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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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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 l.jpg
Presentation

  • Strategic Direction

  • Business Strategies

  • Current Performance

  • Proposed Tracking Stock Issue


Anz financial parameters l.jpg
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 l.jpg
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


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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 l.jpg
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


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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


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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 l.jpg
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


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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

%

%


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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 l.jpg

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


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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


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A New Dedicated Business for Premier Customers

  • Premier Financial Package

  • Dedicated Managers

  • Premier Suites

  • Dedicated Service Officers


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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


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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 l.jpg

350 Increased

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


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Simplify and Focus International Increased

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


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Simplify and Focus International Increased

  • 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


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Building a Leading e-Commerce Position Increased

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


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Building a Leading e-Commerce Position Increased

  • 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


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Execution is the Key Increased

  • 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


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Organising to Deliver Increased

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


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Presentation Increased

  • Strategic Direction

  • Business Strategies

  • Current Performance

  • Proposed Tracking Stock Issue


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Momentum Evident in First Half Increased

$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


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Risk and Costs Reduced Increased

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


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Relative Share Price Performance Increased

Index 100 - 1 October 1998

31-Aug-99


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Second Half 1999 Increased

  • 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


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Analyst’s Comments IncreasedAlastair 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….


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Analyst’s IncreasedCommentsMike 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 l.jpg

ANZ is a vibrant financial services company that delivers: Increased

  • Superior performance and value for our shareholders

  • An experience which delights our customers

  • An environment where our people excel

ANZ Vision


Presentation32 l.jpg
Presentation Increased

  • Strategic Direction

  • Business Strategies

  • Current Performance

  • Proposed Tracking Stock Issue


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ANZ Capital Management Principles Increased

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


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Rationale for Tracking Stock Increased

  • 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


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ANZ New Zealand Tracking Stock Increased

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


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Exchange Mechanism Increased

  • 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


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ANZ New Zealand Tracking Stock Increased

  • 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 l.jpg
New Zealand Tracking Stock Increased

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


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Questions Increased


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