2 0 0 0 Annual Results Australia and New Zealand Banking Group Limited 26 October 2000 John McFarlane Chief Executive Officer
2 0 0 0 Annual Result • Strong result – better than expectations – $1,703m up 15% – $885m second half up 8.2% on first half • We delivered on all our commitments – Financial performance – Rebalancing the portfolio – Reducing risk • Restructuring program accelerates strategy – Sensible application of surplus capital – EPS accretive – Superior to buyback alternative Page 2
Results sum m ary • Operating profit after tax before abnormals: – Full year: $1,703 million, up 15% – Second half: $885 million, up 15.8% on 1999, and 8.2% on first half 2000 • Earnings per ordinary share up 15% to $1.04 • Return on ordinary shareholders’ equity of 18.3% , up from 17.2% • Final dividend 35 cents, up 5 cents with 100% franking. Full year dividend 64 cents, up 14% • $361m restructuring charge to accelerate new strategy • Net abnormal profit $44 million - Grindlays profit largely offset by restructuring and other provisions • Costs flat. Cost income ratio down to 51.7% from 54.4% Page 3
Our three year com m itm ents to shareholders • Achieve superior financial perform ance – Deliver double-digit earnings growth – Improve return on equity – Bring down our cost income ratio to 53% • Re-balance our portfolio – Increase proportion of Personal business – Enhance leadership position of Corporate – Simplify and focus our International business – Build momentum in eCommerce • Reduce risk Page 4
W e have delivered superior financial perform ance % ROE $m NPAT 1703 20 1800 18.3 1600 1480 18 1400 CAGR 1175 1171 17.2 16 13.3% 16.9 1200 15.5 1000 14 800 12 600 10 400 1997 1998 1999 2000 1997 1998 1999 2000 Total Shareholder Return Cost Income Ratio 160 65 135 60.9 140 100 63.1 120 60 100 100 54.5 80 55 84 60 51.7 40 50 20 0 45 1997 1998 1999 2000 1997 1998 1999 2000 Page 5
W e have re-balanced our portfolio NPAT Loans & Advances 149 10% 5930 5% 8% 7966 39% 45684 647 41% 251 23% 46861 49% 547 50% 65264 772 56% 49% 41577 43% 302 27% 1997 2000 1997 2000 PFS CFS International • Includes Grindlays • Excludes Group Page 6
Portfolio breakdow n - indicative $772m $647m $1,703m* % % 100 100 Small Business Other Institutional Corporate Corporate General Banking Personal Transaction Services Asset Finance Wealth Mgmt Capital Markets International Mortgages Foreign Exchange Funds Mgmt ANZIB Financial Services Cards 40m* 0 0 Personal Corporate 0 1 0 0 * Excluding Grindlays ($127m) International Customer Businesses Page 7
W e continue to reduce risk ELP Factors Market Risk ( Av. VaR) bp’s A$m 45 43 23 23 39 40 36 35 30 25 5.4 4.4 20 ANZ 1999 ANZ 2000 ANZ 2000 Grindlays - ex 1997 1998 1999 2000 • Beta reducing towards 1.0, in line with peer average Page 8
W e didn’t get everything right – firm action taken • Personal loan portfolio • International provisioning from historical book • Panin writedown to market • Took action to put historical Grindlays issues behind us Page 9
Accelerating our transform ation program 3 5 I nitiatives across our portfolio of businesses including: • Standardisation and rationalisation of IT and processing platforms • Rationalisation and upgrading of EFTPOS network Expected cost reduction • Transformation of Branch Network $ 3 0 0 m • Improving efficiency in Asia/ Pacific by rationalising IT platforms and centralising back office processing • Establishing new business platform for Esanda Page 10
Building for the future - recap on our strategy Proposition Strategy I m plications • Specialists will • Reconfigure ANZ • Specialist win over as a portfolio of approach to Specialise conglomerates 21 specialist customer and businesses product businesses • Corporations • An e-Bank with • Transform the need to embrace a human face way we do e-Transform new business by using technologies IP technology • Value depends • Drive results • Meet Perform and on performance whilst investing expectations, and growth in growth fund growth by Grow businesses cost reduction Page 11
Portfolio strategy should reflect degree of globalisation and leverage real capabilities now FX Institutional Banking GSF Impact of globalisation Soon Funds Management Trade B2B Capital Markets Esanda Custody Cards B2C Later Mortgages Wealth Management Not yet General Banking Mid Corporate Small Business Less At par Local Regionally Globally developed leader distinctive distinctive ANZ’s capability Page 12
Different businesses need different strategies Business size by NPAT Invest for rapid Create new e-Payments growth businesses FM GSF High e-Asia Cards Wealth GTS Market Growth Institutional FX Small BusCap Mkts Corporate Low •Defend position and return Gen Banking •Optimise performance Esanda Mortgages •Grow selectively •Identify new growth products Low High ROE Page 13
Balancing the autonom y of each business w ith strong leadership from the centre Business Unit Corporate Centre • Prime accountability for • Drive group strategic profit and value direction and set policy • Freedom to pursue • Portfolio management opportunities within and resource allocation agreed boundaries • Cross-Business Unit • Operate using agreed set synergies of platforms, systems • Control and oversight of and shared services risk, brands and • Transfer pricing based technology on market - no cross subsidisation Page 14
Personal Financial Services Accountabilities PFS 5 0 % Peter Haw kins Group 5 0 % General W ealth Sm all Mortgages Cards Funds Banking Managem ent Business Managem ent Them e Drive sales Invest to Aggressively Maintain Accelerate Reinvigorate and grow rebuild profitable growth and grow efficiency growth • Advanced • Expert • Build • Maintain • “Best of • Leverage marketing/ advice profitable distribution breed” distribution segmentation market share strength delivery channels • Open Priorities platform • Straight architecture • Relationship • Straight • Optimise through based through • Data mining products/ • “Wrap” processing proposition processing capabilities facility • Exploit • Lower cost to • Redesign end- growth • Double FUM • Seamless serve to-end opportunities by 2003 access processes anz.com systems CRM SSP brand risk management Page 15
ANZ in the m edium term ANZ in 1 - 2 years ANZ in 3 - 7 years • Material reallocation of • Substantial portfolio shifts resources • Narrower, more focused • Substantial e-transformation portfolio with leading reducing costs and focused positions service • Increased investment in • Performance optimised high growth business – EPS, ROE, investment – capital management • Modern performance culture • Transformational cultural change • Higher stock rating Page 16
Goals going forw ard • EPS growth above peer average (target 10+ % ) • ROE over 20% • Cost-income ratio comfortably in the 40’s • Inner Tier 1: 6% • Maintain AA category credit rating Page 17
2 0 0 0 Annual Results Australia and New Zealand Banking Group Limited 26 October 2000 Peter Marriott Chief Financial Officer
Highlights � Earnings growth of 15% (13.3% compound) � Return on equity 18.3% (17.2% ) � Cost income ratio 51.7% (54.5% ) � Grindlays sold, realising net profit after tax of $404m after related provisions � Income up 6% , costs flat, ELP down 4bp’s to 39bp’s � $2bn returned to shareholders in the form of dividends and share buyback � Dividends returned to 100% franking � Restructuring charge to accelerate transformation program Page 19
Drivers of perform ance ( excluding abnorm als) Net Interest/Assets Margins 2.41 ROA 3.05 2.30 1.03 2.87 0.97 Other Inc./Assets ROE 1.57 1.56 Cost/Income 18.3 54.5 17.2 51.7 "Leverage" 17.8 17.7 Cost/Assets 2.17 Provisions/NLA 2.00 0.43 1 9 9 9 0.39 Provisions/Assets 2 0 0 0 0.34 0.30 Page 20
Good progress across the board Other Costs $1,900 (14) Tax & outside income interests 47 Other Net profit (123) fee after 111 Debt $1,800 abnormals Lending Profit before provisioning 1747 fee abnormals 8 48 1703 Net interest $1,700 income Abnormals 146 44 $1,600 1480 $1,500 $1,400 $1,300 $1,200 2000 2000 1999 Page 21
I ncom e drivers 4.00 3.60 3.51 Margins stabilised in 3.50 3.19 second Half 3.14 3.00 • Smaller differential between PFS 2.50 2.55 90d BBSY and Cash Rate 2.67 2.64 International* 2.60 CFS 2.00 • Greater focus on improving 1.90 1.91 1.84 margins 1.50 1.72 1.00 * Includes Grindlays Mar-99 Sep-99 Mar-00 Sep-00 Other 175 Non-interest incom e show ed MOS 174 Trading 342 healthy im provem ent 340 FX • Driven by higher fee income 1133 1022 Other Fees • FX and trading profits lower, reflecting lower volumes Lending 727 679 Fees 1999 2000 Page 22
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