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International - Move to Growth Phase

International - Move to Growth Phase. Elmer Funke Kupper Head of International Division 18 July 2000. International - Move to growth phase. Last year, we presented a three year agenda to “Simplify and Focus” International. The first phase is nearing completion:

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International - Move to Growth Phase

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  1. International - Move to Growth Phase Elmer Funke KupperHead of International Division 18 July 2000

  2. International - Move to growth phase • Last year, we presented a three year agenda to “Simplify and Focus” International. The first phase is nearing completion: • Implemented risk reduction program • Simplified positions and extracted value in one move • Freed up capital and management for growth agenda • With the focus shifting to growth, new positions will be built in the Pacific and Asia: • In the Pacific, we will extend our leadership position to new geographies and continue to drive operational improvement • In Asia, following the crisis, we have small and lower risk positions. We will re-energise these positions and direct new investment towards eCommerce • Implementation of the growth agenda will take two years, and a deal pipeline has been established

  3. Risk reduction program largely completed Impact Grindlays Sale on Risk Profile Specific Provisions International One Name Assets in countries rated below ‘Single A’ 82% $299m $247m 48% $75m Grindlays ANZ Post Completion 1998 1999 1H2000 ELP (%) 1.58 1.38 1.13 * H2000

  4. Simplification completed in one move • Asia - Selective Investment • Japan, Korea • Trade, money centre • Three Chinas • 4 branches • South East Asia • Singapore, Indonesia, Philippines, Vietnam, Malaysia, Thailand M M M P N N M N D N R D D • Grindlays transaction: • $10.2b assets, $79m 1H earnings • Simplifies network in one move • Extracts immediate value at 2.3 times NAV and 14.6 times earnings • Completion on track for 3rd quarter 2000 D D D D N M D R N R D M D D N D D D D D D • Pacific – Extend leading position • South Pacific well covered • 41 branches • 20-60%share D

  5. International - Move to growth phase • Last year, we presented a three year agenda to “Simplify and Focus” International. The first phase is nearing completion: • Implemented risk reduction program • Simplified positions and extracted value in one move • Freed up capital and management for growth agenda • With the focus shifting to growth, new positions will be built in the Pacific and Asia: • In the Pacific, we will extend our leadership position to new geographies and continue to drive operational improvement • In Asia, following the crisis, we have small and lower risk positions. We will re-energise these positions and direct new investment towards eCommerce • Implementation of the growth agenda will take two years, and a deal pipeline has been established

  6. Two growth agendas Starting Position Strategic Response • Replicate leading market positions • Organic growth or acquisition in new geographies • Rapid deployment of successful management model • Continue to drive operational improvement • Markets • Large in number, individually small • Modest growth • Highly concentrated – few players • Similar market/management models • ANZ • Leading position in eight markets • Strong track record • NPAT 1H2000: $22m Pacific • Build existing positions • Re-energise network points • Build Panin into top 5 retail bank • Invest in new growth • Target mass affluent as they get online • Partner to complement ANZ’s strengths in e-commerce and monoline businesses (eg cards) • Markets • Individually large, more fragmented • Recovery under way • Emerging “mass affluent” • Rapid growth in online economy • ANZ • Network positions in 11 countries • Early investment in Panin Bank • NPAT 1H2000: $15m Asia

  7. Pacific: Consolidate existing leadership Leadership Positions Continuous Improvement Results (NPAT) • Customer segmentation - Prime Banking in Fiji, PNG • Products - funds mgmt, insurance, asset finance • Electronic channels: ATMs, EFTPOS • Fee income automation • Going forward • Continue to invest in new channels and products • Review opportunities to regionalise operations Fiji Vanuatu Samoa Solomon Islands American Samoa Tonga Cook Islands PNG 1 1 1 2 2 2 1 3 $44m $37m 2000* 1999 % Consumer • Assets 81% • Liabilities 80% • NPAT 85% * First half annualised

  8. Impact of recent events in pacific Real GDP Growth NPAT contribution 10 100% = $766m $22m Solomons 5 46 Other Islands 68 0 54 Fiji/Solomon 32 -5 Fiji Lending Assets 2000 Profit After Tax H2000 -10 '90 '92 '94 '96 '98 f00

  9. Extending leadership to new markets

  10. Pacific Population and Wealth, Bubble Size proportional to GDP US Territories, 24% GDP 25 French Territories, 36% GDP Guam South Pacific, 40% GDP 20 French Polynesia New Caledonia 15 GDP/Capita (USD 000's) 10 Northern Marianas Palau American Samoa PNG Fiji 5 Micronesia Cooks Vanuatu Solomons Marshalls Samoa 10k 100k 1m 10m Population Size of the pacific opportunity

  11. Asia: Dealt with the credit crisis as predicted New Non Accrual Loans Net Specific Provisions One name $277m $270m $228m $118m $101m $51m 1998 1999 H2000 1998 1999 H2000 Coverage (%) 86.0 67.2 70.0

  12. Re-energise Asia Economic Recovery in Region Grow the Business in Selected Areas • Build Strategic Assets • Trade finance • Network customers • Relationship banks • Key project sectors • Maintain Policy on Non-Strategic Assets • USD wholesale banking • Interbank lending • Participations • ANZ represented in: • Japan • South Korea • China • Hong Kong • Taiwan • Singapore • Indonesia • Philippines • Thailand • Malaysia • Vietnam

  13. Indonesia: Patience in building position Inflation Improved annual % change Panin Bank Food • Profile • Assets $2.6bn (Dec 1999 full year) • Pre provisions NPAT $107m • 29% shareholding by ANZ • Currently number 8 Non-State Bank- 106 branches mainly in Jakarta/Java Consumer Prices All Items • Going forward AUD20m investment in retail banking Currency/Stock Market Remains Weak Rupiah Index Jakarta SE Composite Price Increase (RHS) • New ATMs • Phone banking/National Call Centre • Refurbish branches • New branches in Jakarta Rupiah per USD Inserted Scale (LHS)

  14. Key to new Asia growth are mass affluent • There is a largely untapped opportunity to provide financial services to the emerging mass affluent consumers • eCommerce provides a more cost efficient and low risk way of targeting this potential – ANZ is a leader in eCommerce • The need for speed, access to markets and risk sharing means that we need to combine the strengths of ANZ with those of others in the region • We have joined forces with OCBC from Singapore to develop the regional business, which we expect to launch early 2001 • The business model recognises the weaknesses of existing pure online propositions and includes specific responses to these

  15. Japan Mass affluent market is emerging Korea China 3 Hong Kong Wired Emerging Affluent • Adults in urban areas: • Annual income over approx. US$10,000 • Connected to the Internet Taiwan Thailand Philippines Malaysia Singapore Indonesia

  16. Online use is taking off Internet Take-up Zone Internet Penetration of Households (%) 25 Australia Singapore 20 Based on US experience, B2C financial services takes off when internet penetration hits 10-20% Broking and Net Banking are the early ‘Killer Apps‘ Japan Hong Kong Taiwan Korea 15 Malaysia 10 Indonesia Thailand 5 Philippines China Vietnam 0 GDP / Capita (USD '000) 0 10 20 30 40 Implication: e-Commerce opportunities are starting to emerge in each country

  17. Online customers are attractive Online customer more attractive Online customers cheaper to acquire (index) Offline (= 100) Online 259 500 185 169 116 100 100 Online Offline AverageProfitability Number of products Average Deposit Balance AverageLoanBalance Source: ANZ customer base

  18. Pipeline under development Leading Financial Portal Online Stockbroking Internet Service Provider • Regional e-based financial institution + Retail Alliances B2B and B2C Enabling Banking front end

  19. OCBC/ANZ partnership makes sense Country OCBC ANZ OCBC Profile June 2000 USDm Total Assets 33,562 Market Capitalisation 7,751 NPAT, Dec 1999 full year 415 Market Share (Spore) 17.9% China 5 2 Hong Kong 3 1 Indonesia JV Panin Japan 1 2 Korea 1 1 1 Rep. Malaysia 25 Office Partnership Benefits Philippines 1 1 Complementary licences, strategic fit Both banks embrace the e-space at home Shared vision of opportunity across Asia Singapore 44 1 Taiwan 1 1 1 Rep. Thailand 1 Office 1 Rep. Vietnam 2 Office

  20. Leveraging ANZ’s strengths • No. 1 in Australia • Domestic partnership through Qantas Telstra Visa Card • International partnership with Star TV Credit Cards • Highest penetration of customers banking with anz.com • Continuously expanding product suite, eg. eauto, pay anyone, my ANZ • Key alliances - E*Trade, Freenet, MultiEmedia, Medweb Consumer eCommerce • Leader in electronic banking to corporates, ANZ Online, FX Online • B2B solutions - eGate, eProcurement with MRO.com, corProcure • Development of FX Online web based platform Corporate eCommerce

  21. International - Move to growth phase • Last year, we presented a three year agenda to “Simplify and Focus” International. The first phase is nearing completion: • Implemented risk reduction program • Simplified positions and extracted value in one move • Freed up capital and management for growth agenda • With the focus shifting to growth, new positions will be built in the Pacific and Asia: • In the Pacific, we will extend our leadership position to new geographies and continue to drive operational improvement • In Asia, following the crisis, we have small and lower risk positions. We will re-energise these positions and direct new investment towards eCommerce • Implementation of the growth agenda will take two years, and a deal pipeline has been established

  22. International program phasing Target Profit Improvement Program Launched Grindlays Transaction Announced Complete “Simplify and Focus” Strategic Review Completed/ Elmer Funke Appointed Completion Grindlays Transaction Indian Mgmt Strengthened Profit Decline Halted – Growth Visible 1/01 9/00 6/99 9/99 3/00 eAsia Team Established Panin Bank Rights Issue • Drive Growth • Agenda: • Pacific new markets • Asia eGrowth BOOM.COM Investment Launch Internet Banking Indonesia Customer Launch OCBC Joint Venture Acquisition Amerika Samoa Bank Announced eCommerce Joint Venture with OCBC Announced • JV Alliances • Pacific new markets strategy

  23. Summary Complete ‘Simplify and Focus’ Extend Pacific Leadership Invest in Asian eGrowth • Implemented risk reduction program • Simplified International positions in one move with Grindlays sale – completion on track • Freed up capital and management • Replicate leading market positions • Organic or acquisition • Deploy successful management model • Continue to drive operational improvement • Agenda defined and under way • Re-energise existing positions • Network points • Panin Bank • Invest in eGrowth • Target mass affluent • Partner to complement strengths • Joint Venture announced

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