International- Move to Growth Phase

Elmer Funke KupperHead of International Division

18 July 2000

International - Move to growth phase

• Last year, we presented a three year agenda to “Simplify and Focus” International. The first phase is nearing completion:

Implemented risk reduction program Simplified positions and extracted value in one move Freed up capital and management for growth agenda

• With the focus shifting to growth, new positions will be built in the Pacific and Asia:

In the Pacific, we will extend our leadership position to new geographies and continue to drive operational improvement

In Asia, following the crisis, we have small and lower risk positions. We will re-energise these positions and direct new investment towards eCommerce

• Implementation of the growth agenda will take two years, and a deal pipeline has been established

Risk reduction program largely completed

* H2000

Impact Grindlays Sale on Risk Profile Specific Provisions International

Assets in countries rated below ‘Single A’

ELP (%) 1.58 1.38 1.13

48%

82%

ANZ Post Completion

Grindlays

One Name

$247m$299m

1998 1999 1H2000

$75m

Simplification completed in one move

D

D

D

DD

D

D

D

D

M

N

N

N

N

M

N

N

D

D DD

D

D

D DD

N

MM

M

P

M

R

R

R

Grindlays transaction:• $10.2b assets, $79m 1H earnings• Simplifies network in one move• Extracts immediate value at 2.3

times NAV and 14.6 times earnings

• Completion on track for 3rd quarter 2000

Asia - Selective InvestmentJapan, Korea• Trade, money centreThree Chinas• 4 branchesSouth East Asia• Singapore, Indonesia,

Philippines, Vietnam, Malaysia, Thailand

Pacific – Extend leading position• South Pacific well covered• 41 branches• 20-60%share

International - Move to growth phase

• Last year, we presented a three year agenda to “Simplify and Focus” International. The first phase is nearing completion:

Implemented risk reduction program Simplified positions and extracted value in one move Freed up capital and management for growth agenda

• With the focus shifting to growth, new positions will be built in the Pacific and Asia:

In the Pacific, we will extend our leadership position to new geographies and continue to drive operational improvement

In Asia, following the crisis, we have small and lower risk positions. We will re-energise these positions and direct new investment towards eCommerce

• Implementation of the growth agenda will take two years, and a deal pipeline has been established

Build existing positions- Re-energise network points- Build Panin into top 5 retail bank

Invest in new growth- Target mass affluent as they get

online- Partner to complement ANZ’s

strengths in e-commerce and monoline businesses (eg cards)

Two growth agendas

Markets Large in number, individually small Modest growth Highly concentrated – few players Similar market/management modelsANZ Leading position in eight markets Strong track record NPAT 1H2000: $22m

Pacific

Asia

Starting Position

Markets Individually large, more fragmented Recovery under way Emerging “mass affluent” Rapid growth in online economyANZ Network positions in 11 countries Early investment in Panin Bank NPAT 1H2000: $15m

Strategic Response Replicate leading market positions

- Organic growth or acquisition in new geographies

- Rapid deployment of successful management model

Continue to drive operational improvement

Fiji

Vanuatu

Samoa

Solomon Islands

American Samoa

Tonga

Cook Islands

PNG

1

1

1

2

2

2

1

3

Leadership Positions

Pacific: Consolidate existing leadership

* First half annualised

Customer segmentation - Prime Banking in Fiji, PNG

Products - funds mgmt, insurance, asset finance

Electronic channels: ATMs, EFTPOS

Fee income automation

Going forward Continue to invest in new

channels and products Review opportunities to

regionalise operations

Continuous Improvement Results (NPAT)

1999 2000*

$37m

$44m

% Consumer• Assets 81%• Liabilities 80%• NPAT 85%

Impact of recent events in pacific

Real GDP Growth NPAT contribution

-10

-5

0

5

10

'90 '92 '94 '96 '98 f00

Fiji

Solomons

Other Islands

Fiji/Solomon

Lending Assets 2000

Profit After Tax

H2000

5432

4668

100% = $766m $22m

Extending leadership to new markets

Size of the pacific opportunity

5

10

15

20

25

10k 100k 1m 10m

Population

GD

P/C

apita

(USD

000

's)

Guam

French Polynesia

New Caledonia

PNGFiji

Northern Marianas

PalauAmerican Samoa

Micronesia

Marshalls

Cooks

Solomons

Samoa

Vanuatu

US Territories, 24% GDP

French Territories, 36% GDP

South Pacific, 40% GDP

Pacific Population and Wealth, Bubble Size proportional to GDP

Asia: Dealt with the credit crisis as predicted

New Non Accrual Loans Net Specific Provisions

1998 1999 H2000

$277m$270m

$101m

Coverage (%) 86.0 67.2 70.0

One name

1998 1999 H2000

$228m

$118m

$51m

Re-energise Asia

Economic Recovery in Region Grow the Business in Selected Areas

Build Strategic Assets Trade finance Network customers Relationship banks Key project sectors

Maintain Policy on Non-Strategic Assets USD wholesale banking Interbank lending Participations

ANZ represented in: Japan South Korea China Hong Kong Taiwan Singapore

Indonesia Philippines Thailand Malaysia Vietnam

Profile Assets $2.6bn (Dec 1999 full year) Pre provisions NPAT $107m 29% shareholding by ANZ Currently number 8 Non-State Bank

- 106 branches mainly in Jakarta/Java

New ATMs Phone banking/National Call Centre Refurbish branches New branches in Jakarta

Currency/Stock Market Remains Weak

Indonesia: Patience in building position

Panin Bank

Going forward AUD20m investment in retail banking

-200

20

406080

100

120140

Jan-97 Jan-98 Jan-99 Jan-00

All Items

Consumer Prices

annual % change

Food

Inflation Improved

200

2200

4200

6200

8200

10200

12200

14200

16200

1996 1997 1998 1999 2000

0

100

200

300

400

500

600

700

800Jakarta SE CompositePrice Increase (RHS)

Rupiah per USDInserted Scale (LHS)

Rupiah Index

Key to new Asia growth are mass affluent

• There is a largely untapped opportunity to provide financial services to the emerging mass affluent consumers

• eCommerce provides a more cost efficient and low risk way of targeting this potential – ANZ is a leader in eCommerce

• The need for speed, access to markets and risk sharing means that we need to combine the strengths of ANZ with those of others in the region

• We have joined forces with OCBC from Singapore to develop the regional business, which we expect to launch early 2001

• The business model recognises the weaknesses of existing pure online propositions and includes specific responses to these

0.10.26

2000 2005

14

24.24

1.3

3.5

1.24

2.98Taiwan

1.34

2.61

2000 2005

0.1 0.23

2000 2005

0.5

0.89

2000 2005

0.45

1.11

2000 2005

Mass affluent market is emerging

Adults in urban areas:• Annual income over approx.

US$10,000• Connected to the Internet

Wired Emerging Affluent

Thailand

Malaysia Singapore

China 3 Korea

Indonesia

Philippines

Japan

Hong Kong0.12

0.39

2000 2005

1.5

3.23

2000 2005

Online use is taking off

Internet Penetration of

Households (%)

GDP / Capita(USD '000)

Singapore

JapanHong KongTaiwanMalaysiaKorea

Internet Take-up Zone

Based on US experience, B2C financial services takes off when internet penetration hits 10-20%

Broking and Net Banking are the early ‘Killer Apps‘

Indonesia

Vietnam

ThailandPhilippines

China

0

5

10

15

20

25

0 10 20 30 40

Australia

Implication: e-Commerce opportunities are starting to emerge in each country

Online customers are attractive

100116

259

169185

AverageDepositBalance

AverageLoan

Balance

Number of products

AverageProfitability

Offline (= 100)Online

Online customers cheaper to acquire (index)Online customer more attractive

Source: ANZ customer base

Offline Online

500

100

Pipeline under development

Regional e-based financial institution

+

Internet Service Provider

B2B and B2C Enabling

Online Stockbroking

Retail Alliances

Leading Financial Portal

Banking front end

OCBC/ANZ partnership makes sense

June 2000 USDm

Total Assets 33,562

Market Capitalisation 7,751

NPAT, Dec 1999 full year 415

Market Share (Spore) 17.9%

OCBC Profile

Complementary licences, strategic fit

Both banks embrace the e-space at home

Shared vision of opportunity across Asia

Partnership Benefits

Country OCBC ANZ

China 5 2

Hong Kong 3 1

Indonesia JV Panin

Malaysia 25 1 Rep.Office

Philippines 1 1

Singapore 44 1

Taiwan 1 1

Thailand 1 1 Rep.Office

Vietnam 1 Rep.Office 2

Korea 1 1

Japan 1 2

Leveraging ANZ’s strengths

Credit Cards

ConsumereCommerce

Corporate eCommerce

• No. 1 in Australia• Domestic partnership through Qantas Telstra Visa Card• International partnership with Star TV

• Highest penetration of customers banking with anz.com• Continuously expanding product suite, eg. eauto, pay anyone, my

ANZ• Key alliances - E*Trade, Freenet, MultiEmedia, Medweb

• Leader in electronic banking to corporates, ANZ Online, FX Online• B2B solutions - eGate, eProcurement with MRO.com, corProcure• Development of FX Online web based platform

International - Move to growth phase

• Last year, we presented a three year agenda to “Simplify and Focus” International. The first phase is nearing completion:

– Implemented risk reduction program– Simplified positions and extracted value in one move– Freed up capital and management for growth agenda

• With the focus shifting to growth, new positions will be built in the Pacific and Asia:

– In the Pacific, we will extend our leadership position to new geographies and continue to drive operational improvement

– In Asia, following the crisis, we have small and lower risk positions. We will re-energise these positions and direct new investment towards eCommerce

• Implementation of the growth agenda will take two years, and a deal pipeline has been established

International program phasing

Indian Mgmt Strengthened

Strategic Review

Completed/ Elmer Funke Appointed

6/99

Profit Decline Halted – Growth

Visible

Grindlays Transaction Announced

Completion Grindlays

Transaction

9/99 3/00 9/00 1/01

Profit Improvement

Program Launched

Complete “Simplify and Focus”

Target

Drive Growth Agenda: Pacific new

markets Asia

eGrowth

eAsia Team Established

Acquisition Amerika Samoa

Bank Announced

BOOM.COM Investment

eCommerce Joint Venture

with OCBC Announced

Customer Launch OCBC Joint Venture

Panin Bank Rights Issue

Launch Internet Banking

Indonesia

• JV Alliances• Pacific new

markets strategy

Complete ‘Simplify and Focus’ Extend Pacific Leadership

• Re-energise existing positions

Network points Panin Bank

• Invest in eGrowth Target mass affluent Partner to complement

strengths

• Joint Venture announced

Invest in Asian eGrowth

• Replicate leading market positions

Organic or acquisition Deploy successful

management model

• Continue to drive operational improvement

• Agenda defined and under way

• Implemented risk reduction program

• Simplified International positions in one move with Grindlays sale – completion on track

• Freed up capital and management

Summary