#12003 Roadshow Presentation Australia and New Zealand Banking Group Limited November 2003 ANZ#2Table of contents 1. ANZ 2003 Result overview Page 3 2. NBNZ Acquisition Page 4 3. Strategy Page 13 4. Results Review Page 22 5. Portfolio Performance Page 36 6. Credit Quality Page 46 Important Notice: USA Nothing in this document constitutes an offer of shares. A Prospectus in respect of the entitlements offer dated 24 October 2003 was lodged with the Australian Securities & Investments Commission on that date. Offers of shares will only be made in a copy of the Prospectus which is available to residents of Australia and New Zealand only. The offering of shares made in the prospectus has not been, and will not be, registered under the U.S. Securities Act of 1933, as amended, and is not being made in the United States or to persons resident in the United States. Important Notice: UK "This presentation is directed only at persons who (i) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (as amended) or (ii) have professional experience in matters relating to investments. This presentation must not be acted on or relied on by persons who are not such relevant persons. Any investment or investment activity to which this communication relates is available only to such relevant persons and will be engaged in only with such relevant persons." Important Notice: Singapore "This presentation is directed only at persons who are persons falling within Section 274, or are sophisticated investors falling within Section 275, of the Securities and Futures Act of Singapore. This presentation must not be acted on or relied on my persons who are not such persons. Any investment or investment activity to which this communication relates is available only to such relevant persons and will be engaged in only with such relevant persons." 2 ANZ#3SECTION 1 Another Solid Result for ANZ, up 8.3% v Sep 02 NPAT $2,348m ↑ 1.1% EPS 148.3 cents ⇧ 0.7% Before Significant Items NPAT $2,348m 8.3% . EPS 148.3 cents ↑ 8.2% EPS (Excluding goodwill) 152.4 cents ↑ 9.2% • • Dividend Net Specific Provisions 3 95 cents $527m 11.8% (27.6%) ANZ#4SECTION 2 NBNZ Acquisition 4 ANZ#5SECTION 2 NBNZ acquisition creates the leading bank in New Zealand Purchase price equivalent to A$4.915 billion (at exchange rates on 23 October 2003) ANZ and NBNZ, when combined, will create: The leading bank in New Zealand . One of New Zealand's top three companies • Market leadership in all major market segments A very different acquisition: ● • ● - Based on customers and growth leveraging the best of both banks NBNZ CEO Sir John Anderson invited to head the combined company The ANZ and NBNZ brands and branch networks to be maintained ● No change intended in the total number of branches Built on the foundation of the oldest bank and company in New Zealand Head office in Wellington with major office presence in Auckland and other cities ANZ may consider a partial minority listing on the NZ Stock Exchange post integration 5 ANZ#6SECTION 2 NBNZ acquisition is transforming for ANZ Acquisition an important step in a broader strategy. ANZ is now: ● The leading bank in New Zealand The leading bank in the South Pacific ● The leading Australian bank in Asia ● Leading positions in Australia: -Institutional -Corporate -Cards -Esanda With renewed focus on traditional areas of potential: -Small to medium business -Mortgages -Personal Banking -Wealth management 6 ANZ#7SECTION 2 Key financial highlights Purchase price equivalent to A$4.915 billion (at exchange rates on 23 October 2003) Excludes a NZ$575 million dividend to be paid to Lloyds TSB prior to completion from NBNZ's retained earnings Total funding by means of: • 2 for 11 renounceable rights issue at A$13 per share raising A$3.570 billion • A$1.370 billion of various debt/hybrid funding Purchase price equates to 11.2x NBNZ adjusted cash earnings for the year to June 2003 ANZ's current 2003 price/cash earnings multiple around 12x ANZ's strong capital and AA-/Aa3 credit rating preserved NBNZ's credit rating should be brought up to ANZ's rating upon completion of acquisition 7 ANZ#8SECTION 2 Estimated operating cost synergies and integration costs . Operating Cost Synergies Estimated at ~A$110m pa (before tax) within 3 years Expected cost synergies represent around 20% of NBNZ's cost base Cost synergies to be fully phased in by end 2006 •⚫ Key areas of cost synergies: Technology Back office functions Head office integration Synergies reflect no net branch closures in New Zealand • Minimal impact in 2004 Integration Costs Estimated at ~A$230m (before tax) over 3 years Key integration cost components: Core and subsidiary IT systems integration Non-branch premises integration • NBNZ senior management team has a strong track record in managing banking integrations 80 ANZ#9SECTION 2 Managing key integration risks Consideration Minimise Impact on Customers Mitigant Maintain both brands and both branch networks • New Zealand centric retail business model leveraging NBNZ "client-facing" systems for retail, rural and SME • Manageable concentration issues in corporate and institutional • People Retain the best people from both organisations Maintain headcount in "client-facing" roles Technology • Two year integration period for core systems conversion to a common core technology platform Leverage expertise in IT integration 9 ANZ#10SECTION 2 NBNZ Group strong track record Strong growth in loans and advances NZ$b 40 40 55 35 30 30 T 25 25 20 20 % 50 50 45 40 40 35 30 Dec-01 Dec-02 bps 15 12 6 High asset quality – Provisioning charge as % of loans and advances 6 3 0 Jun-03 Dec-01 Declining cost-to-income ratio Dec-01 NZ$m 600 400 200 Dec-02 Jun-03 (LTM) Consistent growth in NPAT Dec-02 Jun-03 (LTM) Dec-01 Dec-02 10 Jun-03 (LTM) ANZ Source: NBNZ Group Financial Reports#11SECTION 2 NBNZ purchased at attractive multiple Price# / LTM cash earnings multiples 20 16.1 16 14.6 13.3 11.9 11.2 12 8 4 0 Australian Regional Banks Past Domestic Acquisitions* Major Australian Banks (excl ANZ) ANZ Standalone ANZ / NBNZ Price# / Net tangible assets multiples 3.5 3.0 3.0 3.0 2.5 2.0 1.5 1.0 Major Australian Banks (excl ANZ) ANZ / NBNZ 2.9 2.4 2.2 Australian Regional ANZ Standalone Past Domestic Banks Acquisitions* * Average of 10 past Australian and New Zealand transactions # - Price used in calculating LTM cash earnings multiples and NTA multiples for the major Australian banks and the Australian regional banks are 30-day volume weighted average prices as at 23 October 2003 ANZ#12SECTION 2 Funding the NBNZ acquisition Target ACE/RWAS ratio range lowered to 4.75-5.25% The transaction is to be funded via the following sources: Net proceeds of A$3.570 billion from a 2 for 11 deeply discounted rights issue at $13 A$1.370 billion in Hybrid, subordinated and wholesale funding The size of the equity raising is a function of the goodwill arising on acquisition* Upon completion: ACE ratio of approximately 5.0% Tier 1 ratio of approximately 6.7% Total capital ratio of approximately 10.2% Source of Funds A$m Rights issue net proceeds Debt/Hybrid Total 3,570 1,370 4,940 Use of Funds A$m 4,915 25 4,940 Proceeds to Lloyds TSB Transaction costs Total Goodwill on Acquisition Purchase consideration LESS NTA on acquisition Goodwill on acquisition * - Goodwill will be amortised in line with Australian Accounting Standards based on 30 June 2003 pro-forma financial statements and will be finalised based on 30 November 2003 net assets 12 A$m 4,915 (1,657) 3,258* ANZ#13SECTION 3 Strategy 33 13 ANZ#14SECTION 3 Australian banks: A decade of efficiency gains and credit expansion 65% • The Australian banking sector has enjoyed a decade of efficiency gains which has seen material reductions in Cost to Income ratios. 60% 55% . ANZ has outstripped its competitors and has achieved world class efficiency. 50% • A study of the world's top 100 banks by Boston Consulting Group earlier this year found that ANZ was in the top five banks in the world in terms of efficiency, total shareholder return and risk-adjusted relative shareholder return over the previous five years. • Solid credit growth during the past decade has also contributed to the out performance of Australian banks. A significant driver of recent credit growth has been the consumer sector, in particular via home lending. Our forecast is for a weakening in housing growth, which in part is forecast to be offset by increasing demand for business credit. Overall system credit growth is forecast to weaken but to remain at positive levels. Cost to Income^ NAB CBA WBC ANZ ANZ Target 45% 40% 1998 1999 2000 2001 2002 2003 Annual Growth 20% 15% 10% 5% 0% Australian Credit Growth# Forecast* Sep-89 Sep 91 Sep-93 Sep-95 Sep-97 Sep-99 Sep-01 Sep-03 Sep-05 -5% 14 Sources: #RBA, *Economics@ANZ, ^Citigroup Analyst Forecasts, CBA 2003 Results ANZ#15SECTION 3 Banking industry profit growth will be more challenging Future growth within the financial services sector will be more challenging than in the last five years, largely due to the following: . There is greater penetration of the industry by non bank institutions and third party distributors. The early win productivity gains of the last five years are largely over with the focus now turning to end to end process improvement from which the benefits emerge over a longer term. Given the prospect of a slowing housing market, future banking industry growth will rely more on other asset classes. Other market factors which are likely to affect near term growth potential for the industry include: - - The recent interest rate environment has been a challenging one for the banking industry. In the current period low interest rates have adversely impacted the expected return on free funds invested by Treasury. Movements in interest rates in future periods will impact both the return on free funds, and the level of lending and deposit activity in both the retail and corporate markets. The stronger AUD will adversely affect USD denominated offshore earnings and domestic trade income. % change 40 55 35 Housing credit growth likely to be lower 30 25 Housing credit 20 15 10 Forecast* 5 House prices 0 88 90 92 94 96 98 00 02 04 06 Strengthening A$ delivering challenges USD/AUD 0.9 Reserve Bank imposed credit card interchange fee reductions have forced financial institutions to reassess their strategy in this market following the loss of a substantial revenue stream. Through the creation of strategic alliances we believe that the impact on growth of these changes has been marginalised. 0.8 0.7 0.6 0.5 Given the above challenges and the prevailing market conditions ANZ's focus for growth going forward will be primarily organic, complemented by the possibility of strategic moves in core markets should opportunities arise. 0.4 0.3 15 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 *Source - RBA, Economics @ANZ ANZ#16SECTION 3 ANZ has positioned itself to meet market challenges ANZ has developed a strong, balanced platform for sound organic growth which positions us well to meet market challenges. Our model of a portfolio of specialist businesses is distinctively different from our competitors. Its insight is that speed, focus and flexibility will out- compete scale and size advantage. Our first mover advantage in ongoing cultural transformation is fundamental to our strategy given that: a well led and inspired team makes ANZ an employer of choice. the largest service improvements will arise from front line expertise and attitude. in order to derive maximum benefit from our portfolio model a culture that promotes accountability, autonomy and a breakout mentality is essential The stability and competence of ANZ's management is critical in continuing to deliver value to stakeholders. ANZ prides itself as being one of the top five most efficient banks in the world. By reducing our exposure to higher risk asset classes and non core markets we are positioning ANZ for solid growth in asset classes and markets that we know and understand; a cornerstone of our future strategy. First mover advantage on cultural transformation Stable and well regarded management team Unique portfolio of specialist businesses World leading efficiency Reducing exposure to higher risk asset classes and non core markets 16 ANZ#17SECTION 3 Monolines win, but returns more volatile -diversification reduces risk Independent analysis* has found that monoline specialists create greater returns than generalists. ANZ's response has been to create a portfolio of specialist businesses. Whilst the returns from individual business units within the portfolio have exhibited the volatility typical of monoline specialists, volatility is reduced for the portfolio as a whole. Average ROE % 1998-2002 25 20 15.7 15 10 5 0 Generalists A portfolio of specialist businesses reduces volatility and brings: 30 27.6 Responsiveness - we believe that speed, flexibility and expert knowledge will prevail over large scale generalists 25 20 An Entrepreneurial approach, which encourages innovation yet brings with it accountability and ownership from business management. The portfolio model is strengthened by ensuring that governance, risk management and group oversight are centrally controlled. *Source Boston Consulting Group 15 10 5 17 Cards % 30 Average Volatility (standard deviation in TSR) 1998-2002 23.6 20.8 25 20 15 10.6 10 Specialists Generalists Standard Deviation in NPAT Growth# Sep 00 to Sep 03 Mortgages 18.1 Corporate 7.6 2.8 ANZ Group Specialists ANZ#18SECTION 3 We have rebalanced the bank's lending portfolio Corporate versus Retail Lines of Business ANZ has refocused the loan book towards lower risk retail lines of business through: 1. Corporate to retail lines of businesses In 2003, Gross Lending Assets are split approx. 66/34% across retail and corporate lines of business (compared with an approx. 43/57% split in 1996) • ANZ's retail lending franchise has been underpinned by robust residential mortgage growth 43% 66% Retail Businesses • Sustained market share gains in the SME segment and a leadership position in asset finance have also contributed to the re-weighting of the loan portfolio towards retail lines of business 57% 34% 2. Non-core to core markets • Further, ANZ has re- orientated its loan book towards domestic lending opportunities and to improving the quality of its international diversification • International exposure, outside our core domestic markets of Australia and NZ, within the loan book has been reduced from approx. 15% of Gross Lending Assets in 1996 to approx. 6% in 2003. Sep-96 Composition of ANZ Loan Book by Key Lending Region 15% 11% 12% 15% Corporate Businesses Sep-03 International Lending Assets Distribution 6% Pacific 13% 9% 81% 77% Asia 32% 70% United Kingdom & Europe 32% Middle East 3% Americas 24% Sep-96 Australia Sep-00 18 NZ Sep-03 International ANZ#19SECTION 3 This provides us with a well balanced portfolio for organic growth Notwithstanding our relative re-weighting of the asset portfolio towards Retail lines of business and the lowering of the risk profile within the corporate portfolio, ANZ has retained its strong tradition in corporate banking. 40% of the Group's profits are still derived from these sectors which positions us relatively favourably as system growth returns to a more traditional balance. The Retail business is characterised by: ◉ Strong niche leadership - ANZ enjoys market leading niche positions in both Credit Cards and Auto and Equipment Finance Punching above weight - Restoring Customer Faith program is starting to show positive results, particularly in Rural Banking. Mortgages is improving sales through its branch network, whilst at the same time it is outperforming in third party originated growth. Foundation laid for improved performance - significant investment is being made in NZ and Personal Banking to deliver growth in future years. There are early signs of progress emerging. The Corporate segment is characterised by: ◉ ◉ Strong tradition in Institutional and Corporate Banking which places ANZ well for expected pick up in business credit growth. Institutional and Corporate customers continue to provide significant cross selling opportunities Focus creates a key growth opportunity SME Banking is already experiencing solid market share growth leading to strong profit growth. Retail 60% of profit* Corporate 40% of profit* 66% of assets# 34% of assets# 19 *Business segment profit, #Lending assets ANZ#20Clear international strategy Modest capital reallocation if growth options are identified ANZ's international focus is twofold and remains clear 1. US and Europe - REDUCE Involving: " ▪ Focusing on core products and relationships Reallocating capital to fund growth options ■ Returning excess capital, primarily to domestic markets 2. East Asia/Pacific GROW LONG TERM Involving seeking reward whilst carefully managing the risk through: Individual investments that are modest in value and low risk US and Europe Capital reduction Majority of capital reallocation to core markets Adopting a portfolio approach Ensuring the potential for significant long term upside 2500 Investments must leverage ANZ's skills and capabilities 2000 whilst avoiding investments that are: 1500 Corporate focused 1000 ■ Require large capital investment Only require ANZ's financial resources rather than management skills 500 1999 ■ ▪ Unduly distracting for group management 20 NPAT mix by region - shift to domestic markets 2000 2001 East Asia/Pacific 2002 Australia/NZ 2003 Aust. NZ Asia/Pacific UK/Europe Middle East/SE Asia North America ANZ#21SECTION 3 ANZ's forward looking agenda To become Australia and New Zealand's most respected company The bank with a human face, easy to do business with, building enduring customer relationships Our Customers A great company, with great people, great values, great opportunities Our People One of the most efficient, best managed, and most successful banks in the world Our Shareholders Trusted. Making a sustainable contribution to society Our Community Breakout. Bold, different, investing, partnering, growing 21 21 Our Future ANZ#22SECTION 4 Results Review 22 ANZ#23Full year result driven by asset and deposit growth Full year NPAT growth increased 8.3% with growth in net income, tight expense control, and improving credit quality being the highlights. Net interest income strong lending growth resulted in a $454m increase in net interest income, offset by a 10 bp margin decline, which reduced net interest income by $161m. Other income flat as a result of an under accrual of loyalty points on co- branded credit cards in prior years, higher cost of loyalty points, and sale of ANZ FM. Expenses • were once again tightly controlled across the group, increasing 2%. Cost savings generated throughout the period were offset by a volume driven increase. Provisioning Tax • asset quality improved with the ELP rate down offsetting volume growth, primarily in mortgages. reduction in tax rate by 0.4% due to a higher proportion of equity accounted income. $m 2168* Sep-02 293 Interest Non Interest Income Income 12 Expenses (75) Provisioning (4) Tax & OEI (46) $m 2348 NPAT 8.3% headline basis 9.2% cash basis Sep-03 * 23 Sep-02 excludes significant items ANZ#24SECTION 4 -30% Higher interest income, driven by strong mortgage and deposit growth Average Lending & Deposit Volumes • Average net lending assets grew by $b $13.6b (10.0%) in 2003, with growth of 100 $10.8b (18%) in Mortgages, $1.6b in Corporate and $0.8b in Asset Finance. • • 73.5 67.3 61.8 57.2 60 Average deposits and other borrowings 80 grew $13.5b, principally in Personal Banking Australia ($4.2b), Treasury ($3.2b), IFS ($2.7b) and Corporate ($1.6b). The deposit growth was encouraged by uncertainty in global equity markets. 58.2 59.2 58.1 56.2 97.3 99.7 89.2 86.4 40 End of period net lending asset volumes reduced 23% in overseas markets as a result of the strategy to reduce higher risk exposures in the UK and US and the exchange rate impact of a strengthening Australian dollar. 20 Mortgages Mar-02 Business* ■Sep-02 Mar-03 Deposits* ■Sep-03 Lending Asset Growth for the year to September Trends in international exposure 2003 -20% -23% -10% -9% 0% 12% ANZ Group -34% 14% Australia & NZ International -23% -9% -25% -29% -11% Total UK & Europe Americas -14% 6% Asia ■Local Currency = AUD 5% 12% Pacific 10% 20% -40% -30% -20% -10% 0% 10% 20% 24 ANZ *Business Lending includes Corporate & Small Business, and Institutional Segments. Deposits includes Esanda retail debentures#25SECTION 4 Margins down, primarily due to yield curve and mix effect Interest Margins Net interest margin contracted by 10bp yoy: Net interest income in Treasury fell by $45 million as a result of run off of the existing portfolio and flat yield curves. This represented 3bp. The interest benefit from low interest savings accounts and non-interest bearing balances reduced as the rate at which they were invested reduced, representing 3bp. • The funding cost associated with unrealised trading gains resulting from the appreciating AUD represented 3bp, although this was offset in trading income (half on half) 5.00 4.79 4.50 4.22 4.18 3.93 3.82 3.82 3.84 4.00 3.87 3.50 3.14 2.96 2.99 2.83 2.78 3.00 2.86 2.78 2.82 2.71 2.50 2.76 2.78 2.75 2.79 2.71 2.64 Funding and changed asset mix contributed 5bp 2.00 Margin Drivers 1.36 1.3 1.50 1.25 1.28 1.30 1.33 2.77 (3) Lower mismatch income in Treasury (3) Lower earnings on low & zero interest deposits (3) 1.00 1.25 1.22 1.19 1.10 1.10 1.10 0.50 (5) 3 2.67 Funding derivative cash flows 1 Funding Lower & asset interest mix foregone FX revenue hedges Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Corp & Small Bus IB - Mortgages Asset Fin Personal Group 2002 2003 25 25 ANZ#26SECTION 4 Treasury - adversely impacted by a tough interest rate environment Australian & New Zealand Mismatch $mAUD pts 200 Total Income 50 (LHS) • • Over the last three halves Group Treasury's earnings have been in decline, with further decreases expected in 2004. Group Treasury mismatch income is a function of the steepness of the yield curve (ie. rolling avg 3yr assets funded at rolling 90 days), which has been declining. • The current interest rate environment is not one for building risk. • The benign global interest rate • environment, with term rates falling to historical lows and flattening yield curves, has limited investment opportunities. As such net ageing has occurred within the mismatch portfolio over recent periods. • The Australian & New Zealand 80 70 60 60 40 40 30 30 20 20 10 10 -10 mismatch portfolios remain well placed to benefit from a tightening interest rate cycle. -20 Avg Income Aus Yield Spread: Rolling 3 year avg rate Vs Rolling 90 150 day avg rate (RHS) 100 50 50 1H00 2H00 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 26 26 -50 ANZ#27SECTION 4 Non interest income impacted by Cards under-accrual and loyalty costs, underlying growth strong • Lending fees increased $57 million due to strong volume growth in Corporate, Asset Finance and Institutional Banking in Australasia • Non lending fees reduced by $81 million principally from a $38 million under accrual of loyalty points on co-branded credit cards in prior years, higher cost of loyalty points and reduced fee revenue from US and UK structured finance operations. • Structured Finance International income reduced as a result of the re-weighting of the Group's portfolio in both risk and geographic terms, foreign exchange rate movements and subdued market conditions. • Trading securities income growth included $45m from cash flow mismatches on swaps which had an opposite impact on net interest income Underlying $m JV Impact 2796 (71) 2002 cards under- Cards accrual under- (20) accrual Higher (38) loyalty Cashflow impact on trading securities costs# income^ Lower (37) Panin SFI 45 bond income sales (33) 20 Sep-02* 27 growth $m 146 2808 * Sep-02 excludes significant items # excludes volume impact and benefits from repricing ^ refer also Margin Drivers (p8) Sep-03 ANZ#28SECTION 4 Expense growth well controlled Higher software $m JV impact amortisation (42) 43 Expense growth was relatively flat, with discretionary cost growth minimised due to lower revenue growth. • • Personnel costs up 2%, reflecting growth in staff numbers of 3% (increase occurred largely towards the end of the period). Overall FX impact on expenses immaterial at $1m, with fall in USD denominated expenses netting off against a rise in NZD denominated expenses. Higher software amortisation charges are coming through as further projects reach implementation stage. Cost management will continue to be a core discipline at ANZ. We will seek to maintain cost growth below income growth and increase re-investment in the business 3153 Underlying growth $m 74 3228 Sep-02 Sep-03 28 ANZ#29SECTION 4 $m Doubtful Debts Provision reflects improved underlying portfolio "Standard" ELP (as a % of NLAs) has decreased significantly from 46 bps to 32 bps across the period 1998 through 2003. This is consistent with mortgage growth in key lending markets of Australia and NZ and reduced Group risk profile ELP Charge bp's ELP Adjustment ANZ has adopted a conservative view on the level of offshore expected default frequencies post Sep 2001 by recognising an approximately 7bp average incremental ELP adjustment charge 350 80 ELP Charge Standard ELP (bps) 309 311 301 303 Headline ELP (bps) 70 300 290 36 36 47 50 62 52 ELP adjustment expected to be progressively wound back over the next two years, predicated on continued risk reduction and stabilisation in the offshore book. 258 252 256 250 246 250 237 241 41 41 60 ELP Rate Drivers 200 bps 46 Normalised ELP ELP Top-Up 46 47 45 43 42 22 44 42 40 38 150 (1) 1 39 (4) 100 T 36 34 32 50 50 30 28 Sep-02 Headline in NLA's IFS reduction Corporate increase in NLA's Growth in mortgages Sep-03 Headline 40 40 Mar- Sep- Mar- Sep- Mar- Sep- 98 98 99 99 00 00 29 36 50 43 42 41 40 39 35 40 40 39 38 36 * X 33 30 32 Mar- Sep- Mar- Sep- Mar- Sep- 01 01 02 02 03 03 ANZ +0 10 20#30SECTION 4 Cumulative ELP balance is well above the specific provision balance $m • The cumulative ELP balance continues to comfortably exceed the specific provision balance. 4000 3500 In 2003 an additional $100 3000 million was provided in ELP as precaution against continued above expected levels of 2500 default on the offshore lending portfolio. 2000 • The reduced 2003 specific provisioning charge reflected a 56% decrease in overseas market charges. This is reflective of the de-risking 1500 strategy in the Institutional 1000 Financial Services segment, resulting in the winding down of offshore exposures. 500 1997 1998 1999 2000 2001 2002 ELP (LHS) SP (LHS) Cumulative difference (RHS) 30 30 $m 700 600 +500 +400 0 2003 300 200 100 Cum + $250m top up ANZ#31SECTION 4 Healthy dividend growth $1.00 Dividends $0.90 $0.80 Interim ■Final $0.70 - 0.51 0.46 $0.60 0.40 $0.50 0.35 • The full year dividend of 95 cents per $0.40 0.30 0.28 ordinary share represents a 12% increase on 2002. $0.30 $0.20 0.39 0.44 • • The final dividend is 100% franked. For year ending 30 Sep 2004, the directors expect to at least maintain a fully franked dividend per share at the same level as for the year ended 30 Sep 2003 on the expanded issued capital. 0.33 0.26 0.29 0.24 $0.10 $0.00 1998 1999 2000 2001 2002 2003 72% 70% 68% 66% 64% 62% 60% 58% 56% 54% 52% 50% Dividend Payout Ratio 1998 1999 2000 2001 2002 2003 31 ANZ#32SECTION 4 Capital targets reduced, reflecting lower risk Drivers of ACE ratio • • Net impact of FX rate movements on ACE capital was approximately -$235 million. FX impact on RWA was approx -$3.2bn down due to FX rate movements, again principally the US$ depreciation (US$ accounted for -$3.3bn of the movement). % Earnings Dividend 7.50- 1.59 (1.02) 7.25 7.00 • Net impact on ACE ratio due to FX movement was +2bpts. 6.75 6.50 Our target ACE capital range has been lowered to 4.75% to 5.25% to recognise: 6.25 Other (0.12) RWA growth (0.43) Continued reduction in risk as evidenced by growth in the 6.00 proportion of residential mortgage lending and reduction in offshore lending 5.71 5.70 5.75 5.50 Acquisition of NBNZ which further diversifies our income and has a 5.25 lower risk lending book 5.00 ~5% Target range 4.75 4.50 Sep-02 Sep-03 NBNZ Pro Forma 32 ANZ#33SECTION 4 Restructuring our hybrid funding will impact the relationship between PAT & EPS in 2004 Background TrUEPrS StEPS Issued Amount Sept/Nov 1998 Approximate 2004 impact (indicative)* NPAT Dividend -40 -44 27 Sep 2003 Cost of Dividend To be called USD 0.775 bn 8% Fixed 1H 2004 AUD 1bn BBSW Floating "EPS" contribution +4 Significant transactions in 2004 (indicative) Close out of swap Profit & Loss Income Fixed to Floating Swap Tax Tax on Swap Deduction for dividend nil Deduction for dividend Other NPAT NPAT EPS Preference Dividend 8% Fixed BBSW + Margin Net Cost Floating rate + margin BBSW + margin A swap effectively converts TrUEPRS 8% fixed cost to floating plus a margin 33 +76 + 6 +82 Final "cash" dividend¹ - 31 +51 1 includes impact of delaying TrUEPRS for NBNZ acquisition * Refer following page for further details ANZ#34SECTION 4 Illustrative Impact of TrUEPRS redemption and replacement on 2004 $m $m TrUEPrS StEPS $m Change $m Redemption of TrUEPrS 2003 2004 Significant transactions NPAT components Interest on re-investment (net of tax) 11 33 1 Interest rate swap (net of tax) 49 78 Tax credit on dividend 31 18 3 91 51 -40 82 Dividend Contribution to EPS -102 -58 44 -31 -11 -7 Subject to final timing of redemption of TrUEPRS and interest rates 34 51 ANZ#35SECTION 4 Outlook • We expect ANZ will continue to perform well in a tougher industry environment in 2004 • . • Expected NPAT growth in 2004 for existing businesses on a stand alone, individual basis: • Growth in net profit after tax for ANZ and NBNZ on an individual/stand alone basis expected to be moderately lower than ANZ's growth in 2003 (excluding significant transactions) based on current economic conditions. The growth rate in 2003, excluding significant transactions, was 8.3%. Expected integration costs, cost synergies, and revenue attrition associated with the NBNZ acquisition in the 10 months to 30 September 2004: • Slightly less than half of estimated $230m integration costs expected to be incurred in 2004 • Only a small amount of the estimated cost synergies expected to be realised in 2004 Revenue losses expected to exceed cost synergies in 2004 • Adjustment to EPS from bonus element of rights issue of approximately 4%: • 2003 restated EPS will be 142.1c (Basic), and 146.1c (adjusted for goodwill amortisation) • After adjusting for the bonus element of the rights issue, we expect modest growth in EPS in 2004 (excluding goodwill amortisation and significant transactions but including integration costs). • After including the amortisation of goodwill on acquisition of NBNZ, we expect similar EPS in 2004 compared to 2003 adjusted for the bonus element of the rights issue. • ANZ expects to maintain a dividend of at least 95 cents per share in 2004, fully franked 35 ANZ#36SECTION 5 Portfolio Performance 36 36 ANZ#37SECTION 5 A specialised portfolio - efficient allocation of resources to deliver results A specialised portfolio allows us to efficiently allocate resources to those businesses experiencing, or with the potential for growth and to reduce resources away from those businesses with lower growth prospects and/or higher risk profiles. NPAT by business segment Risk Weighted Assets by business segment Other Other 8% 13% Corporate 12% Asset Finance 33% 9% 43% Consumer 6% Finance IFS 10% IFS 5% Corporate Asset Finance 18% 6% 12% 25% New Zealand Personal & INGA Mortgages Mortgages Sep 03 Sep 02 Change Full Year NPAT $m Institutional Financial Services 772 715 8% Personal Banking & Wealth 422 403 5% Mortgages 270 247 9% Corporate 270 242 12% Consumer Finance 144 150 -4% New Zealand Banking 141 131 8% Asia Pacific 131 98 34% Asset Finance 127 103 23% Treasury 95 55 125 -24% 37 0 NPAT increase NPAT decrease Prior period NPAT ZNV 200 400 600 800#38SECTION 5 IFS - a strong domestic franchise, continued risk reduction offshore ANZ has a strong tradition and leading position in the domestic institutional banking market. A very strong domestic franchise* • Our core domestic Institutional Banking 80% business once again performed well in 2003, as we pursued our strategy to reduce non strategic exposures in the US and European markets, whilst placing emphasis on domestic 60% activities. 71% 69% II Total Customers Significant Customers* II Lead Customers* 63% 60% 57% 53% 54% 49% 64% 61% • • • Our Capital Markets business also produced a robust result, with increased client penetration and higher trading volumes notwithstanding an environment of low interest rate volatility and consequently reduced client hedging activity. Transaction Services produced a respectable result in a difficult external environment as a result of SARS and Australia's extended drought. Foreign Exchange earnings were flat for the year as a whole, with range bound currencies and a difficult international environment contributing to slow market conditions. Corporate Financing and Advisory services were flat in a slow external environment with limited transaction flow in the corporate advisory and project finance markets. This downturn was offset by a more robust performance in areas including private equity, infrastructure fund management and structured asset financing. Structured Finance International produced lower profits as a result of our re-weighting of the portfolio in both risk and geographic terms, and due to subdued market conditions. 54% 52% 38% 40% 47% 45% 32% 46% 39% 37% 42% 20% 31% 28% 23% 27% 23% 21% 21% 18% 15% 13% 0% 8。 。。 8 ANZ Peer 1 Peer 2 *Source 2016 Peer 3 Peer 4 20% 17% - Greenwich and Associates Domestic profit growth has absorbed offshore reductions for 2003 7% 1% -1% Insitutional Capital Markets Transaction Services Foreign Exchange CFA SFI 38 -19% ANZ#39SECTION 5 We continue to strengthen our position in the Corporate and SME markets • High levels of customer satisfaction and continued focus on our service proposition enabled Corporate Banking to deliver a 6% increase in NPAT in the half to September. • A solutions based proposition led by our Wall St to Main St strategy has ensured that we have maintained our market leadership. . Initiatives to free up front line time to focus more on customers and synergies from working with SME have enabled the business to grow the customer base and increase cross selling opportunities. Corporate Banking continues to deliver significant profit opportunities to other businesses within the bank with total customer profit increasing by 26% in the year. SME Banking is benefiting from significant investment in the business in recent periods. Our continued double digit NPAT growth (2003: 16%), and strong growth in both lending and deposits are largely attributable to: 8.5 8 7.5 7 6.5 • An enhanced customer proposition • Increased staff and customer satisfaction • Selective increases in front line staff where growth opportunities are evident • The continuing benefits of our business specialisation strategy and controlled use of the third party origination market • Up-skilling our staff and business management • Our underweight market position coupled with a strong execution of the growth agenda and specialised business focus ANZ leads Corporate Banking customer satisfaction* 6 1996 1997 1998 1999 2000 2001 2002 2003 ANZ Peer 2 Peer 1 *Score out of 10: Source - Roberts Research 1996-2003 Peer 3 Regionals Growing from an underweight position in SME - FUM growth (A$b) 27% 15% Net Loans & Advances Deposits Sep-02 ■Sep-03 39 ANZ#40SECTION 5 Market leader: Asset Finance continues to prosper growing 23% in 2003 Asset Finance has continued its momentum, with NPAT growth of 23% in 2003. This strong performance is largely attributable to three key factors: • Cultural transformation and a continued commitment to increasing staff satisfaction, which has lead to an improvement in partner satisfaction (79%) and customer satisfaction (80%). Process re-design leading to improved efficiency within the group. The cost to income ratio has fallen from 43.5% to 42% since March 2002, and average processing cost per contract has fallen 25%. 90% 80% A significant cultural transformation Staff Advocacy 70% 60% Motor vehicle sales are at a 5 year high creating a favorable environment for new business writings. Likewise SMB financing (mostly equipment) has been growing strongly as businesses re-equip providing excellent support for extending our market leading position. 50% 1999 2000 2001 2002 2003 Asset Finance's strong market position is emphasised by its growth in motor vehicle and equipment finance of 18% and 26% respectively against estimated system growth of 10% and 15%-20% respectively for the 2003 year. % yearly change 15 10 10 5 0 -5 -10 -15 Delivering the benefits of re-design Greater efficiency - cost per contract decreased 25% over 2 years Index 120 Australian motor vehicle sales % yearly change SMB annual lending growth 100 14 80 12 60 10 8 40 40 6 4 2 0 99 99 00 01 40 02 22 03 30 20 0 1H02 1H02 1H03 2H03 ANZ#41SECTION 5 Consumer Finance: profitable market leadership 44% Good underlying momentum in the Australian business NPAT# • ANZ is the Australian market leader in the credit card business, with approximately 20% market share driven by the scale and variety of our product offerings. • The Consumer Finance business enjoyed strong underlying business growth during the year including: . • An increase in net interest income of 15%, largely driven by an increase in credit card outstandings. • Merchant turnover grew 18%, driven by the ongoing shift to card-based payments and growth in market share. Since 2000 we have increased the number of merchant outlets by 85% and annual turnover has increased in excess of 90%. • Other operating income was impacted by a first half charge of $38m pre tax, relating to an under accrual of loyalty points dating back to 1999. After adjusting for the under accrual write back, NPAT grew 28% half on half and 26% for the year. The Reserve Bank interchange fee reduction has resulted in a decrease in interchange revenue of between 40- 50%. We have endeavored to reduce the net impact to the business through the restructuring of our rewards program and the strategic alliance formed with Diners Card International. A comprehensive communications and retention program has been established following the program restructuring announcement. To date, customer retention levels have been significantly better than expected. Issuing 1H03 12H03 13% 9% Acquiring Personal Loans Strong market share in all aspects of cards market* 18% 16% 28% 21% 19% # of Accounts 41 Cash Advances Purchases Outstandings Limits # - NPAT for Australian businesses only - *Source RBA July 2003 ANZ#42SECTION 5 Mortgages -strong growth drives performance • . . • • The momentum in ANZ's mortgages business in Australia and New Zealand continued during the year delivering a 9% increase in NPAT, with FUM increasing 19.9% on prior year. The cost of increased staffing required to maintain service levels in light of volume growth and the record level of internal commissions paid to the Network, as result of improved sales, slightly subdued the result. Strong growth was recorded in the Australian network and broker channels with 25% FUM increase on prior year. The New Zealand business has also delivered improved growth in the September 2003 quarter, following a period of flat or reducing volumes in 2002. Further development of the ANZ mortgage sales force capability is a priority for the 2004 year. Focus will continue to be on improving the capability of our mortgage specialists through sales, product and credit training, along with new sales tools. Additional specialist roles are being created in the branch network, and a significant increase in mobile managers is underway. A customer retention program also remains a key priority with dedicated Mortgage Customer Service and Retention teams. The teams proactively follow-up retention "triggers" and new sales opportunities. In conjunction with the network, a 25% increase in renewal activity has also been delivered during the year. A number of Business Improvement initiatives are well advanced and will continue to be a key focus in 2004. Specific initiatives include streamlining and automating business processes, the full rollout of the electronic lodgment of broker applications and enhanced behavioural credit scoring for existing customers. Monthly % $m 1,500 1,200 900 Renewed momentum in the branch network Australian Network & Broker sales Network Broker 600 300 0 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Prepayment Rate - Owner Occupied and Investment Loans* 2.5% 2.0% 1.5% 1.0% 0.5% Residential Investment Owner Occupied 0.0% Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 * Australia (excluding Origin) 42 ANZ#43SECTION 5 Personal Banking - The personal banking business has continued to invest in its Restoring Customer Faith ("RCF") program. This program aims to improve the "health" of the business. Significant improvements have been achieved: underlying health of the business improving... Staff advocacy. substantial improvement Customer satisfaction with branch increasing 100% 80% 81% 10 8.2 8.3 8.3 7.6 7.4 7.5 7.5 65% 8 6.5 60% 6 . Customer satisfaction scores for both Rural and Personal banking continue to improve, whilst complaints levels are falling. 35% 40% 4 20% NO 2 0 • Mystery shopping results, which measure service at the branch level through unannounced monthly visits, continue to improve. Branches can act on detailed recommendations for improvement. 0% Jul-01 Jul-02 Jul-03 Mar-02 Sep-02 Mar-03 Sep-03 Personal Rural Significant reduction in queue complaints* Branch refurbishments continue. Over 100 branches have been upgraded, making the total more than 160 since the start of the program. A new telling platform is in pilot stage. Mystery Shopping (% of branches with >75% score) 90% 85% 120 80% 75% 90 • Staff advocacy, being the % of staff that would recommend ANZ as a place to work has more than doubled since 2001. 90 70% 60 Staff skills have improved, with more than 4,200 staff trained in sales skills in the second half. New merchandising has been rolled out to support the sales process. 60% 30 50% 0+ Mar-03 Sep-03 43 Mar-02 Sep-02 Mar-03 Sep-03 *- average number of complaints per month, ANZ#44SECTION 5 ... and we are starting to see improved sales momentum... 000's 750 Total sales events increasing A$b 34 Increase in total deposit FUM The investments in the branch network are showing promising early results. Particularly in the second half, sales momentum has picked up across all main drivers of revenue: 32 700 30 650 28 • Total sales activity improved 8% in the second half, assisted by seasonality 26 T 600 24 550 22 ⚫ Deposit balances, for which the 20 business earn the full interest 20 500 margin, continue to grow strongly, increasing 9.7% in 2003 Mar-02 Sep-02 Mar-03 Sep-03 Mar-02 Sep-02 Mar-03 Sep-03 • Mortgages sales, the largest source of sales commissions, A$b Increasing mortgage increased strongly on the back of market demand and investment in mortgage skills 8,000- sales FUM 16% 7,000 Embracing insurance cross sell opportunities 40% 8% • Managed Investment sales 8% remained flat as investors 6,000 continued to favour conservative investments and property 200% 5,000 ⚫ Cross sell of insurance products improved from a low base, allowing 4,000 us to deepen the customer relationship. 3,000 Mar-02 Sep-02 Mar-03 Sep-03 Mar-02 Sep-02 Mar-03 Sep-03 44 ANZ#45SECTION 5 ... and continued growth in our core transaction products Positive momentum in access account openings since relaunch Our core transaction product suite is performing as we 000's expected: 1,800 • Product leadership was 1,750 Relaunch Momentum maintained in net new account openings '000 180 Opened Closed Net confirmed with ANZ 120 winning the industry 1,700 award for the best 1,650 transaction account • Account growth 1,600 60 continued to be positive 1,550 during 2003 with net growth of 118,000 1,500 T 0 accounts Jan- Jul- Jan- • Account behaviour is not materially different from accounts acquired before the launch of the new products 01 01 02 Jul- 02 03 Jan- Jul- 03 1H02 2H02 1H03 2H03 New transaction accounts have not led to lower average balances New transaction accounts have not led to higher transactions Index Index 100 100 • New customers are joining ANZ. 60% of new 80 80 accounts represent new 60 60 customers, and 40% have at least one other product 40 relationship 40 20 20 • Breakeven - we have now achieved breakeven on the new accounts 0 H 0 > 5 years 2-5 years < 2 years > 5 years 2-5 years < 2 years Average Balance -Average Income Monthly Transactions ANZ#46SECTION 6 Credit Quality 46 ANZ#47SECTION 6 Consumer & SME portfolios in good shape • Arrears profile (60 days) is approaching historical lows reflecting strength of Australia's retail sector. 2.50% 2.00% The consumer sector is robust with continuing low levels of unemployment and a low interest rate environment. 1.50% Arrears have decreased over the half, contrary to previous expectations SME Mortgages Credit Cards • Mortgage arrears continue to decline. . Quarterly behavioural review scoring in 1.00% the SME portfolio is contributing to a lower arrears profile. 0.50% • SME sector is benefiting from low interest rates and healthy business environment. 0.00% Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 0.45% Delinquency levels have continued to improve over the year and remain at 0.40% Mortgage arrears have improved across major product lines historic lows. RILS and Broker 0.35% Originated loans are continuing to 0.30% perform in line with the wider portfolio. 0.25% • Mortgages Loss Rates improved from 2.7bp to 1.8bp. 0.20% 0.15% 0.10% RILS Australia & NZ O/O Australia & NZ TPMI Australia 0.05% 0.00% + Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 47 TPMI - third party mortgage introducers 0/0 - owner occupied ANZ#48SECTION 6 Mortgages portfolio sound Strong LVR profile · An LVR analysis of ANZ's mortgage portfolio suggests it has sufficient equity margin to 80% sustain a reasonable devaluation in Australian residential property prices. 70% 60% • Stress testing conducted by ANZ showed that even under the most extreme scenario of; 50% . Unemployment rising to 10.3%, Mortgage rates increasing to 10.57% and property prices falling by 20%, the loss incurred 40% II LVR at origination Dynamic LVR 30% would be approximately A$90 million, or 0.12% of the portfolio. 20% 10% Emerging risks in apartment investment lending in near city locations in Sydney, Melbourne & Brisbane have been controlled by implementation of tighter policies. 0% 0-60% 61-75% 76-80% 81%+ $b 90 Strong growth in the mortgage portfolio Portfolio by product 77.0 100% 80 70.3 70 64.2 28 29 30 59.3 80% 60- 55.4 5 50 40 52322° 60% 40% 30 67 40 69 66 65 63 T 20 10 0 T Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 20% 0% 2001 2002 2003 II Home Loans Equity Loans ■RILS 48 ANZ#49SECTION 6 . Domestic portfolio remains in good shape Australia & New Zealand Risk Grade Profile Asset Quality Sept 2003 v Sept 2001 (Australia & New Zealand) Net Non Accruals • Net Specific Provisions $126bn $136bn $155bn 11.4% 11.3% 10.0% AAA to BBB down 50% down 32% . Economic Loss Provision rate down 5bps 55.2% 57.1% 58.4% BBB- • Lending Growth (over 70% due to mortgages) B or lower ratings continue to decrease 23% 49 49 14.9% 14.2% 15.0% BB+ to BB 15.0% 14.7% 14.2% BB- 3.5% 2.7% 2.4% >BB- Sep-01 Sep-02 Sep-03 ANZ#50SECTION 6 US Energy Portfolio - • Management has been proactive in addressing Group exposure to the global energy sector Concentration risk associated with exposure to energy lending as a issues remain, but exposure continues to reduce Total Limits (Excl Settlement) $1.8bn $1.7bn proportion of the aggregate loan book has been mitigated by management AAA to BBB 36% 30% $1.3bn initiatives to exit or restructure a number of key corporate lending positions in the US 28% BBB- 16% 22% • 15% Outstandings $0.9bn (65%) • A number of high risk exposures remain, and are BB+ to 27% 23% 18% being actively managed (including sell down in secondary markets). BB- Other Committed $0.4bn (30%) 24% • We expect further specific B+ to CCC 12% 14% provisions but at a reducing Non Uncommitted <$0.1bn (5%) rate and that these can be absorbed within ELP 9% 11% 15% Accrual Sep-02 Mar-03 Sep-03 No of Cust (Total 20) Investment Grade 51.6% 51.5% 43.0% 9 Non Accrual 9.2% 10.8% 14.8% 4 Specific Provisions (AUD) 9.7m (six months) 9.1m 46.1m n/a Note: 1. Includes utilised guarantees and market related products 2. Includes US domiciled exposures only (Excludes Mexico) 50 ANZ#51SECTION 6 Quality of Group Telco lending book has also improved • ANZ Group has been proactive in addressing the telco concentration risk of its global lending asset portfolio -ANZ continues to manage down its exposure to the industry, particularly offshore. Offshore assets now represent 42% of the Telco portfolio, down from 52% in Mar-03 and 57% in Sep-02. -The risk profile of the telco industry is improving with increased financial flexibility stemming from strong free cash generation and debt reduction Total Limits (Excl Settlement) $5.3bn $4.8bn AAA to A $3.8bn 52% 63% 64% • Outstandings $2.1bn (56%) BBB+ to BBB 9% Other Committed $1.2bn (30%) 4% BBB- 22% 15% 5% • 14% · During the Full Year, Group Uncommitted $0.5bn (14%) "Top 6" committed telco BB+ to BB- 10% 8% 5% exposures declined (as a % of B+ and below 7% 10% 12% ACE) from 38% to 25%. Sep-02 Mar-03 Sep-03 No of Cust (Total 39) Investment Grade 83.1% Non Accrual 5.0% 81.7% 3.4% 82.8% 19 2.1% 3 51 ANZ#52SECTION 6 Group risk grade profile ANZ Group - Outstandings $142bn $143bn $149bn $158bn $165bn AAA to BBB 15.6% 13.5% 14.5% 14.1% 12.8% 51.4% 53.9% 54.0% 53.8% 55.3% BBB- BB+ to BB 14.9% 14.7% 14.3% 14.9% 15.3% Total investment grade as at Sep 03: $112.7bn or 68.1% of the portfolio BB- 14.2% 14.2% 13.9% 14.0% 13.7% >BB- 3.9% 3.7% 3.3% 3.2% 2.9% Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 B+ to CCC 3.0% 2.8% 2.5% 2.5% 2.3% Non Accrual 0.9% 0.9% 0.8%52 0.7% 0.6% ANZ#53SECTION 6 Specific provisions down 28% on 2002- no large single provisions Specific Provisions Full Year Specific Provisions by size $m 400 Significant impact from single customers 100% 90% 350 80% 300 70% < $5m Grindlays credit indemnity* $30m - $40m 3 customers 250 60% 200 50% 40% 150 30% 5 customers 7 2 customers $20m - $30m customers 100 20% $5m - $10m 50 $10m - $20m 10% 0 +0% • Sep- Mar- Sep- 98 99 99 00 Mar- Sep- 00 Mar- Sep- Mar- 01 01 Sep- Mar- Sep- 02 02 03 03 Net specific provisions - $m (LHS) % International SPs (RHS) ELP charge $m (LHS) 53 No major individual specific provisions during the year • Australian net specific provisions of $324m in 2003 included $33m further provision on Pasminco FX contracts, $20m for aircraft leases in Esanda, and $40m for a single corporate loss in the second half. • *Settlement of Grindlays credit warranties, finalising ANZ's commitment to meet Grindlays credit losses. ANZ#54SECTION 6 $m 800 700 600 500 400 300 200 100 0 T T T 1999 New Specific Provisions down 28% on the 2002 year 2000 Geographic Specific Provisions -100 Aust/NZ UK/US 2001 2002 2003 Asia Other Inter 54 Specific Provisions by Source $m 250 200 214 145 150 131 132 100 59 59 47 50 0+ 2002 136 115 109 72 56 38 2003 Energy Asset Finance Other Offshore II Domestic Corporate ■Consumer Finance Other ANZ#55SECTION 6 Non-accrual loans continue to fall Historic $m 1800 Gross Non-Accrual 1662 1543 Loans (LHS) $m 1000 1.75% Non-Accrual Loans/ Loans & advances (RHS) 1500 1391 1260 1203 1200 900 900 Geographic Gross Non-Accrual Loans 1.50% 792 800 II 2000 2002 II 2001 2003 651 681 643 1.25% 600 1007 1.00% 523 522 770 699 0.75% 400 657 628 600 525 0.50% 300 Net Non-Accrual Loans (LHS) 200 0.25% 59 59 80 60 0.00% 0 1998 1999 2000 2001 2002 Sep-03 Aust NZ 55 37 22 22 388 Inter 463 ANZ#56SECTION 6 New non-accruals reduced 23% on 2002 Geographic New Non-Accrual Loans $m 1600 1400 1200 1028 1000 930 800 600 400 200 1356 1285 New Non-Accrual Loans by source $m 350 331 300 250 988 200 150 100 50 0 T 186 190 274 253 200 168 150 154 159 120 88 2002 2003 II Energy Domestic Corporate Asset Finance Aust/NZ I UK/US Asia Other Inter Consumer Finance Other Offshore Other 56 ANZ#57SECTION 6 Existing and future problem loans are well provided for 60% • The period 1998 through 2003 has seen Group GP trend down 16% to 101 bps, consistent with the sustained de-risking of the Group lending book. 48% 50% • As at September 2003, gross non-accrual loans were 61 bps of GLAS (or A$1.0bn). Of this, 48% was covered by specific provisioning. • Group levels of general and specific provisioning compare favorably with Australian banking peer group. 40% 30% 20% 10% Specific Provision/Non-Accrual Loans 31% 30% 43% 0% ANZ Sep 03 CBAJun 03 NAB Mar 03 WBC Mar 03 % General Provision/RWAS 1.20 1.01 0.95 1.00 0.90 0.75 0.80 0.60 0.40 0.20 0.00 T ANZ Sep 03 CBA Jun 03 NAB Mar 03 WBC Mar 03 ANZ Note: 1. As per most recent company financial reports for CBA, NAB and WBC 57#58SECTION 6 Proactive reduction in volume of "top 10" client committed exposures S & P Rating • ANZ has implemented credit management policies to diversify loan A- book exposure by reducing the volume AA- of "top 10" client committed lending. A+ This has led to a reduction in client concentration risk AAA • Sustained A management of client exposures has reduced the AAA sensitivity of the capital base of "top BBB+ 10" clients (to ~75% of ACE in 2003 from ~135% of ACE in 2001) A- BBB+ Top 10 Committed Exposures(1) Top 10 Lending Exposures as % of ACE(2) 140% 130% 120% 110% 100% 90% 80% Position of top 10 70% exposures as at Sep 02 60% 50% T A 40% AUDM 0 250 500 750 1000 1250 Sep-2001 Sep-2002 Sep-2003 -Funded = Unfunded Note: 1. Limits represent total 7 month limits excluding uncommitted and non-recourse, net of credit derivatives 2. Excludes non-recourse and uncommitted facilities 58 ANZ#59SECTION 6 Basel II will provide some benefits, but adjustments expected for local market Change in RWA under Basel II¹ • QIS 3 results reflect the underlying QIS 3 results quality of ANZ's assets, and support % ANZ Advanced IRB ANZ's move to a lower ACE target range Aust Majors Average G10 major bank average 0 • Corporate portfolio in particular produces a RWA reduction consistent with lower levels of risk -10 -20 -13 • We do not expect that APRA or Ratings Agencies will allow Australian Major banks the full benefit of the potential capital relief available under Basel II -30 -40 -50 -43 -49 • Results reinforce why Australian banks have lower Tier 1 and ACE ratios -60 Note: 1. 2. 3. ANZ Regulatory Capital under Basel II by key asset class (calculated at 8% of risk weighted assets) The reduction in RWAs using Advanced IRB outcomes (excluding operational risk) when compared with current accord capital requirements can be used as an indicator of the relative riskiness of a bank's assets. RWA calculations were performed using the capital functions used in QIS 3.0 These may change upon the finalisation of Basel II These results exclude any impact from NBNZ Corporate (incl SMEs) Residential Mortgages 59 II Current Foundation Other Standardised ■ Advanced ANZ#60The 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 Simon Fraser Head of Investor Relations ph: (613) 9273 4185 fax: (613) 9273 4091 e-mail: [email protected] 60 60 ANZ#61Copy of presentation available on www.anz.com 61 ANZ