2004 Interim Results
Australia and New Zealand Banking Group Limited
27 April 2004

Table of contents
1.

CEO review

2.

Result review Page [7]3.

Credit Quality

4.

Other Financial Issues

5.

Business performance Page [21]6.

Strategy7.

Supplementary information

Page [3]Page [14]Page [17]Page [36]Page [47]2SECTIONSECTION 11

ANZ
ANZ 2004
2004 InterimInterim Results
Results

John McFarlane
Chief Executive Officer

3

SECTIONSECTION 11

ANZ Interim Results Summaryv Mar 03v Sept 03

NPAT•Headline$1,396m

22%

16%•Excluding significant transactions$1,312m

15%

9%•Underlying3$1,241m

10%

4%

EPS

76.8 cents

11%

5%

Cash EPS1

78.9 cents

11%

5%

Dividend fully franked2

47 cents11%

n/a

1. EPS excluding significant transactions and goodwill amortisation
2. March 03 dividend of 44c adjusted for bonus element of rights issue (@0.9597)
3. Excludes significant items, NBNZ and adjusts base for TrUEPrS swap

4

SECTIONSECTION 11

ANZ now has a strong foundation

Successful
specialist
business model

Risk reduced andsustainability
improved

NBNZ acquisition
brings New
Zealandleadership• Model now enhanced by clustering around customers;
Personal - Key driver of future growthInstitutional - A leading business with lower risk
Corporate - Strong organic growth• Credit concentrations almost to optimal levels• International risk exposure contained• Business mix now more domestic and sustainable• Trading risk modest• NBNZ acquisition cash EPS accretive• Two-phase implementation plan
• Integration and cost synergies are on track• Revenue attrition better than expected• Customer numbers are now growing

5

SECTIONSECTION 11

A low risk approach to NBNZ integration

Phase one: quick wins
• RBNZ approval expected early May• Legal amalgamation into ANZ National, targeted for 30 June 2004
• Maintain both brands to enhance customer retention• Rapidly integrate activities that are not systems dependent• Idea sharing already begun for franchise growth
Phase two: full integration• Full plans already submitted to RBNZ. Discussions well progressed• Systems strategy:
Domestic – NZ stand-alone
International – Group systems• Common systems suite in both Australia and New Zealand• Full systems integration expected by end 2005

6

SECTIONSECTION 22

Results
Results Review
Review

Peter Marriott
Chief Financial Officer

7

SECTIONSECTION 22

A good underlying result, driven by strong income growth andimproved credit quality

2H03
NPAT
Growth66

Interest
Income42

Interest
Income –TrUEPrS
impact*21

Noninterest
income46

Non-Interest
Income –TrUEPrS
impact#(35)

Expenses
Provisions
(47)
25

Tax &
OEI
(18)

1,241

1,207

1,141

NPAT growth excluding NBNZ acquisitionand significant transactions
Adjusting for TrUEPrS impact onongoing business, underlying growth
Mar -03

Sep -03

8.8%

10.2%

Mar –04
NPAT excl. NBNZ &significant transactions

Cash EPS
71.0

Cash EPS
75.2

EPS growth* Reflects StEPS being reinvested in AUD whereas TrUEPrS was invested in USD# Reflects loss of earnings on TrUEPrS hedge
811% / 5%EPS
78.9

Including
NBNZ

SECTIONSECTION 22

Strong balance sheet growth across most businesses…

74.1

80
70
60

60.6

67.3

50

42.3 40.5

40

39.0

30
14.8

20

17.8
16.0

24.0 25.4
13.5 13.4

100Mortgages
Australia

IFS

Corporate

Mar-03• End of period deposits increased
to $128.4b (29%) for the half.
Excluding NBNZ deposits
volumes grew to $104.9b (5%)• Strong growth was seen acrossthe board, with Personal Banking& Wealth up $1.7b (5.3%),
Institutional up $1.5b (5.8%),
and Corporate up $0.7b (5.5%)

30

NZ BusinessSep-03

26.7

Other

Mar-04

Deposit Volumes ($b)

40
35

NBNZ

46.5

NBNZ

• Excluding NBNZ, growth waslargely in Mortgages $6.8b(10%) and Corporate $1.7b(11%) for the half, reflecting
favourable market conditions forboth businesses

Lending Volumes ($b)

30.4

31.8

33.5
28.2

31.5
26.0

27.5
22.4

25
17.1 17.6

20
15

11.9

12.813.5

105

12.0 11.7

NBNZ• End of period lending assets
grew by $41.4b (25%) for thehalf. Excluding NBNZ, lending
grew $8.8b (5%)

0Personal

IFS
Mar-03*Other deposits include Esanda retail debentures

9

Corporate
Sep-03NZ Business
Mar-04

Other*

SECTIONSECTION 22…partly offset by margin pressure, particularly in 2nd quarter• Reduction in mortgage margins
the key driver of margin decline –this reduction driven primarily byinterest rate environment

2.64

Mix impact of 5bp includes 4bp forincreased wholesale funding and
1bp for mortgage mix

Average spread between Cash rate
and rolling 30 day rate: Jun-03 6bp,
Sep-03 6bp, Dec-03 8bp, Mar-04
21bp• Mortgage broker costs accounted forjust 1bp of the 12bp mortgage
margin decline

(6)

2H03
movement

(3)

2

(5)

Mortgages,
3(2)
Credit Cards,
2.53
NBI &
Asset
NBNZ
low
Cash flow
Finance
Impact interest Funding TrUEPrS impact ofdeposits & asset
derivativesmix

Mar-03• Mortgage margins were down 12bp
over the half, driven principally by
the cyclical impact of wholesale
rates moving up ahead of the cashrate during the half

Margin Drivers

(7)

2.71

Sep-03Mar-04

Interest rate environment adversely
impacting mortgage margins

5.75

Mortgages funded off
wholesale rates

5.50

~20bp

5.25
5.00

Mortgages priced off
cash rate

4.75
4.50
4.25
Mar-0310

Rolling 30 day

Jun-03cash

Sep-03

Dec-03Mar-04

SECTIONSECTION 22

Growth in underlying non-interest income reflects volume growth
TrUEPrS
swap
close out

110

1,683

NBNZ
Property
sales
2H03

1,456

(27)

TrUEPrS
hedge
income
2H03

(35)

FX
impact(15)

Cashflow
Underlying
impact on
growthtradingsecurities
67
income

106
1,467

21

Underlying growth in noninterest income5%

Sep-03

Mar –04other income excl.
NBNZ & significant
transactions
11

Mar –04SECTIONSECTION 22

Expenses well controlled, providing scope for re-investment
Underlying operating expenses
increased by 2.8% over the half.
Key drivers were:• Operating costs were up 4% in
Personal Banking as a result of
increased staff training, the cost of
rolling out the new telling platform,
and increased depreciation resulting
from further investment intechnology and branch
refurbishments

Acquisition*
costs
NBNZ
61
1,902
168

Expenses: Investing for growth
Underlying
growthSoftware &FX
2H03
hardware48
impactgrowthamort’n
1,673
24
1,626 (16)
15
1,602

• SME expenses up 8% over the half,reflecting substantial investment inthis business as we expand thefootprint• Volume related costs in themortgages business drove expenses
up 8% over the half

Mar-03

Sep-03Mar-04 excl.
NBNZ impact

Mar-04

Cost to Income within mid 40’s target
The cost to income ratio remains
comfortably within our statedtarget range of “mid 40’s”.

%

2H03
movement

45.6

1.0
%
44.6

• Both the NBNZ acquisition and
TrUEPrS redemption impacted theratio in the half

TrUEPrS
0.2

NBNZ*
0.2

Operatingexpenses
0.1

%
45.1

• The ratio was also impacted byinvestment in the franchise in thefirst half
Mar-03*includes Acquisition, Funding & Integration Costs

Sep-0312

Mar-04

SECTIONSECTION 22

Doubtful Debts Provision reflects improved underlying portfolio• Standard ELP charge (as a % of
average lending assets) has remained
stable at 31bps (32bps September
2003)
inclusion of higher quality NBNZ portfolio
reduces ELP rate by ~1bp

ELP Charge$mbp’s
ELP Adjustment
NBNZ Impact
ELP ChargeStandard ELP (bps)Headline ELP (bps)350

reduction in headline ELP charge due to4bps reduction in ELP central adjustment
ELP top up is being unwound in line with
the improved credit quality of theoffshore lending book, driven by the derisking strategy

40

39Normalised ELP

258
250

237

46

36

32

(1)

36

50

42

150
(4)

303

313
20

70

27
60

241

200

ELP Top-Up

38

34

256

301

50

ELP Rate Drivers

bps

300

80

33
(1)

45

40
35

40
33

39
33

31

100

40
30
20

30

50

28

10

Mar-04
Headline

Growth inmortgages

NBNZ
Acquisition

Reduction inCentralAdjustment

Sep-03
Headline2600Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04

13

SECTIONSECTION 33

CreditCredit Quality
Quality

14

SECTIONSECTION 33

Overall portfolio in good shape• Mortgages portfolio remains healthy• Domestic corporate environment relatively
buoyant• Non-core offshore lending has beensignificantly reduced• Specific Provisions down 27% on 2H03, nolarge individual losses• Gross Non-Accrual loans down 8% on 2H03,
lowest level since 1997

15

• Risk in thebusiness has beensignificantly
reduced• Credit quality thebest it has been forsome timeSECTIONSECTION 33

Quality of Consumer & SME portfolios again better than expected
Delinquencies down on March 03• Mortgage delinquencies (60days) improved over the half

2.50%

• Delinquency for customers new
to SME since September 2002 is
in line with delinquency on
legacy SME portfolio

2.00%• Strong economic conditions andprudent credit practices havecontinued to see our Retaildelinquency and loss rates
remain very low• Delinquency for Mortgage
products have flattened over the
half

SME

Mortgages

Credit Cards

1.50%
1.00%
0.50%
0.00%
Sep01

0.45%
0.40%
0.35%

delinquencies on RILs andBroker introduced loans haveremained in line with the wider
portfolio

0.30%• Australia’s low unemployment
rate should continue to help
maintain the quality of theportfolio

0.15%

Dec01

Mar02

Jun02

Sep02

Dec02

Mar03

Jun03

Sep03

Dec03

Mar04

Mortgage delinquencies remain low acrosseach category*

0.25%
0.20%
RILS Australia & NZ
O/O Australia & NZ
TPMI Australia

0.10%
0.05%

0.00%
Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04
TPMI – third party mortgage introducers
O/O – owner occupied

16*Excludes NBNZSECTIONSECTION 44

Other
Other Financial
Financial Issues
Issues•• Revenue
Revenue Hedging
Hedging•• TaxTax Risk
Risk•• Capital
Capital Position
Position•• Dividends
Dividends•• Outlook
Outlook

17

SECTIONSECTION 44

Capital position remains strong, and towards the top end of our range• With the acquisition of
NBNZ further reducing therisk in the balance sheet,the Group lowered its ACE
target range by 50bpts in
the half to 4.75% to
5.25%• Capital position is strong,
but will be impacted by
new APRA treatment ofintangibles
this is likely to reduce
ACE by approximately
20bp from June onwards

Drivers of ACE ratio
%
6.25

NBNZ
acquisition& capitalraising

6.00

5.75

5.70

Earnings

Dividend

0.92(0.60)(0.62)
RWA
growth5.50(0.24)

5.25

5.16

~5%

Target range

5.00

4.75

4.50

Sep-03Mar-0418

Adjustedfor
capitalised
expensechangesSECTIONSECTION 44

A record interim dividend• The record interim dividend of
47 cents per ordinary sharerepresents an 11.1% increaseon the 2003 interim dividend
adjusting for the bonus elementof the rights issue*• Policy is to increase dividend inline with cash earnings per
share growth• Cash payout ratio is calculated
against core cash earnings(defined as earnings after
hybrid distributions, but before
goodwill and significant items)• Expect to sustain full franking
capacity for the foreseeable
future, despite the lower
percentage of Australian profits

Interim Dividends

$0.50

$0.40

$0.30

0.44

0.47

0.39

$0.20
0.26

0.29

0.33

$0.10

$0.00
1999

*2003 interim dividend discounted by 0.9597 representing thedilution impact of the bonus element of the rights issue

19

2000

2001

2002

2003

2004

SECTIONSECTION 44

Short term outlook• We expect ANZ will continue to perform well in 2004
• Margin pressures likely to subside in the second half due to lower gap
between 90 day rate and cash rate
• Lending growth likely to remain robust, but with moderating mortgage
growth offset by increased business lending• Expenses will continue to be well managed and focus on growth• Credit quality expected to remain in good shape• Integration costs higher in the second half

20

SECTIONSECTION 55

Business
Business
Performance
Performance

Dr Bob Edgar
Chief Operating Officer

21

SECTIONSECTION 55

Our consumer and corporate businesses were the key driver ofunderlying profit growth, offsetting de-risking impact in IFS
Cluster
Consumer Businesses

PCP Growth$62m*

Key Drivers

15%• Personal Banking Australia up 13% due to growthin consumer deposits, lending and salescommissions• Consumer Finance up 21%* due to strong
customer growth and turnover in the merchantbusiness• ING JV up 18%*after adjusting for cards under accrual in 1H03

Institutional Financial
Services

$(4)m

1%

• Fall in NPAT reflects de-risking within the lending
portfolio and the impact of the appreciation of the
AUD on USD earnings

Corporate

$16

12%

• Strong lending growth in both Corporate and SME
driving profit• Revenue offset by the cost of expanding thegeographic footprint in SME franchise

New Zealand Business

$136m

large

• Strong lending growth in NBNZ offset reduced
volumes in Corporate & Institutional• ANZ (NZ) down largely due to margin pressure andcontinued investment in the franchise

Other

$(1)m

• 11% growth in Esanda resulting from buoyant
new car market and efficiency gains• 4% contractions in both Asia Pacific and Treasury
driven by exchange and interest rateenvironments respectively
22

SECTIONSECTION 55

We now have a strong position in the domestic consumer market
Retail Market Share in Australia & New Zealand*
We now have a combined retailcustomer base across Australia& New Zealand of approximately
5.1m customers• We have a scale position• Following the NBNZ
integration, all retailcustomers will be on a
Hogan platform• Relative market sharesindicate the capacity toderive profit from retailbanking

%

20

18.7

18
16

15.7

15.5
NBNZ
impact

14

12.2

12
10
8
6
4
2
0
ANZ

23

CBA

NAB

WBC

* source: ANZ - weighted average of Australian and New Zealand market shares,
based on Roy Morgan data in Australia (share of traditional banking) andACNeilson data in NZ (share of main bank customers)

SECTIONSECTION 55

Our Australian consumer businesses have improved their position• We have grown our shareof wallet, but remain well
below peers. Clustering of
consumer businesses will
help grow share of walletgoing forward

Jan 2004

ANZ

%
55

Jun 2002 – Jan 2004

-1.5

-0.5

0.5

1.5

%

ANZ

• We have grown market
share by more than each of
our peers. Specialisation
has helped with this.

%
20
18
16
14
12
10
8
6
4
2
0

Change in Market Share

Peer
Average

In 2002, we set out to revitalise
our branch network, with theaim of growing our market
share and our share of wallet

Australian Market Share
Traditional Banking*Peer Average

Share of Customer Wallet* Change in Share of Wallet-4.0

Jun 2002 – Jan 2004

-2.0

50
ANZ

45
40

Bank A

35
Bank B

30
25

Bank C

20
ANZ
Bank A Bank B Bank C
Source – Roy Morgan Research*traditional consumer banking is defined as transactions, deposits, personal/other loans, mortgages and credit cards,
rolling 12 months. Peers include CBA, NAB, WBC
24

0.0

2.0

4.0

6.0 %

SECTIONSECTION 55

Personal Banking Australia: strong foundation delivering results
A continued commitment toinvesting in our franchise has seen
strong growth in the half withNPAT up 8%. The result was built
upon:• Strong revenue growth up 5% on thehalf driven by robust deposits growth
up 5%, solid growth in Rural lending
up 8%, and continued growth in our
margin lending business up 39%.
• Net interest margin increased 4bps
following increases in the cash rate,
but was partly offset by growth inlower margin deposits• Increase in non interest income
reflecting 4% growth in sales andretention payments received fromsale of ANZ products.
• Expenses increased 4% largely due toour continued investment in the
franchise, including:Continued investment in sales
training
The successful roll out of the
new telling platform to theentire branch network
Ongoing commitment tobranch refurbishments andimproving the risk profile ofour branch network.
Opening of four new branches
in the half

The investment in our franchise is delivering results
Customer satisfaction

Staff satisfaction

80%

88%
82%

77%

68%
62%

65%

Feb-02

Feb-03

Feb-04ANZ

Peer Ave.*

ANZ

Source: Roy Morgan Research“very” or “fairly “ satisfied$m
240

Source: Nielsen Media
Researchoverall satisfaction

Driving solid growth in NPATCAGR 12%

220
200
180
160

1H02

*Peers include CBA, NAB, WBC

25

2H02

1H03

2H03

Peer Ave.*

1H04

SECTIONSECTION 55

Consumer Finance: interchange impact well managed; offset by
growth initiatives
Strong profit growth, up 9% for the half driven by:

Othergrowthinitiatives

NPAT• Well managed changes to credit card programs following$mInterchange
Other
Interchange Reform$mrateissuing
Loyalty104
22• Significant reduction in loyalty expense following the95(34)changes impacts
restructuring of our product suite(1)
22• Customer attrition minimised; concentrated in hightransacting customers• Leading loyalty product – ANZ Frequent Flyer (“AFF”) remains attractive– Majority (52%) of customers not impacted– Only Big 4 Bank still offering $1 spend to earn 1 QFF
Net issuing impact
point on standard and Gold VISA/MasterCards$(13)m after tax• New products/services– Diners; Low Rate MasterCard have been successful; on-line Personal loan approval• Strong growth in the merchant customer base with 6%
Sep
Mar
increase in the half year
2003
2004
• Increased merchant turnover over the Christmas period• Strong expense control: up 1% on prior half
$ spend to earn 1 QFF point for%standard and Gold VISA/MasterCards
customers

Our merchant base has grown
Customer numbers (000s)

25.4

Competitors

56.9

53.6
28.2

AFF Standard and Gold

6%

Bank B Gold
Bank A Gold

28.6

52% of clients

Bank A Standard
Bank C Standard& Gold

30%

28.3

8%
2H03

1H04

Small BusinessInstitutional & Corporate

No impact

26

$1

$1.33

$1.50

6%

4%
$2

$ spendSECTIONSECTION 55

Mortgages: strong volume growth more than offset by interest rateenvironment
Margin impact on NPAT substantial

NPAT reduced 7% for the half despite continued
strong volume growth, key drivers included:• A 10% increase in mortgage volumes during the half
resulting from record sales volumes being written
through all key channels was offset by a 12 basis point
reduction in margin due to higher funding costs
following two interest rate increases.

$mMarginimpact119(45)

Volumegrowth
38

Net
other
income Expenses
5

(6)

$m
111

• Sales and retention commissions paid to personal
Banking increased due to growth in sales through thebranch network• Operating expenses increased 8% largely driven by
volume growth, along with costs associated with thebusiness investing for the future

In the half the Mortgages business has significantly
improved customer and staff satisfaction,
maintained product leadership in Cannex Awards(independent mortgage analysts), and continued
to focus on channel diversity, including
development of the ANZ Mortgage Solutions
franchises

Cannex Product Awards March 2004
12

Five Star Awards

Sep
2003

Australian Retail Mortgage
sales remain strong$b
3.5

Four Star Awards

Mar
2004

3.0

22

2.5

8

2.0

19

1.5

16

1.0

4

13

0.5

AHL

Wizard

RAMS

27

p
O
ct
N
ov
D
ec
Ja
n
Fe
b
M
ar

SGB

Se

CBA

Ju
l
Au
g

NAB

Ap
r
M
ay
Ju
n

WBC

M

ANZ

10

ar

0.0

0

‘000
25

Value (LHS)

Number (RHS)SECTIONSECTION 55

IFS: subdued result driven by focus upon de-risking
The IFS profit was adversely affected by revenue
constraints imposed by the de-risking strategy, andthe strength of the AUD affecting offshore earnings.
Positive aspects of the result include:IFS Offshore assets as % of Groupassets substantially reduced
9.0%
7.5%

• Specific provision charge has decreased A$32m (34%)
to A$62m for the half, reflecting the improving quality ofthe portfolio and AUD appreciation• Continued underlying cost discipline was evident acrossthe business with operating expenses up 3% for thehalf, largely attributable to increased pension costs in
the UK and increasing our FX and Capital Markets
capabilities in the UK and Asia.
• Maintained our leading domestic market position

4.8%
3.1%

Sep-01• IFS offshore lending reduced by 47% since September
2001. At March 2004 IFS offshore lending comprise ~3% of Group balance sheet

NPAT composition shifted towards
less volatile and more sustainableearnings

10%
14%

$b
12.4

10.9

3.1

2.7

IB

33%
Sep-01Mar-04TTS

FXCap Mkts

at ROA of ~ 1% NPAT
foregone ~ $60m
7.8
1.9
1.7

6.1

40%

5.7

Sep-01

Sep-02

Structured Finance

C&SF
28

Mar-04

3.2

23%

22%

Sep-03

Reduction in lending assets
is affecting NPAT*

2.5

16%
11%
10%

21%

Sep-02

6.6
1.5
1.5

4.2

3.6

Sep-03Mar-04

US/UK

Asia

*End of period NLA’s

SECTIONSECTION 55

Corporate: continued strong growth and investment in the businessContinued growth in Corporate NPAT with thehalf year result up 5%, key highlights include:

Strong, low risk lending growth

Corporate Banking Australia

Corporate• 4% revenue growth driven by growth in averagelending volumes of 10%, coupled with solid growthin average deposit volumes of 8%

SME

%

16%

1.2
27%
1.0

• Wall St to Main St activity increased, with revenue
from these deals up over 50% in the half

0.8

• 46% of total profit generated from Corporate
customers is recorded in other business units results

0.6• Operating expenses were up 4% as we invested for
growth, including increased frontline FTE

0.4• Net specific provisions down significantly from 2H03.

0.2

Small to Medium Enterprises Australia• 7% revenue growth driven by 14% average lending
growth, and 9% increase in average deposit volumes

0
1H03• Continued growth reflecting effective investment in
the business and a focus on delivering a superior
customer proposition, including;

2H03
1H04
Lending Assets

1H03
2H03
1H04
Non Accruals Loans (RHS)**Non accrual loans as % of net loans and advances%

expanding our geographic business footprint:
frontline FTE up ~ 200 in last two years
more FTE committed to industry specialisation
effective use of 3rd party originated loans toensure full capacity utilization of relationshipteams and continuing introduction of quality
customers to ANZ• Operating expenses up 8% reflecting the above
mentioned investments and on-going business
infrastructure

35
30
25
20
15
10
5
0

Price is not a key driver in customers
using brokers in SME market
Only 13%

Too
Busy/Wanted
help• Sound credit quality, which is closely monitored
29

Existing
Relationshipwith Broker

Recommended Wanting betterby accountant
price/deal

SECTIONSECTION 55

ANZ New Zealand (ex NBNZ): result affected by inclusion of mortgage
business, margin pressure and exchange rates
ANZ (NZ) result was adversely affected by
reduced net interest income frommortgages business (mortgage businessincluded for the first time which waspreviously reported in ANZ’s specialist
Mortgages business) and exchange rates.
As a result, NPAT was down 3% for thehalf, however excluding Mortgages, NPAT
increased 1%• Personal - strong growth in deposit FUM
offset by a decline in fee income, due partly
to the removal of non-ANZ ATM fee for NBNZ
customers, and lower punitive fee income.
The half also saw continued re-investment in
the franchise, with the opening of two
branches and increased spend on brandimage. This increased investment offset net
interest income growth of 2% resulting in aflat profit for Personal in the half.
• Mortgages – after several halves of stable
margins, an adverse yield curve in thecurrent half resulted in a 13bp margin
contraction in the mortgages business, morethan offsetting the good volume growth.
• Other – solid performance principally from
Corporate, driven largely by strong interest
income from robust lending and deposit
growth and growth in fee income

NZD m

ANZ (NZ) NPAT adversely impacted byMortgages

50
40
30
20
10

Personal

Other*

Mortgages*includes Business, Rural and Corporate Banking

Interest rate environment adversely
impacting mortgage margins
6.00
5.75

Mortgages funded off
wholesale rates

5.50
~20bp

5.25
5.00
4.75

Rolling 30 day

cash

Mortgages priced off
cash rate

4.50
Mar-0330

Jun-03

Sep-03

Dec-03Mar-04

SECTIONSECTION 55

Integration update
1. Integration Planning• Detailed integration planning for 41 workstreams virtually completed, common management
structure in place• Integration is on track; an integration timetable is included in the appendix (refer page [71])2. Systems• ANZ National to adopt common systems largely based around ANZ’s core systems withselected best of breed front office NBNZ applications
3. Synergies• To meet RBNZ requirements, more technology processing than expected will be undertaken in
NZ. The cost of this has been offset by the identification of additional synergies, with overall
cost synergies in line with prior forecast of A$110m pa (within 3 years)• RBNZ focus is industry wide not ANZ and NBNZ specific• Customer attrition rate is better than originally forecast, and expected revenue synergies havebeen upgraded
4. Integration Costs• Integration costs remain in line with prior estimate of A$230m.

31

SECTIONSECTION 55

Net customer acquisition rebounding wellNet monthly customer
acquisition

NBNZ Personal• acquisition of customers
continues to rebound from 2003,
and continues to be a net
acquirer

8,000

Personal Net Customer
Acquisition rebounding well
3 month moving average*

6,000

ANZ Personal• net outflow continues, but at amuch lower level in March
compared to February 2004 andMarch 2003
NBNZ Business & Rural• net acquisitions remain positive,
however down on year earlier
levels

4,000

2,000

0
Mar-03

ANZ Business & Rural• net outflow continues but at a
substantially reduced ratecompared to twelve months prior

Jul-03

Sep-03

Nov-03Jan-04-2,000ANZ Corporate• maintains a net inflow

May-03ANZ-4,000

NBNZ

Total

* 3 month moving average removes impact of monthly volatility

32

Mar-04

SECTIONSECTION 55

Current integration plans project a positive outcome from 2006
Net Integration Position (pre-tax)

A$m

113

150

110

100

72

50

• Revenue attrition improved modestly
on business case

39

0
2004

2005

2006

2007
-36

-50

Central Mgt

9%8%

Head Office

Personal
8%

5%

14%

Institutional &Corporate

Central Mgt

Other
2%
11%

Institutional &Corporate

Head Office

Revenue Synergies*: where
we will create revenue
benefits
Other

7%
18%

Technology~10%-15% relates to the cost of existing
resources

Cost Synergies*: where
we will save $110m p.a.

7%

Personal

23%

56%*Synergies are based on
percentage of 2007 benefits~10% relates to equipment that will becapitalised

Revenue Benefits
Integration Costs (cash)

Integration Costs: where
we will spend $230m
Other• Integration costs $230m~10% will be met by restructuring charge
included in the calculation of goodwill

Revenue Attrition
Cost Synergies
Net Position-150• Revenue synergies substantiallyupgraded from business case

-67

-105

-100

• Cost synergies in line with businesscase, however newly identified
synergies offset by increased
processing costs in NZ

Premises

4%

48%
35%

Technology
33

Personal

Institutional &Corporate
45%

SECTIONSECTION 55

Integration timetable*
Systems milestones

2004

Business milestones
June Qtr
IT Systems

2005

Sep QtrDec Qtr

Comparison phasecompletedManaged Funds& Insurance
sold

Retail Bank

Business Banking

Combined central
team

Relocation
completed

Amalgamation*selected business units

Account
Migrationcompleted

Systems
integrated

Branches
integrated
Cap Mkts
systems
migration

Systems
integrated
Systems
integrated

FX business
unit
integration

Systems
integrated

GL integrated

Systems design complete

RBNZ
approval

Dec Qtr

Commence
Account Migration

ANZ RM customer transfer
complete

TTS
systems
go live

People Capital

Sep Qtr

Product mix & strategy
complete

Corporate &Institutional

Finance

June Qtr

Development complete

Business
integrated

Rural Banking

Mar Qtr

Systems
live

Senior exec’s
appointed

Property colocations
complete

34

Integration completed

Revised Credit
policies
implemented

Integration
completedSECTIONSECTION 55

Business summary• Consumer & Corporate businesses performing well
• Institutional Financial Services de-risking strategy progressing well
• New Zealand business and integration on track• A strong foundation for growth

35

SECTIONSECTION 66

CEOCEO Review
Review

John McFarlane
Chief Executive Officer

36

SECTIONSECTION 66

ANZ systematically optimises variables to create value

Risk
Returns

Fade

GrowthSustainability
Time

37

SECTIONSECTION 66

After six years of risk reduction we are now approaching optimal levels

Offshore exposure

Trading Value at Risk#$mInternational Asset toGroup Assets

International NPAT toGroup NPAT*

23.0

32%

28%

12%
7%

$m

1.4

1997

2004

1997

2004

1997

2004

# Average daily Value at Risk at 97.5% confidence interval*excludes significant and abnormal items

38

SECTIONSECTION 66

Our strategy is to grow sustainable earnings at low volatility%

16
14• NZ makes our earnings less volatile• Although NZ alone is more volatile thangroup, diversification results in NZ creating
lower overall volatility at a group level

Volatility in ANZ 6 monthly NPAT growthover past 10 years*

12
10
8
6
4
2
0
ANZ NZ• Wealth management’s susceptibility to
globalisation and rapid fade likely to impact
future returns• Wealth management earnings are morevolatile than banking• Global scale base is important to develop
systems, platforms, and brands• The ING JV delivers a sustainable position
with scale, with low volatility to ANZ,
particularly with equity risk hedged%

50

Combined ANZVolatility in 6 monthly NPAT growthsignificantly higher in Wealth Management#

40
30
20
10
0
WealthManagement (3years)*as measured by one standard deviation from mean half yearly profit
growth (or exchange rate movement) over past 10 years# Wealth management includes listed wealth management companies andWM operations of major banks, and excludes AV uplift and goodwill

ANZ ex NZ

39

ANZ (10 years)

ANZ (3 years)

SECTIONSECTION 66

We have transformed ANZ into a more sustainable, lower risk business
Reduction in risk andmovement towards
domestic consumer
businesses

Has significantly
reduced earnings
volatility

14%

And has not had amaterial impact onearnings

NPAT Volatility*
NPAT Growth

12%
10%
8%
6%
4%
2%
0%
Last 10 Years

Last 5 Years

Last 3 Years* Standard deviation in six monthly NPAT growth for ANZ, excluding abnormal/significant items
40

SECTIONSECTION 66

Value of focus and specialisation
Specialisation and focus yields better return than generalisation from the perspectiveof individual challenges and tasks, as this Olympic example demonstrates
Javelin

The Generalist

Mens Decathlon Gold
Medal Winner Sydney 2000

65.8m

Specialist premium
37%

The Specialist

Mens Individual Event Gold
Medal Winner Sydney 2000

90.2m
Event

The Specialists

The Generalists“Specialist Premium”

100m

9.87 s

10.68 s8%110m Hurdle

13.00 s14.48 s

10%400m

42.84 s46.71 s8%

1500m

3 m 32.07 s

4 m 29.48 s

21%

Discus69.3 m43.66 m59%

Shotput

21.29 m15.11 m41%

Long Jump

8.55 m

7.76 m10%

High Jump

2.35 m2.00 m18%

Pole Vault

5.90 m5.00 m18%

41

Average outperformance

23%

SECTIONSECTION 66

Coherence already achieved in Institutional by clustering businesses…

Institutional
Banking• Businesses establishedas distinct units tounleash energy &innovation

Foreign
Exchange• In 2002, businesses
brought together
under Institutional• Very high levels ofcross sell achieved,with deep engagementwith the customer

CapitalMarkets

Institutional
Corporate &Structured
Finance

Trade &
Transaction
Services• Low reliance on
trading income

Institutional Customers

42

SECTIONSECTION 66…as it has been in both our Corporate and New Zealand businesses…

Small toMediumEnterprise

Personal
Banking
Micro
Business

Corporate
Banking

Institutional& Corporate
Banking

Rural
Banking

Corporate

Business
Banking

Business Customers

New
Zealand

Institutional
Markets

New Zealand Customers
43

SECTIONSECTION 66…now our focus is on building coherence with personal customers• Retail not a traditional
strength for ANZ. Creationof specialist businesses
necessary:brought focus to this area
unleashed energy andinnovation

Personal &WealthDistribution

prevented smaller network
constraining growththrough third-party andspecialist distribution• Product businesses havegrown strongly andachieved scale

Banking
Products

Rural
Banking

Personal
Consumer
Finance

Mortgages• Businesses now havesufficient strength andmomentum that synergies
and growth are possible,
but coherence against
customer now vital

Personal Customers
44

SECTIONSECTION 66

ANZ has successfully mastered each stage from performance throughto specialisation. Focus now on coherence, growth and sustainability
THE ANZ JOURNEYCOHERENCE

SPECIALISATIONEFFICIENCYPERFORMANCERECOVERYGROWTH
TRANSFORMATIONBEST PRACTICEPEOPLEVALUES & ENERGYEXECUTIONPROCESSVIABILITY
DE-RISKING

VIABILITY

Mid 90’s

REVENUE ENHANCEMENTPROFESSIONALISMRELATIONSHIPSFOUNDATIONCRISIS

Early 90’s

CUSTOMER GROWTH

Early 00’s

Today
45

SECTIONSECTION 66

A solid result with good foundation and prospects• Solid first half, clean result• Accretive New Zealand acquisition. Market
leadership in all segments. Integration andsynergies on track• Business mix inherently domestic, more sustainable• Economic environment positive with global upturn.
Housing and consumer segments softer,
institutional, corporate and SME stronger• Risk radically reduced towards optimal• ANZ’s execution capability a strength• Businesses now clustered around customers forrevenue enhancement with emphasis on growth46

We remain
confident about
our prospects
for the year as awhole

SECTIONSECTION 77

Supplementary
Supplementary Information
Information

47

SECTIONSECTION 77

NBNZ acquisition and TrUEPrS-related significant transactions further
increased profit
NBNZ
4 months
NZ$m

NBNZ
Pro Forma
NZ$mInterest

347

338

Non Interest

120

116

Operating Income

467

454

Expenses

(192)

(195)

Profit before debt provisions

275

259

Provisions

(31)

(30)

Profit before tax

244

229

Tax

(74)

(65)

NPAT

170

164

Significant transactions$m

Swap Income & interest

112

Tax expense

28

P&L Impact

84

Cash Dividend (EPS impact only)(35)

NBNZ Earnings (NZD)*
Acquisition,
funding &NBNZ
integration
NPAT
costs
4 months(79)
150

Significant
transactions
84
1,396

1,312

1,241

Mar –04
NPAT excl.
NBNZ &
significant
transactions

Mar –04
NPAT excl.
significant
transactions

Mar –04
Reported
NPAT

48* excludes integration costs

SECTIONSECTION 77

Impact of unwinding TrUEPrS and issuing StEPSTrUEPrS

StEPS

Background• Issued• Sept/Nov 1998

• 27 Sep 2003

• Amount• USD0.775b• AUD1b• Cost of dividend• 8% Fixed• BBSW Floating• Called• 1H04

P&L impact• Income• Swap (difference between 8%• No impact

fixed and BBSW plus margin)• Tax• Tax on swap income• Credit for dividend paid

• Credit for dividend paid

• NPAT• Net swap income• No impact• Preference Dividend• 8% Fixed• BBSWNet Cost• BBSW + Margin• BBSW + Margin

EPS Impact

49

SECTIONSECTION 77

Revenue hedging undertaken when appropriate• Revenue hedging only undertaken when currency is believed to be outside its
normal trading range and inconsistent with their value• Revenue from FX hedges are reported as Interest Income within the Group Centre
Notional
Principal

March 2004

IncomeUnrealised
from hedge gain/loss

Exchange
Rate

Expiry date

USD Revenue Hedges

78

15

35

~0.55

September 2005

NZD Revenue Hedges

1,138

14

51

~1.09

September 2008

USD & GBP Revenue Hedges 151

1237

NZD Revenue Hedges

853

September 2003

%

60
50
40

1,126

Estimated Proportion of NZ earnings hedged(rolling 12 months basis)

30
20
10
0
Mar-05Mar-06Mar-0750

Mar-08SECTIONSECTION 77

Tax risk substantially lowered• Tax risk is an ongoing business risk
• We have established a constructive working relationship with the ATO and the IRD• Some higher risk aspects of the operations of the multi-jurisdictional ANZ Investment Bank have been
substantially wound back in recent years• NBNZ Structured Finance book will be substantially reduced, with the focus going forward on moresustainable business. NBNZ pre-acquisition tax risk is covered by an indemnity from Lloyds TSB

NZ$m

Projected NPAT impact from
NBNZ Structured Finance book

Proportion of NZ 1H04 NPAT
from Structured Finance Deals*

80

ANZ NBNZ
4%
6%

70
60
50

?

40
30
20
10
0
Prospectus
12 months

10 Months
pro rata

2004 (est)

2005

Other
90%
* Geographic profit adjusted for goodwill and funding costs

51

SECTIONSECTION 77

Low exposure to Inner City residential mortgage lending
Mortgages Australia

Inner City

Other
96.3%

• Total Lending for inner city property at 3.7% of AustralianMortgages portfolio, with 2.1% for investment purposes.
Tight policies to control emerging risks include:
valuations required on all properties
rental income allowable in debt servicing calculation
60%
non-inclusion of negative gearing benefit inserviceability calculation for first time investors
inner city is broadly defined, and extends wellbeyond CBD• Exposure to Melbourne Docklands area ~0.06% of theAustralian mortgages portfolio, or <2% of the inner city
lending portfolio

Inner City
(OO)
1.6%

Location of inner city lending• Delinquencies

Melbourne
24%

only 19 customers nationally with arrears >90 days
no delinquencies in the Melbourne Docklands book

Other
40%

Sydney36%

OO – Owner Occupied
RIL – Residential Investment Loan

Inner City
(RIL)
2.1%

52

SECTIONSECTION 77

US power exposures continue to reduce, although lagged credit effects
continue to affect the portfolio
Total US Limits(1)A$1.8bn

US: March 2004
• Outstandings: $0.6bn (70%)

36%
A$1.3bn

AAA to BBB

16%
BBB-

BB+ to BBB+ to CCC
Non Accrual• Uncommitted: $0.1bn (5%)

28%
15%

27%

• Other Committed: $0.2bn (25%)

18%$0.9bn
35%
22%

24%

9%
8%

9%

15%

26%

Sep-02

Sep-03Mar-04

12%

Customers• Investment Grade: 10• Non Accrual: 4• Total: 19• We continue to actively manage our exposure to the US Energy sector.
• Over the past 18 months, exposure to the merchant energy sector and other non-core segments has
reduced substantially through repayments, sell-downs and restructuring.
• Whilst Non Accrual Loans have increased in the US portfolio as a result of the lagged credit effect,
prudent management has resulted in a lower level of expected losses from the portfolio. Any further
losses can be readily absorbed within existing ELP levels.

1.

Excludes Settlement Limits but includes Contingent andMarket-Related products domiciled in the US.

53

SECTIONSECTION 77

New Specific Provisions down 16% on 2H03

Specific Provisions by Source

Geographic Specific Provisions
$m

$m
450

90

400

80

78

77
72

350

70

300

60
52

250

50

200

40

150

30

100

20

50

10

0

0
Mar-02

Sep-02Mar-03

Sep-03

UK/US

Asia

46

24

5

54

11

9

Sep 03

Other Inter

28

15

Mar-04-50

Aust/NZ

47

Mar 04

EnergyConsumer FinanceDomestic Corporate

Other Offshore

Asset Finance

Other

SECTIONSECTION 77

Non-accrual loans to Loans & Advances less than half the level of two
years ago
New Non-Accrual Loans relatively
stable, default rate down…

…Non-Accrual Loans as a % of theportfolio down to just 0.45%$m

Gross Non-Accrual
Loans (LHS)

$m

900

1.4%

1500

824

1357

800

1295

1.2%

Annualised default
rate (RHS)

700

579

600
500

1260

1203

1200

596

Gross Non-Accrual Loans/
Loans & advances (RHS)

1.50%

1153

1.0%

1007

1.25%
931

900

0.8%

461

833
727

409
400

1.00%

770
628

0.6%

600

600

0.75%
525

300

517

0.4%
200

300

Net Non-Accrual
Loans (LHS)

0.2%

100

Asia

0.00%

0

Mar-02 Sep-02 Mar-03 Sep-03 Mar-04

UK/US

0.50%

0.25%

0.0%

0

Aust/NZ

1.75%

Mar 01 Sep 01 Mar 02 Sep 02 Mar 03 Sep 03 Mar 04

Other Inter
55

SECTIONSECTION 77

RWA to Total Assets not an accurate measure of risk%

• RWA/Total Assets under the existing accord is a
simplistic measure of risk
RWA/Total Assets is distorted by Life
company assets not appearing within RWA
does not consider the default risk of
individual lending assets, or security
profilepeer banks have higher levels of onbalance sheet derivative revaluations andtrading securities which reduce their ratios
relative to ANZ

100
90
80
70
60

RWA to Total Assets(ex life investment & intangibles)*

50
40
30
20
10
0
ANZ
ANZ
Sep-03 Mar-04

CBA

NAB

WBC

Change in RWA under Basel II1
QIS 3 results• More relevant is the impact of Basel II, whichtakes a more sophisticated and granularapproach• Based on QIS3 results, ANZ is likely to receivea benefit greater than peers, reflecting theunderlying quality of our book
• Notwithstanding this, APRA unlikely to allow
significant capital reductions%

1. The reduction in RWAs using Advanced IRB outcomes (excluding
operational risk) when compared with current accord capital requirements
can be used as an indicator of the relative riskiness of a bank’s assets.
2. RWA calculations were performed using the capital functions used in QIS
3.0 These may change upon the finalisation of Basel II

56

0
-10
-20
-30
-40
-50
-60

ANZ Advanced
IRBAust Majors
Average

G10 major
bank average

-13

-49

-43

*Information as at CBA – 30/6/03, WBC – 30/09/03, NAB – 30/09/03

SECTIONSECTION 77

Mortgages portfolio remains soundStrong LVR profile• Mortgages Portfolio continues toexperience strong growth.

80%• ANZ “Lo Doc” policy requires amaximum LVR of 60%, maximum loan
size $450k and is only available forstandard residential and minimum credit
standards.

60%

70%
50%

LVR at origination

40%

Dynamic LVR

30%
20%
10%
0%
0-60%

Strong growth in themortgage portfolio

$b
140

NBNZ
Mortgages

120
100
80
60

61-75%

55.4

59.3

64.2

70.3

76-80%

81%90%

91%+

Portfolio by product
100%

98.2

80%

77.0

60%
40%

40

28

29

30

31

5

5

7

8

67

66

63

61

'Sep 01'Sep 02'Sep 03'Mar 04

20%

20
0
Sep01

0%

Mar-02 Sep-02 Mar-03 Sep-03 Mar-04

Home Loans
57

Equity Loans

RILs

SECTIONSECTION 77

Specific provisions down 27% on 2H03 – no large single provisions

$
m
400

1H04 Specific
Provisions by size

Specific Provisions
Significant impact fromsingle customers

100%$20m $30m

90%

350

80%
300

2
customers

70%
250

60%

200

50%

< $5m
40%

150

30%
100
20%
50

10%
0%

0
Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar98
99
99
00
00
01
01
02
02
03
03
04
Net specific provisions - $m (LHS)% International SPs (RHS)
ELP charge - $m (LHS)

58$10m $20m$5m $10m

SECTIONSECTION 77

Offshore power exposure reducing, with markets showing signs ofimprovement
Total Limits Split by Geography

KMV Median Expected Default Frequency
EDF %(Max KMV EDF = 20.00)

20.00

10.00

OffshoreB
1.00

North America

AA
AAA

Asia Pacific• ANZ’s exposure to offshore Power companies has reduced by 23% in the past six
months, with the portfolio becoming increasingly Australasian-centric. Domestic
markets will continue to be buoyed by traditional non-diversified, regulated, investorowned businesses.
• Furthermore, KMV Median Expected Default Frequencies indicate that offshore power
markets are recovering. Credit quality erosion is now abating, with the liquidity crunch
faced by merchant energy companies in 2002/03 from the backlog of debt rescheduling
now largely alleviated.
59

Mar-04

Sep-03Mar-03

Sep-02Mar-02

Sep-01

EuropeMar-01

0.01

A

Sep-00Mar-04BBB

Mar-98

Sep-020.10

Mar-0048%

BB+

Sep-9969%

Australia /New ZealandBB

Mar-9952%

CCC

Sep-9831%

SECTIONSECTION 77

The quality of the Telcos book continues to improve
Total Telcos Limits(1)A$5.3bn

KMV Median Expected Default Frequency
EDF %A$3.8bn

B

69%
1.00

82%

AA
AAA

Europe• Other Committed: $1.06bn (29%)• Uncommitted: $$0.78bn (22%)

Note:
Excludes Settlement Limits but includes Contingent and Market-Related products.

60

Mar-04

Asia PacificSep-03Mar-98• Outstandings: $1.76bn (49%)

1.

North America

Mar-030.01

March 2004

A

Sep-02Mar-04BBB

Mar-02

Sep-036%

0.10

Sep-01

Sep-02

2%

3%
5%
4%

Mar-01

5%

6%
9%
2%

Sep-00

10%

14%Mar-00BB+ to BBB+ to CCC
Non AccrualBB+

Sep-9922%

BB

Mar-99

BBB-

CCC

Sep-98AAA to BBB

10.00

A$3.5bn

61%(Max KMV EDF = 20.00)

20.00

SECTIONSECTION 77

Group risk grade profile
ANZ Group - OutstandingsAAA
to BBB$143bn$149bn$158bn$165bn$207bn

13.5%

14.5%

14.1%

12.8%

12.1%

53.9%

54.0%

53.8%

55.3%

56.2%

BB+ to BB

14.7%

14.3%

14.9%

15.3%

15.5%

BB-

14.2%

13.9%

14.0%

13.7%

13.9%

>BB-

3.7%

3.3%

3.2%

2.9%

2.3%

Mar-02

Sep-02Mar-03

Sep-03Mar-04

2.8%
0.9%

2.5%
0.8%

2.5%
0.7%

2.3%
0.6%

1.9%
0.4%

BBB-

B+ to CCC
Non Accrual

61

Total investment
grade as at Mar 04:$136.6bn or 65.9%of the portfolio

SECTIONSECTION 77

Geographic risk profiles

Australia & New Zealand
AAA toBBBBBB-BB+ to BB

BB>BB-

B+ to CCC
Non AccrualInternational$135 bn$145 bn$155 bn$198 bn

11.4%

10.2%

10.0%
10.0%

10.3%

55.2%

14.9%

57.6%

14.2%

58.4%

14.8%

$14 bn$13 bn$10 bn

$9 bn

44.0%

46.0%

46.2%

45.8%

23.6%

17.8%

17.5%

16.2%

15.5%

16.7%

24.3%

8.9%

7.3%

58.5%

15.0%

15.5%
7.4%

14.7%

14.7%

14.2%

AAA
to
BBB

BB+
to
BB
BB-

6.4%

14.1%

9.5%

10.6%

10.5%

7.3%

2.7%

2.7%

2.4%

2.1%

Sep-02Mar-03

Sep-03Mar-04

Sep-02Mar-03

Sep-03Mar-04

2.8%
0.7%

2.3%
0.4%

2.3%
0.4%

2.0%
0.4%

4.3%
2.4%

4.9%
4.6%

6.0%
4.6%

6.1%
4.4%

62

BBB-

>BB-

SECTIONSECTION 77

Existing and future problem loans are well provided for

50%
45%

Specific Provision/Non-Accrual
Loans
44%

40%
33%

35%

• The period 1998 through March 2004 hasseen Group GP trend down to 98bps,
consistent with the sustained de-risking of
the Group lending book.
• As at March 2004, gross non-accrual loans
were 45bps of GLAs. Of this, 44% wascovered by specific provisioning.

31%

30%

27%

25%
20%
15%
10%
5%

• Group levels of general provisioning andspecific provision cover compare favorablywith Australian banking peer group.

0%
ANZ Mar 04%

CBA Dec 03

NAB Sep 03

WBC Sep 03

General Provision/RWAs

1.20
1.00

0.98

0.97
0.86

0.80

0.71

0.60
0.40
0.20
Note:

0.00
ANZ Mar 04

1. As per most recent company financial reports for CBA, NAB and WBC

63

CBA Dec 03

NAB Sep 03

WBC Sep 03

SECTIONSECTION 77

Proactive reduction in volume of “Top 10” client committed exposures
S&P
Rating0

Top 10 Lending Exposures as % of
ACE(1)

Top 10 Committed Exposures
200

400

600

800

1000 AUDm

120%

AAA

• Implementation of credit
management policies to
AA diversify the loan book
exposure, has resulted inA+
reducing the client
concentration risk, despite theAAAinclusion of NBNZ exposures.
This has been achieved throughreducing the volume of “Top 10” AA client committed lending.
A-

100%

80%

60%

• Sustained management ofAclient exposures has reduced
the sensitivity of the capitalbase of “Top 10” clients (to 68% A of ACE in March 2004 from 75%
of ACE September 2003).
A-

40%

20%
A
ANZ Drawn

ANZUndrawn

NBNZ Drawn

NBNZ Undrawn

Sep-

Sep-2003

200

Note:
1.

0%

2 impact in moving to thisMarch 2004 derivative exposures were calculated using a Monte Carlo model to calculate ANZ's potential credit loss. The
methodology reduced the above ratio by 4.4 percentage points in comparison to ANZ's previous methodology.
64

Mar-2004

SECTIONSECTION 77

Concentration risk addressed in business and corporate lending bookthrough management cap on industry exposure• Management has reduced
concentration risk in ANZ’s
18%business/corporate loan
book by limiting industry
16%
exposure to 10% of ANZGroup GLAs

% of ANZ Group Lending Assets(Australia and New Zealand)
1993

2004

14%

• Increased diversification ofbusiness/corporate lending
12%
portfolio across industry
segments since 1993 has
10%been accompanied byreallocation ofbusiness/corporate lending 8%
capacity to retail lines ofbusiness
6%

Policy Cap

4%

2%

65

Other

Transport & Storage

Accomm, Pubs, Clubs

Cultural & Rec
services

Finance - Other

Business Services

Agriculture

Wholesale Trade

Finance - Banks

Retail Trade

Manufacturing

Commercial Property

0%

SECTIONSECTION 77

Industry exposures – Australia & NZ (excl. NBNZ)
Lending Assets (AUD)% of Portfolio (RHS scale)% in CCR 7D-8G (RHS scale)% in CCR 9-10 (RHS scale)x

Health & Community
Services

Cultural & Recreational
Services

2.5bn

5.0% 2.5bn

2.0bn

4.0% 2.0bn

1.5bn

3.0% 1.5bn

Forestry & Fishing
20.0% 1.0bn

10.0%

0.8bn

8.0%

0.6bn

6.0%

0.4bn

4.0%

0.2bn

2.0%

15.0%
10.0%

1.0bn

2.0% 1.0bn

0.5bn

1.0% 0.5bn

0.0bn

Sep-01

Sep-02

Sep-03Mar-040.0%

0.0% 0.0bn

Sep-01MiningSep-02

Sep-03

40.0%

2.0bn

20.0%
1.0bn

3.0%

0.6bn

10.0%

Sep-01

Sep-02

Sep-03Mar-040.0%

Sep-02

Sep-03Mar-04

Communication Services
20.0%

0.8bn

15.0%

0.6bn
2.0%

0.4bn

0.5bn

0.0%
Sep-01

4.0% 1.0bn

1.0bn

30.0% 0.8bn

1.5bn

0.0bn

Mar-04

Personal & Other Services

2.5bn

0.0bn

5.0%

10.0%
0.4bn

1.0%

0.2bn
0.0bn
Sep-01

Sep-02

66

Sep-03Mar-04

5.0%

0.2bn

0.0% 0.0bn

0.0%
Sep-01

Sep-02

Sep-03Mar-04

SECTIONSECTION 77

Industry exposures – Australia & NZ (excl. NBNZ)
Lending Assets (AUD)% of Portfolio (RHS scale)% in CCR 7D-8G (RHS scale)% in CCR 9-10 (RHS scale)x

Transport & Storage

Finance - Other

Utilities

5bn

5.0%

5bn

10.0% 2.5bn

4bn

4.0%

4bn

8.0%

2.0bn

8.0%

3bn

3.0%

3bn

6.0%

1.5bn

6.0%

2bn

2.0%

2bn

4.0%

1.0bn

4.0%

1bn

1.0%

1bn

2.0%

0.5bn

2.0%

0.0%

0bn

0.0%

0.0bn

0bn

4bn

Sep-01

Sep-02

Sep-03Mar-04

Finance – Banks,
Building Soc etc.

5.0%
4.0%

3bn

4bn

Sep-01

Sep-02

Sep-03Mar-04

Accommodation,
Clubs, Pubs etc.

1.0%

Sep-01

Sep-02

Sep-03Mar-040.0%

Sep-03Mar-04

10.0%

4bn

8.0%

3bn

6.0%
4.0%

2.0%
1bn
0bn

0.0%

2bn

2.0%

0bn

5.0%

2bn

1bn

Sep-02

3.0%

3.0%
2bn

Sep-01

Construction
4.0%

3bn

10.0%

1.0%

Sep-01

Sep-02

67

Sep-03Mar-04

0.0%

1bn
0bn

2.0%

Sep-01

Sep-02

Sep-03Mar-040.0%

SECTIONSECTION 77

Industry exposures – Australia & NZ (excl. NBNZ)x

Real Estate
Operators & Dev.
20bn
15bn

Agriculture

Retail Trade
10.0% 8bn

10.0%

8.0%

8.0%

6bn

6.0%
10bn

6.0%
4bn

4.0%
5bn
0bn

2.0%

Sep-01

Sep-02

Sep-03Mar-04

0.0%

4.0%
2bn
0bn

2.0%

Sep-01

Sep-02

Sep-03Mar-04

0.0%

3.0%

2bn

2.0%

1bn

1.0%

0bn

Sep-01

Sep-02

Sep-03Mar-04

0.0%

4bn

4.0%

3bn

6.0%

3bn

3.0%

4.0%

2bn

4.0%

2bn

2.0%

2.0%

1bn

2.0%

1bn

1.0%

0.0%

0bn

0.0%

0bn

8.0%

4bn

6bn

6.0%

4bn
2bn

Mar-04

3bn

8.0%

8bn

Sep-03

4.0%

5.0%

10.0%

Sep-024bn

5bn

10.0% 5bn

Sep-01

5.0%

Business Services

10bn

0bn

5bn

Wholesale Trade

Manufacturing

Lending Assets (AUD)% of Portfolio (RHS scale)% in CCR 7D-8G (RHS scale)% in CCR 9-10 (RHS scale)

Sep-01

Sep-0268

Sep-03Mar-04

Sep-01

Sep-02

Sep-03Mar-040.0%

SECTIONSECTION 77

ANZ Group Structure 2004

Chief Executive Officer
John McFarlane

Chief Financial Officer

Chief Operating Officer

Peter Marriott

Bob Edgar

Group Development
Peter Hawkins

Risk
Mark Lawrence

People Capital
Shane Freeman

Corporate Affairs
Gerard Brown

Personal

Institutional

New ZealandCorporate

Asia PacificEsandaBrian Hartzer

Steve Targett

Sir John Anderson

Graham Hodges

Elmer Funke

Elizabeth ProustTechnology Operations & Shared Services
Mike Grime

69

SECTIONSECTION 77

ANZ Specialist Business Structure 2004

Chief Executive Officer
Chief Financial Officer

Chief Operating Officer

Group Treasury

Private Banking
ING Australia

Personal

Institutional

New ZealandDistribution

Institutional Banking

Personal Banking

Corporate

Asia*

EsandaMortgages

Transaction Services

Institutional-Corporate*

Small Business

Pacific

UDC*

Cards

Foreign Exchange

Institutional Markets*

Microbusiness

Merchant Services

Capital Markets

Business Banking

Banking Products

Structured Finance

Rural Banking

Rural Banking

Corporate Finance

UDC**Matrix

70

Corporate

Asia PacificEsandaSECTIONSECTION 77

Esanda: operational excellence and improved business economics, partly
offset by margins pressure
New Business Writings per FTE ($m)

Esanda’s profit grew 3% for the half, key
drivers and initiatives included;

Up 30%

Operational excellence and improved economics
Esanda has made substantial progress in improving
the efficiency of its business
Expenses continue to be well managed, CTI down
to 40%
Other operating income increased by 9% due
mainly to changes in the fee structure for business
lending
Our Australian debenture portfolio grew by 5% in
1H04, reaching $7b
Signed an alliance with Pratt Water, allowing
Esanda to provide funding for irrigators seeking toconvert to water saving drip and sprinkler irrigation– valued at $10m per year for 10 years
Strong growth in the equipment leasing segment inparticular in IT and mining equipment
Interest Margin
Net Interest Margin declined by 4 basis points due
to run off of higher yielding loans during the half
Branding & Advertising
Esanda promoted as easy to deal with, progressive
and forward thinking
New ad campaign launched in March 2004 to
position Esanda = Car Finance3 year sponsorship deal agreed with Wheels
Magazine ‘Car of The Year’

2.0

Mar-022.5

2.6

Mar-03

Sep-03Mar-04

2.2

Sep-02

Cost to Income Ratio
45.9%
43.8%

Mar-02

Sep 02

42.7%

Mar-03

40.8%

40.1%

Sep-03Mar-04

Debentures on issue - $m

Up 20%

7,181
6,430

6,612

6,822

6,004

Mar-0271

2.5

Sep 02Mar-03

Sep-03Mar-04

SECTIONSECTION 77

Pacific & Personal Banking Asia: a strong franchise adversely affectedby strengthening AUD
Solid underlying NPAT performance up
3% (pre exchange rates) reflective of ourstrength in the region:

Pacific Market Share100%

Number 1 Market Position
Number 2 Market Position• ANZ holds either number 1 or 2 market
position in all the Pacific markets in which
we operate

63%

58%

58%

43% 40% 46%• The Pacific’s income is dominated by our Fijiand PNG businesses.

34% 36%27%

The strengthening AUD reduced NPAT by$A4m over the half, key drivers included:

G
PN

C

oo
ks

on
s

a

ol
om

To
ng

S

Ea
st

Ti

m
or

Fi
ji

am
m
S

A

at
u

an
u

oa
V

am
S

ib
a
ir
K

• Our centralised Pacific processing hub in Fiji,‘Quest’, continues to develop its capacityand provision of services to the region.

ti• Notwithstanding our dominant position
growth opportunities remain in existing andnew markets

1H04 NPAT impacted by strengthening AUD• Panin has strong momentum in Indonesia.
• Solid growth in Personal Banking Asia due tostrong focus on customers requiring
Australia and New Zealand relatedtransactions.
• Strong NPAT growth in PNG due to increasein foreign exchange earnings-2% 3%

Segment-4% 3%

Indonesia-7% -2%• Fiji earnings adversely affected by thesuspension of forward foreign exchange
trading by the Reserve Bank of Fiji

Fiji
12%

-10%

0%

Local Currency
72

18%
10%

AUD

PNG
20%

SECTIONSECTION 77

ING JV benefits from markets upturn•NPAT increased 5% over the half driven by:Higher fee income arising from growth in funds undermanagement (“FUM”)
Higher capital investment earnings, up 7% due tostrong equity markets and rising interest rates. These
were partially offset by ANZ’s capital hedge losses.
Costs remained flat due to tight expense control•INGA maintained its number four Retail FUM
position as measured by ASSIRT•Most recent review of valuation model andassumptions performed by Ernst & Young at
September 2003 confirmed current carrying
value.
•Valuation will be performed at least once a year
and more often if there is a significant change incircumstances that is likely to impact the value
Current JV Valuation
ANZ Contribution to JV$mStrong Retail FUM growthsince JV inception

$b
30
27
24
21
18
15
Jun-02

Sep-02

Dec-02Mar-03Jun-03

Sep-03

Dec-03$m

INGA NPAT and ANZ net return
improving with market conditions $m

140

50

120

879

100

Equalisation payment

960

80

Unrecognised profit on saleof ANZ FM

(248)

60

Equity accounted profit
since inception

100

Carrying value ay Mar-04

1,691

40

30

40
20

20

0
1H03
INGA NPAT (LHS)
73

2H03

1H04
ANZ net return (RHS)

The material in this presentation is general background information about the Bank’s
activities current at the date of the presentation. It is information given in summary
form and does not purport to be complete. It is not intended to be relied upon asadvice to investors or potential investors and does not take into account theinvestment objectives, financial situation or needs of any particular investor. Theseshould be considered, with or without professional advice when deciding if aninvestment is appropriate.
For further information visit

www.anz.com
or contact
Simon Fraser
Head of Investor Relations
ph: (613) 9273 4185

fax: (613) 9273 4091

74

e-mail: simon.fraser@anz.com