Finance and Risk Forum November 2012

1. Finance and Risk Forum November 2012

2. Plenary Session • Where do Finance & Risk professionals currently add value to the business, and • how might this change in the future? • The impact of structural change on banking model

3. Plenary Session • Reflection on the conference • Key challenges going forward • Your role in these challenges • Sharing Ideas – how to deal with these challenges

4. Reflection on Forum • John Peters – stable / good outlook – China key driver – structural change (industries – regions) – savings culture • Steven Glenfield – growth logic – point of difference – clear path - risk appetite – technology adoption – Basel III – Tier 1 options • Peter Russel -Reduced NIM-NII, less in top 15 – Falling ROA (long term) • Darren Ball - IR – Game Changer – Management – Business Plan • Geoff Yui - GST anomalies, Monthly payments, surplus focus • Mark Degotardi - 48% > $4bn, ROA .56% from .70%, NIM 3% fall 10 yrs cost to income 27 > 90% - technology challenge, Risk v Reward - stand out from crowd – inward focus

5. Reflection on Forum • Paul Williams – Treasury – risk appetite, manage liquidity – Financial Risk – Capital – Debt Issuance, profit centre, securitise • Mark Workman - setting-up treasury, skills – structure – strategy – systems, working with brokers, complex products – FRNs - CDOs • Sam Garland: Risk: 3 lines of defence (Executive – Risk Function – Internal Audit), Risk-Return Thinking, Understand Risk Appetite, Confident Decision Making • Rob Kella: Risk Framework – Resilience Framework, change structure – raise risk function / strategy (belief, skills, culture), $ impact on risk model • David Tattam: VAR, Quality Quantity Consistency – Capital & Liquidity, leverage-maturity mismatch, capital buffer, Capital Strength – Liquidity Strength, options – CCDS, others?

6. Key Challenges Going Forward • Structural change in bank model: • Savings (Mint.com, Smarty Pig) • Insurance (Real etc) • Mortgage Lending (iSelect, Ubank, BBVA) • Channel – no one dominates – ‘Omni Channel’ • Customer Engagement (PFG, Smart Phones) – Paradox • Margin Pressure: • Banks vying for deposits 55% funding mix (more TDs) • Rate competition – discounting, third party channels, disruptive models • Lower volumes – more competitors

7. Key Challenges Going Forward • Convergence: • Banks changing branch to store (change in transaction banking), • Life Cycle and Life Stage Focus • New stores – ‘Apple style’ • Wealth – Risk – Retirement – Home Purchase (problem: training/compliance) • Governance: • Boards still not engaged in strategic thinking • Over focus on operational – audit issues • Skills mix often skewed • Risk appetite – conservative – easily scared by APRA etc

8. Key Challenges Going Forward • Basel III: • More pressure on profits to build capital • Counter Cycle buffers, working with new Tier I • Technology Investment: • Apps, smart phone banking, core banking, payments switch • Shorter life cycle – higher amortisation • Productivity: • Falling volumes – explains most of scale problem • Tendency to avoid targets – cross sell culture

9. Back to the Question • Where do Finance & Risk professionals currently add value to the business, and • how might this change in the future? • The impact of structural change on banking model

10. Your Role • What do you think are the three top challenges you face in your role?

11. Your Role • How do you contribute to dealing with these now?

12. Your Role • What new value can you add to deal with these more innovatively?

13. Metaphor Thinking Activity • What motor vehicle describes your business best?

14. Metaphor Thinking Activity • What type of restaurant – café describes your business best?

15. Metaphor Thinking Activity • What type of airline describes your business best?

16. Back to the Question • Where do Finance & Risk professionals currently add value to the business, and • how might this change in the future?

17. Warm thanks to all Delegates!