
• Customer driven rather than product focused• Lower balance sheet intensity

Financial
Management• Greater balance sheet diversity• Reduced reliance on interest income• Funding flexibility
11

Growth levers - organic, partnerships and M&A

Continued Focus on Organic Growth
Leveraging Super Regional connectivity
Increasing productivity
Focus on core customers

Managing the value of ANZ’s
Partnerships

Selective M&A opportunities• Deliveringg access to attractive markets//
segments• Linking partnership customers to ANZ’sinternational network• Actively managing the portfolio to
optimiseti i strategict t i positioning
iti i• Dislocation in global markets continuing
to create opportunities• Consistent M&A disciplines – on
strategy, delivers value, executable

12

The Super Regional Strategy improves ANZ’s overall
Balance Sheet profile
The key aspects of the SRS from a balance sheet
management perspective are :APEA Loan to deposit ratio is 60%• Self Funded• 75% NLA’s are <1 year duration

USDb

Customer Deposits

70

Net Loans & Advances(incl. acceptances)

63

60
50

30

38
27

• Much of our focus in the regiongis on
providing non lending products to clients(eg Cash, Trade, Rates, FX, Commodities and
DCM)• Our Asian network enables us to takeAustralian and NZ clients directly to the
Asian debt capital markets rather thanbank loan funding

45

40• Balance sheet in Asia is self funded withdeposits substantially higher than lending
assets (~60% LDR)

26

• We can also look to p
provide Australian &NZ clients with diversified funding
structures, through assets written in Asia

17

20
10

• Deposit pools are managed through ourgotreasury
su y centress with the majority
ajo yregionalof APEA deposits in interchangeable
currencies.

0
Sep 09Sep 10Retail

Sep 11

Sep 09Sep 10

Sep 11

Institutional
13

Emerging differentiation• Super Regional strategy giving us greater exposure to Asia
Asia’ss
growth• Building blocks in place via both acquisition and investment incapability• Developingp g stronger
g customer p
propositionsp• Driving productivity gains from our hubs
• Integrating the Super Regional strategy into all our businesses

14

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

Capital Funding and Liquidity

ANZ well capitalised and positioned to transition to Basel III
Basel II

Basel II

Basel III – Common Equity Tier 1

Basel II
Dec-11~14.9%

11.9%

10.1%

12.1%

12.1%

10.5%

10.9%

7% minimum
including buffer
applicable from
Jan-16

Proposed
APRA
Basel
III#

Basel IIIfully
harmonised

~9.5%
~8.7%

~7.4%
~7.0%

8.5%

Mar-11

Common Equity Tier 1

11.0%

CommonEquity Tier 1
surplus
over
7.0%

~7.5%

~11.4%
8.7%

8.5%
Minimumtargetg
4.5%

4.5% minimum

Sep-10

12.0%

~9.5%

CapitalBuffer
2.5%
8.0%~14.0%

Sep-11

Common Equity
Tier 1
Deduction(Insur banking(Insur,banking,assoc, ELvCP)

Hybrids

Higher RWA
Charges(credit risk) *Dividend
accrualAPRA Basel III

Tier-2* Excludes Basel 2.5 Market & Securitisation Risks and any Basel 3 liquidity changes# Still subject to discussion paper feedback

16

10%/15%threshold insur,
assoc, DTA(inc DTA on CP)(inc.
& other items

RWA: IRRBB& mortgage
LGDs & otherSep-11 Basel III
Full Int'nl
Alignment

Sep-11 FSA

Solid organic capital generation continues to underpin thestrong Common Equity Tier 1 position
Basel II

Capital Position (Common Equity Tier 1 Ratio)

Dec-11~11 4%~11.4%
2.13%~9.5%(0.83%)
8 05%
8.05%

Portfolio growth & mix
Risk Migration
Portfolio data review
Non-credit RWA

8.67%

8.52%
(0 43%)(0.43%)(0.33%)(0.07%)

Other(4)

Investments

51bp decrease +15.8b7bp increase-1.3b
2bp increase-0.5b
1bp decrease+0.4b

Net organic up 54bp

Up
p 47bpp

Sep-10NPAT(1)Dividend/DRP(2)

RWA
movement(3)

Sep-11

Sep-11 BaselIII(5)

Sep-11 FSA(1) Underlying NPAT. (2) Includes prior period under-accrual of DRP. (3) Includes impact of movement in Expected Loss versus
Eligible Provision shortfall. (4) Includes OnePath Insurance Business’ retained earnings, Asian Banking Associates’ retained
earnings, Non-Core NPAT items, Capitalised Costs and Software, FX, Net Deferred Tax Assets, Pensions, MTM gains on own nameincluded in profit (5) Ratios based on full Basel III international alignment.
17

Tier 1 position strengthened significantly with recent CPS3
issuance and solid organic capital generation
Basel II

Capital Position (Tier 1 Ratio)

Dec-11~14.0%
14 0%
2.13%~11.7%(0.83%)

10.10%

Portfolio growth & mix
Risk Migration
Portfolio data review
Non-credit
Noncredit RWA(0 57%)(0.57%)

65bp decrease
8bp increase
2bp increase
2bp decrease(0.33%)

0.51%

10.94%

Hybrids

Sep-1111.03%(0.07%)+15.8b
-1.3b
-0.5b
+0.4b
0.4b

Net organic up 40bp

Up 84bp

Sep-10NPAT(1)Dividend/DRP(2)

RWA
movement
(3)

Other
(4)

Investments

Sep-11 BaselIII(5)

Sep-11 FSA(1) Underlying NPAT. (2) Includes prior period under-accrual of DRP. (3) Includes impact of movement in Expected Loss versus Eligible
Provision shortfall. (4) Includes OnePath Insurance Business’ retained earnings, Asian Banking Associates’ retained earnings, Non-Core
NPAT items, Capitalised Costs and Software, FX, Net Deferred Tax Assets, Pensions, MTM gains on own name included in profit (5)Ratios based on full Basel III international alignment including 10% reduction in current portfolio of Tier 1 hybrids.
18

Reconciliation of ANZ’s capital position under Basel III

ANZ capital ratios under a Basel III fully harmonised approach :CommonEquity Tier 1

Tier 1

Total Capital

APRA Sep-11 Basel II

8.5%

10.9%

12.1%

Plus: dividend not provided for (net of DRP)

0.5%

0.5%

0.5%

q
Less Investments in ADI and overseas equivalents

-0.4%

-0.4%

0.0%

Less Investments in ANZ insurance subs including OnePath

-0.4%

-0.4%

0.0%

Less Expected losses in excess of eligible provisions

-0.2%

-0.2%

0.0%

Other

-0.1%

-0.1%

-0.1%

-

-0.2%

-0.4%

Estimated increase in RWA1

-0.4%

-0.5%

-0.6%

APRA Sep-11 Basel III discussion paper

7.5%

9.6%

11.5%

10% allowance for investments in insurance subs and ADIs

0.8%

0.7%

0.6%

p to 5% allowance for deferred tax asset
up

0.2%

0.2%

0.2%

other capital items

0.2%

0.2%

0.3%

Mortgage 20% LGD floor and other measures

0.6%

0.7%

0.7%

IRRBB RWA (APRA Pillar 1 approach)

0.2%

0.3%

0.4%

Sep-11 Basel III fully aligned

9.5%

11.7%

13.7%

g hybridsyand sub debt securities
Less 10% reduction of existing

1.

Includes credit counterparty but excludes Basel 2.5 Market & Securitisation Risks and any Basel III Liquidity changes

19

ANZ has a well diversified funding profile with an increasing
weighting to customer funding
Maintained low levels of shortterm wholesale funding

Strong Funding Composition
Short Term Wholesale
Funding

Customer Funding

Term Debt < 1 year Residual
Maturity

Shareholders equity & Hybrid
debtTerm Debt > 1 year Residual
Maturity

12%

Equity/Hybrids
8%

Well diversified term wholesalefunding portfolio

18%** Current at 30 September 201120

Stable term debt issuance, portfolio costs increasing

AUDb
30

Portfolio term funding costs expected toincrease further due to current market
volatility

Stable term funding profile
Domestic

Offshore

220bp
25

200bp
Coveredbond
issuance

20

180bp
160bp
140bp

15

120bp

Forecast Portfolio funding
costs based on current
market levels

100bp
80bp

10

60bp
40bp

5

20bp
0bp

0
FY08 FY09 FY10 FY11* FY12 FY12 FY13 FY14 FY15 FY16 FY17 >FY17
YTD* FY11 includes $2.4bn of pre-funding from FY10; All numbers are at Group Level
Note: As at February 2012

21

Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep
05 06 07 08 09 10 11 12 13 14 15 16Mortgage pricing

Criteria used to assess Interest
Rates

Change in cost of funds over the RBA
Cash Rate since the Global Financial Crisis
Mvmt in funding costs vs. Cash
Rate relative to pre-crisis levels*

Cost ofwholesalefundingChange in Funding Costs relative to Pre Crisis(ex Capital, Mix and Liquidity)

1.60%
1.40%

Short Term Wholesale

1.20%

Returns fordepositors

Competitive
positionInterest
rate
decisionLong Term Wholesale

1.00%
0 80%
0.80%

Weighted
contributionof funding
sourcesCumulativeCl ti
Out-of-cycle

0.60%

Deposits

0.40%

Impact of
economic
conditions
ditioncustomers

0.20%
0.00%
Oc
tD e 07cFe 07
bAp 0 8
rJu 0 8nAu 0 8gO c 08
tD e 08
cFe 08bAp 0 9rJu 0 9nAu 0 9gO c 09tD e 09
cFe 09bAp 1 0
rJu 1 0nAu 1 0gO c 10tD e 10cFe 10bAp 1 1
rJu 1 1nAu 1 1
gO c 11tD e 11cFe 11b12

Regulatory
requirementsit* Pre-crisis levels represents the average change in cost of funding relative
to the cash rate over the 12 month period ending September 200722

Total liquid assets exceed TOTAL offshore wholesale debt
portfolio
Strong liquidity position ($b)

Prime Liquidity Portfolio

Other Eligible & Highly Liquid Securities

ANZ Total
Offshore
Wholesale Debt
securities

Long-term

Composition of prime liquid asset portfolio ($71.4b)($71 4b)Class 1

Class 2

Class 3$31.3b

$9.4b

$30.7

Government/Semi Govt./Govt.
Guaranteed
G
t db
bank
k paper, NZ cashhWith RNBZ, supernational paper

Bank or Corporate
paper ratedt d AA or
betterInternal RMBS

Priority of use
23

Short-term

Hedging has lessened the impact on earnings of the stronger$A
Earnings Composition by Region& Average Translation Rates

EPS Impact• Hedge profits more than halved the negative
impact of AUD strength on FY11 earnings.

• FY12 hedges are in place to cover ~80% of USD(inclusive of other significant currency
exposures), and ~40% of NZD exposures.

• At current levels (AUD/USD 1.04, AUD/NZD

1.30) FY12 FX expected to adversely impact
FY12 EPS by ~0.3% (inclusive of hedges)• EachE h 5% appreciationi ti
off ththe AUD wouldld

negatively impact FY12 EPS by an additional
~0.9%

24

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

Risk Management

Provision Charge and Impaired Assets
Total Provision Charge(IP charge by Division, total CP charge)

1,435

New Impaired Assets
by Division

1,621

3,600
3,035
1,098

3,126

2,319
722

2,436
1,824

660

551

26

Individual Provision Charge
Individual Provision Charge
by Segment

Individual Provision Charge
composition
1,531

1,283

1,062

762

594

609

1,531
1,283
1,062

Individual Provision Charge
by Region

762
594

609
1,531

27

1,283

1,062

762

594

609

Collective Provision Charge
Collective Provision Charge by Source
CP Charge by Division 2H11
(96)

331

36

(40)

65

(58)

(74)

28

(42)

29

29

Collective Provision Charge
Collective Provision Charge by Source
Risk Impact

Lending
GrowthPortfolio
Mix

Cycle &
Concentration

Total

Australia Division

20

42

(6)

(14)

42

Institutional

(29)

65

(14)

12

34

New Zealand

(35)

(6)

(1)

(47)

(89)

APEA & Group Centre

(47)

29

1

37

20

Total

(91)

130

(20)

(12)

7

2H11

Risk Impact

Lending
GrowthPortfolio
Mix

Cycle &
Concentration

Total

Australia Division

(1)

26

(6)

(93)

(74)

Institutional

(20)

36

1

12

29

New Zealand

(8)

(5)

(1)

(28)

(42)

APEA & Group Centre

(27)

17

2

37

29

Total

(56)

74

(4)

(72)

(58)

FY11

29

Credit Risk Weighted Assets
Credit Risk Weighted Assets
Movement FY11 v FY10

Total Credit Risk Weighted Assets

30Credit Risk Weighted Assets
Credit Risk Weighted Assets by Basel Asset Class
$b

300

250

251
9%

200

12%
9%

150

14%

230

234

6%
11%

7%
11%

11%

12%

16%

17%

249

251

8%

8%

11%

12%

12%

12%

17%

17%

Bank, Sovereign & Other

Specialised Lending(slotted exposures eg. project
finance, certain commercial
property exposures)
QRR and Other Retail(Credit Cards, other retaillending)
Residential Mortgage

100
56%

56%

53%

52%

51%

50

Corporate0
Sep 08

Sep 09Sep 10

Sep 1131

Dec 11

Risk Weighted Assets
Risk Weighted Assets by Geographic Region
$b

300

250

280

275
14%

252
13%

200

264
17%

20%
APEA

21%
22%

18%

18%

NZ

150

100

65%

65%

65%

62%

Sep 09Sep 10

Sep 11

500
Sep 0832

AustraliaImpaired Assets
Gross Impaired Assets
by Size of Exposure

Gross Impaired Assets by Type
$m

$m
$

Impaired Loans

NPCCD

8 000
8,000

Restructured

6,000

8,000

4,000

7,000

6,561 6,561

6,000

5,595

5,595

6,561

6,561

6,221

5,581

4,158

2,000

6,221

0

5,581

Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11> $100m$10-$99m< $10m

5,000
4,158

New Impaired Assets by Segment

4,000

$m

4,000

3,000

3,000
2 000
2,000

3,600
3,035

3,126
2,319

2,000

2,436

1 824
1,824

1,000

1,000

0

0

1H09 2H09
Institutional

Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11

33

1H10 2H10
Commercial

1H11 2H11
RetailWatch & Control Lists and Risk Grade Profiles
Group Risk Grade profile byExposure at Default

Watch & Control List
Index
Mar 2009
= 100

180

Watch List by Limits
Watch List by No. Groups
Control List by Limits
Control List by No. Groups

160

59%

59%

58%

60%

61%

80

13%

13%

14%

14%

13%

60

13%

13%

13%

12%

12%

9%

9%

9%

8%

8%

20

6%

6%

6%

6%

6%

0

Sep 09Mar 10

Sep 10Mar 11

Sep 11

140
120
100

40

Mar 09

Sep 09Mar 10

Sep 10Mar 11

AAA to BBB

Sep 1134

BBB-

BB+ to BB

BB-

>BB-

Commercial Industry Exposures

Finance & Insurance
80

16%

Property Services
80

14%

14%
60

12%
8%
6%

20

4%

10%

60

10%
8%

40

6%
4%

20

2%
0

12%
60

10%
8%

40

6%
4%

20

2%

0%

0

0%

Sep 10 Mar 11 Sep 11

Sep 10 Mar 11 Sep 11

Wholesaleh ll TradedMining
i i

80

14%

80

14%
12%

12%
60

10%
8%

40

6%
4%

20

0%
Sep 10 Mar 11 Sep 11

Exposure at Default ($b) (LHS)% in Non-Performing (RHS)

4%

0

Agri,
i Forestry & Fishing
i hi
12%

14%

2%

Sep 10 Mar 11 Sep 11

14%

6%

20

0%

80

8%

40

2%
0

80

12%
60

10%
40

Manufacturing

2%
0

0%

60

8%

40

6%
4%

20

2%
0

Sep 10 Mar 11 Sep 11% of Group Portfolio (RHS)
35

10%

0%
Sep 10 Mar 11 Sep 11

Australia 90+ Day Delinquencies
Australia Retail 90+ day delinquencies

1.25%
1.00%
0.75%
0.50%
0.25%
0 00%
0.00%
Sep 07

Sep 08

Sep 09Sep 10

Sep 11

Total Mortgage Portfolio

NSW & ACT Mortgages

QLD Mortgages

VIC Mortgages

WA Mortgages

Total Credit Cards

Australia Division90+ day Delinquency Balance ($m)

Mortgages have low loss rates
Individual Provision Loss Rates

2,000

FY09

FY10

FY11

Group

0.79%

0.52%

0.31%

Australia Region

0.87%

0.51%

0.30%

Australia Mortgages

0.03%

0.01%

0.02%

1,500
1,000
500
0
Sep 10Mortgages

Mar 11

Sep 11Other Lending36

Australia Mortgages

Dynamic Loan to Valuation Ratio

Portfolio Statistics% Portfolio

Total Number of Mortgage Accounts

832k

Total Mortgage FUM$170b% of Total Australia Region Lending60%% of Total Group Lending

43%

60%
50%
40%

13% of Portfolio>80% LVR

30%
20%
10%
0%

Owner Occupied Loans - % of Portfolio
Average Loan Size at Origination

64%

0-60%

Sep-09$231k

Average LVR at Origination

63%

Average
g Dynamicy
LVR of Portfolio

48%% of Portfolio Ahead on Repayments1

37%

First Home Owners - % of Portfolio

9%First Home Owners - % of New Lending

8%61-75%

76-80%

81%-90%

Sep 10

Sep 11Mortgage Portfolio by State(Sep 2011)28%

NSW & ACT
16%
10%

19%

37

VIC
WA

27%

1. One month or more ahead of repayments. Excludes funds in offset accounts.

QLD

OTHER

91%+

Australia Commercial
Australia Commercial 90+ day delinquencies
3.00%
2 50%
2.50%
2.00%

Business Banking

Regional Commercial Banking

EsandaSmall Business Banking

1.50%
1.00%
0.50%
0.00%
Sep-07

Sep-08

Sep-09

Regional Commercial Banking
90+ day delinquencies
3.00%

RCB Total

Agri

Other Commercial

Business Banking

28%

2.00%
1.50%

30%
34%

1.00%
0.50%
0.00%
May-10

Sep-10Jan-11

May-11

Sep-11

Australia Commercial Lending Mix

2.50%

Jan-10

Sep-10

Sep-11
38

8%

Regional Commercial Banking
EsandaSmall Business Banking

New Zealand businesses

Total Impaired Assets

Total Provision Charge
NZDm

NZDm

400

2.25%

351

247

165

200

2.06%

2,215
1.92%

531

600

2.47%

2,020

98

119

0
1,809

-200
1H09

1,718
1.25%

2H09 1H10 2H10 1H11
IP Charge
CP Charge

2H11

90+ Days Arrears
0.70%

1.20%

1,132

0.80%

631

Mortgages
Commercial
Rural

0.40%
Mar 09

Sep 09Mar 10

Impaired Assets

Sep 10Mar 11

Sep 110.00%

IA as % GLA

2007

39

2008

2009

2010

2011

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

ANZ Mortgage Portfolio

The Australian mortgage market
Full
Recourse• All mortgage lending is full recourse• Investment loans are also secured by
mortgage over primary residence

Variablerate• Most mortgage lending in variable rate
format (ANZ ~85%)• Direct transmission for monetary
policyLow LVRs• Average dynamic LVR is ~48%(or ~63% at origination)• Loans with LVR > 80% requiremortgageg g insurance• No sub prime market

Limited tax
advantages• Mortgage debt on owner occupied
homes is not tax deductible• Results in high prepayment levels• Consequently mortgage debt as
proportion of housing stock is low(~30% in Aust vs ~62% in the US)

Originate tohold model• Mortgages typically retained onbalance sheet• Last Securitisation by ANZ in 2004
41

ANZ Individual Provision Loss Rates (%)
1H09 2H09 1H10 2H10 1H11 2H11
Group

0.85

0.74

0.61

0.42

0.31

0.31

Australia
Region

1.03

0.72

0.59

0.42

0.31

0.29

Australia
Mortgages

0.03

0.02

0.02

0.01

0.01

0.03

Australian house price growth since the mid 1980s - income
growth + structural decline in interest rates
Australian house price vs. purchasing power$700,000Interest rate contribution to simulated house price**
Income g
growth contribution to simulated house price***pActual house prices$600,000$547,861$500,000$400,000$300,000$200,000$100,000$,$086-$100,000$100 000

88

90

92

94

96

98

00

02

04

06

08

*
Represents the average households purchasing power over the median priced home** Calculated using trend discounted variable bank mortgage rate*** Calculated using average household disposable income

Sources: Residix, ABS

42

10

Global House Price Trends
Median House Prices

Index Mar
2002=100
350

Hong Kong

300

250

Singapore
New ZealandAustralia

200

CanadaUnited Kingdom

150

United States

100
2002

2003

2004

2005

2006

2007

2008

Sources: Datastream, ANZ Research
43

2009

2010

2011

Australian House Price Trends
Median House Prices
Index Dec
2004=100

Index Dec
2004=100

230

230

210

210

190

# - Movement from peak to Dec 2011

Brisbane(-9.0%)#

150

170

150

130
30

Adelaide(-6.6%)#

13030

Sydney(-1.9%)#

110

110

90
2005

Perth
(-7.5%)#

190

Melbourne(-6.9%)#

170

Darwin(-6.0%)#

90
2006

2007

2008

2009

2010

2011

2005

Sources: RP Data-Rismark, ANZ Research
44

2006

2007

2008

2009

2010

2011

Australian House Price Trends
Median House Prices
Index Jan 2009=100
130

Top 20% Suburbs

125

120

Middle 60% Suburbs

115

Bottom 20% Suburbs

110

105

100
2009

2010

2011

Source: RP Data-Rismark
45Australian Housing Loan Approvals
Monthly Approval s $b

Monthly Approvals $b
25

25

Total Approvals

20

15

20

15

Non First Home Buyer
Owner Occupiers

105Investors

10

5First Home Buyers
0
2000

0
2001

2002

2003

2004

2005

2006

Source: RBA, ABS
46

2007

2008

2009

2010

2011

Debt is concentrated in higher income households

Indebted Households
Share of household debt by income
quintiles, 2006

• Household debt up but also total
assets held byy households• Debt largely used to acquire assets

25%• Financial assets (e.g. ex housing)
now equivalent to 2
2.75
75 years ofincome up from 1.75 years ofincome in the early 1990’s

50%• Increased debt mostly taken on byhouseholds in the strongest
position to service it

16%• Households in the top two quintiles
account for 75% of all outstanding
debt

3% 6%
First

SecondThird

FourthFifth

Source: RBA paper “Aspects of Australia’s finances” 15 June 201047

• Bottom two income quintiles
account for 10% of household debt

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

Balance Sheet Management

Group loans and deposits
Group customer deposits
$b

450

FY08
12%

Growth Rates
FY09
FY10
16%
14%

Loan to (Customer) Deposit Ratio (%)
(%)

FY11
15%

200

300

180

150

160

0

140
Sep 07

Sep 08

Sep 09Sep 10

Sep 11

FY08
16%

450

Growth Rates
FY09
FY10
0%
9%

134

120

Group net loans and advances(including acceptances)
$b

156
151

100
80

FY11
7%

60

300

60

40
150

Sep 07 Sep 08 Sep 09 Sep 10 Sep 11
Australia0
Sep 07

Sep 08

Sep 09Sep 10

Sep 11
49

APEA

NZ

Group

Customer deposits by geography

200

Australia (AUDb)

New Zealand (NZDb)

APEA (USDb)

Growth Rates

Growth Rates

Growth Rates

FY08

FY09

FY10

FY11

FY08

FY09

FY10

FY11

FY08

FY09

FY10

FY11

10%

16%

9%

11%

5%

1%

0%

4%

49%

49%

68%

40%

Sep
08

Sep
09

Sep
10

Sep
11

Sep
08

Sep
09

Sep
10

Sep
11

Sep
08

Sep
09

Sep
10

Sep
11

180
160
140
120
100
80
60
40
20
0
Sep
07

Retail1

Sep
07

Commercial

1. Includes Wealth
50

Sep
07

Institutional

Customer deposit composition by segment
Group deposits by segment(AUDb)

Deposits compositionSep 2011

297
257

Group

39%

18%

41%

2%

47%

1%

233

124
110

Australia

102

31%

21%

54
46

APEA

47

98

80

Sep 09Sep 10Wealth

77%

23%

117
New Zealand

19%

29%

45%

Sep 11RetailCommercial

51

Institutional

7%

Net loans and advances by geography

FY07

300

Australia (AUDb)

New Zealand (NZDb)

APEA (USDb)

Growth Rates

Growth Rates

Growth Rates

FY08

FY09

FY10

FY11

14%

0%

9%

6%

Sep
08

Sep
09

Sep
10

Sep
11

FY07

FY08

FY09

FY10

FY11

12%

(1%)

(1%)

(3%)

Sep
08

Sep
09

Sep
10

Sep
11

FY07

FY08

FY09

FY10

FY11

large

(2%)

57%

44%

Sep
08

Sep
09

Sep
10

Sep
11

250
200
150
100
50
0
Sep
07

Retail1

Sep
07

Commercial

1. Includes Wealth
52

Sep
07

Institutional

Lending composition by segment
Group lending composition
by segment (AUDb)

Lending compositionSep 2011

397
369
346

202

185

Group

23%

Australia

19%

85

17%

63%

82%

1%

18%

87

71

79

91

Sep 09Sep 10

Sep 11

Wealth

1%

54%

215

APEA
86

22%

New Zealand 7%

RetailCommercial

53

54%

Institutional

37%

1%

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

Australia Division

Australia Division – Consistent customer focus and wellestablished market positioning driving solid results
1.

Delivered customer propositions targeted at
key segments aligned to our Super Regional
Strategy

Pro forma Profit before credit &income tax• New banking services for affluent customers• Improved process for NZ customers opening
accounts in Australia• Customer referral agreements with Shanghai Rural
Commercial Bank (SRCB) and AmBank• Introduced multi-lingual capabilities to more than
2 700 ATMs
2,700
ATM (9 languages)l)2.

Commercial

RetailDriving customer growth and improving
productivity and efficiency• Leveraging Super Regional advantage and franchise
strength across Retail, Commercial, Wealth andInstitutional• Improving efficiency by centralising andstandardising administration functions

3.

WealthSuccessful implementation of technology andinnovation initiatives• Rolled out integrated mortgage origination platform• ExpandedE
d d ffunctionalityti
lit off GoMoneyG M
forf BPAY
payments (~420k customers & ~26% of all online
traffic)• Launched Multi-currency Travel Card in May 11(~55k cards sold with a value of $220m)• Launched OneAnswer Frontier – a 'fee for service'(commission free) investment platform• Term Deposits now available on OneAnswer• EasyProtect and 50+Life insurance products solddirectly via anz.com and branches55

L diLending&ddepositit growthth(YOY)Australia Division – Financial performance
Pro forma
Growth Rates

Pro forma NPAT movement – FY11 v FY10

Up 2%

P o formaProfo ma NPAT momovement
ement – 2H11 v 1H11

Up 8%

56

Australia Geography – Balance sheet and funding
Balance sheet management strategy

Significant improvement in loan todeposit ratio• A well managed balance sheet supports sustainablelending and revenue growth• We aim to:¾ Continually improve the composition of deposits inline with Basel 3 expectations - type, tenor andsegment to fund core assets¾ Reduce the funding gap and therefore reliance on
shorthterm wholesale
h l
l d
debt
b
¾ Continually improve capital efficiency

Outcome• Loan to deposit ratio has improved to 156% in FY11f
from186% ini FY08• Improved quality of deposit base:¾ Strong proportion of deposits from Household
segment (Household deposits as % total deposits
up from ~39% in Sep 08 to ~41% in Sep 11)1
¾ HouseholdHh ld customer ddepositi growth
h abovebmarketk
rates (1.5x system for the year1)• Market share for traditional banking products
improved from 12.5% in Sep 10 to 13.0% in Sep 112• Net gain of 113k transaction account customers• Launch of Term Deposits on our Wealth platform
provides additional customer contact and allows
customers to better manage their funds
1. Source: APRA Banking Statistics
2. Roy Morgan Research

57%

Australia Geography – loans and deposits
Net loans and advances(including acceptances)• Lending up 6% YOY and 2% HOH• Mortgages up 7% YOY and 3% HOH growing at
1.2x system1 YOY• Commercial up 5% YOY and 4% HOH¾ Business Banking up 10% YOY and 4% HOH¾ Small Business Banking up 12% YOY and 9%
HOH¾ Regional Commercial Banking flat YOY and up
4% HOH• Institutional up 5% YOY and 1% HOH

Customer deposits• Deposits up 11% YOY and 9% HOH• Focus on core bank customers• Retail up 13% YOY and 6% HOH• Commercial up 18% YOY and 7% HOH¾ Business Banking up 17% YOY and 5% HOH¾ Small Business Banking up 22% YOY and 11%
HOH¾ Regional Commercial Banking up 17% YOY and
4% HOH• Institutional up 5% YOY and 16% HOH

1. Source: APRA Banking Statistics and RBA data
58

Australia Division – Net Interest Margin
Net Interest Margin

Margin strategy• ANZ is focused on profitable growth in key
segments using a service led approach

Outcome• YOY NIM ddown 2 bbps¾ Improved asset margins and reduced relianceon wholesale funding largely offset byincreased deposit competition and negative
asset mix impacts

NIM movement 2H11 vs.
vs 1H11• HOH NIM down 2 bps¾ Asset repricing benefit offset by increased
funding costs and price competition fordeposits¾ Costs of funds impact on variable rate bookpronounced in 4Q

59

Retail – ANZ value proposition: “easy and empowering”
Superior customer service

Priorities
Strong brandDeeperrelationships
withCustomers

Simple to dobusiness with

Capabilities• Position ANZ as the most “easy and empowering bank” forcustomers• Strategic marketing campaigns – “We live in your world.”• Be the bank of choice for target customer segments:¾ Affluent¾ Migrant¾ Young money¾ Over-50s¾ ANZ Staff• Tailored offerings and better processes• More specialists (migrant teams, retirement bankers, etc.)• Ability
Abilit to
t open AustralianA t liaccountst in
i otherth countriest i (e.g.
(
New Zealand and China)• Simplified products, processes and policies making banking
easier for customers and staff• Channels aligned with customer trends• Reconfiguring branch network – more efficient customer
Multi-channel
sales & service••

friendly footprint, more technologically advanced (e.g.
Smart ATMs, cash recyclers, video conf.), more sales andadvice oriented (e.g. engagement desks, Client Advisors)
Single front-end platform (iKnow) will deliver a seamlessp
across all channels
customer experience
Extending functionality of online and mobile platforms inline with customer expectations
60

Retail – Strategy delivering results
FY11 v
FY10

2H11 v
1H11

Income6%2%

Expenses

4%

2%

Profit Before Provisions

7%

3%

Net loans & advances incl. acceptances

7%

3%

Customer deposits
p

13%

6%

Movement

Customer deposit composition

Using a combination of short & long-term
strategies to drive growth• Focused on growing share of wallet in key customer
segments through a distinctive value proposition of
being the most easy and empowering bank
• Competitive in the market on price without being theprice leader

Outcome• Revenue growth of 6% YOY• Improving CTI – 43.8% in FY11 from 44.6% in FY10
• Peer leading customer satisfaction and improving
share of wallet• Strong growth in deposits - up 13% YOY and 6%
HOH• Mortgages FUM up 7% YOY and 3% HOH
61Cost to income (CTI) ratio

Retail - Focused on profitable growth and market share
With MFI Customer Satisfaction again
approaching 80%...
(%) MFI Customers1… and Peer leading Customer Advocacy
Net Promoter Score1,3… purchase intention for ANZ home loans is up … and share of wallet growth outperforms
YOY and HOH
domestic peers(%) Home loans trial intention2Peer 1

Peer 2(%) Share of wallet – Traditional Banking1Peer 3

1. Source: Roy Morgan Research62
2. Source: Australian Retail Brand Monitor
3. "Net Promoter Scoresm is a service mark of Bain & Company, Inc., Satmetrix Systems, Inc. and Mr. Frederick Reichheld"

Retail – Mortgages

Dynamic Loan to Valuation Ratio

Portfolio Statistics% Portfolio

Total Number of Mortgage Accounts

832k

Total Mortgage FUM$170b% of Total Australia Region Lending60%% of Total Group Lending

43%

60%
50%
40%

13% of Portfolio>80% LVR

30%
20%
10%
0%

Owner Occupied Loans - % of Portfolio
Average Loan Size at Origination

0-60%

64%

Sep-09$231k

Average LVR at Origination

63%

Average Dynamic LVR of Portfolio

48%% of Portfolio Ahead on Repayments1

37%

First Home Owners - % of Portfolio

9%First Home Owners - % of New Lending

8%61-75%

76-80%

81%-90%

Sep 10

Sep 11Mortgage Portfolio by State(Sep 2011)28%

NSW & ACT
16%
10%

19%

63

VIC
WA

27%

1. One month or more ahead of repayments. Excludes funds in offset accounts.

QLD

OTHER

91%+

Retail – Becoming the bank of choice for Asia Region
customers
Customer Focus

Capabilities

Outcome1• Chinese customers able to open Australia & China accounts
with one application

Simpleprocesses

600% increasei• Improved process for NZ customers (15 min process)• Visa Debit card available on arrival

new accounts opened by NZ
customers since process
streamlined from Dec-10• Fee free international money transfers2• Global
Gl b l R
Retailil R
ReferralflT
Tooll
Tailoredproducts &network forcustomert
needs• International Banking Services (IBS) branches increased
from 19 to 47 branches from Jan to Jul-11• Online multilingual application forms• Significant
Si ifit mortgagetandd credit
dit cardd policyli enhancementsht

47 IBS Branches(19 branches Jan-11)• Dedicated email and phone contacts• Advertising in targeted countries and segments• Banking in Australia Seminars• Representation at appropriate Expos1.
2.

new online accounts sinceApril launch ofmovingtoaustralia.anz.com
gto better suit customers moving to Australia and insurance
proposition under development• New website “Moving to Australia”
Understand ofbanking inAustralia~5,800(~160% increase in
online sales)

400+ in-branch
specialists withlanguage capability

Results as at September 2011
ANZ offers fee free international money transfers to customers with a 1+1 student and parent account in Australia and China

64

Retail – Delivering customer propositions targeted at
key segments aligned to our Super Regional Strategy
Moving to Australia website(Online)• Launched
au c ed April
p 20110• Simplified multilingual content¾ English¾ Chinese¾ Korean• Multilingual Online forms• Online content including
LifeGuides, country guides, etc.
• Complements Concierge modelInternational Banking
Services branches(Branch)• Increasedc eased from
o 19
9 to
o 47
branches• 47 targeted branches supportedby over 400 Banking Specialists
with language capability• Supported by bilingual marketingt i l andd iin-branchbhmaterial
campaigns• Dedicated support resources toassist in sales coaching forsegment• Supports Global Retail Referrals
Tool

65

Concierge model(Phone)• Launched
au c ed August
ugus 20110• Multilingual account opening
service• High-touch point of contact forcustomers• FX and International Money
Transfer Specialists• Arrange Visa Debit Card pick up
on arrival• Based on successful model in
ANZ New ZealandRetail – Strong momentum in Affluent program driven
by new capabilities and services
Principles driving performance - easy and empowering

Customer Focus

Capabilities• Whole customer relationship taken into account in financial
Customerknowledge

product assessment• Front line system for customers designed to capture all

Outcome (5 months)1~4,700
Customers onboarded

customer interactions

Accessibility to
Wealth advice• Introduction of a 30 minute Wealth Health Check• New capability for Wealth advisers that takes into accounttime poor customers• Dedicated customer
c stome managers
manage s
Customerengagement• Referral processes between Financial Advisers, Mobile
Lenders, Home Investment Lending Managers andbranches for specialist support• Email communication the #1 method of daily liaison withcustomers from their dedicated customer manager

Customerliaison~790
790
Wealth Health Checks• First meeting with specialists face to face
• Dedicated Practice Manager to guide customers throughmortgagetprocess

1. Results from May 2011 to October 2011
66

Average advice fee$1510 (up ~90%),
average risk
premium $2260(up ~70%)~$480mMortgage FUM
referred~Average size ofreferred Mortgages
more than double
retail average

Commercial overview
FY11 v
FY10

2H11 v
1H11

Income6%

4%

Expenses

6%(2%)

Profit Before Provisions

6%

7%

Net loans & advances incl. acceptances

5%

4%

Customer deposits
p

18%

7%

Movement

Net loans & advances (incl.
acceptances) by business

Strategic focus• Drive customer growth through leveraging:

Net loans and advances incl.
acceptances & deposits
d
i

¾ ANZ
ANZ’s
s Super Regional capabilities and footprint¾ ANZ’s strengths in Markets, Trade Finance andCash Management and Agriculture and Natural
Resources sector expertise¾ Retail, OnePath and Esanda’s distribution
network• Improve efficiency and productivity throughcentralising and standardising administration
functions and enhanced use of offshore hubs.

Outcome• Income up YOY and HOH
HOH, strong deposit growthand improving asset volumes• NIM up YOY reflecting strong transaction accountgrowth.
67

Commercial – super regional advantage
Our super regional platform and ANZ
core capabilities are driving cross-sell
and new-to-bank acquisition

Cross-border referrals
29%
increase

Super regional platform• ANZ is the only bank able to connect Commercial
customers across Asia, New Zealand and Australia
via a network that spans:¾ 1,200+ branches¾ ~270 business centres¾ ~3,000 Commercial frontline staff• The value of this connectivity is evidenced by a 29%
growth in cross-border referrals HOH

Cross-Border Cash Capability:
ANZ Transactive

ANZ strengths• To further enhance our super regional offering we’releveraging ANZ’s market leading capabilities in:• Web-based Cash Management platform withcross regional capabilities
cross-regional¾ Trade finance:#1 in market share and #1 incustomer experience1

1.
2.

¾ Markets: ‘Best FX House in Australia’2• Enables complete regional visibility overaccounts, control over all accounts and financial
information¾ Cash Management: ANZ Transactive cross-bordercash capability• Provides comprehensive range of payment
solutionsl ti
tto ttrack
k llocall andd overseas paymentstInstitutional customer share and Institutional customer experience; source East & Partners
AsiaRisk 201068

Commercial - Business banking
Building momentum, creating capacity
to grow

FY11 lending book composition by
key segments• Growingg the balance sheet throughg a focus on
acquiring larger customers and improved share ofwallet• Leveraging super regional connectivity and offering
new services to customers (e.g. trade finance in
RMB)• Introduced “ANZ OneSwitch” to make it easier forcustomers to switch their banking to ANZ via a
simplified application and fulfilment process• Enhanced frontline skills and capabilities via sales
leadership and coaching initiatives

Net loans and advances incl.
acceptances & deposits• Improved frontline productivity and capacity
through continued centralisation of admin-related
tasks

Outcome• Lending up 10% YOY, with a 35% increase YOY in
average new-to-bank deal size
• Strong growth in deposits (17% increase YOY)

69

Commercial - Regional Commercial banking
Capitalising on opportunities for growthand supporting customers in need
Regional Commercial1• Leveraging bank-wide sector expertise in Resources
and Infrastructure to identify and capture
Commercial opportunities within major projects, e.g.
contractors and suppliers.
2
A ib i
Agribusiness• Leveraging bank-wide Agribusiness expertise tocapture farmgate business• Increased products per customer in the acquired
Landmark customer portfolio by 60%• Supported customers impacted by natural disasters
through the ‘Seeds of Renewal’ program, providing
assistance to 40 separate community programs

Outcome• Despite unprecedented climatic conditions and othermacro level impacts
macro-level
impacts, RCB 2H11 PBP grew 6%• Tight cost management led to positive revenue
growth exceeding cost growth YOY• Lending flat YOY but up 4% in 2H11
• Strong deposit growth HOH (4%) and YOY (17%)

1. Non metro Small Business and Business Banking customers
2. Farmgate customers
70

FY11 lending book by key
segments

Net loans and advances incl.
acceptances & deposits
FY10 benefited fromLandmark acquisition andinternal resegmentation

Commercial - Small Business banking (SBB)
FY11 lending book composition by
sectorLeveraging ANZ distribution networks
and enhancing customer experience• Acquiringq
g new-to-Commercial customers byy tapping
pp g
into the distribution networks of OnePath, Esanda
and Retail’s affluent segment• Enhanced our innovation offering via the launch of“Business Insights”, the relaunch of SB Hub andpartnering with Xero (online accounting solution)• Improved productivity through the roll out of SBB
Assist: elimination of admin tasks from frontline
staff – 10,000 frontline hours saved

Net loans and advances incl.
acceptances & deposits

Outcome• ~16k net new customers in FY111, with improved
customer satisfaction• Product cross sell up 15% in FY11 (e.g. asset
finance, commercial cards, wealth, etc.)• Deposits up 22% YOY• Lending up 12% YOY• PBP up 10% HOH and 15% YOY

1. Metro customers only. As at August 201171

Commercial - Esanda
Esanda is the market leader invehicle finance and a prime sourceof new-to-bank customers

Esanda lending composition byassets (Sep 11)• Largest player in the dealer vehicle financemarket• Market leading credit processing speeds (under
15 minutes to process new applications)• Rich source of new-to-bank consumer andCommercial customers:¾ ~110k contracts settled per year

Esanda lines of business¾ ~75% of customers have no existingl ti
hi withith ANZ
relationship¾ ~80% of auto finance customers are
consumers and small business clients• Provider of equipment finance products offeredthrough ANZ

Dealer(Auto
Finance)• Auto finance and insurance products
offering to dealerships and consumers• National presence and capability acrossmetro and regional• Relationships with over 200 dealer
groups and over 700 car dealerships• ~300,000 active finance contracts• Over 9k deals written per month1

ANZ
Asset
Finance• ANZ asset finance offering to commercial
and corporate banking clients• Offering include hire purchasepurchase, chattel
mortgage, finance lease facilities, etc.

¾ Leverages Esanda’s skills and technology
platform¾ Fully integrated into ANZ’s Commercial andCorporate distribution networks.

1.

Average Consumer & Commercial contracts per month over FY11 through the Dealer channel

72

Wealth (OnePath superannuation, Investments &Insurance and ANZ Private)
In-force annual premium growth

Strategic focus• Improving management bench strength appointed new
management;¾ Distribution & Advice - Paul Barrett¾ Superannuation & Investments - Craig Brackenrig¾ CRO - Edith Pfister¾ CFO - John Frechtling¾ Well advanced search for new MD Wealth• Develop products to suit simple super environment• Improve penetration of bank customers through branches andanz.com• Complete roll out of new client service model to ANZ Private• Actively adapt to regulatory change agenda• Deliver service & functionality
y enhancements to front end
systems

Business Performance• NPAT down 16% YOY and 15% HOH driven by revenue
impacts from volatile market conditions• Negative investor sentiment given poor equity markets
impacted OnePath FUM and E*Trade, FUM down 8% YOY and
10% HOH• Annual in-force premiums up 12% YOY and 6% HOH• Growth in retail insurance income was offset by higher
general insurance claims due to catastrophic weather events• Expense growth (+3% YOY) due to higher levels ofinvestment in strategic projects coupled with somerestatements and one-offs• Lapse rates below industry average during 2011.
73

Retail insurance lapse rates(Rolling 12 months)

Wealth – Progress against strategic priorities
Priorities
Step change in
ANZ customer basepenetration

Capitalise
C
it li
on
opportunities

Leverage
combined wealthbusiness

Progress• Life insurance launched on anz.com ($3.4m premiums) and 50+ product•through branches ($0.7m premiums)
Launched Affluent “Wealth Health Check.”• Further increase MyAdvice (phone advice) volumes which doubled YOY• Capturing fee-for-service inflows on OneAnswer Frontier ($400m FUM1)• Maintain momentum in Retail life insurance, sales increased 29% YOY• Wealth business (previously INGA, ANZ Private and ANZ Investment andInsurance businesses) now integrated – next steps to improve penetration ofbroader customer base and drive further efficiency.

• Automate key customer and adviser transactions to improve speed and accuracy
Enhance corecapabilities for
future growth••– (60% of retail life insurance business coming through electronically)
Significant transformation of insurance claims management experience
Service and functionality enhancements to the OneAnswer investment platform(including online switches, improved super to pension transfer process and term
deposits with ~$200m FUM since 1 Sept)• Managing within a constrained environment – prioritised investment spend andProductivity•

improving cost efficiency
FFocus
on centralisingt li iandd standardisingt d di iprocesses anddbback
k off househfunctions.
fti

1. As at 30 September 201174

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

Asia Pacific, Europe & America(APEA)() Division

Asia Pacific, Europe & America Division (APEA) building a leading super regional bank
APEA achieved another year of significant growth in
FY 2011…
•••

Revenue increase of 22%
NPAT growthth off 20%
Customer deposit growth up by 40% ($18b) and lending
growth up by 44% ($12b)

•
•
•

•

37% CAGR
1,870

2,091

15%

716

Balanced business - growth in selected
geographies, segments and products– APEA Retail grew to 36% of APEA total revenue– APEA Institutional contributed 26% of Global
Institutional revenue in FY11
C
Connectivity
ti it - across theth network,tk andd increasinglyii l intrai tAsia – intra-Asia revenue up 40% in 2011
Investment discipline – finding investment dollars fromcost savings
Balance sheet strength - improving the deposit base andqualityy–ggreater than 50% CAGR in loans andcredit q
deposits over the last three years
Brand recognition – Institutional and Commercial
recognition more than doubled from 2010

8%
1

%

APEA Contribution to Group Revenue

APEA Division Net profit after Tax(USD m)RBS Integration – all phases completed by FY11,
FY11 resulting
in USD130 million of savings over 4 years from 2010

1. Includes Europe and America results not included in originally reported figures
76739

31% CAGR
543
393
253

…and completing our acquisitions successfully
•

2,556

1,184

…while continuing to execute our longer termorganicgg
growth strategy…
gy•

APEA Division Revenue(USD m)1

617

APEA Division financial performance strengthened, despite
markets trading headwinds in the second half
Pro forma NPAT movement – FY11 v FY10

Up 20%

Ex-Global Markets

Global Markets

Pro forma NPAT movement – 2H11 v 1H11

Down 9%Ex-Global Markets

Global Markets

77

Revenue is growing in key strategic geographies
customer segments and products
Customer Segments

Products

Franchise Markets• Greater China, Indonesia,
Singapore, Greater Mekong and thePacific

Institutional

Institutional• Natural Resources • Financial• Agriculture
Institutions• Infrastructure• Commercial• CashManagement• TradeNetwork Markets• Europe and America, Japan, Korea
and India

Retail & Wealth••• Affluent• Emerging
Affluent• FX &
Commodities• Global CapitalMarkets

Retail & Wealth• Investments• Deposits• InsuranceKeyy Achievements

FY 2011 Reveenue Growth1

Strategic Priorities

Geographies•••

Locally incorporated and establishedoperations hub in China
Commenced operations in India andopened 1st branch in Mumbai
Offshore RMB services launchedCompleted RBS integration across 6
geographies

1:

•
•

Refocused Retail & Wealth business on
Affluent and Emerging Affluent
Launched Commercial segment, buildingon RBS acquisition
Deepened industry specialisation in
Natural Resources, Agriculture andInfrastructure2010 and 2011 underlying FX adjusted, excludes partnerships

78

•
•

•

Cash platform on track for delivery in
Singapore and Hong Kong
Expanded Markets and FI sales
distribution, and substantially
improved position in league tables fordebt capital markets in Asia
Expanded wealth product menu andproduct specialists menu in Retail &WealthConnectivity is a key differentiator for ANZ, driving
revenue growth across the network
Intra Asia connectivity becoming
increasingly important

APEA Cross-Border Income1(AUD m)864

801• ANZ’s
ANZ s Asian business intra region cross
cross-borderborderrevenues expanded –up 40% YOY• Macro concerns in Europe and America curtailed
cross-border income from these markets• Trade transaction volume increased 58% YOY and
25% HOH• RMB cross-border trade approval in Hong Kong
with about 1,000 corporate customers having
already booked offshore RMB transactions• Offshore customers represent 35% of the ourRetail Banking customer base in Singapore and
H
Hong
K
Kong

Intra-APEA

40%

Australia/NZ

Institutional• Expanding footprint in China, India, Dubai, London, and New York, while
continuing to develop key markets of Indonesia, Singapore, Hong Kong andJapan

Retail & Wealth• Framework implemented to capture Retail connectivity in the region has
resulted in a 10 fold increase in cross-border referrals HoH

Partnerships• Partners leverage on ANZ’s core capabilities in Australia and other markets
for customer referrals and connectivity¾ e.g. SRCB and AMMB customers moving to Australia can open ANZAustralia accounts prior to arriving in Australia

1:2010 and 2011 translated at constant FX rates

79

Growth has driven diversification across APEA as Asia
Retail and Northeast Asia have expanded
APEA segments percentage of Group revenue FY07 vs FY1115%

8%Partnerships & Other
Asia Retail
Pacific Retail
Institutional & Commercial

APEA geographies percentage of Group revenue FY07 vs FY11
15%

8%
Europe & North America
North East Asia
South East Asia
Pacific

80

Tight cost disciplines and improving efficiency are
helping to fund front-line investment
Improving efficiency• Focused on reducing enablement/back-office costs
while continuing to invest in revenue-generating
capabilities¾Enablement Centralisation Program¾Operational efficiency initiatives¾Reduced ~230 FTE in Enablement¾Reduced ~130 FTE in Retail & Wealth andPrivate BankAPEA FTE(including contract employees)~12,100~11,900

Investing to grow revenue generating
capabilities• Build-up of front-office and support staff, continued
investment in systems, distribution and branding:¾Increased ~160 staff for Commercial andInstitutional businesses¾Initiated Global Investment Program to build
core banking, cash management, trading andsales capabilities¾New Branches opened in India,
India China,
China Dubai and
PNG
Additional cost synergies achieved inacquired RBS businesses• Restructure of the Retail Business• Alignment with Affluent Strategy away from Mass
Market
1. Asia Retail underlying (excluding Pacific Retail & Private Bank Asia)

81

Asia Retail Cost to Income1

Increased net funding while improving the credit
quality of loan portfolio and growing the balance sheet• Significant Volume growth• Self Funding• 75% Net Loans & Advances <1 year duration
Customer Deposits

Net Loans & Advances(incl. acceptances)• Credit Quality Improving

APEA Institutional Risk Grade profile
by Exposure at Default

63
53% CAGR

AAA-BBB

45
51% CAGR

27

BBB38

BB+~BBBB-

26

>BB
>BB-

17

82

Brand awareness has significantly improved across allof our customer segments
Brand awareness1 across Hong Kong, Singapore and Taiwan
Average Percentage, 2010-2011

2
3

1. Includes both Prompted and Spontaneous awareness, arithmetic average across all three markets
2. Based on ANZ Brand Health Tracker study 2010, Hall & Partners
3. Based on ANZ Brand Campaign Tracking 2011, Hall & Partners
83Integration of acquired RBS businesses into ANZ wascompleted in October 2011
Completed complex integrationin 6 Asian markets

Building a larger and more capablebank on the integrated business

Effective
Effectie management of a comple
complexintegration• 6 markets• 1.8 million customers• 6,500,
Staff• 54 Branches• 4 different business segments: Retail & Wealth,Private Bank, Commercial & Institutional

Enhanced ffrontline
ontline• New frontline pricing tools• Enhanced channels• New risk & sales governance• New call centres
New Platforms• New credit cards platforms• New core banking – Institutional/ Commercial• New general ledger• New payments platforms• New risk feeds• New regulatory reporting

Realising real value from acquisition• ~USD$130m in Cost Saving projected over 4
years from FY10 to FY13
• Renegotiated/reviewed 3,500 suppliercontracts• Integrated
I t
t d new revenue platforms
l tf(across(
Retail, Wealth and Private Bank)

Commercial
Ci l presence & more scalel totbusiness• Consolidated and built 3 new data centres• 1,200 new systems interfaces built• 6,200,
standard desktops
p replacedp/ rebuilt• 800 standard servers replaced / rebuilt

84

APEA Institutional: Executing to a clearly articulated
strategy
Revenues up 29% YoY as customer franchise
strengthens

Customer numbers continue to growTargeting sectors aligned to global strengths and withsignificant regional growth prospects• Natural Resources• Agribusiness• Infrastructure• Financial Institutions
Increasing geographic significance• APEA contributed 26% of Global Institutional revenue in
FY11• Asia revenues grew 38% FY11
• New Institutional branch builds in India and Middle East
Building diversified product revenue with reduced
reliance on Trading• Significant growth in revenue in Trade Finance (51% YOY)
and Cash Management (59% YOY)
• Ongoing investment in Transaction Banking cash platform• Global Markets product expansion and platform
development
Growing client base and deepening relationships• Asia customers grew 33% FY11
• Maximising network flows with client revenues within APEA
up 40%
1. Excludes Commercial
2. Excludes markets trading and amortisation impact of annuity business

85+41% CAGR

Institutional Client revenue growing2(AUD m)+47% CAGRAPEA Retail: Growth in wealth driving businessexpansion in Asia
Customer growth despite portfolio
repositioning

Substantial repositioning of Mass to
Affluent / Emerging Affluent

Customer Numbers (‘000s)• Revenue up 18% amidst repositioning and volatile market
conditions• Growth in Wealth Management revenue contribution - upfrom 14% to 22%• Significant CTI improvement - 8% in Asia retail underlying,
2% overall pro forma• Channel expansion – mobile banking roll out in Fiji and
Taiwan

+51%
2,450
1,100

Building Revenue (USDm)
+34%
347

Growing Signature Priority Banking(SPB) proposition

290• Presence in 10 markets (6 Asian markets and 4 markets in
the Pacific) up from 6 in 2010
• Monthly SPB customer acquisition growth of 29%• Average product holding per customer increased by 14%

2 500
2,500

786

342

Growing Funding Base
Loans & Deposits

Expanded product suite• Launched mortgage offering in Singapore, Taiwan andIndonesia• Expansion in Wealth Management product offering - 400
mutual funds, 25 bancassurance products, 450 Exchange
Traded Fund’s
86

930

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

Institutional Division

Institutional – executing to a clearly articulated
strategy• Targeting sectors with existing strength andsignificant regional growth prospects• Natural Resources• Agriculture
A i lt• Infrastructure

Institutional Division
Underlying Net profit after Tax ($m)
35% CAGR• Increasing geographic diversification• APEA 26% of Institutional revenue FY11 (20% FY10)• Asia revenues grew 38% FY11

• Diversifying product range and reduced reliance on
lending• Trade finance revenue up 29% YOY• FX revenues up 22% YOY• Cash management revenue up 13% YOY• Grow client base and maintain strong relationships• Acquired 1,300 new relationships, growing client base
8% YOY• Asia Pacific client base grew 15% FY11
• Ranked first in terms of overall institutional relationships
and lead bank relationships across Australia and New
Zealand (combined across both markets as measured byPeter Lee Associates)• Improving risk profile of business• Net impaired assets down 27% YOY
88

Institutional – Financial Performance
Pro forma NPAT movement – FY11 v FY10Up 9%Ex-Global Markets

Global Markets

Pro forma NPAT movement – 2H11 v 1H11

Down 15%

Ex-Global Markets

Global Markets

89

Identified priority sectors where we have existing
strengths to build upon
Priority Sectors

Priority Products

Natural Resources• In target sub-segments – minerals & mining, oil &gas, primary processing, primary services andcommodity trading.
• Focused on capturing Australia/NZ – Asia/Pacifictrade supply and demand chain flows.
• Lead bank to sector in Australia and growing
Asia/Pacific franchise offering opportunity to assist
both producers and consumers

Cash Management• A leading provider of cash management andworking capital solutions in Australia and NZ via
ANZ Transactive, the first trans-tasman internet
banking platform• Continued build and roll-out of Asian Cashgcapabilitypy across 11 countries
Management
Trade• Provides trade finance and supply chain solutions to
our customers that manage risk and liquidity andsupport a deepening of customer relationships.
• ANZ is theh leading
l d
trade
d and
d supplyl chain
h
b
bank
k in
Australia and NZ, delivering superior sales andservice underpinned by a global proposition withteams on the ground in 28 countries.

Agriculture• Clear emphasis on customers with flows into andwithin the Asia Pacific region.
• Focused on providing markets, working capital andsupply chain solutions.
• A particular focus on cotton, coffee, cocoa, grains
and oilseeds, sugar, dairy and protein.

FX & Commodities• Building on our strong Australian and New ZealandCorporate businesses to expand into Asiancurrencies and clients• Emphasis on building a high-frequency global flow
and trading Corporate and Institutional business infour hubs
hubs, and on growing our business withFinancial Institutions (which account for ~90% of
all global FX volumes)

Infrastructure• Target customers and investors operating in power& utilities, roads, rail, airports, ports, water, waste
and social infrastructure.
• Primary focus is to support customers in the Asia
Pacific
f region whilst
h l remaining dominantdinAustralia and New Zealand.
• Continue to position as infrastructure specialists.
90

Benefits emerging through growth in priority sectors
and products
Institutional Division
Client revenue growth FY11 vs FY10

Growth has been achieved through:• A global specialised relationship model offering
industry expertise and a broader product proposition
has seen priority sectors achieve superior growth• Natural Resources - Asia revenues up ~40% withsignificant increases in Markets and Trade products• Agribusiness - Asian revenues up ~80%, again withsignificant increases in Markets and Trade products• Infrastructure - predominantly growth in Australianrevenue from large domestic infrastructure projects
augmented by a lift in Asian revenue momentum.
• Trade – 29% revenue growth reflects continued
increase in client relationships. ANZ maintains aleading position in the Australian and New Zealandtrade markets and growing presence in Asia which
now represents over 50% of total trade revenue.
• Over 85% of growth in our FX business occurred in
APEA due to better penetration of our client
base, product diversification and a focus on Financial
Institutions clientsl• In Australia, our share of Australian FX turnoverincreased from 6.3% at the end of September to
11.8% in September (as measured by the RBA)
• The only bank offering a trans-tasman cash
management platform
platform, with Singapore and Hong
Kong to be added to system the by end of 201191

More diverse, self funded loan growthInstitutional Lending and Deposits

Net Loans & Advances(incl. acceptances)$13b Growth YOY

Institutional Trade Lines
Funded & Unfunded
39

Customer Deposits
30
22$20b Growth YOY
117.4
97.7

91.2
75.6

78.7

79.8

Asia Funded Trade Lines
11
7
3

92

Investment in the strategy
Majority of FY11 cost growth relates to investment in de risking andsupporting immediate and longer term growth initiatives$m• Back / middle office FTE• Risk management systems• Payments infrastructure• Productivity initiatives• Process automation• Cash management
platform• Markets FX engine• Pricing tools• Salary CPI• Reduce Back / Middle Office FTE• Customer
C tsystemst• Markets technology• Frontline FTE
M k t sales,
Marketsl
RelationshipR l tihi M
Managers

93

P

r o

d

u

c t i v i t y

f o

c u

s

e v i d

e n

t

i n

n

e a

r

t e r m

c o

s t

g

r o

w

t h

Initiatives in train to maintaincost trajectory

Institutional Operating Expenses
Growth Pro Forma HOH

Process automation and enhancement• Enhanced markets operations platforms andprocesses• Automation of data p
processing
g capabilitiespto reduce manual intervention
Increased utilisation of regional hubs
• Operations streams are now managed as
global functions throughoutggAustralia,, New
Zealand and Asia

Institutional Operating Expenses
Quarterly Trend

Streamlining regional and global
enablement support
g opportunities
pp
to share• Creating
regional/functional resources andinfrastructure• Aligning business and support structures tofuture business requirements

94

Improved credit quality
Institutional risk grade profile
by exposure at default

Institutional net impaired assets
by size and as % NLA

AAA-BBBBBBBB+~BBBB>BB-95

Diversification of client base and revenues
Institutional client base

Revenue mix1

7,464
6,924
6,382

96

1. Underlying basis

Cash management business delivering connectivity
Significant progress made in 2011

ANZ Transactive trans-tasmansites and usage• Connecting our customers’
customers transaction banking needs

across Australia and New Zealand is a key differentiator.

• Customers can perform a range of cash management

activities through a single internet channel:¾ Record number of multi-country Cash Management
mandates won in 2011
¾ Strong growth in the number of paymenttransactions processed in Asia via internet
channels• Over 7,800 clients have been on-boarded to ANZTransactive to date:¾ 3,923 clients on-boarded to ANZ Transactive
Trans-Tasman solution in Australia and New
Zealand¾ 3,909 clients on-boarded to ANZ Transactive Asia
• We will continue to add functional enrichments, with theplanned rollout of the enhanced ANZ Transactive
platform to 11 key Asian markets:¾ Singapore and Hong Kong enhancements to occur
in November 2011

¾ Remaining 9 key Asian markets will be brought
online by 2013

97

Global Markets Performance
Strategy to increaseclient flow revenues is delivering

Global Markets revenue
pro forma FX adjusted• Revenue down 11% YOY and 31% HOH due todifficult macro conditions in traded risk and balance
sheet management• Trading and balance sheet related revenues were
down 36% YOY and 70% HOH• A strong Markets sales performance across all
geographies and products has partially offset lower
trading revenues with sales revenues growing 13%
YOY• APEA sourced revenue was up 25% YOY driven by
expansion of capabilities throughout the region• The FX business continued to expand in the second
half 2011 with a 7% uplift in FX sales revenue HOH• The Commodities business doubled 2010 revenues
withh strong tradingdandd salesl performancef• Australian results were impacted by balance sheet
and trading revenues, including a widening of credit
spreads on the Australian liquidity portfolio

98

Global Markets revenue QOQGlobal Markets product offering
Global Markets delivers innovative
product solutions through specialist
teams operatingpg across the Asian regiongFixedd Income• Interest rate risk hedging for clients• Pricing and risk management of credit
iinstruments• Management of the bank’s liquidity
portfolios and Trading of position risk

• Foreign exchange risk management
Foreign
Exchange&
Commodities

advice and products for clients• Commodity price risk advice andmanagement• Commodity derivatives (e.g. gold, soft
commodities and energy)• Origination and distribution of credit
Global CapitalMarkets

products• Corporate and Financial Institutions
sourced listed and unlisted Bonds• Syndicated Loans• Securitisation

99

Global Markets revenue mix

Sales, trading and balance sheet revenue
Global markets business focussed on client
driven risk management and trading activity
Also management of ANZ’s own liquidity andb lbalance
sheet
h
risk
i k management• Direct client flow business on core products
Sales
Revenuesuch as Fixed Income, FX, Commodities andDebt Capital Markets (DCM)• Continued growth in FY11 through continued
focus on client acquisition• Growth of client flows in APEA

• Trading represents management of positions
Trading
Revenuepart of direct client sales flow andtaken as p
strategic positions• Trading in the rates and credit product, inline with balance sheet trading• Difficult trading conditions particularly in Q4
with both domestic and global
macroeconomic
i volatilityl ili• Management of interest rate risk for the loan
Balance Sheet
Revenueand deposit books• Management of the bank’s liquidity position• Impacted
p
in Q
Q4 by
y the widening
g of credit
spreads on semi government bonds to swap
hedges with market movements taken at
Fair Value through the Profit and Loss
100

Global Markets revenue
composition (pro forma)

Global Capital Markets - becoming a leading Asia Pacificcapital markets specialist
Achieved a number of milestones in 2011

Corporate and frequent issuer bonds
league table rankings• A number of first in offshore RMB/CNH market¾ Joint Lead Manager for First offshore bond for an
Australian bank
¾ Joint Lead Manager for First offshore bond for a
Japanese corporate• Joint lead manager for ANZ's first syndicated loan for a
Chinese sovereign entity• C
Completedl t d ANZ'ANZ's FirstFi t KoreanK
securitisation
iti titransaction• Arranged the first syndicated loan by a foreign bank in
Vietnam• Fastest execution of a secured bond transaction in
Singapore Market YTD

Category
g y

Rank

#
Deals

AmountArranged

Australia (ex-self led)

1

57

AUD11.5b

New Zealand (ex-self led)

130

NZD2.0b

SGD

3

11

SGD1.4b

Asia Pacific ex-Japan

8

102

USD12.2b

Source – Bloomberg as at end 3Q11

Loan syndications mandated arranger
league table rankings

Extended leading position in domestic markets• No. 1 bond issuer in Australia with 19% market share
YTD 2011

Rank

#
Deals

AmountArranged
USD

Asia-Pac ex-Japan1

182$18.6b

Deepened our presence in Asia

Australia1

81$11.3b• Increased cross border deals across Asia with greaterddistributionb
into Europe andd America

Asia

10

77

$
$4.7b

• Grew APEA GCM revenue 77% FY11

Source – Thompson Reuters as at end 3Q11

• N
No. 1 bondb d issuer
i
in
i New
N
ZealandZ l d withith 49% market
k tshare YTD 2011

101

Category

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 2012

New Zealand Businesses

New Zealand Businesses - simplification & efficiency
Simplifying the business• Have simplified the management structure• Progressingg
g with p
process and p
product simplificationp• Moving to one IT system
Improved customer and employee engagement• Increasingg customer satisfaction – up
p 3% YOY for
both ANZ and NBNZ
• Improved staff engagement scores• External recognition (awarded the two best banking
brands New Zealand’s Sunday Star-Times Canstar
Cannex Bank of the Year Award)• Research indicates strong awareness of ANZ's
sponsorship of the 2011 Rugby World Cup andincreased overall ANZ brand awarenessManaging for changed conditions• Cost focus – aiming to be the most efficient bank in
New Zealand with lowest CTI• Return focus – profitable growth, improved ROE,
margin management• Risk focus – manage to the changed economic
settings
1. FY08 Underlying; FY09-FY11 Pro Forma

103

Profit before provisions1
NZDm

New Zealand Businesses – financial performance
Pro forma
Growth Rates (NZD)

Pro forma NPAT movement – FY11 v FY10

Up 55%

Pro forma NPAT movement – 2H11 v 1H11

Flat

104

New Zealand Businesses - balance sheet management
Net Interest Margin

Retail• Mortgages – have held share in the <80% LVR
market and taken a more conservative
approach to growth in >80% LVR segment• Deposit strategy focussed on growing better
quality at call and savings accounts (up 15%
YoY)• A disciplined approach to pricing on term
deposits also achieved a margin improvementof 15-20bps on term deposit portfolio

Net Loans & Advances(incl. acceptances)

Customer Deposits

Commercial
88 3
88.3

• Continued strong Dairy sector pay-outs driving
deleveraging in the Agri sector• 1.4x system lending growth in BusinessBanking

88 4
88.4

86 8
86.8

48.3

• Continued working with customers to achieve
more sustainable debt levels resulting in a
reduction in the level of impaired loans.
• A focus on credit quality has seen a reduction in
Commercial and Agri net impaired assets of
26% HOH

105

51.1

50.2

Simplification program progressing well with good
progress made in 2011

N
New
OperatingModel• New regional management approach that simplifies decision making
across all businesses• Merged Commercial and Agri businesses to ensure an integrated focus
right across the agribusiness sector• Made Business Banking a stand alone business focussed on the needs ofsmall business customers• Simplified product set (reducing retail products from 140 to under 100)
Simpler
Product and
Fee Structure• Over 380,000 customers migrated to end state products with minimal
negative feedback• Now
Neasieri forf customersttot transacttt across bothb th theth ANZ andd NBNZ
networks• Expenses down 2% YOY• Improved staff engagement
A Stronger
Business• Increased levels of customer satisfaction• Additional productivity gains available in 2012 and 2013 from move to asingle platform• An FY11 after tax charge of NZD111m has been taken outside underlying
earnings with respect to this programme106Super Regional capabilities provide real differentiation
Leveraging our Super Regional capabilities
•
•
•
•
•

Migrant Banking – on track to exceed 10,000 new customers through migrant banking channel this year
Wealth – migrant investor program targeting high net worth investors
First major New Zealand bank to have Chinese Renminbi (RMB) trade settlement deal capability
Set up first full payments and cash management implementation between ANZ New Zealand and ANZ China
Only New Zealand bank to structure Export Credit Agency funding, with over NZD200m of deals

Investing to further strengthen capabilities••••

Now have 61 retail branches with dedicated Chinese and Indian specialists
Established multilingual call centre with Mandarin, Cantonese, Korean and Hindi capabilities
Asian specialist team in Private Bank business managing 1,200 clients and NZD2b in assets
Launched ANZ Transactive, the first trans-Tasman internet banking platform for Institutional andCommercial customers• Cross-border connectivity - established single points of contact (“Asia desk”) for intra-region customer
referrals

Providing leadership on New Zealand’s growing opportunities with Asia
• Partnerships with Education New Zealand and Ministry of Ethnic Affairs to support migrants• Supporting linkages with India through partnerships with the India business forum and joining the NZ Prime
Minister's
Ministers recent trade delegation to India• Business Banking China tour provided 25 delegates the opportunity to build connections in the Chinese market

107Retail & Wealth - simplifying our business to makebanking easier for customers and staff
Simplification initiatives undertaken acrossbusiness• Re-engineering processes to allow frontline staff tospend more time with customers• Progressing optimisation of product portfolio with 140
products reduced to under 100 products to date
• Opened new branches in key locations around
Auckland
Program already yielding results• Productivity gains from simplification drove flat cost
growth FY11 and a 3% reduction in costs 2H11
• Increased retail customer satisfaction to record levels• Contact Centre recognised as the best in financial
services in NZ at the CFM Contact Centre Industry
awards
Wealth position continues to strengthen• OnePath #1 in the Retail Managed Funds market• Awarded the Morningstar KiwiSaver Fund Manager of
the Year – KiwiSaver is NZ’s primary retirementsavings initiative• Divested non-core property businesses• Insurance profitability improved – favourable claims
experience and reduced lapse rates
1

Source: Nielsen Consumer Finance Monitor

108

Customer satisfaction at
historic highs1

OnePath KiwiSaver FUM

Commercial & Agri – unlocking value by bringing
segments closer together
Managing for a lower growth environment• Disciplined management of risk, balance sheet and expenses
Enhanced customer focus• Unrivalled coverage, with customers having access to more
relationship managers in more locations than any other bank
• Continued investment in frontline efficiency and training toenhance relationship skills• Customer satisfaction stable in a highly competitiveenvironment• Supporting customers through the economic cycle via
customer forums and thought leadership, e.g. Viewpoint
papers; Economy in 5 courses; Better by Design partnership;
Farming for Profitability sessions• Working with customers to assist them in achieving moresustainable debt levels
Leveraging Super Regional connectivity• By connecting customers to our Super regional network we aredifferentiating ourselves in the New Zealand market, examples
include:¾ Connecting a South Island Agri client to ANZ Indonesia
who provided insights on the local market and assisted in
facilitating new trade into Indonesia¾ Linking a commercial client to ANZ teams in Fiji andAustralia and assisting expansion into new markets¾ Introducing wine production clients to the ANZ China
team and help them commence distribution into thelucrative Chinese market.
109

Lending Composition
By Segment

Dairy Milk Payout/Price

Business Banking – ANZ has a compelling growth
proposition in Small Business
Small Business a significant partof the NZ economy

Strong performance in FY11
• Maintained #1 market share position• Customer satisfaction improved from 87% to 88%1
• Lending growth 1.4x system

90% of NZ businesses employ
5 or fewer staff2• Staff engagement lifted from 60% to 70%• Profit improvement from increased revenue andreduced costs
Increased coverage of small business customers• More Business Bankers in branches and in a greaternumber of locations• Small Business workshops – attended by 5,000
customers• Launch of the ANZ Biz Hub, a market leading online
customer site supporting small business• Assisted more than 4,500
4 500 customers in the last two
years with our business start-up package (providing
business advice and a transactional account, fee-freefor one year)• High growth potential with low risk as majority oflending
g is mortgage
g g based

1 Source: TNS Business Finance Monitor Sep 2011
2 Source: NZ Department of Statistics Feb 2010

110

Good growth in both marginand volume

New Zealand Businesses - credit quality

Total impaired assets

Total provision charge
531
247

351
165

90+ Days arrears

111

98

119

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 20122012 Q1 Trading Update (17 February 2012)

ANZ released FY12 Q1 trading update on 17 February

Key Highlights (QOQ)
A$m• Q1 (3 months to 31/12/11) Underlying profit*
up 4.6% QOQ (up 4.1% pcp)
• Statutory profit (unaudited) for Q1 was $1.7b• GroupGPBP up b
by 6% ((or 8% FX adjusted)
d
d) to
$2.3b
• Total Provision charge $239m• TotalT
lP
Provisioni icoverage## hihighh at 11.86%
86%• Group customer deposits up ~2%• Group lending increased by ~2%• Net interest margin (ex Markets) down 1bp• Impaired assets down $65m to $5,516m

Note:*Underlying profit is unaudited and adjusted for non core items# Total Provision coverage = collective provision balance plus individual provision balance as aproportion of Credit Risk Weighted Assets

113

Provisions remain at or below long term averages
Provision charge remains at low
levelsTotal Provision Charge(IP charge by Division and total CP charge)
A$m

098
1,098

722

660

551
Expected Range239** 1Q12 provision charge annualised

114

Key points from the ANZ Q1 Trading Update:

ANZ is growing and diversifying its customer and revenue base in line with its Super Regional Strategy.
In Australia,
Australia deposit growth remained strong,strong asset growth was driven largely by mortgages anddelinquency trends in the mortgage portfolio continued to improve
In APEA, quality & diversity of earnings streams continue to improve, deposit growth exceeded loan
growth, there were positive income/expense jaws as income benefited from rebound in Global Markets
income as well as growth in Trade income while expenses benefited from the RBS integration program
In NZ, while economic growth is subdued our business momentum remains positive, the businesssimplification program is underway delivering some early cost improvements, credit quality has
continued to improve as has the business margin
The Balance sheet remains strong with a diversified funding profile (range of domestic and offshore
sources as well as in both senior unsecured and covered bond format):• The 2012 term wholesale funding task is in line with 2011 around $20b of which ~$9b has
already been raised year to date
• The capital position at the end of the first quarter remained strong with a Tier One ratio of
11.03% and a Core Tier One ratio of 8.7%
Asset quality has improved:• Total impaired assets were down $65m to $5,516m, reflecting further slowdown in new
impaired assets• Q1 provision charge of $239m• Provision coverage remains high (total provisions to Credit RWA’s:
RWA s: 1
1.86%)
86%)

115

Global Markets income recovered somewhat in 1Q12
Global Markets Income (FX Adjusted)$m
Total Income

600

Sales Income

Trading & Balance Sheet Income

500

400

300

200

100

0
1Q10

2Q10

3Q10

4Q10

1Q11

116

2Q11

3Q11

4Q11

1Q12

Global Markets customer sales income at record highs
Trading & Balance Sheet Income(FX Adjusted)

Sales Income (FX Adjusted)
$m
$
400

$m
$

Quarterly Sales Income
Quarterly Average 2008
Quarterly Average 2009
Quarterly Average 2010
Quarterly Average 2011

400

300

300

200

200

100

100

0

0
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12

117

Quarterly Trading & Balance Sheet Income
Quarterly Average 2008
Quarterly Average 2009
Quarterly Average 2010
Quarterly Average 2011

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12

I
Investort
Discussion
Di
i
Pack
P k

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
March 20122011 Financial Result

Overview of financial performance
2011
$m

%

Underlying Profit

5,652

+12%

Operating Income

16,812+7%

E
Expenses

7 718
7,718

+11%
11%

Provisions

1,211

-33%

Statutoryy Net Profit After Tax

5,355
,

+19%

EPS (cents)

218.4

+10%

140

+11%

Net Interest Margin

2.46%

-1bps

Customer deposits

296,753

16%

Net loans and advances1

397,285

8%

Dividend per Share (cents)

All figures other than Statutory Net Profit after Tax and Dividend are presented on an underlying basis.
1. Including acceptances
1192011 Full Year
Performance FY11 v FY10

3%

33%

Up 12%
2%
Up 19%

Performance 2H11 v 1H11
1H11
Statutory
Profit

Non-Core
Items

1H11
Underlying
ProfitProfit
BeforeProvisions

Provisions

2,664

154

2,818

(124)

109

Down 3%

Down 17%%120

Tax & OEI

2H11
Underlying
Profit

Non-Core
Items

2H11
Statutory
Profit

31

2,834

143

2,691

Up 1%
%

Up 1%
%

Impact of trading income and provision trends 2H11
Performance 2H11 v 1H11

Down 70%

Up 3%

Up 2%

Down 17%

Down 3%

Up 1%

Performance FY10 v FY11FY10Underlying
ProfitTrading
IncomeIncomeex-Trading

Expenses

Provisions

Tax & OEIFY11Underlying
Profit

5,025

(337)

1,367

(747)

609

(265)

5,652

Down 36%

Up 9%

Up 11%

Down 33%

Up 13%Up 12%U 8%
Up
Pro Forma

121

Trends September Quarter 2011
Trading Income weaker than expected

Lower provision charge

Higherg
recoveries & write-backs driven byyInstitutional division

Release of collective flood p
provision takenin 1H11122

Adjust for acquisitions & FX – The Pro Forma Numbers
Growth FY11 v FY10 – Underlying & Pro forma
Revenuee e ueProfit before
P
Provisions
i i

Expensespe ses

Ex-Trading

Ex-Trading
g

7.6%

7.0%

Net
et Profito t aftera te Taxa

Growth 2H11 v 1H11 – Underlying & Pro forma
Revenue

Profit before
Provisions

Expenses

Net Profit after Tax

Underlying

Pro forma

Underlying

Pro forma

Underlying

Pro forma

Underlying

Pro forma(0.6%)(0.8%)

2.0%

2.4%(2.7%)(3.4%)

0.6%(0.1)%

Ex-Trading

2.9%

Ex-Trading

3.3%

123

Divisional overview
Net Profit after Tax (Pro Forma)
2H11 v 1H11

2H11

HOH

FY11

YOY

1,445

8%

2,777

2%

353

(9%)

739

20%

867

(15%)

1 895
1,895

9%

451

0%

904

55%

2H11

HOH

FY11

YOY

2,361

2%

4,673

5%

491

(9%)

1,030

17%

1,314

(17%)

2,905

(8%)

755

2%

1 493
1,493

13%

Profit Before Provisions (Pro forma)
2H11 v 1H11

124

Net Interest Margin
Movement 2H11 v 1H11 (bps)

280.9

280.3

Down 0.6 bps ex-markets
Down 3.0 bps

Movement FY11 v FY10 (bps)
FY10

FundingF
di&Asset Mix

Funding Costs

Deposits

AssetsOther

Markets

FY11

247.4

2.8

(3.4)

(7.8)

16.3

(1.1)

(8.5)

245.7

Down 1.8 bps
273.9

Up 6.7 bps ex-markets

125

280.6

Net Interest Margin
Net Interest Margin 2H11 v 1H11
Australia Division

Down 2bps

New ZealandBusinesses (NZD)

Up 6bps

Net Interest Margin

Institutional
ex-Markets

Down 17bps

APEA Division
ex-Markets (USD)

Down 36 bps

126Operating Expenses
Operating Expense Growth Pro Forma HOH
Group Operating Expense growth
5.5%

Group

Australia
Division

New ZealandBusinesses

Institutional

APEA
Institutional

APEA
ex-Institutional

4.1%

2.4%

127

Continue to invest for future growth and productivity
Operating Expense Growth
Pro Forma FY11 v FY10

• Risk management systems• Payments & IT infrastructure• Back & middle office FTE• Frontline FTE in Institutional & APEA
• Institutional cash management platform
rollout, Global Markets systems• Investment in regional support hubs
• Operational process transformation• Super Regional Sourcing program• Regional support hubs
• New Zealand simplification• RBS, One Path and Landmark integration synergies

128

Credit quality is improving
Total Provision Charge

1,435

New Impaired Assets

1,621

3,600
3,035
1,098

3,126

2,319
722

2,437
1,842

660

551

129

Collective Provision Charge & Management Overlay
Economic Cycle & Concentration(Management) Overlay BalanceCollective Provision Charge

Additional natural
disaster overlay

Total charge
$8m

130

The material in this presentation is general background information about the Bank’s activities current at thedate 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 theinvestment objectives, financial situation or needs of any particular investor. These should be considered,with or without professional advice when deciding if an investment is appropriateThis presentation may contain forward-looking statements including statements regarding our intent, belief
or current expectations with respect to ANZ’s business and operations, market conditions, results ofoperations and financial condition, capital adequacy, specific provisions and risk management practices.
When used in this presentation, the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”,“should” and similar expressions, as they relate to ANZ and its management, are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Such statements constitute “forward-looking statements”
for the purposes of the United States Private Securities Litigation Reform Act of 1995. ANZ does not
y obligationg
to publiclypy release the result of any
y revisions to these forward-looking
g statements toundertake any
reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.
For further information visit

www.anz.com
or contactt t
Jill Craig
Group General Manager Investor Relations
ph: (613) 8654 7749 fax: (613) 8654 9977

e-mail: jill.craig@anz.com