FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

Report of Foreign Private Issuer

 

 

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

 

 

 

 

 

For the month of November 2003

 

Australia and New Zealand Banking Group Limited

(Translation of registrant’s name into English)

 

Level 6, 100 Queen Street Melbourne Victoria Australia

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F.    ý    Form 40-F

 

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ..... No .....ý

 

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

 



 

2003 Roadshow Presentation

 

Australia and New Zealand Banking Group Limited

 

November 2003

 



 

Agenda

 

1.

ANZ 2003 Result Review

 

 

 

 

2.

NBNZ Acquisition

 

 

 

 

3.

Strategy

 

 

 

 

4.

Outlook

 

 

Important Notice:

 

“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



 

Another Solid Result for ANZ, up 8.3%

 

 

 

 

v Sep 02

 

 

 

 

 

 

 

 

              EPS

148.3 cents

 

 

0.7

%

              NPAT

$

2,348m

 

 

1.1

%

 

 

 

 

 

 

 

Before Significant Items

 

 

 

 

 

 

 

 

 

 

 

 

              NPAT

$

2,348m

 

 

8.3

%

              EPS

148.3 cents

 

 

8.2

%

              EPS (Excluding goodwill)

152.4 cents

 

 

9.2

%

 

 

 

 

 

 

 

              Dividend

95 cents

 

 

11.8

%

              Net Specific Provisions

$

527m

 

 

(27.6

)%

 

3



 

Full 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

                  asset quality improved with the ELP rate down offsetting volume growth, primarily in mortgages.

 

Tax

                  reduction in tax rate by 0.4% due to a higher proportion of equity accounted income.

 

 


* Sep-02 excludes significant items

 

4



 

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.

 

 

 

 

 

Sep 03

 

Sep 02

 

Change

 

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

 

125

 

-24

%

 

 

5



 

Specific provisions down 28% on 2002 – no large single provisions

 

 

 

                  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.

 

6



 

Non-accrual loans continue to fall

 

 

 

7



 

Capital targets reduced, reflecting lower risk

 

                  Net impact of FX rate movements on ACE capital was approximately -$235 million.

 

                  FX impact on RWA was approx -$3.2 bn down due to FX rate movements, again principally the US$ depreciation (US$ accounted for -$3.3 bn of the movement).

 

                  Net impact on ACE ratio due to FX movement was +2bpts.

 

                  Our target ACE capital range has been lowered to 4.75% to 5.25% to recognise:

 

                  Continued reduction in risk as evidenced by growth in the proportion of residential mortgage lending and reduction in offshore lending

 

                  Acquisition of NBNZ which further diversifies our income and has a lower risk lending book

 

 

8



 

NBNZ Acquisition

 

9



 

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

 

10



 

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

 

11



 

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

 

12



 

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

 

13



 

Managing key integration risks

 

Consideration

 

Mitigant

 

 

 

 

 

Minimise Impact on Customers

 

      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

 

      A common core technology platform

 

 

      Two year integration period for core systems conversion

 

 

      Leverage expertise in IT integration

 

 

14



 

NBNZ Group strong track record

 

 

 

 

 

Source: NBNZ Group Financial Reports

 

 

15



 

NBNZ purchased at attractive multiple

 

 

 


* - 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

 

16



 

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

 

3,570

 

Debt/Hybrid

 

1,370

 

Total

 

4,940

 

 

Use of Funds

 

 

 

A$m

 

 

 

 

 

Proceeds to Lloyds TSB

 

4,915

 

Transaction costs

 

25

 

Total

 

4,940

 

 

Goodwill on Acquisition

 

 

 

A$m

 

 

 

 

 

Purchase consideration

 

4,915

 

LESS NTA on acquisition

 

(1,657

)

Goodwill on acquisition

 

3,258

*

 


* - 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

 

17



 

Strategy

 

18



 

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.

 

 

19



 

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.

 

 

 

A portfolio of specialist businesses reduces volatility and brings:

 

                  Responsiveness – we believe that speed, flexibility and expert knowledge will prevail over large scale generalists

 

                  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

 

20



 

We have rebalanced the bank’s lending portfolio

 

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

 

                  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

 

 

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.

 

 

 

21



 

Clear international strategy

 

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

 

                  Adopting a portfolio approach

 

                  Ensuring the potential for significant long term upside

 

                  Investments must leverage ANZ’s skills and capabilities

 

whilst avoiding investments that are:

 

                  Corporate focused

 

                  Require large capital investment

 

                  Only require ANZ’s financial resources rather than management skills

 

                  Unduly distracting for group management

 

 

22



 

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

 

23



 

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

 

For further information visit

 

www.anz.com

 

or contact

 

Simon Fraser
Head of Investor Relations

 

ph: (613) 9273 4185  fax: (613) 9273 4091  e-mail: simon.fraser@anz.com

 

24



 

Copy of presentation
available on

 

www.anz.com

 

25



 

 

Media Release

Corporate Affairs

Level 22, 100 Queen Street

Melbourne Vic 3000

Facsimile 03 9273 4899

www.anz.com

 

For Release: 6 November 2003

 

ANZ to buy-back TrUEPrS preference shares

 

As part of its ongoing capital management strategy, Australia and New Zealand Banking Group Limited (ANZ) has called for the buy-back of the ANZ Preference Shares issued as part of the trust units exchangeable for preference shares (TrUEPrS) Series 1 (September 1998 – CUSIP No. 001823202) and Series 2 (November 1998 – CUSIP No. 0018241010). The buy-back is for the entire issue of both series.

 

The buy-back date will be effective on 12 December 2003.  This buy-back will also result in ANZ redeeming the TrUEPrS on the same date.

 

The redemption price will be US$25.00 plus an amount equal to the accrued but unpaid interest on each US$25.00 principal amount of the debt securities from and including the Interest Payment Date immediately preceding the Exchange Date to but excluding the Exchange Date.

 

Notices will be sent to the holders of the TrUEPrS and payment of the redemption price will be made to the holders through The Bank of New York, 21W, 101 Barclay Street, New York, NY 10286, United States of America.

 

For media enquiries, contact:

For analyst enquiries, contact:

 

 

Paul Edwards

Stephen Higgins

Head of Group Media Relations

Senior Manager Investor Relations

Tel: +61-409-655 550

Tel: +61-417-379 170

email: paul.edwards@anz.com

email: higgins@anz.com

 



 

2003 Roadshow Presentation

 

Australia and New Zealand Banking Group Limited

 

November 2003

 



 

Table of contents

 

1.

ANZ 2003 Result overview

 

 

 

 

2.

NBNZ Acquisition

 

 

 

 

3.

Strategy

 

 

 

 

4.

Results Review

 

 

 

 

5.

Portfolio Performance

 

 

 

 

6.

Credit Quality

 

 

 

 

7.

Economic Forecasts

 

 

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.

 

2



 

SECTION 1

 

Another Solid Result for ANZ, up 8.3%

 

 

 

 

v Sep 02

 

 

 

 

 

 

 

 

              EPS

148.3 cents

 

 

0.7

%

              NPAT

$

2,348m

 

 

1.1

%

 

 

 

 

 

 

 

Before Significant Items

 

 

 

 

 

 

              NPAT

$

2,348m

 

 

8.3

%

              EPS

148.3 cents

 

 

8.2

%

              EPS (Excluding goodwill)

152.4 cents

 

 

9.2

%

 

 

 

 

 

 

 

              Dividend

95 cents

 

 

11.8

%

              Net Specific Provisions

$

527m

 

 

(27.6

)%

 

3



 

SECTION 2

 

NBNZ Acquisition

 

4



 

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



 

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



 

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



 

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

 

8



 

Managing key integration risks

 

Consideration

 

Mitigant

 

 

 

Minimise Impact on Customers

 

             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



 

NBNZ Group strong track record

 

 

 

 

 

Source: NBNZ Group Financial Reports

 

10



 

NBNZ purchased at attractive multiple

 

 

 


* - 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 11 Australian regional banks are 30-day volume weighted average prices as at 23 October 2003

 

11



 

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

 

3,570

 

Debt/Hybrid

 

1,370

 

Total

 

4,940

 

 

Use of Funds

 

 

 

A$m

 

 

 

 

 

Proceeds to Lloyds TSB

 

4,915

 

Transaction costs

 

25

 

Total

 

4,940

 

 

Goodwill on Acquisition

 

 

 

A$m

 

 

 

 

 

Purchase consideration

 

4,915

 

LESS NTA on acquisition

 

(1,657

)

Goodwill on acquisition

 

3,258

 

 


* - 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



 

SECTION 3

Strategy

 

13



 

Australian banks: A decade of efficiency gains and credit expansion

 

                  The Australian banking sector has enjoyed a decade of efficiency gains which has seen material reductions in Cost to Income ratios.

 

                  ANZ has outstripped its competitors and has achieved world class efficiency.

 

                  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.

 

 


Sources:  #RBA, *Economics@ANZ, ^Citigroup Analyst Forecasts, CBA 2003 Results

 

14



 

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.

 

                  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.

 

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.

 

 

 


*Source - RBA, Economics @ANZ

 

15



 

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.

 

 

16



 

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.

 

 

 

A portfolio of specialist businesses reduces volatility and brings:

 

                  Responsiveness – we believe that speed, flexibility and expert knowledge will prevail over large scale generalists

                  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

 

17



 

We have rebalanced the bank’s lending portfolio

 

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

 

                  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

 

 

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.

 

 

 

18



 

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 BankingMortgages 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.

 

 


*Business segment profit, #Lending assets

 

19



 

Clear international strategy

 

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

 

                  Adopting a portfolio approach

 

                  Ensuring the potential for significant long term upside

 

                  Investments must leverage ANZ’s skills and capabilities

 

whilst avoiding investments that are:

 

                  Corporate focused

 

                  Require large capital investment

 

                  Only require ANZ’s financial resources rather than management skills

 

                  Unduly distracting for group management

 

 

20



 

ANZ’s forward looking agenda

 

To become Australia and New Zealand’s most respected company

 

 

21



 

SECTION 4

 

Results Review

 

22



 

Full 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

 

                  asset quality improved with the ELP rate down offsetting volume growth, primarily in mortgages.

 

Tax

 

                  reduction in tax rate by 0.4% due to a higher proportion of equity accounted income.

 

 


* Sep-02 excludes significant items

 

23



 

Higher interest income, driven by strong mortgage and deposit growth

 

                  Average net lending assets grew by $13.6b (10.0%) in 2003, with growth of $10.8b (18%) in Mortgages, $1.6b in Corporate and $0.8b in Asset Finance.

 

                  Average deposits and other borrowings 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.

 

                  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.

 

 

 

 


*Business Lending includes Corporate & Small Business, and Institutional Segments. Deposits includes Esanda retail debentures

 

24



 

Margins down, primarily due to yield curve and mix effect

 

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

 

                  Funding and changed asset mix contributed 5bp

 

 

 

25



 

 

Treasury – adversely impacted by a tough interest rate environment

 

                  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 mismatch portfolios remain well placed to benefit from a tightening interest rate cycle.

 

 

26



 

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

 

 


* Sep-02 excludes significant items

# excludes volume impact and benefits from repricing

^ refer also Margin Drivers (p8)

 

27



 

Expense growth well controlled

 

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

 

 

28



 

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

 

                  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

 

                  ELP adjustment expected to be progressively wound back over the next two years, predicated on continued risk reduction and stabilisation in the offshore book.

 

 

 

29



 

Cumulative ELP balance is well above the specific provision balance

 

                  The cumulative ELP balance continues to comfortably exceed the specific provision balance.

 

                  In 2003 an additional $100 million was provided in ELP as precaution against continued above expected levels of default on the offshore lending portfolio.

 

                  The reduced 2003 specific provisioning charge reflected a 56% decrease in overseas market charges.  This is reflective of the de-risking strategy in the Institutional Financial Services segment, resulting in the winding down of offshore exposures.

 

 

 

30



 

Healthy dividend growth

 

                  The full year dividend of 95 cents per ordinary share represents a 12% increase on 2002.

 

                  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.

 

 

 

31



 

Capital targets reduced, reflecting lower risk

 

                  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).

 

                  Net impact on ACE ratio due to FX movement was +2bpts.

 

                  Our target ACE capital range has been lowered to 4.75% to 5.25% to recognise:

 

                  Continued reduction in risk as evidenced by growth in the proportion of residential mortgage lending and reduction in offshore lending

 

                  Acquisition of NBNZ which further diversifies our income and has a lower risk lending book

 

 

 

32



 

Restructuring our hybrid funding will impact the relationship between PAT & EPS in 2004

 

Background

 

 

 

TrUEPrS

 

StEPS

 

 

 

 

 

Issued

 

Sept/Nov 1998

 

27 Sep 2003

Amount

 

USD 0.775 bn

 

AUD 1bn

Cost of Dividend

 

8% Fixed

 

BBSW Floating

To be called

 

1H 2004

 

 

 

 

 

 

Profit & Loss

 

 

 

 

 

 

 

 

 

Income

 

Fixed to Floating Swap

 

nil

 

 

 

 

 

Tax

 

Tax on Swap
Deduction for dividend

 

Deduction for
dividend

 

 

 

 

 

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

 

Approximate 2004 impact (indicative)*

 

 

 

 

 

 

 

NPAT

 

-40

 

Dividend

 

-44

 

“EPS” contribution

 

+4

 

 

 

Significant transactions in 2004 (indicative)

 

 

 

 

 

 

 

Close out of swap

 

+78

 

Other

 

+ 4

 

NPAT

 

+82

 

Final “cash” dividend(1)

 

-31

 

 

 

+51

 

 


(1) - includes impact of delaying TrUEPrS for NBNZ acquisition

*  Refer following page for further details

 

33



 

Illustrative Impact of TrUEPrS redemption and replacement on 2004

 

 

 

 

$m
TrUEPrS
2003

 

$m
StEPS
2004

 

$m
Change

 

$m
Redemption of TrUEPrS
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

 

-102

 

-58

 

44

 

-31

 

 

 

 

 

 

 

 

 

 

 

Contribution to EPS

 

-11

 

-7

 

4

 

51

 

 

Subject to final timing of redemption of TrUEPrS and interest rates

 

34



 

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



 

SECTION 5

 

Portfolio Performance

 

36



 

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.

 

 

 

 

 

Sep 03

 

Sep 02

 

Change

 

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

 

125

 

-24

%

 

 

37



 

IFS – a strong domestic franchise, continued risk reduction offshore

 

                  ANZ has a strong tradition and leading position in the domestic institutional banking market.

 

                  Our core domestic Institutional Banking 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 activities.

 

                  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.

 

 


*Source – Greenwich and Associates

 

 

38



 

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:

 

                  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

 

 


* Score out of 10: Source - Roberts Research 1996-2003

 

 

39



 

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%.

 

                  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.

 

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.

 

 

 

 

 

40



 

Consumer Finance: profitable market leadership

 

              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.

 

 


# - NPAT for Australian businesses only

* Source - RBA July 2003

 

41



 

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.

 

 


* Australia (excluding Origin)

 

42



 

Personal Banking – underlying health of the business improving…

 

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:

 

                  Customer satisfaction scores for both Rural and Personal banking continue to improve, whilst complaints levels are falling.

 

                  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.

 

                  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.

 

                  Staff advocacy, being the % of staff that would recommend ANZ as a place to work has more than doubled since 2001.

 

                  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.

 

 

 

 

 


*- average number of complaints per month

 

43



 

… and we are starting to see improved sales momentum…

 

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:

 

                  Total sales activity improved 8% in the second half, assisted by seasonality

 

                  Deposit balances, for which the business earn the full interest margin, continue to grow strongly, increasing 9.7% in 2003

 

                  Mortgages sales, the largest source of sales commissions, increased strongly on the back of market demand and investment in mortgage skills

 

                  Managed Investment sales remained flat as investors continued to favour conservative investments and property

 

                  Cross sell of insurance products improved from a low base, allowing us to deepen the customer relationship.

 

 

 

 

 

44



 

… and continued growth in our core transaction products

 

Our core transaction product suite is performing as we expected:

 

                  Product leadership was confirmed with ANZ winning the industry award for the best transaction account

 

                  Account growth continued to be positive during 2003 with net growth of 118,000 accounts

 

                  Account behaviour is not materially different from accounts acquired before the launch of the new products

 

                  New customers are joining ANZ.  60% of new accounts represent new customers, and 40% have at least one other product relationship

 

                  Breakeven – we have now achieved breakeven on the new accounts

 

 

 

 

 

45



 

SECTION 6

 

Credit Quality

 

46



 

Consumer & SME portfolios in good shape

 

                  Arrears profile (60 days) is approaching historical lows reflecting strength of Australia’s retail sector.

 

                  The consumer sector is robust with continuing low levels of unemployment and a low interest rate environment.

 

                  Mortgage arrears continue to decline.

 

                  Quarterly behavioural review scoring in the SME portfolio is contributing to a lower arrears profile.

 

                  SME sector is benefiting from low interest rates and healthy business environment.

 

                  Delinquency levels have continued to improve over the year and remain at historic lows. RILS and Broker Originated loans are continuing to perform in line with the wider portfolio.

 

                  Mortgages Loss Rates improved from 2.7bp to 1.8bp.

 

 


TPMI - third party mortgage introducers

O/O ^ owner occupied

 

47



 

Mortgages portfolio sound

 

                  A Loan to Valuation Ratio (LVR) analysis of ANZ’s mortgage portfolio suggests it has sufficient equity margin to sustain a reasonable devaluation in Australian residential property prices.

 

                  Emerging risks in apartment investment lending in near city locations in Sydney, Melbourne & Brisbane have been controlled by implementation of tighter policies.

 

 

 

 

48



 

APRA’s findings from mortgage industry stress test

 

APRA Comments

 

ANZ Response

 

 

 

    APRA found that 32% of loans with LVR’s greater than 80% are not mortgage insured

 

    Comparative figure for ANZ was 16%, however APRA analysis included all “retail” type lending including Small Business lending, which may not even include a residential mortgage as security

 

 

 

 

 

 

 

 

 

•   A more appropriate measure is looking at ‘retail’ mortgages only. For ANZ, less than 2% are without mortgage insurance

 

 

 

 

 

 

 

 

 

  These are under our ‘medico’ package, which targets newly qualified medical professionals where we waive mortgage insurance to 95% LVR, and for some staff lending

 

 

 

 

 

 

 

    APRA stress test, assuming a 30% fall in house prices, suggests industry losses of approximately A$4.3b

 

    APRA stress test used values at origination, rather than current prices. This results in an actual price fall from today’s values of 40%-45%.

 

 

 

 

 

 

 

    ANZ “extreme” scenario stress test indicates A$90m loss over 12 months, assuming:

 

 

 

 

 

      Unemployment rising to 10.3%,

 

 

      Mortgage rates increasing to 10.57%

 

 

      Property prices falling by 20%

 

 

 

    APRA reported disappointment with the capacity of ADI’s to respond to its data collection requests - IT systems insufficient

 

    APRA confirmed that ANZ systems can accurately calculate LVRs for multiple security loans

 

 

 

 

 

    For the past two reporting periods, ANZ has disclosed to the market dynamic LVRs

 

 

 

49



 

Domestic portfolio remains in good shape

 

 

 

50



 

US Energy Portfolio – issues remain, but exposure continues to reduce

 

                  Management has been proactive in addressing Group exposure to the global energy sector

 

                  Concentration risk associated with exposure to energy lending as a proportion of the aggregate loan book has been mitigated by management initiatives to exit or restructure a number of key corporate lending positions in the US

 

                  A number of high risk exposures remain, and are being actively managed (including sell down in secondary markets).

 

                  We expect further specific provisions but at a reducing rate and that these can be absorbed within ELP

 

 

 

 

 

 

 

 

 

 

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)

 

9.7

m

9.1

m

46.1

m

n/a

 

(six months)

 

 

 

 

 

 

 

 

 

 

Note:

1.                Includes utilised guarantees and market related products

2.                Includes US domiciled exposures only (Excludes Mexico)

 

51



 

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

 

                  During the Full Year, Group “Top 6” committed telco exposures declined (as a % of ACE) from 38% to 25%.

 

 

 

 

 

 

 

 

 

 

No of Cust
(Total 39)

 

Investment Grade

 

83.1

%

81.7

%

82.8

%

19

 

Non Accrual

 

5.0

%

3.4

%

2.1

%

3

 

 

52



 

Group risk grade profile

 

 

B+ to CCC

 

3.0

%

2.8

%

2.5

%

2.5

%

2.3

%

Non Accrual

 

0.9

%

0.9

%

0.8

%

0.7

%

0.6

%

 

53



 

Specific provisions down 28% on 2002– no large single provisions

 

 

 

                  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.

 

54



 

Section 6

 

New Specific Provisions down 28% on the 2002 year

 

 

 

55



 

Non-accrual loans continue to fall

 

 

 

56



 

New non-accruals reduced 23% on 2002

 

 

 

57



 

Existing and future problem loans are well provided for

 

                  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.

 

                  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.

 

 

Note:

1.                                       As per most recent company financial reports for CBA, NAB and WBC

 

58



 

Proactive reduction in volume of “top 10” client committed exposures

 

                  ANZ has implemented credit management policies to diversify loan book exposure by reducing the volume of “top 10” client committed lending. This has led to a reduction in client concentration risk

 

                  Sustained management of client exposures has reduced the sensitivity of the capital base of “top 10” clients (to ~75% of ACE in 2003 from ~135% of ACE in 2001)

 

 

 

Note:

1.                                       Limits represent total 7 month limits excluding uncommitted and non-recourse, net of credit derivatives

2.                                       Excludes non-recourse and uncommitted facilities

 

59



 

Basel II will provide some benefits, but adjustments expected for local market

 

                  QIS 3 results reflect the underlying quality of ANZ’s assets, and support ANZ’s move to a lower ACE target range

 

                  Corporate portfolio in particular produces a RWA reduction consistent with lower levels of risk

 

                  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

 

                  Results reinforce why Australian banks have lower Tier 1 and ACE ratios

 

 

Note:

1.                                       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.

 

2.                                       RWA calculations were performed using the capital functions used in QIS 3.0 These may change upon the finalisation of Basel II

 

3.                                       These results exclude any impact from NBNZ

 

60



 

SECTION 7

 

Economic forecasts

 

61



 

Summary of forecasts by economics@anz – Australia (bank year)

 

 

 

2001

 

2002

 

2003

 

2004 (f)

 

2005 (f)

 

 

 

 

 

 

 

 

 

 

 

 

 

GDP*

 

1.7

 

4.1

 

2.4

 

4.1

 

3.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Inflation*

 

5.1

 

3.0

 

2.9

 

1.8

 

3.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Unemployment (Sep)

 

6.8

 

6.2

 

5.9

 

5.3

 

5.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash rate (Sep)

 

4.75

 

4.75

 

4.75

 

5.50

 

4.75

 

 

 

 

 

 

 

 

 

 

 

 

 

10 year bonds (Sep)

 

5.6

 

5.3

 

5.3

 

5.8

 

5.5

 

 

 

 

 

 

 

 

 

 

 

 

 

$ A / $US (Sep)

 

0.49

 

0.54

 

0.68

 

0.70

 

0.66

 

 

 

 

 

 

 

 

 

 

 

 

 

System Credit Growth*

 

9.9

 

9.1

 

12.7

 

14.1

 

9.1

 

 

 

 

 

 

 

 

 

 

 

 

 

-  Housing

 

14.5

 

18.6

 

21.1

 

20.0

 

11.0

 

 

 

 

 

 

 

 

 

 

 

 

 

-  Business

 

6.3

 

1.6

 

4.9

 

8.3

 

7.2

 

 

 

 

 

 

 

 

 

 

 

 

 

-  Other

 

10.7

 

7.8

 

11.8

 

11.0

 

7.3

 

 


* Annual average

 

62



 

Summary of forecasts by economics@anz – New Zealand (bank year)

 

 

 

2001

 

2002

 

2003

 

2004 (f)

 

2005 (f)

 

 

 

 

 

 

 

 

 

 

 

 

 

GDP*

 

2.3

 

4.1

 

3.4

 

2.3

 

2.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Inflation*

 

3.2

 

2.5

 

2.0

 

2.6

 

2.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Unemployment (Sep)

 

5.1

 

5.3

 

4.9

 

5.3

 

5.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash rate (Sep)

 

5.25

 

5.75

 

5.00

 

5.50

 

5.50

 

 

 

 

 

 

 

 

 

 

 

 

 

$ A / $NZ (Sep)

 

1.22

 

1.16

 

1.14

 

1.17

 

1.17

 

 

 

 

 

 

 

 

 

 

 

 

 

System Credit Growth*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-  Housing

 

7.2

 

7.6

 

10.5

 

8.0

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

-  Business

 

2.1

 

7.9

 

6.2

 

6.0

 

6.0

 

 

 

 

 

 

 

 

 

 

 

 

 

-  Other

 

10.5

 

8.1

 

5.8

 

3.0

 

7.0

 

 


* Annual average

 

63



 

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

 

Simon Fraser

Head of Investor Relations

 

ph: (613) 9273 4185  fax: (613) 9273 4091  e-mail: simon.fraser@anz.com

 

64



 

 

Copy of presentation

available on

 

www.anz.com

 

65



 

2003 ANZ

Annual Report

 

Strong

Different

Successful

Sustainable

 

 



 

The ANZ

Agenda

 

 

 

 



 

Contents

 

 

Investor Snapshot

 

 

Chairman’s Report

 

 

Chief Executive Officer’s Report

 

 

Chief Financial Officer’s Review

 

 

Risk Management

 

 

A View from the CEO on Creating Sustainable Businesses

 

 

The National Bank of New Zealand

 

 

People

 

 

Personal and Rural Customers

 

 

Business Banking

 

 

Systems

 

 

Community and Environment

 

 

Leadership

 

 

Business Profiles

 

 

Board of Directors

 

 

Corporate Governance and the Board

 

 

Compensation

 

 

Guide to Concise Financial Report

 

 

Concise Financial Report

 

 

Directors’ Report

 

 

Directors’ Declaration

 

 

Auditors’ Report

 

 

Shareholder Information

 

 

Shareholder Feedback Form

 

 

Information for Shareholders

 

 

66



 

Investor Snapshot

 

2003.
The year
at a glance

 

Key terms

 

Cost to income ratio (CTI)

 

A business efficiency measure. It is the ratio of our expenses (excluding goodwill amortisation) to our income.

 

Credit rating

 

A measurement of the credit worthiness of a business. AAA is the top credit rating accorded by ratings agencies such as Moody’s Investor Services and Standard & Poor’s. The better our credit rating, the cheaper we can borrow money from capital markets. ANZ ‘s long-term credit rating is AA-.

 

Dividend per share (DPS)

 

The amount of the Company’s after tax earnings declared and paid to ordinary shareholders. It is usually expressed as a number of cents per share, or as a dividend per share.

 

Earnings per share (EPS)

 

The amount, in dollars, of earnings divided by the average number of ordinary shares. For example, if the earnings are $2 million and 1 million shares are outstanding, the earnings per share would be $2.00 ($2 million ÷ 1 million shares = $2.00). The earnings figure is based on profit after tax less preference share dividends.

 

Economic value added (EVATM)

 

A measure of risk-adjusted accounting profit. It is based on operating profit after tax, adjusted for one-off items, the cost of capital, imputation credits and economic credit costs.

 

Net profit after tax (NPAT)

 

The Group’s net profit after all taxes, expenses and provisions have been deducted from the operating income.

 

Return on equity (ROE)

 

A calculation which shows the return the Company has made on the money ordinary shareholders have invested in ANZ. It is expressed as a percentage.

 

Our share price has remained relatively steady over 2003

 

 

Movement in our share price has been in line with most of our major competitors in 2003.

 

 

In 2003, we continued to deliver improved returns to our shareholders with a record interim dividend of 44 cents and a final dividend of 51 cents both 100% franked.

 

We continued to deliver real growth to our shareholders

 

Value of $100 investment in ANZ shares invested for five years(A)

 

 

A record dividend per share together with a relatively stable share price has again delivered returns to our shareholders.

 

Profitability growth remained solid

 

Earnings per share(B)

 

 

Earnings per share growth was above 8%.

 

67



 

 

 

Our record profit in 2003 of $2,348 million is a continuation of the strong returns ANZ has delivered in recent years. This momentum has been achieved by a combination of repositioning our business in previous years and a focus on productivity.

 

Over the past five years we have rebalanced our portfolio, by exiting higher risk businesses such as Grindlays and turning our focus to developing and strengthening our consumer businesses in Australia and New Zealand. This process is ongoing as evidenced by our recent purchase of The National Bank of New Zealand. During this period we also aimed to use our resources better, which led to a significant reduction in our cost to income ratio and contributed to our strong growth.

 

 

ANZ again achieved a return on equity (ROE) in 2003 above 20%, with a full year ROE of 20.6%. This return is slightly down on last year (21.6%) after a slow first half of the year, however momentum picked up in the second half.

 

We continued to increase shareholder value as measured by EVATM

 

EVATM

 

 

EVATM growth was moderately dampened by relatively higher cost of capital. EVATM nonetheless continued to increase in absolute terms.

 

 

Operating efficiency improved further with the cost to income ratio reduced to 45.1%. In the September 2003 half, a cost to income ratio of 44.6% was below our 45% target.

 

 

Key to graphs

 

(A)

 

Total Shareholder Return

 

 

 

 

excludes the benefits of franking credits or any taxation costs

 

excludes share trading costs

 

assumes all dividends are re-invested on the ex-dividend date

 

 

 

(B)

 

Earnings per share

 

 

 

 

excludes the effect of significant transactions in 2002

 

 

 

(C)

 

Cost to income ratio

 

 

 

 

excludes the effect of significant transactions in 2002 and abnormal transactions in 2000

 

 

 

***

 

Significant Transactions

 

 

 

 

 

In the year ended 30 September 2002, the significant transactions included NHB recovery ($159m after tax), Special Provision for Doubtful Debts ($175m after tax) and Profit on sale of businesses to the ING Joint Venture ($170m after tax).

 

 

68



 

Chairman’s Report

 

[PHOTO OF CHARLES GOODE]

 

Charles Goode
Chairman

 

A solid platform for future growth

 

ANZ performed well in 2003. Profit after tax, excluding significant transactions in 2002, was up 8.3% this year, demonstrating the effectiveness of our specialist business model in delivering returns to shareholders. The directors were pleased to increase the dividend per share by 11.8% to 95 cents fully franked.

 

Most of our businesses recorded solid growth with some recording double-digit growth in earnings. These were partially offset by a one-off charge in our credit card business. We delivered solid financial performance by focusing on organic growth, effective cost control and the management of risk.

 

The return on ordinary shareholders’ equity was slightly down at 20.6%, although above our target of 20%. Our cost to income ratio of 45.1 %is the lowest of the major Australian banks and places ANZ among the most efficient banks in the world relative to business mix. Risks continue to be well managed. Specific provisions were down by 28% to $527 million. Our capital position is strong, with the Group’s adjusted common equity ratio at 5.7%, which was at the upper end of our target range for 2003.

 

Significantly, we settled a long-running tax dispute with the Australian Taxation Office this year relating to equity product transactions undertaken predominantly in the 1990s. The settlement of $262 million was met from ANZ ‘s existing tax provisions.

 

Growth through specialisation

 

ANZ is focused on creating sustainable value for shareholders – now and in the longer term.

 

Much of this work involves building on the competitive advantages that exist in our specialist businesses. This year’s results reinforce the quality of each of these businesses. In many cases such as credit cards, corporate banking and automobile and equipment leasing, our business is the market leader.

 

We believe our specialist business strategy is fundamental to sustaining and building leadership positions that help us to deliver

superior returns to shareholders and make a difference to our customers, community and staff.

 

69



 

Strategic expansion

 

We continually evaluate opportunities to expand in Australia, New Zealand and elsewhere in Asia and the Pacific.

 

On 24 October 2003, we agreed to acquire The National Bank of New Zealand from Lloyds TSB for $4.915 billion at exchange rates on 23 October 2003. The acquisition will make us the largest bank in New Zealand and is consistent with our strategic goal to have sustainable top three positions in each of our core businesses and markets.

 

We have also taken steps to develop a small portfolio of growth options in East Asia over the medium to long-term. This has involved two relatively modest initiatives: signing a memorandum of understanding with the Shanghai Rural Credit Cooperative Union – expected to become the Shanghai Cooperative Bank – and a joint venture credit card business with Metrobank in the Philippines.

 

Our role in the community

 

We continue to give high priority to creating a distinctive culture within ANZ as part of the Group’s long-term competitive advantage.  This involves reinforcing a performance culture among staff while unleashing their talents and energy to expand the business for the benefit of shareholders, our customers and the community we serve.

 

While we have a wide range of formal community programs in place in countries in which we operate, being part of a community means being able to respond quickly to urgent needs.

 

All of us at ANZ feel proud of the way our staff responded to the terrible bushfires that destroyed over 530 homes in Australia’s capital, Canberra in January. ANZ provided immediate cash assistance for its mortgage customers whose primary residence had been affected by the bushfires. The grants of $5,000 to $10,000 were gifts and did not have to be repaid. We also offered a range of other measures and our local staff worked hard to help customers and others affected by the tragedy.

 

As part of the process to strengthen the relationships we have with our staff and the broader community, we have been examining our response to concerns about environmental and social issues. This process has provided us with the opportunity to re-examine our role as a bank and the contribution we make to society as “the bank with a human face”.

 

Importance of our staff

 

The continuing strong performance of ANZ, its growth in returns to shareholders and increasing responsiveness to customers and the community is the result of the hard work and commitment of our 23,137 staff. On behalf of the Board and shareholders, I thank them for their contribution.

 

Governance strengthened

 

This year we have taken further steps to strengthen our corporate governance and disclosure standards. It has been a year when regulatory emphasis has increased substantially, both in Australia and overseas.  While this interest on the part of regulators is welcomed, so long as it focuses upon good process and good governance, ANZ is itself proactive in this area. Our belief is that good corporate governance is not only an ethical and stewardship responsibility; it can also give ANZ a strong advantage.

 

We believe a strong focus on corporate governance and transparency, combined with delivering on our promises, makes ANZ both more attractive to investors and a more sustainable business.

 

This starts with regulatory compliance but significantly involves fostering an environment in which open, well-informed and constructive discussion is encouraged. This provides the basis for actively monitoring the company’s activities and creates an environment in which integrity is able to prevail at every level.

 

It also means a commitment to transparent reporting, timely and accurate disclosures and management accountability. For some years ANZ has been recognised for its level of transparency and disclosure to investors, not only in Australia, but globally.

 

The Board’s focus in 2003

 

ANZ’s Board met 11 times during 2003, with additional specific activities carried out by the Board’s committees. This year some of the key issues to engage the Board included strategic growth opportunities and their role in ANZ’s future success; strengthening operating risk management including improved governance associated with technology changes; the impending changes to international financial reporting standards and their impact on ANZ; and our approach to sustainability and how the

Group balances its obligations to shareholders, customers, staff and the community.

 

Outlook

 

In the year ahead, we expect the Australian and New Zealand economies to continue to perform relatively well and for overseas markets to strengthen from their low base. Some challenges are, however, posed by various factors including low interest rates and associated margin pressure and the rising Australian dollar.

 

Overall, ANZ is making good progress toward achieving its business priorities. We have produced a solid, consistent financial performance and we are creating growth opportunities for the future. I am confident this will enable us to continue to deliver value for you, our shareholders.

 

/s/ Charles Goode

 

Charles Goode

Chairman

 

70



 

Chief Executive Officer’s Report

 

The ANZ Agenda: achieving value through specialisation

 

ANZ’s agenda is based on a strategy of specialisation that is well executed and consistently delivers superior performance for our shareholders, staff, customers and the community we serve.

 

Overall, the 2003 financial result has been reasonable in an environment that is beginning to be difficult for banks around the world.  It’s the power of our specialisation strategy and the quality of the teams that run our specialist businesses that has allowed us to reinvent ANZ over the past five years as a low risk, well-managed company that consistently produces sound results.

 

Five years of achievement

 

Last year I reported on the achievements we had made since 1997 making ANZ a very different bank.  These included:

 

      lowering risk

 

      balancing our business portfolio by growing our consumer businesses while maintaining our strong business banking franchise

 

      radically transforming our cost structure and becoming one of the most efficient banks in the world

 

      reinvigorating our culture by tapping into the energy and passion of our staff.

 

In thinking about that transition – and what ANZ is today – it is being the “bank with the human face” which is the core of who we are and what we do at ANZ.  Our objectives, strategy, tactics and organisational structure are aligned to translate the “bank with a human face” from a set of words into everyday actions.

 

Customer driven businesses

 

All businesses now operate in a customer-driven economy.  This is particularly true in financial services where there are more competitors pursuing a stable number of more sophisticated, better informed buyers.  The Internet, consumer advocate organisations and a critical media enable customers to find and analyse competing products and to make informed choices.

 

Many financial services offerings have become commodities where differentiation lies in the provider’s service and reputation rather than the product itself.  We believe that to compete and survive in the customer economy takes more than simply improving customer relationships.  It is about the whole organisation evolving to put the customer at the centre.

 

Specialisation works for shareholders and customers

 

We set out on this path in 2000 recognising that over time specialist businesses, which have real capabilities, produce more sustainable value than generalists.  Importantly, they are better able to get close to customers, understand their real needs and deliver more valuable services and products.  We have seen that through our Local CEOs and branch staff, we are now much closer to the communities we serve.  It reflects a reality that our customers and our staff find it easier to identify with a more agile, less bureaucratic organisation.  Customers identify with “their” branch or “their” relationship manager.  Staff identify with “their” team or “their” business.

 

At the same time, we began to show our staff and the rest of the community that ANZ was a different bank.  We announced a moratorium on rural bank closures, offered to buy the branches being closed by one of our major competitors, gave immediate “no strings attached” grants to customers whose houses had been destroyed by bushfires and started trialing a matched savings program for low income earners.

 

We also recognised that winning companies are companies that can offer value to customers at lower cost.  We radically changed our cost base which is now flowing through to propositions such as our low-cost personal transaction accounts and the associated growth in customer numbers that is part of our “best deal with a human face” strategy for personal banking.

 

Winning through specialisation

 

Through specialisation, each of our businesses is now:

 

      more transparent

 

      more flexible and more responsive to its staff and customers

 

      easier to do business with

 

      offering more satisfying jobs with more autonomy

 

      developing a culture of innovation, teamwork and shared responsibility

 

      making implementation easier

 

      able to grow faster.

 

All of this is a very different approach to any other bank. Through it, we seek to deliver more consistent, sustainable returns to shareholders.

 

Focusing on sustained performance and growth

 

While all we have achieved so far remains central to ANZ’s agenda, another measure of our progress will be the management actions we take in other areas to deliver continued superior performance and growth over the coming years.  The reality is that there is more to ANZ than producing consistent short-term results.

 

We have reached agreement on acquiring The National Bank of New Zealand which gives us a leading position in New Zealand.  It is a very different acquisition, one based on improving customer service, satisfaction and growth by leveraging the strengths of both companies.

 

It demonstrates that we are in a transitional phase, which means we will focus increasingly on three strategic priorities in the years ahead:

 

      delivering sustainable performance and value through a rich portfolio of strongly positioned businesses with best-practice cost and process leadership that allow us to achieve above sector revenue and share growth.

 

71



 

[PHOTO OF JOHN McFARLANE]

 

John McFarlane

Chief Executive Officer

 

      earning the respect of our stakeholders by consistently producing superior financial results through knowing the business and customers best, and creating a strong sales and service culture while developing real engagement with the community.

 

      creating a new future by leveraging specialisation as a distinctive approach and by being dynamic, innovative and willing to experiment.

 

Creating more value

 

Our future is about delivering the best value for customers, performing and growing to create value for our shareholders, leading and inspiring each other, earning the trust of the community, and being bold and having the courage to be different. It’s why people come to work for ANZ – to be part of a company that is continually raising its energy levels to make a lasting impact and create something that matters for shareholders, customers and the community we serve.

 

By really being the “bank with a human face” to our customers, staff and community, and focusing on these priorities, ANZ is stronger, more sustainable, more successful and very different.

 

/s/ John McFarlane

 

 

John McFarlane

Chief Executive Officer

 

72



 

Chief Financial Officer’s Review

 

Growth, returns and profit

 

Full year result driven by growth in net interest income

Full year NPAT $m

 

 

 

 

ANZ recorded a profit after tax of $2,348 million for the year ended 30 September 2003, an increase of 1% over the September 2002 year.

 

 

 

 

 

Excluding the significant transactions in 2002 (A), profit increased 8.3%. This was driven by strong lending growth coupled with tight control of expenses:

 

 

 

 

Net interest income $4,311 million +7.3% – Grew by $293 million in 2003 as a result of a 10% (+$13.6 billion) increase in Average Net Lending Assets primarily in our Mortgages business (+$10.8 billion). This was partially offset by a 10 basis point reduction in Net Interest margin as a result of changes in our funding and asset mix and the flat yield curve prevalent during the year.

 

A specialised portfolio – efficient allocation of resources to deliver results

Full year NPAT $m by business unit

 

 

 

 

A specialised portfolio allows us to efficiently allocate resources to those businesses experiencing growth, or with the potential for growth, and to reduce resources in those businesses with lower growth prospects and/or higher risk profiles.

 

 

 

 

 

The result was driven by solid profit growth in seven of the nine business segments excluding Operations, Technology and Shared Services (OTSS) and Corporate Centre.

 

Higher interest income, driven by strong mortgage and deposit growth

Average lending and deposit volumes

 

 


* Business lending includes corporate, small business, and institutional segments. Deposits includes Esanda retail debentures.

 

 

 

Average net lending assets grew by $13.6 billion (10%) overall, $10.8 billion (18%) in Mortgages, $1.6 billion in Corporate and $0.8 billion in Esanda/UDC. Average net lending volumes fell 15% in overseas markets.

 

 

 

 

 

Average deposits and other borrowings grew $13.5 billion – Treasury ($3.2 billion), Personal Banking & Wealth Management ($4.2 billion), Institutional Financial Services ($2.7 billion), New Zealand Banking (NZD $0.8 billion), Esanda/UDC ($0.8 billion) and Corporate ($1.6 billion). Deposit growth was encouraged by uncertainty in global equity markets.

 

73



 

[PHOTO OF PETER MARRIOTT]

Peter Marriott

Chief Financial Officer

 

 

Non-Interest Income $2,808 million +0.4% – Reported growth was flat for the year. After adjusting for the sale of ANZ Funds Management businesses to the ING Joint Venture and under accrual of loyalty points cost on credit cards in prior periods, underlying growth was 5.2% driven by higher lending fees in our Corporate Banking, Asset Finance and Institutional Banking businesses, higher equity accounted profit from our investment in PT Panin Bank and development property sales in Institutional Banking.

 

 

 

 

Expenses $3,228 million +2.4% – Once again, tightly controlled across the Group. Higher staff levels required to service increased lending volumes and an increase in software amortisation on system upgrades, were the main contributors to the 2.4% increase in costs. Discretionary costs were contained as the control of expenses remains a key aspect of our financial management.

 

 

 

 

Provisioning $614 million +0.7% – Asset quality improved with the Economic Loss Provision (ELP) rate down primarily due to a higher proportion of mortgages. This lower rate offset the impact of increased lending volumes.

 

 

 

 

Tax & Outside Equity Interests (OEI) $929 million +5.2% – Increase in profits caused the higher tax expense in 2003, however, a higher amount of equity accounted earnings has meant that the growth in tax expense was below profit growth.

 

 

 

 

 

Strong results in Corporate (12%) and Esanda/UDC (23%) were driven by strong domestic growth, while the 34% improvement in Asia Pacific resulted largely from higher equity accounted earnings from PT Panin Bank, higher foreign exchange earnings and lending growth.

 

 

 

 

 

Profit in Mortgages grew 9% reflecting continued growth in the Australian housing market while the 5% improvement in Personal Banking and Wealth Management resulted largely from increased deposit volumes and increased commissions on mortgage sales. This was partially offset by lower earnings from our ING Joint Venture.

 

 

 

 

 

The Institutional Financial Services result increased 8% with strong contributions from Capital Markets and the Australasian operations of Institutional Banking. Contributions from Structured Finance International and the offshore operations of Institutional Banking reduced following the decision to reduce exposure to the US and UK markets.

 

 

 

 

 

New Zealand Banking results were flat after adjusting for the impact of the appreciation in the exchange rate.

 

 

 

 

 

Consumer Finance was impacted by the under accrual of loyalty expense, and mismatch earnings in Treasury reduced as high yielding investments matured.

 

Profits continued to be derived from our core domestic markets

2003 NPAT by geography – %

 

 

Sustained underlying profit growth in our core domestic markets has been supported by strong growth in Asia and Pacific. The Group’s strategy to reduce exposure to higher risk offshore sectors saw reduced profit in the UK and US.

 

 

 

 

 

(A)

 

Significant Transactions

 

 

 

 

 

 

 

 

 

In the year ended 30 September 2002, the significant transactions included NHB recovery ($159m after tax), Special Provision for Doubtful Debts ($175m after tax) and Profit on sale of businesses to the ING Joint Venture ($170m after tax).

 

 

 

 

 

 

 

For further information on financial terms, please refer to the Guide to Concise Financial Report on page 48 and the Investor Snapshot on page 2

 

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Net interest margin contracted by 10 basis points:

 

 

 

 

Net interest income in Treasury fell by $45 million with maturing high yielding assets not able to be replaced due to the sustained period of low and stable interest rates (3 basis points).

 

 

 

 

The interest benefit from low interest savings accounts and non-interest bearing balances reduced as the rate at which they were invested reduced (3 basis points).

 

 

 

 

The proportion of the balance sheet funded by low interest savings accounts and non-interest balances reduced during the year, offset by an increase in term deposits and wholesale funding. This change in funding mix reduced the net interest margin by 5 basis points.

 

 

 

 

The funding cost associated with unrealised trading gains increased as a result of the appreciation of the Australian dollar. While resulting in a 3 basis point decline in net interest margin, it is offset by an equivalent gain in trading income.

 

 

 

 

Partially offsetting these declines was an increase in foreign currency hedge earnings revenue as a result of the strengthening Australian dollar (3 basis points) and a reduction in the funding cost on impaired assets (1 basis point).

 

Margins down, primarily due to the level of interest rates and mix effect

Group net interest income

 

 

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 because of a $38 million under accrual of loyalty points on co-branded credit cards in prior years, higher cost of loyalty points, the sale of ANZ’s Funds Management business to the ING Joint Venture 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 $45 million from cash flow mismatches on swaps, which had an opposite impact on net interest income.

 

Non interest income impacted by the sale of ANZ Funds Management to the ING Joint Venture, cards under-accrual and loyalty costs. Underlying growth strong

Non interest income $m

 

 


  *

Sep 02 excludes significant transactions

**

excludes volume impact and benefits from repricing

 

We maintained strong capital levels in 2003 as a prudent measure considering the world economic climate. Our Adjusted Common Equity remained at 5.7% of Risk Weighted Assets the same as September 2002 (Target range 5.25% - 5.75%). In September 2003, the Group issued 10 million ANZ StEPS preference shares at $100 each, raising $1 billion ($987 million net of issue costs).

 

Strong capital levels maintained

Adjusted common equity/risk weighted assets ý

 

 

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The Group economic loss provision charge (ELP) was $614 million, compared with $610 million (excluding the $250 million special provision) in the year to September 2002. The standard ELP charge to operating segments at $514 million reduced from September 2002. An additional charge of $100 million (7 basis points) was taken to recognise continued uncertainty and expected levels of default in the offshore lending portfolios.

 

In recent years, ANZ has been repositioning itself away from higher risk offshore institutional lending, towards lower risk domestic lending as reflected in our 2003 growth in Mortgages and reduction in US and UK lending. This has resulted in a reduction in our ELP rate over time, which fell from 43 basis points in September 2002 to 39 basis points in September 2003.

 

Doubtful Debts Provision reflects improved underlying portfolio*

 

 


* excludes the $250 million special provision in 2002

 

New non-accruals have reduced significantly over the last year, particularly in the offshore portfolios where in 2002 two large single name exposures in the offshore Telecommunications and Energy portfolios accounted for 35% of new non-accruals.

 

New non-accrual loans by source 2002

Geographic new non-accrual loans

 

 

New non-accrual loans by source

 

 

End of period gross lending asset volumes reduced 24% 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.

 

24% reduction in gross lending assets in offshore portfolio

Lending asset growth for the year to Sept 2003

 

 

For further information on financial terms, please refer to the Guide to Concise Financial Report on page 48 and the Investor Snapshot on page 2

 

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Risk Management

 

 

 

Key Terms

 

 

 

 

 

Arrears – a contractually due and payable sum which remains overdue/unpaid.

 

 

 

 

 

Credit risk – the potential for loss arising from the failure of a customer or counter-party to meet its contractual obligations.

 

 

 

 

 

Market risk – the potential loss the Group may incur from changes in interest rates, foreign exchange rates or the prices of equity shares and indices, commodities, debt securities and other financial contracts, including derivatives. It also includes the risk that the Group will incur increased interest expense arising from funding requirements during periods of poor market liquidity.

 

 

 

 

 

Operational risk – the direct or indirect loss resulting from inadequate or failed internal processes, systems, or from external events.

 

 

 

 

 

Over the year, ANZ has remained vigilant in monitoring and managing the Group’s global risks including:

 

 

 

 

Credit risk – Overall credit quality remains sound; reduced level of defaults in the corporate portfolio; off shore credit exposures reduced to 6% of our loan portfolio.

 

 

 

 

Market risk – Levels remain low.

 

 

 

 

Operational risk – Strengthened business continuity and crisis management capabilities to withstand the emergence of new threats, including increased threats of terrorism and the SARS virus; enhanced technology risk management processes with specific focus on new software releases.

 

 

 

 

Other risk – Increased focus on strategic and emerging risks; substantial progress made on Basel II (see page 38).

 

 

 

 

 

Offshore exposures

 

 

 

 

 

We have reduced our offshore credit exposures, including to the power and telecommunications industries.

 

 

 

 

Telecommunications – Active portfolio management of exposures to this sector resulted in a reduction in credit limits for offshore telecommunications operators of 46%.

 

 

 

 

Power – As expected, some further deterioration in the Group’s US power portfolio over the last year was experienced, however, our US power exposures have been managed down by 28% to $1.3 billion and any further losses which might result from this portfolio are expected to be manageable.

 

 

 

 

 

Australia and New Zealand market

 

 

 

 

 

The Australian and New Zealand portfolio risk profile has continued to improve over the year with strong mortgage growth and reduced high risk exposures.

 

 

 

 

Consumer portfolio – Arrears and loss rates are now at or near historically low levels; low-risk personal business exposures now comprise two thirds of the Group’s loan portfolio.

 

 

 

 

Residential property market – Adherence to conservative lending criteria, including allowing for the likelihood of interest rate increases in the assessment of borrowers’ capacity to make mortgage payments has ensured a robust mortgages portfolio; we also have conservative lending policies in place to ensure our risk exposure to inner-city apartment markets across Australia is minimised.

 

 

 

 

Recent APRA stress-testing of our mortgages portfolio confirms that we are well-placed to withstand a severe downturn in the Australian housing market.

 

 

 

 

 

Large Individual Credit Exposures

 

 

 

 

 

Over the year to September 2003, ANZ has managed down its large exposure risks and significantly reduced portfolio concentrations. To further reduce risk in the Group’s credit portfolio, our maximum limits applicable to exposures to individual customers have also been reduced.

 

ANZ Group’s credit risk profile has improved over the last 5 years*

 

 


*

 

Internal credit ratings have been mapped to external credit grades

 

 

 

 

 

The Group’s credit risk profile, representing the risk of our customer lending portfolio, has improved over the last 5 years.  This is evident with growth in our lower risk domestic portfolios (particularly mortgages in the BBB-category) and reductions in our high risk exposures.

 

77



 

ANZ has lowered risk across its global portfolio

 

[PHOTO OF MARK LAWRENCE]

 

Mark Lawrence

Chief Risk Officer

 

Top 10 exposures further reduced

 

 

One measure of the concentration of large exposures in the Group’s portfolio is the aggregate of the 10 largest committed corporate exposures as a percentage of adjusted common equity (ACE).  This is used as a measure of risk, hence the lower the ratio the lower the concentration risk.  This ratio has declined significantly over the past 24 months.

 

ANZ portfolio moving toward lower risk domestic exposures

 

 

In line with ANZ’s lower risk strategies, offshore lending exposures have decreased as a proportion of total lending assets.

 

Lower risk portfolio due to increased proportion of personal businesses

 

 

Based on the Group’s lending assets

 

In line with strategy, lower risk personal businesses now comprise two thirds of the credit loan portfolio.  This has been underpinned by strong growth in the mortgages portfolio.

 

 

For further information on financial terms, please refer to the Guide to Concise Financial Report on page 48 and the Investor Snapshot on page 2

 

78



 

A View from the CEO on Creating Sustainable Businesses

 

Delivering sustainable performance and value

 

 

 

This year I discovered a surprising and interesting statistic, which I have reflected on from an ANZ perpective.

 

 

 

 

 

Of the Top 20 companies by market capitalisation in Australia in 1980, only eight remained on the 1990 list, and five on the 2000 list.

 

 

 

 

 

ANZ, I’m pleased to say, is one of those which has survived and thrived, albeit with some ups and downs, so that it is one of the five on both the 1980 and 2000 Top 20 lists.

 

 

 

 

 

Our responsibility to deliver

 

 

 

 

 

The challenge for ANZ is to continue to create value by delivering strong and sustainable performance and value to shareholders – not only this year and next year, but over the long term.  While this is the responsibility of any management team, it is particularly true of a bank.  That’s precisely why there is so much mention of “sustainability” in this report.

 

 

 

 

 

The key to delivering sustainable performance and value starts with the fundamentals – having a genuine competitive advantage, ensuring flawless execution of strategy, no-surprises management and delivering on promises to shareholders.

 

 

 

 

 

In financial terms, value represents the capital invested in ANZ, plus a premium representing future earnings and value that the market ascribes to our expected future economic value added.  In fact, this explains around 60% of our share price.  It takes into account our unique specialisation strategy and growth opportunities, the talent of our staff, our culture, the market positions and customer franchises held by our specialist businesses, the strength of our brand and our reputation in the community.

 

 

 

 

 

While the value of investment represented by tangible net assets per share has risen by around 9%a year since 1998, the value represented by future economic value added hasrisen by about 21%a year.  It’s a compelling statistic that forces me, as Chief Executive Officer, to think about business differently.

 

 

 

 

 

Focus on long-term value

 

 

 

 

 

It highlights that enduring success means more than short-term performance.  Sustainable value takes us beyond the traditional notion of shareholder value as it has been conceived and implemented over the past decade.

 

 

 

 

 

It recognises that delivering sustainable value in the long-term is, in essence, about restoring customer faith and building community trust by understanding that we do not serve shareholders exclusively, but others as well.

 

 

 

 

 

It is why being the “bank with the human face” has to be at the core of who we are and what we do at ANZ. It means we integrate economic, environmental and social factors, and balance our obligations to different groups of stakeholders and create value for all of them – shareholders, customers, staff and the community.

 

 

 

 

 

It requires us to continually factor the long-term into our decision-making.

 

 

 

 

 

Our societal purpose

 

 

 

 

 

This year we have developed a corporate response to environmental and social concerns expressed by our key stakeholders.  Many of our staff have been involved in an assessment of our impact on society, contributing to defining ANZ’s “Societal Purpose” and in developing a number of new initiatives to improve our environmental and social performance.  Our particular approach to sustainability is based on seeing our people, customers and community as an integrated business system.  It means embedding society’s environmental and social concerns into our core business practices, products and services to ensure we stay aligned with the society in which we operate.

 

 

 

 

 

It formally acknowledges that we exist to meet the needs of shareholders and to do so successfully in the long-term we must recognise that society’s values and aspirations are market forces, where people act on their beliefs as voters, investors, employees and customers.

 

 

 

 

 

Building broader relationships

 

 

 

 

 

Becoming a fully engaged, respected participant in society is about building a broader, deeper set of relationships based on respect, trust and integrity.  It’s clearly understanding our purpose in society so that we have a framework for making decisions.

 

 

 

 

 

We believe a focus on sustainability will give us a competitive advantage.  While investors and customers, governments and other stakeholders are increasingly favouring those companies whom they see as truly sustainable, we also believe sustainability has the potential to create new value for shareholders through:

 

 

 

 

increasing staff engagement and satisfaction leading to higher productivity and commitment to ANZ’s success

 

 

 

 

growing market share as a result of improved brand strength and customer satisfaction

 

 

 

 

gains in productivity and lower costs through improved environmental, health and safety performance

 

 

 

 

improving our lending risk profile through superior understanding of social and environmental risks

 

 

 

 

enhancing corporate governance by ensuring systematic transparency and accountability in all aspects of our business.

 

79



 

It is not a radical concept.  It is why we take time each year in our Annual Report to explain not only our annual financial results but to report on what we are doing for staff, customers and the community we serve.

 

Integrating sustainability

 

This more formal approach to sustainability, however, involves integrating the concept of delivering value to a broad range of stakeholders into our business strategies and the way we operate, and to begin creating greater alignment between the interests of shareholders and those of society, and to report transparently on our progress.  It will mean seeking help from and creating new relationships with groups from a wide cross-section of society.

 

It is the focus on these themes that will allow us to continue to create value and to ensure ANZ is a leading company today and in 20 years time.

 

 

/s/ John McFarlane

 

John McFarlane

Chief Executive Officer

 

Market expectations of future performance determine our current share price

 

 

Serving different stakeholders

 

Shareholders own ANZ and appoint directors, therefore the directors’ focus is on shareholders

 

Directors have a duty to act in the best interests of ANZ

 

Growing acknowledgement that to protect the long-term value of ANZ, the needs of our customers, people, shareholders and community must be addressed

 

Sustainable performance

>

 

>

 

>

 

>

 

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[GRAPHIC]

 

The National Bank of New Zealand

 

On 24 October 2003, ANZ announced it had reached agreement with Lloyds TSB to acquire The National Bank of New Zealand for $4.915 billion at exchange rates on 23 October 2003.

 

New Zealand’s best bank

 

The National Bank of New Zealand is one of New Zealand’s leading banks with net loans and advances of NZ$35 billion representing around 23% of industry lending. It has strong market share in personal, rural, and small business banking including a national network of 160 retail branches and 260 ATMs.

 

The National Bank of New Zealand also enjoys consistently high customer and staff satisfaction levels. In the year to September 2003, The National Bank of New Zealand maintained its top position in the ACNielsen Consumer Finance Monitor with 71% of personal customers rating its service as excellent or very good. This is coupled with leading levels of staff satisfaction (85%).

 

The National Bank of New Zealand’s track record of value creation is based on an efficient operating model, strong revenue growth with sound credit quality and high levels of staff and customer satisfaction driven by a strong and experienced management team.

 

A strong existing business

 

ANZ of course already has a strong business in New Zealand that dates back to 1840. Today, ANZ has established its position among the top five banks in New Zealand with over one million personal customers and a leading position in corporate banking.

 

We have also taken a number of steps to invigorate our existing business in New Zealand including more autonomy for New Zealand management and a series of initiatives to improve customer satisfaction including introducing new products, opening branches and re-organising our approach to personal banking.

 

Strategic milestone

 

The acquisition is a significant strategic milestone for ANZ. It is part of ANZ’s strategy to develop leading positions in growth businesses in its home markets and clearly establishes ANZ as New Zealand’s largest bank. It also reflects our long-term confidence in New Zealand’s economic prospects.

 

A different acquisition

 

Following completion of the acquisition of The National Bank of New Zealand in December 2003, our combined business in New Zealand will contribute as much as 30% of earnings in future years. Naturally, the significance of our business and of our presence in New Zealand will necessitate a very different approach to thinking about our business in New Zealand, our customers, staff and our role in New Zealand as the largest provider of banking services.

 

We have already stated the acquisition will be very different – one based on improving customer service, satisfaction and growth. ANZ intends that both the ANZ and The National Bank of New Zealand brands, names and branch networks will be retained for the forseeable future. By working together with The National Bank of New Zealand and focusing on the interests of our customers, staff and the community we can create a better organisation in the future for New Zealand and for shareholders.

 

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[GRAPHIC]

 

An acquisition based on customer satisfaction and growth

 

82



 

People

 

[PHOTO]

 

Sally Morgan enjoys the flexibility of working part of her week from home. This is another way ANZ is committed to life balance for its people

 

83



 

[GRAPHIC]

 

A more vibrant culture creates value for shareholders

 

Better organisational leadership, talent and a vibrant culture results in better performance for shareholders. It’s a big statement, but globally companies rated as being leaders in their people practices produce, on average, significantly higher returns to shareholders than industry peers. It is easy then to understand why we have consistently placed so much emphasis on creating a unique ANZ culture that engages and involves everyone in the company.

 

Real progress

 

We survey all of our staff twice yearly to measure our progress. In 2000, when we started the process of systematically developing our culture as a unique and competitive asset as part of our specialisation strategy, only 52% of staff were satisfied working for ANZ. The top 10 values of management included bureaucracy, hierarchy, control and short-term focus.

 

Through the programs we have put in place, staff satisfaction now stands at more than 80%, and the values of the past have been replaced by customer focus, achievement, accountability and continuous improvement.

 

These programs involve our people at all levels. They help foster diversity, create opportunities, encourage ongoing learning through training and education, promote a healthy life balance and build a distinctive culture. They are designed not only to nurture individual talent but also to develop ANZ as an organisation best able to meet the needs of customers, shareholders, staff and the community.

 

Cultural transformation

 

Since 2000, over 13,000 of our people have participated in a cultural transformation program called Breakout. Breakout emphasises leadership, diversity, coaching and development. This program reflects today’s reality that everyone in the organisation has to be a leader, whether it is at the moment of contact with the customer or at the moment of a decision in their day-to-day role.

 

Creating opportunities

 

To support this transformation, we have developed opportunities for our people to enrich their careers at ANZ and provide the necessary skills required to meet business needs. For example, the Opportunities@ANZ initiative provides information and resources for staff to develop their careers through short and long-term job placements and professional development programs.

 

We have made significant progress in strengthening our talent identification and this has profoundly improved the quality of leadership succession, creating opportunities for our talented people as well as bringing in fresh talent from the market.

 

We are fostering diversity within ANZ through the establishment of diversity forums within our specialist businesses. Representation of females in ANZ management roles is above average for the banking and finance industry and we are incrementally increasing representation – over 31% of middle management roles are currently held by women. In executive management, almost 17% are women and by 2005 our expectation is that women will fill 20% of executive roles.

 

Health and safety

 

ANZ has a strong commitment to the health, safety and we