2000 annual results
DESCRIPTION
2000 Annual Results. Australia and New Zealand Banking Group Limited 26 October 2000 John McFarlane Chief Executive Officer. 2000 Annual Result. Strong result – better than expectations $1,703m up 15% $885m second half up 8.2% on first half We delivered on all our commitments - PowerPoint PPT PresentationTRANSCRIPT
2000 Annual ResultsAustralia and New Zealand Banking Group Limited
26 October 2000
John McFarlaneChief Executive Officer
Page 2
2000 Annual Result• Strong result – better than expectations
– $1,703m up 15%
– $885m second half up 8.2% on first half
• We delivered on all our commitments
– Financial performance
– Rebalancing the portfolio
– Reducing risk
• Restructuring program accelerates strategy
– Sensible application of surplus capital
– EPS accretive
– Superior to buyback alternative
Page 3
Results summary• Operating profit after tax before abnormals:
– Full year: $1,703 million, up 15%
– Second half: $885 million, up 15.8% on 1999, and 8.2% on first half 2000
• Earnings per ordinary share up 15% to $1.04
• Return on ordinary shareholders’ equity of 18.3%, up from 17.2%
• Final dividend 35 cents, up 5 cents with 100% franking. Full year dividend 64 cents, up 14%
• $361m restructuring charge to accelerate new strategy
• Net abnormal profit $44 million - Grindlays profit largely offset by restructuring and other provisions
• Costs flat. Cost income ratio down to 51.7% from 54.4%
Page 4
Our three year commitments to shareholders
• Achieve superior financial performance– Deliver double-digit earnings growth
– Improve return on equity
– Bring down our cost income ratio to 53%
• Re-balance our portfolio– Increase proportion of Personal business
– Enhance leadership position of Corporate
– Simplify and focus our International business
– Build momentum in eCommerce
• Reduce risk
Page 5
We have delivered superior financial performance
1171 1175
1480
1703
400
600
800
1000
1200
1400
1600
1800
1997 1998 1999 2000
$m NPAT
CAGR 13.3%
18.3
16.915.5
17.2
10
12
14
16
18
20
1997 1998 1999 2000
% ROE
51.7
54.5
60.963.1
45
50
55
60
65
1997 1998 1999 2000
Cost Income Ratio
100
100
84
135
020406080
100120140160
1997 1998 1999 2000
Total Shareholder Return
Page 6
We have re-balanced our portfolio
302
772
547
647251
149
1997 2000
NPAT Loans & Advances
PFS
CFS
International
41577
65264
46861
456847966
5930
1997 2000
27%
50%
23%
49%
41%
10%
56%
39%
5%
43%
49%
8%
• Includes Grindlays
• Excludes Group
Page 7
Portfolio breakdown - indicative
International
PersonalCorporate
Other
0
100
Cards
Wealth Mgmt
Mortgages
Funds Mgmt
General Banking
Small Business
Corporate
Foreign Exchange
Asset Finance
Capital Markets
Institutional
ANZIB Financial Services
Transaction Services
0 100AsiaPacific
%
* Excluding Grindlays ($127m)
$1,703m*
40m*
$772m $647m
International CustomerBusinesses
100
0
%
Personal Corporate
Page 8
We continue to reduce risk
43
3936
20
25
30
35
40
45
AN
Z 1
999
AN
Z 2
000
AN
Z 2
000
- ex
Gri
ndla
ys
ELP Factors
bp’s
1997 1998 1999 2000
Market Risk (Av. VaR)
A$m2323
5.4 4.4
• Beta reducing towards 1.0, in line with peer average
Page 9
We didn’t get everything right – firm action taken
• Personal loan portfolio
• International provisioning from historical book
• Panin writedown to market
• Took action to put historical Grindlays issues behind us
Page 10
Accelerating our transformation program
• Standardisation and rationalisation of IT and processing platforms
• Rationalisation and upgrading of EFTPOS network
• Transformation of Branch Network
• Improving efficiency in Asia/Pacific by rationalising IT platforms and centralising back office processing
• Establishing new business platform for Esanda
35 Initiatives across our portfolio of businesses including:
Expected cost reduction
$300m
Page 11
Building for the future - recap on our strategy
Proposition
• Specialists will win over conglomerates
• Corporations need to embrace new technologies
• Value depends on performance and growth
Strategy
• Reconfigure ANZ as a portfolio of 21 specialist businesses
• An e-Bank with a human face
• Drive results whilst investing in growth businesses
Perform and Grow
e-Transform
Specialise
Implications
• Specialist approach to customer and product businesses
• Transform the way we do business by using IP technology
• Meet expectations, fund growth by cost reduction
Page 12
Portfolio strategy should reflect degree of globalisation and leverage real capabilities
Imp
act
of
glo
balis
ati
on
ANZ’s capability
FX
Institutional Banking
Mid Corporate
GSF
Custody
Capital MarketsTrade
Esanda
B2B
General Banking
Small Business
Mortgages
CardsB2C
now
Late
rN
ot
yet
Less developed
At par Local leader
Regionally distinctive
Globally distinctive
Soon
Wealth Management
Funds Management
Page 13
e-Payments
Gen Banking
Corporate
FM
Mortgages
GSF
Esanda
Wealth
FXInstitutional
Different businesses need different strategies
Low
Low
High
High
Invest for rapid growth
• Defend position and return
• Grow selectively
Create new businesses
• Optimise performance• Identify new growth products
ROE
MarketGrowth
Business size by NPAT
Small BusCap Mkts
Cardse-Asia
GTS
Page 14
Balancing the autonomy of each business with strong leadership from the centre
• Prime accountability for profit and value
• Freedom to pursue opportunities within agreed boundaries
• Operate using agreed set of platforms, systems and shared services
• Transfer pricing based on market - no cross subsidisation
• Drive group strategic direction and set policy
• Portfolio management and resource allocation
• Cross-Business Unit synergies
• Control and oversight of risk, brands and technology
Business Unit Corporate Centre
Page 15
Personal Financial Services
Peter Hawkins
General Banking
Wealth Managemen
t
Small Business
Mortgages Cards Funds Management
anz.com
systems CRM SSP brand risk management
Th
em
e
Drive sales and
efficiency
Invest to grow
Aggressively rebuild
Maintain profitable
growth
Accelerate growth
Reinvigorate and grow
Prio
rities
•Advanced marketing/ segmentation
•Straight through processing
•Lower cost to serve
•Expert advice
•Open architecture
•“Wrap” facility
•Seamless access
•Build profitable market share
•Relationship based proposition
•Redesign end-to-end processes
•Maintain distribution strength
•Straight through processing
•“Best of breed” delivery platform
•Data mining
•Exploit growth opportunities
•Leverage distribution channels
•Optimise products/ capabilities
•Double FUM by 2003
AccountabilitiesPFS 50%Group 50%
Page 16
ANZ in the medium term
• Material reallocation of resources
• Substantial e-transformation reducing costs and focused service
• Performance optimised– EPS, ROE, investment– capital management
• Transformational cultural change
• Substantial portfolio shifts
• Narrower, more focused portfolio with leading positions
• Increased investment in high growth business
• Modern performance culture
• Higher stock rating
ANZ in 1 - 2 years ANZ in 3 - 7 years
Page 17
Goals going forward
• EPS growth above peer average (target 10+%)
• ROE over 20%
• Cost-income ratio comfortably in the 40’s
• Inner Tier 1: 6%
• Maintain AA category credit rating
2000 Annual ResultsAustralia and New Zealand Banking Group Limited
26 October 2000
Peter MarriottChief Financial Officer
Page 19
Highlights
Earnings growth of 15% (13.3% compound)
Return on equity 18.3% (17.2%)
Cost income ratio 51.7% (54.5%)
Grindlays sold, realising net profit after tax of $404m after related provisions
Income up 6%, costs flat, ELP down 4bp’s to 39bp’s
$2bn returned to shareholders in the form of dividends and share buyback
Dividends returned to 100% franking
Restructuring charge to accelerate transformation program
Page 20
Drivers of performance (excluding abnormals)
3.05
2.87
Margins
54.5
51.7
Cost/Income
0.43
0.39
Provisions/NLA
17.2
18.3
ROE
2.41
2.30
Net Interest/Assets
0.97
1.03
ROA
17.7 17.8
"Leverage"
1.57 1.56
Other Inc./Assets
2.17
2.00
Cost/Assets
0.34
0.30
Provisions/Assets1999
2000
Page 21
Good progress across the board
$1,200
$1,300
$1,400
$1,500
$1,600
$1,700
$1,800
$1,900
1480
1999 20002000
Net interest income
146
Lending fee 48
Other fee 111
Other income
47
Debt provisioning
8
Costs (14) Tax & outside
interests(123)
Profit before abnormals
1703
Abnormals44
Net profit after
abnormals1747
Page 22
Income drivers3.60
3.51
3.19
3.14
2.552.642.60
2.67
1.90
1.841.911.72
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Mar-99 Sep-99 Mar-00 Sep-00
PFS
International*
CFS
679 727
10221133
340342
175174
1999 2000
Lending Fees
Other Fees
FXTrading
MOSOther
Margins stabilised in second Half
Non-interest income showed healthy improvement
• Smaller differential between 90d BBSY and Cash Rate
• Greater focus on improving margins
• Driven by higher fee income
• FX and trading profits lower, reflecting lower volumes
* Includes Grindlays
Page 23
Cost-income ratio continues to decline
45
50
55
60
65
70
1997 1998 1999 2000
NAB
CBA
WBC
ANZ
Target - comfortably in the 40’s
*
*
* estimate of market expectations for 2000
51.7
63.1
Page 24
Costs are flat and a new baseline is established for 2001
$2,500
$2,600
$2,700
$2,800
$2,900
$3,000
$3,100
$3,200
$3,3003300
(288)331446(50)18
1999
3268
74 3100
GST & EFTPOS
NZ Sale of Grindlays
Sold businesses - Investment
to build business
prior to sale & FX effects
• Higher restructuring costs
• Increased marketing spend
• Higher profit share
Baseline 200020001999 Adjusted
Grindlays
GST & acquisitions
Page 25
Sale of Grindlays re-balances the Group’s portfolio
1.03 1.021.27
ROA
2.3
3.91
2.22
1.51.6
2.8
2.00
3.35
1.92
0.30
0.72
0.28
NII/Assets
Cost/Assets
Other Income/Assets
ELP/Assets
2.873.33
2.76
Margins
51.7
50.0
51.9
Cost/Income
39
113
36
ELP (bp’s)
• Reduces lending in Middle East and South Asia by $4.8b
• Reduces loans by 3.9% but reduces non-investment grade loans by 6.8%
• Exposure to countries rated below A reduced by $8.5b
• Capital released being addressed by current buyback
Group 2000
Grindlays
Continuing
Page 26
Strong organic asset growth
50,000
70,000
90,000
110,000
130,000
150,000
170,000
190,000
210,000
1995 1996 1997 1998 1999 2000
ANZCBANABWBC
Asset growth has been strong without material acquisitions
Australian Assets$m
Page 27
Non-accrual loans stable despite asset growth
1662
1543
1391
872
699657
900
428
0
200
400
600
800
1000
1200
1400
1600
1800
1997 1998 1999 20000.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%Gross Non-Accrual Loans (LHS)
Net Non-Accrual Loans (LHS)
$mNon-Accrual Loans/Loans & advances (RHS)
Historic
870
59
623
50
681651
0
100
200
300
400
500
600
700
800
900
1000 1999
2000
Aust. Inter.NZ
Geographic
$m
Page 28
Overall book continues to improve
18 16
1615
49 53
14 13
3 30%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1999 2000
AAA to BBB+
BBB to BBB-
BB + to BB
BB-
> B
Australian Lending Asset Profile
28.4 31.7 36.2 40.6
41.843.6
45.548.4
0
10
20
30
40
50
60
70
80
90
100
Mar-99 Sep-99 Mar-00 Sep-00
Other
Mortgages
$b
Australian Loans & Advances
• Investment grade 66% of book
• Diversified portfolio
• Minimal exposure to media/telco’s
• Mortgages now represent 46% of book, up from 40% in March 1999
Page 29
Credit quality is sound in our largest industry exposures - Australia
Lending Assets (AUDm)
% of Portfolio (RHS scale)
% in CCR 7D-8G (RHS scale)
0bn
2bn
4bn
6bn
8bn
10bn
Sep- 98 Sep- 00
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep- 98 Sep- 00
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep- 98 Sep- 00
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep- 98 Sep- 00
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep- 98 Sep- 00
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0bn
2bn
4bn
6bn
8bn
10bn
Sep- 98 Sep- 00
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Real Estate Operators & Dev.
Manufacturing Wholesale Trade
Agriculture Accomm. Cafes & Restaurants
Construction
Page 30
Specific provisions: Corporate offsets personal loans problem
0
50
100
150
200
250
300
123
96
171
201
221
125
214
41
134
254
84
140Daewoo
Personal Loans
ELP NSP
Personal Financial Services
Corporate Financial Services
International
1999 2000 1999 2000 1999 2000
A single “B” exit account
Sold Businesses
Page 31
PFS specific provisions were driven by personal loans and credit cards
Credit Cards
40
63
2.1
2.8
0
10
20
30
40
50
60
70
1999 20001.5
1.8
2.1
2.4
2.7
3 • Loss rate 2.3%
• Average margin >5%
SP $m
Av Volume
$b
76
18
1.20.8
01020304050607080
1999 20000.0
0.5
1.0
1.5
2.0
Personal Loans • Loss rate approximately 6% against expected loss rate 3.5%
• Average margin 5-6% (excludes fees which cover approval costs)
• Loss on product ~ $15m after tax
• Hence specific provisions largely offset by margin but product design and controls upgraded to bring losses back in line with expectations
SP $m
Av Volume
$b
Page 32
Asian credit quality improves significantly despite two large specific provisions
77
56
25
0
10
20
30
40
50
60
70
80
90
13.7 11.1
15.5
7.4
20.4
12.7
14.1
24.4
28.8
43.8
3.05.1
1999 2000
Asian Specific Provisions Risk Grade Profile
• Specific Provisions relate to two unusual losses
• ‘B’ exposures now only $130m
• Investment grade 68% of book
• Expected losses declined significantly from 1.4% to 0.5%
AAA to BBB+
BB+ to BB
BB-
B to CCC
Non-accrual
BBB to BBB-
$m
Daewoo
A single ‘B’ exit account
$2.9b $4.3b
Page 33
Provisioning levels strengthen
500
700
900
1100
1300
1500
1700
1900
2100
2.7
3.1
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
3.1
3.3
1999 2000
1395
502 (383)
(51)(90)
1373
967
1999 2000 APRA Guideline
s
ELP charge
Net SP transfer
FX impact
Sale of Grindlays
ELP - Economic Loss Provision
SP - Specific Provision
General ProvisionELP charge*
* ex Grindlays for 2000
Times$m
Surplus406
Page 34
The result incorporated several abnormal items
0
200
400
600
800
1000
1200
Jun-98
Oct-98
Feb-99
Jun-99
Oct-99
Feb-00
Jun-00
Oct-00
Panin
JSX
Net gain on sale of Grindlays businesses
Strategic business and transformation restructuring provision
Panin writedown
Litigation provision
Tax rate change
Revaluation of property
Sale of Colonial shares
Net abnormal gain
404 Cr
245 Dr
81 Dr
33 Dr
64 Dr
30 Cr
33 Cr
44 Cr
After tax$m
Average purchase price
Page 35
Abnormals - Grindlays transaction
Net sales proceeds 1,225
Provisions raised on sale 575
Income tax 246
Net profit 404
Indemnities
• ‘Indian scam’ matters
• US$80m Pakistan cross border risk for 12 months
• US$186m indemnity covers 80% of losses on certain customer accounts. Receive fee equal to ELP
• Standard tax indemnities
$m
Page 36
We have used the financial capacity from the
Grindlays sale to accelerate restructuring
programs spread across 35 separate initiatives
Drivers• Specialist
businesses, eTransformation, and funding growth
• Cost income ratio comfortably in the 40’s
Selected Programs• Reconfigure metropolitan
branch network in line with needs and demographics
• Re-engineer Esanda operation
• Simplify Asian business platform & operations
• IT platform rationalisation for eWorld
• General Banking sales and service platform
Two year program
• Provision relates to costs of ‘dismantling the old’ and investment spend will be covered by normal operations
Benefits• Approximately $300m
lower costs
• Enhance customer service and revenue
• Greater flexibility
• Platform for further eTransformation
• Invest savings in growth businesses subject to EPS growth targets
• Leaves capacity in routine $80-100m pa restructuring for further programs
Page 37
Capital management will continue
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
Mar-99 Sep-99 Mar-00 Sep-00100
105
110
115
120
125
130
135
140
Tier 1
Inner Tier 1
RWA's
% $b
7.77.9
7.5
7.4
6.76.9
6.56.4
Progress• $1014m of buyback• Capping of DRP/BOP to reduce
dilution• Remaining $500m buyback in
progress• Restructure more EPS accretive
than buyback
Capital ManagementPhilosophy:• Capital scarce resource to be
managed effectively and efficiently• Maintain capital consistent with
ANZ’s AA status and peer group ratings
– Tier 1 (6.5 - 7.0%)– Inner Tier 1 (6.0%)
Page 38
Goals going forward
• EPS growth above peer average (target 10+%)
• ROE over 20%
• Cost-income ratio comfortably in the 40’s
• Inner Tier 1: 6%
• Maintain AA category credit rating
Page 39
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 GentryHead of Investor Relations
ph: (613) 9273 4185 fax: (613) 9273 4091 email: [email protected]
Page 40
Copy of presentation available on
www.anz.com