Perform Grow _ Breakout - Presentation by Peter Marriott - ANZ

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Perform Grow _ Breakout - Presentation by Peter Marriott - ANZ Powered By Docstoc
					Perform Grow and Breakout
                                              Presentation to
Deutsche Bank Asia Pacific Financial Institutions Conference
                                    London, 9-10 July 2001


                                     Peter Marriott
                                     Chief Financial Officer
       Australia and New Zealand Banking Group Limited
  ANZ - who we are
  •   One of the ‘Big Four” Australian banks.
  •   Provider of full range of financial services in
      Australia (since 1835) and New Zealand (since
      1840)
  •   Leadership in Corporate Banking, Credit Cards
      and Mortgage origination, a strong
      eCommerce position and an offshore network
      in Asia and Pacific.


  •   Assets                      A$181b             (US$ 95b)


  •   Market Cap                  A$24.5b            (US$ 12.7b)


  •   Profit (half year)          A$895m             (US$ 470m)


  •   Staff                       22,815

  •   Credit Ratings              AA-/Aa3

ANZ Headquarters
100 Queen Street
                            Note: figures as at 31/3/01, with exception of
Melbourne          Page 2   market cap which is as at 28/6/01
We are on track to deliver on our 3 year
commitments


Measure                2003 Commitment            Achievement

EPS growth             > 10%                            13%

ROE                    > 20%                           19.1%

Cost-income ratio      mid 40’s                        49.4%

Inner Tier 1           6%                              6.2%

Credit rating          maintain AA category         maintained


 •    We have also committed to improving customer satisfaction,
      and will publicly report our progress


                               Page 3
      Building for the future - a distinctive
      strategy

                  Proposition                  Strategy          Implications

               • Entrepreneurial       • Reconfigure ANZ as   • Specialist
Specialise       specialists create      a portfolio of 16      approach to
                 more value              specialist             customer and
                                         businesses             product
                                                                businesses


               • Corporations          • An e-Bank with a     • Transform the
                 must embrace            human face             way we do
e-Transform      new technologies                               business with IP
                                                                technology


               • Value depends on      • Drive results,       • Meet
Perform Grow     performance,            invest in growth       expectations,
& Break out      growth and              businesses and         fund growth by
                 breaking out            create new             cost reduction,
                                         paradigms/culture      transform

                                      Page 4
Transforming ANZ through Perform,
Grow and Breakout
                       • Focus:         long term ‘destiny’
                       • Benchmark:     global industry/players
                       • Looking for:   transforming moves
   Break               • Horizon:       5-10 years
    out                • Success:       dramatic market cap increase


                       • Focus:         specialisation and out-growing
                                        the market
                       • Benchmark:     competitors in each business
   Grow                • Looking for:   breakout moves in key
                                        businesses (eg QTV, Origin)
                       • Horizon:       3-4 years
                       • Success:       4-5 moves taking share and
                                        worth ~AUD1bn+ market cap
                                        each

                       • Focus:         performance
                       • Benchmark:     market expectations
   Perform             • Looking for:   six monthly delivery
                       • Horizon:       1-2 years
                       • Success:       meet/exceed expectations
                                        consistently


              Page 5
We are performing well - interim results

 • NPAT from continuing operations $907m - up 18%

 • EPS up 13% to 55.8 cents

 • ROE of 19.1%, up from 17.8%

 • Cost Income ratio down to 49.4%

 • Continuing operations revenue up 10%, costs flat

 • Credit quality sound:
    – ELP charge down to 35 bp’s
    – Total non-accruals down
    – Specific provisions flat - down overseas and up
      domestically

 • Profit on sale of holding in St George $99m ($65m after
   tax), offset by write downs in investments ($84m)

 • Improved disclosure - financial information provided for each
   business unit
                           Page 6
          Building a strong track record
                     NPAT/ROE                                                Cost to Income
  NPAT $m                                    ROE %          $m                                                   %
                                                                             Expenses
  2000                                          20        3500                                                    64
                                                                             Income
  1800                                           19                          CTI                                   62
  1600                                                    3000                                                     60
                                                 18
  1400                                                                                                             58
  1200                          930              17       2500
                                                                                                                   56
  1000     481       763                         16
                                                                                                                   54
   800                                           15       2000
   600                                                                                                             52
                                       895       14                                                                50
   400               717        817                       1500
           625                                   13
   200                                                                                                             48
     0                                           12       1000                                                     46
          1998      1999       2000    2001                      Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01


  $m             Non-accrual loans                                       Internet banking users as % of
                                                                 %             main relationships
1800                                                  2.0%
                                                                 45
                                                                      39.1
1500                                                             40
                                                      1.5%       35                32.0          Source: JP Morgan &
1200                                                                                             Roy Morgan Research
                                                                 30
900                                                   1.0%       25                       23.5

600                                                              20
                                                                                                       13.7
                                                      0.5%       15
300                                                              10
  0                                                   0.0%        5
        1998        1999        2000   2001 1H                    0
                 Gross Non Accruals                                    ANZ         WBC    NAB          CBA
                 Net Non Accruals
                 Non Accruals/Loans                    Page 7
Good profit growth across a diversified




                                                                                                                Metro Banking
                                                                                                                Mortgages
                                                                                                                Institutional
                                                                                                                Structured Finance
                                                                                                                Regional Banking
                                                                                                                Corporate Banking
              Mar 00 v Mar 01




                                                                                                                Cards
                                                                                                                Transaction Services




                                                                                                                                       Page 8
                                                                                                                Small Business
                                                                                                                Asset Finance
                                                                                                                Foreign Exchange
                                                                              International and                 Investment Mgmt
                                                                              subsidiaries
portfolio



                                                                  Corporate                                     Asia
                                                       Personal
                                                                                                                Capital Markets
                                                                                                                Pacific
                                                                                                                Private Clients
                             $m
                                          140

                                                120

                                                      100

                                                                   80

                                                                                     60

                                                                                                  40

                                                                                                       20

                                                                                                            0
  A strong performance culture

       EVA focus                                    Cost Control
• Rigorous Risk v Reward                       • Part of culture
  discipline
                                               • Allocation of a scarce
• Driver based capital allocation                resource
• Integrated model                             • Ongoing re-engineering
                                               • eTransformation
     Value Aspirations                         • Activity Value Analysis
                                                 (AVA)

        Strategies

                                                     Leading Cost
       EVA targets                                   Income Ratio
                              Business Unit
    EVA performance
                                    Customer

         Rewards
                                Page 9
       We continue to actively manage and
       reduce risk
        Lending Profile by Asset Type*
100%                                                         • Exiting higher risk businesses

80%                                                          • More emphasis on lower risk
                                                               businesses
60%
                                                             • Corporate balance sheet
                                                               deliberately constrained –
40%
                                                               focus on fee income

20%                                                          • Risk based approach
                                                               embedded through EVA
 0%
        ANZ ANZ ANZ            CBA     NAB       WBC
        1991 1996 2001
 business

 consumer
            * CBA as at 31/12/00, NAB & WBC as
            at 30/9/00

                                                   Page 10
       Total non-accrual loans continue to
       fall, but increase in Australia
                       Historic                                                             Geographic
 $m    Gross Non-Accrual                                                           Gross Non-Accrual Loans
       Loans (LHS)
1800                                   Non-Accrual Loans/         2.0%      $m
                  1662                 Loans & advances (RHS)
                                                                                                   Mar-00
                                                                            1000
                             1543                                                                  Sep-00
1500                                                                                               Mar-01   858
                                           1391
                                                      1295        1.5%      800            749
1200                                                                                                              681
                                                                                     651

       872                                                                  600
                       900
900                                                               1.0%             495
                                                                                                                    457
                                                            727
                                               699
                                  657                                       400
600
           428
                     Net Non-Accrual                              0.5%
                     Loans (LHS)
                                                                            200
300
                                                                                                 72 59 89


  0                                                               0.0%        0
        1997        1998       1999          2000 2001 1H                            Aust         NZ        Inter


                                                                  Page 11
         Group risk grade profile continues to
         improve - but some signs of turning domestically
                    $114.6bn              $126.5bn              $134.9bn   $141.0bn

   AAA to            14.8%                 16.2%                 16.2%      16.9%
   BBB+




   BBB to
   BBB-              41.5%
                                           45.3%
                                                                 49.7%      50.5%




   BB + to
   BB                19.2%
                                           15.8%
                                                                 14.6%      14.7%
   BB-
                     17.3%     5.4%        17.3%
                                                         3.9%    15.6%      14.1%
   >B        7.2%                                                                     3.8%

                    Sep 1998              Sep 1999              Sep-2000    Mar-01
ELP (bp’s)             45                    43                    38         35

                        >B = B, B-, CCC
                         & non-accrual             Page 12
Provisioning in line with expectations

 ….but increasing in Australia and New Zealand

  $m
  140                          Actual SP v ELP
                                                              ELP charge
  120                              charge                     SP charge
  100
   80
   60
   40
   20
    0
  -20   Mar-   Sep-00 Mar-01   Mar-00 Sep-00 Mar-01   Mar-00 Sep-00 Mar-01
        00
  -40                                                  International &
           Personal                 Corporate
                                                        Subsidiaries

• Slowing domestic economy likely to increase specific provisions
• ELP is a function of volume (on and off balance sheet), risk
  grade profile, and level of security
• Specific Provisions tend to be less volatile in Personal
  businesses and track more closely to ELP

                                Page 13
       Provisioning levels remain strong
                                            represents
                                              3 years
  $m                                         expected
                                                                   %
                ELP                            losses                     GP/Lending Assets*
               charge
1700                                                               1.10
                241                  FX                                   1.06
                                   impact                          1.05
1500                                 27   1460                                                  1.02
       1373
                                                                   1.00                                 0.98
                        (181)                                                        0.97
1300                     Net SP
                        transfer                         Surplus   0.95
                                                          448

1100                                                               0.90
                                                 1012
                                                                   0.85
900
                                                                   0.80

700                                                                0.75


                                                                   0.70
500
       2000                               1H    APRA                       ANZ       CBA        NAB      WBC
                                         2001 Guidelines                  Mar-01    Dec-00     Jun-00   Jun-00

              ELP - Economic Loss Provision
              SP - Specific Provision
                                                                           * includes acceptances
                                                  Page 14
     We are developing a track record for
     building growth businesses
 %                                                           %
15                                                         30                Share of credit
                 Mortgage market                                              card spend
14                    share
                                                           25
13

12
                                                           20
11

10                                                         15
     95     96       97       98       99   00   01              95   96     97    98    99     00   01
                                                            m
 $m              Growing FM inflows              %         4.2
 700                                             16                        Personal customers
                                                                               - Australia
 600
                                                           4.0
                          FM inflows
 500                        (LHS)
                                                  14
             Deposit
 400                                                       3.8
           market share
 300             (RHS)                            12

 200                                                       3.6

 100                                              10
                                                           3.4
     0
                                                             Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00
          Mar-00 Jun-00 Sep-00 Dec-00 Mar-01
-100                                              8

                                                 Page 15
          Most businesses’ targeting revenue
          growth well in excess of expense growth
                                                     Personal
                                                                                                    Cards
                                         High        Corporate
     Plan Revenue Growth 01-03 cagr




                                                     Int. & Subsidiaries
                                                                                 GFX
                                                                                                               Private
                                                                                                               Clients
                                                                       Asia                  GSF
                                                     Asset Fin         GCM           GTS             ANZ
                                                                                         Pacific     Investments
                                      Nominal                              Inst.
                                      GDP                  Small Bus       Bank
                                      Growth                     Metro                             Mortgages
                                                                 & Reg Banking      Corporate
                                                Cost:Income
                                                   falling




                                         Low
                                                                                                            ILLUSTRATIVE

                                                     Low                                                           High
Note: Bubble size approx. in
proportion to 2001 forecast NPAT
                                                           Plan Operating Expense Growth 01-03 CAGR

                                                                                   Page 16
           We are developing a strong CRM
           capability
            INFRASTRUCTURE                                CAPABILITIES

            • Enterprise Customer Data Mart               • Full account and customer EVA
              (ECDM)
                                                          • Segmentation markers and
In Place    • Tran$act database                             profiles
            • Customer scoring and decision               • Propensity-to-buy scores
              engine
                                                          • Application/behavioural scores
            • Behavioural credit scoring
                                                          • Multiple campaign management
              systems
            • Campaign Management System
            • Interim front line screen delivery

            • Call centre, ATM, and SSP                   • Attrition scores by customer
In Pilot/     integration                                 • Recovery scores
Develop-    • anz.com integration                         • Automated, event-based
 ment                                                       campaigns
            • Multi-product decisioning
            • Full front line screen delivery             • Automated prospect list delivery
                                                            (“My Sales”)
                                                          • “Optimal” strategy selection by
                                                            customer (longer term)

                                                Page 17
         Substantial growth opportunities in
         Personal
                                                                         System Growth
                                                                         • Underlying credit growth ~
Customer #’s
                        Total potential revenue                            8-10% pa
    (m)                     growth - $1.5b
                                                                         Market Share

               Peer Average                                              • Product businesses growing
                                                                           customer numbers and
                                                                           market share
                                                                         • Customer #’s increasing by
                                                                           1.0m - translates to $650m
                                                Increased                  in additional revenue pa
  10                                         wallet on higher
               Potential revenue              share $160m
                    $650m                                                Increase Wallet
 7.3
                                                                         • Customer businesses
   5                                                                       deepening wallet share
   4                                                                     • $650m revenue gain by
                                                       Potential
           Existing revenue                            revenue             matching our peers
                 $2.6b                                  $650m                – Created customer
   0
                                                                               businesses
                                   40%       50%*
                                                                             - Sales programs
                               Share of Customer Wallet                      - CRM

                      * Average share of wallet for CBA, NAB, SGB, WBC
                      - source: Roy Morgan Research
                                                        Page 18
     In Corporate, our main focus is on
     growing total wallet share


 # Customers
                          Focus on deeper
                        penetration of existing
                                                                  Grow wallet share
                         CFS customer base
                                                                  •   New high value
                                  Potential                           products
                               revenue ~$1.3b
                                                                  •   New delivery
~5,000                                                                mechanisms

                                                                  •   Improved cross-sell
                                                   Total wallet
          FY 2000 revenue                       of ANZ customer   •   Increased sale of 3rd
                $1.7b                             base ~$8.5b
                                                                      party products


    0
                             ~20%*      ~35%
                           Share of Customer Wallet




         * source: internal estimate
                                            Page 19
Our breakout approach is
differentiating us
                  • Specialised businesses - open architecture
Strategy
                  • First class execution (no surprises)


                  • 91% of managers on individual contracts
Staff
                  • 12% rise in staff satisfaction
                  • Breakout cultural change program

                  • Establishment of Customer Charter,
Customers
                    Customer Advocate and distinctive
                    customer and community initiatives


eTransformation   • Leading cost income ratio
                  • Highest internet banking penetration


                  • Leading financial disclosure & transparency
Risk
                  • EVA embedded in culture


                  Page 20
              Developing a breakout performance
                            culture
    Mission
                                                              where we are
  /aspiration
                                                              where we want to be


                                                 Distinctive (Top 10%)
Targets/goals

                                                  Superior (Top 25%)


Organisational                                             Average
  approach



BU Performance
   feedback



  Consequence                                                          Rewards &      Opport-
                        People   Financial   Operational                                          Values
  management                                                           recognition    unities

                            Coordination and                 +                       Motivation
Average                         control
  Superior
       Distinctive

          * Benchmark - 33 Australasian companies surveyed over 1999-2000
                                             Page 21
ANZ’s aspiration
A high performing company,
exceeding expectations
• Revenue growth
• Cost leadership                                    Positioned in
• Risk mitigation                                   growth markets
• EPS                                             • Actively managed
                                                    portfolio
• ROE
                Perform                    Grow   • Annual
                                                    investment in
                                  AND               growth ideas
                                                  • Higher than peer
                                                    revenue growth


More dynamic than       Breakout
competitors
• High P/E rating
• Performance culture
• Lean and agile
• The e-bank with a human face
• A breakout mentality

                                 Page 22
Summary


• We are performing well

• Cost management momentum –
  eTransformation has just
  begun…                                  We are
• Risk reduction continues               on track
                                        to achieve
• Our new strategy is creating           our goals
  value and better positioning us for
  growth

• We are differentiating ourselves
  through our Breakout program




                         Page 23
The material in this presentation is general background information about the Bank’s
activities current at the date of the presentation. It is information given in summary
  form and does not purport to be complete. It is not intended to be relied upon as
     advice to investors or potential investors and does not take into account the
 investment objectives, financial situation or needs of any particular investor. These
    should be considered, with or without professional advice when deciding if an
                               investment is appropriate.


                             For further information visit

                              www.anz.com
                                      or contact
                                   Philip Gentry
                             Head of Investor Relations
      ph: (613) 9273 4185    fax: (613) 9273 4091     e-mail: gentryp@anz.com




                                        Page 24
    Economic outlook - cautiously optimistic
7
    %      Real GDP Growth incl. and excl.                       Index  Financial conditions in Australia
             housing and Olympics (est)                       1.4
                                                                          more expansionary than US
                                                              1.2
6                                                             1.0
                                                              0.8                                 US
5                                                             0.6                 Contractionary
                                                              0.4
4                                                             0.2
                         Year ended, excluding                0.0
3                       dwellings and Olympics               -0.2
                                                             -0.4
2                                                            -0.6
                                                             -0.8                                Australia
1                                                            -1.0
                                                             -1.2                 Expansionary
0                                                            -1.4
                                                                    90 91 92 93 94 95 96 97 98 99 00 01
           7




                    8




                                 9




                                               0
        -9




                 -9




                              -9




                                            -0
       p




                  p




                               p




                                            p
    Se




               Se




                            Se




                                         Se




    • Retail sales continue to rebound                        • Unlike the US, Australia did not
                                                                experience contractionary
    • Housing recovery continues
                                                                financial conditions
    • But unemployment is still rising
                                                              • With domestic growth indicators
    • Forecast GDP growth for 2001                              strengthening, and early signs of
      calendar year - 2%, rising to 4%                          rising inflation, the interest rate
      in 2002                                                   cycle has likely bottomed

                                                   Page 25
Copy of presentation
    available on
  www.anz.com
        Page 26

				
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