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Australia and New Zealand Banking Group Limited Background Briefing on New Zealand Tracking Stock. David Ward General Manager Office of the Chief Executive Officer. Presentation. Strategic Direction Business Strategies Current Performance Proposed Tracking Stock Issue.

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Presentation Transcript
slide1

Australia and New Zealand Banking Group Limited

Background Briefing on

New Zealand Tracking Stock

David Ward

General Manager

Office of the Chief Executive Officer

presentation
Presentation
  • Strategic Direction
  • Business Strategies
  • Current Performance
  • Proposed Tracking Stock Issue
anz financial parameters
ANZ: Financial Parameters
  • Assets A$149 billion
  • Shareholder Equity A$9.2 billion
  • Return on Equity 17.3%
  • 30,000 staff
  • Return on Risk Weighted Assets 1.2%
  • Top 100 bank globally on Assets, profits and capital
  • Market Capitalisation of A$16 billion (Eighth largest company in Australia)
anz profile
ANZ Profile
  • $100B assets
  • Full service
  • 14% market share
  • 4th largest bank
  • 3 m customers
  • Leader in Business Banking, Asset Finance, Credit Cards
  • Bank of the Year - 1997 and 1998
  • $20B assets
  • Full service
  • 18% market share
  • 4th largest bank
  • 1 m customers
  • Leader in Business Banking, Asset Finance
  • $30B assets
  • Niche commercial banking
  • Widest Represented Australian Bank
  • Leading foreign Bank in South Asia/Middle East (Grindlays)

Australia

New Zealand

International

slide5

Span of International Operations

  • Americas
  • 4% of profit
  • Asia Pacific
  • Pacific Since 1880
  • Asia Since 1970
  • 5% of profit
  • South Asia/
  • Middle East
  • ANZ Grindlays
  • Since 1854
  • 7% of profit
  • New Zealand
  • Since 1840
  • 14% of profit
  • UK & Europe
  • 3% of profit
  • Australia
  • Since 1835
  • 67% of profit
business unit parameters
Business Unit Parameters

Profit Assets

$m $b

Personal* 288 60

Corporate* 244 64

International 115 19

Centre 69 6

___ ___

Total 716148

March 1999

* Retail Asset Finance in Personal

strategic direction
Strategic Direction
  • Rebalance business mix largely organically
  • Focus on four strategic businesses
    • accelerate growth in personal
    • build on strong position in corporate
    • simplify and focus International
    • build leading presence in e-Commerce
  • Transform management process to ensure execution and delivery
optimising the business mix
Optimising the Business Mix

Return

FX

International Consumer

Retail FM

Personal Banking

Capital Markets

Trade

Structured Finance

Risk

Target

Business Banking

Proprietary Trading

Asset Finance

International Corporate

Major Corporate

Institutional

Stockbroking

Target

business strategies
Business Strategies
  • Accelerate growth in personal financial services particularly in funds management by harnessing our distribution power
  • Build on our strength in the corporate sector, by growing services business, whilst reducing risk and improving return on assets
  • Simplify our international network to improve return, by focusing on Asia and the Pacific, by reducing risk and by investing in growth franchises
  • Swiftly build a leading e-Commercepresence, creating the banking platform of the future using internet technology
slide10

Gains in Market Share

Total Market Share

%

Share of Housing Lending

%

NAB

CBA

WBC

ANZ

1988

1993

1998

Share of Credit Cards

Share of Business Lending

%

%

slide11

ANZ Has a High Quality Personal Customer Base

Wealth Bands

$(000)

20

60

100

200

500

1000

ANZ

Other

Industry

Ave

0

10

20

30

40

50

60

70

80

90

100

Total Relationships (%)

Source: Roy Morgan 1998

the opportunity with australian customers

All ANZ Customers

High Value to ANZ

High Value to

Industry

but limited ANZ business

True Retail Market

The Opportunity with Australian Customers

Customer

Base

2.7m

Source: Roy Morgan 98

slide13

Banking Makes up Roughly Half of

Financial Services

Estimated Value of An Australian Retail Customer (A$ Present Value)

$6000 - 7000

General Insurance & Traditional Life

Risk/Wealth Protection

Investment

Traditional Banking

Non-traditional products

slide14

A New Dedicated Business for Premier Customers

  • Premier Financial Package
  • Dedicated Managers
  • Premier Suites
  • Dedicated Service Officers
build on leading corporate position to improve returns
Build on Leading Corporate Position to Improve Returns
  • Market Leader in
    • Business Banking
    • Auto Finance
    • Foreign Exchange
  • Investment Banking restructured
  • Need to
    • Diversify Revenue Sources
    • Reduce Risk
    • Improve EVA
    • Improve ROA
business banking australia risks reduced shareholder value increased
Business Banking Australia: Risks reduced Shareholder Value Increased

Risk Profile

(% of Lending Assets)

EVA by customer decile

-50

0

50

100

Risk Level

High

Customer Deciles

1997

Low

1999

1996

1999 1H

investment banking activities restructured

350

300

250

200

150

100

50

0

1-Apr-97

1-Aug-97

1-Dec-97

1-Apr-98

1-Aug-98

1-Dec-98

1-Apr-99

Investment Banking Activities Restructured
  • Restructured to focus on domestic markets and core products
  • Withdrawn from non core activities such as London Capital Markets
  • Reduction in risk levels and costs

FX Money Trading Revenues( $m)

  • No1 in FX in Australia (2nd year, BRW)
  • Top 5 Asian FX house (Asia Money)

Only 1 negative week

Cumulative

slide18

Simplify and Focus International

UK Europe

Money Centre & Private Banking

  • Grindlays
  • Leading foreign bank
  • 114 branches
  • 1-10% market share

New York

Money Centre

  • Asia
  • 11 “footprint” branches
  • Trade and corporate
  • negligible market share
  • Pacific Islands
  • Leading bank
  • 36 branches
  • 20-60%share

Latin America

Represntative

Offices Closed

simplify and focus international
Simplify and Focus International
  • Re-balance business mix towards consumer
  • Maintain strong lending policies

Continue to Reduce Risk

  • Target Top 2-3 foreign or Top 5 local position
  • Leverage strong positions and global capabilities
  • Deal with minor positions

Target Fewer, Deeper Positions

Imperatives for International

Create Future Growth Platforms

  • Develop Asia-Pacific, e.g. Indonesia
  • Pursue acquisitions only where it creates a desired position, and can be managed
slide20

Building a Leading e-Commerce Position

Internet Banking Registrations

70000

Strategies

  • To build a strong e-financial services capability with rapid growth in registered users, on-line sales and site traffic
  • To create a powerful set of new customer acquisition channels
  • To develop new e-Commerce businesses, such as the E*Trade alliance, Auto Group

60000

50000

40000

30000

20000

10000

0

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

1998

1999

slide21

Building a Leading e-Commerce Position

  • Transform to new business
  • Personalised
  • Holistic
  • Lifestyle aggregated

Customer Value

“Sticky” Customer

ANZ

  • Transact
  • Account Transfer
  • Applications
  • Transactions
  • Interact
  • Interactivity
  • Enquiry
  • Inform
  • Basic presence
  • Brochureware

Visitor

Entry Level

Advanced

Functional Richness

execution is the key
Execution is the Key
  • Difficult to differentiate strategically
  • Aggressive targets to stimulate innovation
  • Organic emphasis for the next 2/3 years
  • New performance management discipline
  • Real differentiation is through execution
    • Shareholder Performance
    • Customer Experience
    • Building Talent

Out-delivering the competition is fundamental to success

slide23

Organising to Deliver

CEO

John McFarlane

Group Functions

Finance

Peter Marriott

Governance

Activities

People

Elizabeth Proust

Strategy

Alison Watkins

Business Groups

International

Elmer Funke Kupper

Technology

David Boyles

Corporate

Roger Davis

Personal

Peter Hawkins

presentation24
Presentation
  • Strategic Direction
  • Business Strategies
  • Current Performance
  • Proposed Tracking Stock Issue
momentum evident in first half
Momentum Evident in First Half

$M

800

716

700

625

International

134

550

600

182

102

New Zealand

500

97

70

400

300

Australia

480

446

200

373

100

0

Mar-98

Sep-98

Mar-99

Profit after Tax

slide26

Risk and Costs Reduced

Asian

Exposure

11.5

US$b

US$b

Cost Income Ratio

%

6.1

75

5.8

70

65

Sep-97

Sept-98

Mar-99

60

A$m

A$m

26

Market Risk (Var)

Equities

55

50

Interest

10

90

93

96

1H99

6

FX

Mar-98

Sept-98

Mar-99

slide27

Relative Share Price Performance

Index 100 - 1 October 1998

31-Aug-99

slide28

Second Half 1999

  • Second half broadly in line with market expectations
  • Income up
    • flat net interest income
    • growth in non-interest income
  • Costs stable
  • Provisioning stable
  • Cost income ratio down
analyst s comments alastair hunter j b were
Analyst’s CommentsAlastair Hunter, J B Were
  • Post FY98 Result
  • Global concerns overshadow a strong domestic performance
  • ... The reduction in the risk profile will add value to the shareholders...
  • Post HY99 Result
  • For further share price appreciation we will need to see:
  • continued improvement in sentiment towards Asia, positive revisions to earnings forecasts, implementation of the strategic plan, improved confidence in management and a regeared balance sheet.
  • Post Strategy Seminar
  • ANZ has a clear vision and strategy in place. The key issue for investors now becomes confidence in management to execute the strategy. We are warming to the execution capability of ANZ….
analyst s comments mike macrow merrill lynch
Analyst’sCommentsMike Macrow, Merrill Lynch

Post FY98 Result

Our reduction in opinion reflects the higher asset quality risk inherent in a more

commercially oriented bank

Post HY99 Result

The underlying result of $1.3b achieved our expectations. While ANZ has partially

recovered from a chronic oversold position, some work is required to take the next

step upwards.

Post Strategy Seminar

ANZ share price has underperformed CBA share price 30% and NAB by 15%

since December 1996. Cost cutting and rationalisation of below hurdle activities

suggest a price catch up is likely.

anz vision

ANZ is a vibrant financial services company that delivers:

  • Superior performance and value for our shareholders
  • An experience which delights our customers
  • An environment where our people excel
ANZ Vision
presentation32
Presentation
  • Strategic Direction
  • Business Strategies
  • Current Performance
  • Proposed Tracking Stock Issue
slide33

ANZ Capital Management Principles

Economic Capital

Inner Tier 1

Equals Economic Capital

Peers

Capital

Structure

Rating Agencies

Risk Adjusted Tier 1 Ratio

ie, AA Status

Comparable to Peers

Shareholders

Cycle

Reduce Cost

Manage Through

of Capital

The Cycle

slide34

Rationale for Tracking Stock

  • Align shareholder base with location of assets/profits
  • Increase ANZ Brand awareness
  • Cost Efficient form of high “Equity Credit” Capital
  • Diversify Shareholder Base/Reduce Cost of Capital
  • Opportunity for Customers and Staff to own their Bank
  • Increases ANZ weighting in the NZSE 40
slide35

ANZ New Zealand Tracking Stock

Main Features

  • An Investment in ANZ Group
  • Denominated in NZ$
  • Dividends in NZ$ equal to ANZ’s dividend
  • Imputation Credits Attached
  • Ability to exchange to ANZ Shares
  • Mandatory Exchange after 30 years
  • Non Voting
exchange mechanism
Exchange Mechanism
  • Both parties have the ability to trigger exchange at any time after initial period
  • Slight discount applies if initiated by investor
  • Investors can buy or sell the securities at any stage on the NZSE
slide37

ANZ New Zealand Tracking Stock

  • An Investment in ANZ Group
  • Key Differences Between This Security and ANZ Ordinary Shares
    • Is a Hybrid Security
    • Expect New Zealand Investors to Receive Imputation Credits
  • The Exchange Mechanism plus same Dividend Yield ensures price will track ANZ head shares
  • Increases ANZ weighting in NZSE 40
new zealand tracking stock
New Zealand Tracking Stock

Timing : Q1 2000, subject to regulatory approvals

Access : Via Lead Managers, Usual Broker or ANZ Network

Size : Sufficient to ensure liquidity

Regulatory Approvals: Proceeding well