#1Investor Presentation Australia and New Zealand Banking Group Limited November 2002 ANZ#2Outline • Result review - - - Overview Revenue/Costs Credit Quality • Delivering for all stakeholders • Strategy • Outlook ANZ 2 Investor Presentation#3Delivering on our commitments . Performing well - record profit of $2,168m* • Exceeded all targets* 1 EPS Growth 17% - ROE 21.6% - Cost Income ratio 46.0% • Strong capital position, well provisioned • Record staff satisfaction - up 16% to 78% • Exciting Restoring Customer Faith pilot Specialised business strategy operating well • Stretch target for 2003 of 10% EPS growth * Before significant transactions 3 Investor Presentation ANZ#4Investor Presentation Building a credible track record % $m NPAT 2400 2168 24 1870 22 1900 1747 ROE 21.6 20.2 19.3 20 1480 18 1400 1024 1106 16 17.6 17.2 14 15.9 900 12 400 10 1997 1998 % Income/Expenses $b 65 8 250 7 Total Shareholder Return 60 200 6 198 55 5 150 100 171 4 101 137 50 3 100 2 84 45 50 1 40 0 1997 1998 1999 2000 2001 2002 ANZ 2002#5A diversified portfolio performing well Personal Banking Australia Mortgages Institutional Banking Transaction Services Small Med Business Corporate Banking Personal Banking NZ Consumer Finance Asset Finance Foreign Exchange Structured Finance Group Treasury Wealth Management Corp Finance & Advisory Asia/Pac Personal Banking Capital Markets ING JV/ANZ FM 2002 NPAT $m 2nd half NPAT $m NPAT increase NPAT decrease Prior period NPAT 100 200 300 0 100 200 300 5 Investor Presentation ANZ#6Provisioning charge reflects conservative management ELP Charge $m ELP adjustment 350 ELP $ ELP BP's 300 258 252 256 246 250 241 bp's 80 309 301 70 290 56 60 50 200 45 42 42 43 40 40 42 150 T 36 35 30 100 20 50 10 0 0 Mar- Sep- Mar- Sep- Mar- Sep- Mar Sep- 99 99 00 00 01 01 02 02 6 Investor Presentation • ELP portfolio level adjustment continued ⚫reflecting ongoing global economic uncertainty ⚫calculated as one notch downgrade across GSF portfolio • Domestic ELP rate declining • ELP adjustment likely to continue until international defaults stabilise ANZ#7Consumer portfolio continues to improve % Arrears > 60 days 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Mar-01 Jun-01 Sep-01 Oct-01 Nov-01 7 Investor Presentation Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 • Consumer sector in good shape, with continuing low levels of unemployment • Mortgage arrears at record lows - unlikely to be sustainable • Ongoing focus on collections management • Scorecards remain "tight" Small Business Mortgages Cards & Personal Loans • Personal & SME Businesses - Overall (excl Asset Finance, Pacific, Asia) ANZ#8% Mortgage outlook - 60 day arrears improving 0.80 0.70 0.60 0.50 0.40 0.30 0.20 Home Loan 0.10 Res Inv Loan 0.00 Jan- 01 May- Sep- Jan- 01 01 02 May- Sep- 02 02 % change 60 50 40 30 20 10 0 -10 -20 1967 1969 House prices well below previous peaks slight deterioration Sydney Melbourne AND 2001 • ANZ has not allowed FHOG to be the source of minimum equity requirement • Behavioural scores remain stable • Scorecards tightened in 2001, resulting in higher quality borrowers • Unemployment, a key driver of default, continues to trend downwards • Scenario analysis at 95% confidence suggests loss not exceeding 4-6 bp. over next 12 months, compared with ELP of 5 bp • Based on uncommitted monthly income at time of application, 100% of customers could meet a 1% rise in interest rates, and 97.2% could meet a 2% increase without rearranging affairs 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 Investor Presentation ANZ#9Domestic corporates in good shape, some concerns in ANZIB offshore ANZIB Risk Grade Profile* C&IB, Asia & GTS Risk Grade Profile* $40.8bn $38.7bn $39.4bn $15.9bn $15.0bn $14.2bn AAA to BBB+ 34.9% 32.8% 37.7% 42.1% 44.4% 47.3% BBB to BBB- 26.8% 28.8% 26.3% 33.3% 29.9% 30.0% BB+ to 22.9% 23.0% BB 22.3% 13.2% 12.9% 15.3% BB- 11.1% 11.1% 3.8% 10.6% 3.4% 2.5% > BB- 4.3% 4.3% 6.4% 3.1% 6.8% 8.7% Sep-01 Mar-02 Sep-02 Sep-01 Mar-02 Sep-02 B+ to CCC 3.0% 3.2% 2.4% 4.5% Non-accrual 1.3% 1.1% 0.7% 1.9% 2.7% 4.1% 4.1% 4.6% >BB = B+ B, B-, CCC & non-accrual 9 Investor Presentation * Risk grade profile by outstandings ANZ#10Non-accrual loans have decreased due to domestic reductions Historic Geographic $m 1800 Gross Non-Accrual Loans Gross Non-Accrual Loans (LHS) $m 1662 % of total lending assets 78% 13% 9% Non-Accrual Loans/ Loans 1000 1543 & advances (RHS) || 1999 869 1500 1.5% 1391 1260 1203 ■ 2000 792 800 11 2001 2002 681 1200 651 643 623 1.0% 600 900 900 523 600 300 770 699 657 628 400 0.5% Net Non-Accrual Loans (LHS) 200 388 80 50 59 37 0 0.0% 0 1998 1999 2000 2001 2002 Aust NZ Inter 10 Investor Presentation ANZ#11% 200 180 160 140 120 100 80 60 40 20 0 Overall - provisioning levels strong Provisions/Non Accrual Loans ANZ Australia Canada Source: CSFB 11 Investor Presentation Germany France UK GP/RWA's % 1.20 1.15 1.10 1.06 1.05 1.00 0.96 0.95 0.90 0.88 0.85 0.80 0.75 0.70 ANZ CBA NAB WBC 1.05 Sep 02 Jun 02 Mar 02 Mar 02 ANZ#12Outline • Result review - - - Overview Revenue/Costs Credit Quality • Delivering for all stakeholders • Strategy • Outlook ANZ 12 Investor Presentation#13Delivering on our commitments to shareholders Specialised business units performing well - 14 of 16 recorded higher profits year on year Specific provision unusually high, but cumulative specifics well covered by cumulative ELP from inception in 1997 Major new governance and transparency initiatives Substantially enhanced disclosure on capitalised - - - - expenses, asset quality, options expense, compensation · Upgraded audit policy introduced Recognition for disclosure and transparency Remuneration practices substantially reformed 13 Investor Presentation ANZ#14Delivering for staff, and increasingly a preferred employer Staff satisfaction up Strong employment brand % 90 78 80 70 60 50 40 T T 62 12000 71 65 10000 8000 46 40 6000 30 20 4000 225 positions 2000 10 0 0 Satisfaction ANZ Regard ANZ Values 2001 2002 ■ 2001 2002 ■ Graduate Applications 14 Investor Presentation ANZ#15New customer initiatives getting real traction Net new account openings up 165%* Key indicators show Restoring Customer Faith program is beginning to deliver 000's 200 180 160 140 120 100 127 80 159 60 40 20 0 Opened Closed Net 32 15 2001 - prior corresponding period * Victoria RCF pilot Investor Presentation 165% 181 Opened Closed 96 Net 2H 2002 Other Vic Indicators States Revenue growth 5.1% 4.0% 85 Staff advocacy 65% 62% Customer satisfaction 6.8 6.6 FUM growth 8.0% 6.2% 2002 - 30 weeks since launch ANZ#16Current performance issues addressed Issue Offshore credit losses NZ consumer satisfaction Response • Reductions in credit limits • Re-focus strategically • Greater local autonomy and resourcing • Roll out Restoring Customer Faith Consumer Finance 2nd half Management reorganisation • Restructure programs Technology project benefits • Wind down of major projects Appointed MD major programs JV performance below plan • Accelerate integration • Capital return hedged 16 Investor Presentation ANZ#17Clear strategic investment priorities Options Invest in options for longer term Asia/ Pacific Refocus Lower risk orientation Eliminate concentrations Global Businesses Grow Domestic Businesses Invest for growth and position 17 Investor Presentation ANZ#18Opportunities for growth Opportunity Personal Banking Corporate & SME New Zealand Approach • Full rollout Restoring Customer Faith Expand network in growth locations. • Investment spending budgeted Leverage business integration synergies • Autonomous customer organisation • Rollout Restoring Customer Faith Wealth Management • Maintain high investment spending • Lower profit volatility from JV Institutional & ANZIB Leverage leading relationship position • Leverage business integration synergies 18 Investor Presentation ANZ#19Key priorities for 2003 • Rollout Restoring Customer Faith, reconnect with community • Complete JV integration. Leverage distribution opportunity ● Reposition cards and mortgages for tougher environments ● Narrow focus of offshore activities to reduce risk ● Capture share of cyclical upswing in corporate lending and SME • Implement three major strategic cost programs, fewer projects • Accelerate shift in performance culture and identify and develop the next generation of leaders 19 Investor Presentation ANZ#202003 targets stretching but unchanged 2001 2002* 2003 Target EPS growth 10% 17% 10% ROE 20.2% 21.6% 20% Cost-income ratio 48.0% 46.0% 45% ACE Ratio 5.9% 5.7% 5.25% -5.75% Credit rating AA- AA- AA- 20 Investor Presentation *excluding significant transactions ANZ#21Summary - delivering on our commitments • Exceeded targets in a difficult year • Specialisation strategy working • Becoming employer of choice Increasingly delivering for customers. and the community • Risks being addressed . • Moving from "perform" to "perform and grow" 2003 target 10% EPS growth 21 Investor Presentation ANZ#22Copy of presentation available on www.anz.com ANZ#23The 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: [email protected] 23 Investor Presentation ANZ#24Supplementary Information Pack Australia and New Zealand Banking Group Limited November 2002 ANZ#25Additional information on strategy 25 Investor Presentation ANZ#2626 - Our growth philosophy unchanged – but primary focus on organic out-performance Organic out-performance Portfolio reshaping • Extend specialisation • Grow customer numbers • Increase share of wallet • Drive productivity • Invest in high growth areas • Build specialist capabilities • Exit weak positions • Risk reduction Our targets • Revenue growth materially higher than expense growth • Take business units to sustainable leadership positions • Build a range of strategic options Transformational moves Step changes in positioning • Creating new growth options • Proactively shaping industry Investor Presentation ANZ#27- Consumer portfolio – significant opportunity for ANZ in domestic markets Share of Customers* Priorities Deliver on promise of Restoring Customer Faith % 50 40 30 20 10 0 ANZ CBA NAB WBC Deliver on JV Improve community perceptions Wallet Share* Continue product innovation Utilise CRM capabilities Target market share growth of 1% pa in key markets % 60 50 40 30 20 10 0 ANZ CBA NAB WBC * source: Roy Morgan Research 27 Investor Presentation ANZ#2815 10 % - Corporate portfolio – positioned for upturn, targeting fee income System Business Credit Growth* Corporate Portfolio Revenue Mix LO 5 0 -5 -10 1990 1992 1994 1996 1998 • Capture expected stronger lending growth from SMB and middle market corporates • Focus on fee income in institutional business 28 Investor Presentation * Forecasts economics@anz 100% 90% 35 80% 43 70% 60% 50% 40% 65 30% 57 20% 10% 0% Today 2005 Aspiration Non-Interest Interest ANZ#29C&IB successfully managing the transition to lower balance sheet intensity 700 600 NIACC growth greater than profit growth Higher lending fees, flat balance sheet 250 642 26% 510 200 T 50 50 45 40 500 14% 400 377 331 300 200 100 0 NPAT 35 150 30 T 25 100 20 15 50 10 5 0 0 NIACC 1999 2000 2001 2002 Lending Fees Balance Sheet ■ 2001 11 2002 29 Investor Presentation ANZ#30Asia/Pacific - create low risk growth options • East Asia and the Pacific are our priorities • Focus on modest, low risk options in the Asian consumer sector • Leverage Panin experience and our core capabilities Strengthen position in the Pacific 30 Investor Presentation East Asia Pacific ANZ#31High Market Attractiveness We will continue to shift the portfolio towards more attractive segments Source of profit - today 5-10% 15-20% Small Bus Consumer Banking 25-35% Low Weak Wealth ANZIB Mortgages Source of profit ~2005 High Cards Corporate Asset Finance 35 - 45% Strong Current ANZ Position 31 Investor Presentation Market Attractiveness 5 - 10% < 10% ~80% Low Weak ANZ Position Strong ANZ#32Executive options will only reward out-performance against market Price Executives rewarded for value premium after allowing for market growth Each 1/2 year the options will be issued at the prevailing weighted average five day price Standard TSR Option strike price ANZ share option indexed by movement in the S&PAB2001 (The value below this line is passed to executives under a conventional option) S&P200BAI ANZ Share Price Year 1 Year 2 Year 3 Year 4 Year 7 etc... 32 Investor Presentation ANZ#3333 Additional information on 2002 results Investor Presentation ANZ#34% Interest margins stable, lending and deposit volumes up Interest Margins $b Average Lending & Deposit 4.50 100 3.93 4.00 3.50 3.06 3.20 8 80 90 80 3.00 2.84 2.79 2.83 70 2.50 2.35 61.6 2.00 2.25 57.2 60 1.61 53.9 1.50 1.21 50 1.00 1.15 1.16 40 0.50 30 20 Sep- Mar- Sep- Mar- Sep- 00 01 01 02 02 Corp Bkg Bus ANZIB →Mortgages Personal Asset Fin Group 34 Investor Presentation Volumes 46.0 45.3 43.6 92.8 88.6 83.0 Mortgages Business Deposits ■Sep-01 || Mar-02 ■Sep-02 * Business Lending includes Corporate, ANZIB and Small Business Segments ANZ#35Healthy underlying income growth $m 6900 6800 6700 6600 6500 6406 72 6400 41 6375 6300 6200 6100 6000 2001 ANZ/JV 6.9% 439 6814 Acquisitions & FX Impact Adjusted revenue base Underlying growth 2002 Income Drivers • Mortgage outstandings up $8.9b, partly offset by $2.7b decline in Corporate lending assets • Deposits up $8b, with an equal increase in both Personal and Corporate • Margins were flat over the year at 2.77%, although second half slightly higher than first half • Lending fees up 11%, principally driven by corporate businesses • Non lending fees up 8%, with strong transaction volumes in consumer finance a major contributor 35 Investor Presentation 6.3% ANZ#3636 2200 $m Cost income ratio on track to meet target of 45 • Peer average CTI (%) 70 impacted by funds management acquisitions Expenses 2000 65 Cost Income Ratio $31m expense -Peer Average CTI* reduction from sold 1800 60 1600 1400 1200 1000 Sep-97 Mar-98 Sep-98 Mar-99 * Source: CSFB Investor Presentation Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 45.5 Sep-02 55 50 45 40 businesses • Effective half on half cost growth of 1.8% • We will invest more in growth areas, particularly personal businesses • 2000 $361m restructuring provision fully utilised, ongoing $60m+ charge likely ANZ#37Additional credit quality information ANZ 37 Investor Presentation#3838 -20 50 40 40 30 20 20 10 0 Change in Sydney House Prices (%) -10 1981 1983 Investor Presentation 1985 1987 60 60 House prices - unemployment a key driver Sydney house prices v change in unemployment -3 60 Sydney house prices v change in interest rates 60 1989 1991 1993 1995 Sydney House Prices Change in Unemployment 50 40 40 30 20 20 10 10 0 Change in Sydney House Prices (%) -10 Change in NSW unemployment (inverted scale) -2 O 3 + 5 1997 1999 2001 1981 1983 1985 1987 1989 1991 1993 1995 1997 -20 -Sydney House Prices Change in Mortgage Rate ANZ Change in mortgage rates (inverted scale) -6 + ○ 2 + 1999 2001 6#39Key drivers of house prices expected to remain benign % 12 % Unemployment 18 Mortgage rates 11 10 9 80 7 6 39 5 4 90 92 94 96 98 00 02 04 Investor Presentation 16 14 12 10 8 16 4 90 92 94 96 98 00 02 04 Source: economics@anz ANZ#40Scenario analysis from ANZ economics 20 18 16 14 12 10 8 6 4 2 0 Housing credit growth 12 10 8 6 4 2 O Business credit growth Main Case Stronger Case Weaker Case - Domestically Driven Weaker Case - Globally Driven 40 Investor Presentation ANZ#4141 Assumptions underlying scenario analysis Main case • Global economy: moderate rebound in global economy • Moderate tightening in policy - 50 bps over the next 12 months • Moderating house price gains (3-5%) Housing investment falls, consumption slows, but business investment picks up Stronger case • Global economy: as per main case • Monetary policy as per main case Ongoing house price gains (8-12% growth) . Consumption & business investment continue to grow firmly • Credit growth strong Weaker case - domestically driven • Global economy: as per main case • 3x50bp interest rate rises up to Mar quarter 2003 • Negative 3% house prices • Flow through to weaker employment, business investment and housing. construction and turnover which in turn feed through to Credit and deposit volumes Source: economics@anz Weaker case - globally driven • Global economy sharply weaker - double dip US recession • Interest rates cut to 4.00% • Negative 6% house prices (peak to . trough) Negative employment growth, mild. recession, much weaker business. investment which in turn feed through to Credit and deposit volumes Investor Presentation ANZ#42Fallen Angels phenomenon continues March 2001 ratings for Full Year 2002 new non accrual loans BB CCC B 1% 9% 4% 42 Investor Presentation BBB+ to BBB- 86% Speed of collapse difficult to model • We continue to diversify the portfolio • SCCL's further reduced and refined ANZ#43Specific provisions again impacted by large corporate collapse $m 400 350 300 250 200 150 100 Provisions Single customers 100% 2nd half Specific Provisions by size 90% 80% 70% < $5m 60% 1 customer 50% 40% 30% 2 customers >$100m $5m - 20% 1 customer $10m 10% $10m - $20m $20m - $50m 0% 50 0 Mar-Sep-Mar- Sep- Mar- Sep- Mar- Sep- Mar-Sep- 98 98 99 99 00 00 01 01 02 Net specific provisions $m (LHS) - % International SPs (RHS) - ELP charge $m (LHS) 02 43 Investor Presentation • Only 4 customers with specific provisions greater than $10m ANZ#44Global telecommunications portfolio in reasonable shape Telco Risk Grade Profile* Exposure by geography AAA to BBB+ 62.6% $3.4b 83.8% investment grade 35% BBB to BBB- 21.2% $1.2b BB+ to BB BB- > BB- 6.7% 8.7% $0.5b $0.4b 0.8% # of customers Sep-02 Total Limits (AUD) $5.5b 49 B+ to CCC Non Accrual 1.9% $0.1b 4.8% $0.3b 4 3 >BB = B+ B, B-, CCC & non-accrual *Risk grade profile by limits 44 Investor Presentation 3% 50% 12% Aust/NZ (97.6% Investment Grade) Americas (69.3% Investment Grade) UK/Europe (71.1% Investment Grade) Asia (34.5% Investment Grade) ANZ#45Global energy portfolio but containable Global Energy Portfolio* AAA to BBB+ BBB to BBB- 46% $4.5b - some issues, Exposure by geography 9% 21% $2.0b US Energy Portfolio 25% 4% 9% 53% BB+ to BB 32% $0.7b 24% $2.3b 16% $0.36b Aust/NZ (77.5% Inv Grade) BB- 1% 36% $0.8b > BB- 8% $0.8b 16% $0.36b (AUDm) Total Limits B+ to CCC Sep-02 $9.6bn 4.8% $0.46b # of customers Sep-02 # of customers Americas (43.5% Inv Grade) UK/Europe (64.6% Inv Grade) Asia (61.0% Inv Grade) 78 $2.2bn 26 12 12.2% $0.27b 5 Middle East (98.0% Inv Grade) Non Accrual 3.2% $0.3b 5 4.0% $0.09b 2 >BB = B+ B, B-, CCC & non-accrual * Risk grade profile by limits ANZ 45 Investor Presentation#46Offshore SCCLs now in place Comparative SCCL Customer Limits 100% 60% Lending type SCCL % for offshore Corporates (excl. GSF) indicative based on BBB- grading Capped at AUD 300m 80% Capped at AUD 100m 25% > 100% Security < 100% Security 75% 100% Australia/New Zealand OffShore Corporates Direct Exposure (Including on and Off Balance sheet) Contingent Indirect or Market Related Exposures Exposure GSF Direct Exposures capped at AUD 450m for > 100% Security and AUD 200m for < 100% Security 46 Investor Presentation ANZ#47Cumulative ELP well above specific provisions $m 3500 3000 2500 2000 1500 1000 500 $m GP top up 700 600 500 400 300 200 100 0 0 1997 1998 1999 2000 ELP (LHS) 2001 SP (LHS) 2002 Cumulative difference (RHS) 47 Investor Presentation Cum + $250m top up (RHS) ANZ