Breakout Perform Grow and Breakout Investor Presentation Australia and New Zealand Banking Group Limited May 2001 John McFarlane Chief Executive Officer.

Perform Grow and BreakoutBreakoutInvestor Presentation

Australia and New Zealand Banking Group Limited May 2001

John McFarlaneChief Executive Officer

Page 2

ANZ - who we are• One of the ‘Big Four” Australian banks. • Provider of full range of financial services in

Australia (since 1835) and New Zealand (since 1840)

• Leadership in Corporate Banking, Credit Cards and Mortgage origination, a strong eCommerce position and an offshore network in Asia and Pacific.

• Assets A$181b (US$ 95b)

• Market Cap A$20.5b (US$ 11b)

• Profit (half year) A$895m (US$ 470m)

• Staff 22,815

• Credit Ratings AA-/Aa3

ANZ Headquarters100 Queen StreetMelbourne

Page 3

ANZ is different…..

0

20

40

60

80

100

120

140

1991 1996 2001*

BusinessConsumer

020406080

100120140160180

1991 1996 2001*

InternationalNZAustralia

Lending assets by asset type

Total assets by geography

We were

• Reliant on market trading earnings

• Higher risk asset base, particularly emerging markets

• Prone to adverse surprises

Today

• Developing specialist businesses from distinctive capabilities

• Australasian, with regional interests

• Strong consumer growth engine balancing leading position in Corporate

A$b A$b

* as at 31 March 2001

Page 4

Building for the future - a distinctive strategy

Proposition

• Entrepreneurial specialists create more value

• Corporations must embrace new technologies

• Value depends on performance, growth and breaking out

Strategy

• Reconfigure ANZ as a portfolio of 16 specialist businesses

• An e-Bank with a human face

• Drive results, invest in growth businesses and create new paradigms

Perform Grow& Break out

e-Transform

Specialise

Implications

• Specialist approach to customer and product businesses

• Transform the way we do business with IP technology

• Meet expectations, fund growth by cost reduction, transform

Page 5

• Specialisation

– 16 Business Units within 3 portfolios, plus corporate centre

– Separate financial reporting for each Business Unit

• eTransformation - the eBank with a human face

– Leading internet banking penetration

– Highest profit per employee

• Perform Grow and Breakout

– Perform exceed market expectations

– Grow higher than system revenue growth, position in high growth sectors

– Breakout bold transforming moves

Implementation of our strategy is progressing well

Page 6

Evolution of Perform Grow and Breakout

• Create a breakout mentality

• Create a strong performance culture

• Out execute in a different game

• Earned the support of the market

• Identify growth opportunities

• Invest to grow

• Build the foundation

• Deliver on the fundamentals

Page 7

Transforming ANZ through Perform, Grow and Breakout

Breakout

Grow

Perform

• Focus: long term ‘destiny’

• Benchmark: global industry/players

• Looking for: transforming moves

• Horizon: 5-10 years

• Success: dramatic market cap increase

• Focus: specialisation and out-growing the market

• Benchmark: competitors in each business

• Looking for: breakout moves in key businesses (eg QTV, Origin)

• Horizon: 3-4 years

• Success: 4-5 moves taking share andworth ~AUD1bn+ market

cap each

• Focus: performance

• Benchmark: market expectations

• Looking for: six monthly delivery

• Horizon: 1-2 years

• Success: meet/exceed expectations

consistently

Page 8

We are performing well - interim results

• NPAT from continuing operations $907m - up 18%

• EPS up 13% to 55.8 cents

• ROE of 19.1%, up from 17.8%

• Costs flat - cost income ratio down to 49.4%

• Credit quality sound:– ELP charge down to 35 bp’s – Total non-accruals down– Specific provisions flat

• Profit on sale of holding in St George $99m ($65m after tax), offset by write downs in investments ($84m)

• Improved disclosure - financial information provided for each business unit

Note: Comparisons are against half year ended March 2000 (including Grindlays)

Page 9

...and building a strong track record

625 717 817 895

930481 763

0200400600800

100012001400160018002000

1998 1999 2000 200112

13

14

15

16

17

18

19

20NPAT $m

NPAT/ROE

ROE %

1000

1500

2000

2500

3000

3500

Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-0146

48

50

52

54

56

58

60

62

64Expenses

Income

CTI

39.1

32.0

23.5

13.7

05

1015202530354045

ANZ WBC NAB CBA

Internet banking users as % of main relationships

Source: JP Morgan & Roy Morgan Research

0

300

600

900

1200

1500

1800

1998 1999 2000 2001 1H0.0%

0.5%

1.0%

1.5%

2.0%

Gross Non AccrualsNet Non AccrualsNon Accruals/Loans

Non-accrual loans

Cost to Income

Page 10

Revenue growth driving earnings per share

0

5

10

15

20

25

30

35

40

Average interest earning assets

27%

Margin Compression

-5%

Non Interest Income

15%

Expenses

-6% Provisions

-1%

Tax

-11%

NPAT Continuing Operations

Discontinued Operations

-8%

Pref Shares

-1%

Earnings - Ordinary Shareholders

Capital Management

4%

EPS Growth

13%

9%

18%

%

Mar 00 v Mar 01

% c

on

trib

uti

on t

o E

PS g

row

th

Acquisitions

-1%

Page 11

0

20

40

60

80

100

120

140

Wealth

Pacific

Cap

ital Markets

Asia

Investm

ent M

gm

t

Foreig

n E

xchan

ge

Asset Fin

ance

Sm

all Busin

ess

Tran

saction S

ervices

Card

s

Corp

orate B

ankin

g

Reg

ional B

ankin

g

Stru

ctured

Finan

ce

Institu

tional

Mortg

ages

Metro

Ban

king

Good profit growth across a diversified portfolio Mar 00 v Mar 01

Personal

Corporate

International and subsidiaries

$m

Page 12

80% of businesses delivered revenue growth greater than expense growth

10

15

20

25

30

35

40

45

50

-10

-15

5

-5

-10-15-20-25 -5 10 15 20 25 30

5General Banking

Pacific

Small Business Wealth

GCM

Corporate

Mortgages

Cards

GSF

GFX

Asia

Asset Finance

Investment Management

expense growth

%*

revenue growth

%*top third

middle third

bottom third

ROE

Institutional

GTS

*based on pcp

Page 13

We are developing a track record for building growth businesses

-100

0

100

200

300

400

500

600

700

Mar-00 Jun-00 Sep-00 Dec-00 Mar-018

10

12

14

16

10

11

12

13

14

15Mortgage market

share

FM inflows (LHS)

Deposit

market share (RHS)

15

20

25

30 Share of credit card spend

3.4

3.6

3.8

4.0

4.2

Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00

Personal customers - Australia

%%

%m

$m

95 0096 97 9998 01 95 0096 97 9998 01

Page 14

Most businesses expected to grow above market over next 2-3 years

High

Medium

Low

Below Market

At Market Above Market

Market Growth

BU Growth

Mortgages

Cards

Small BusinessMetro

Banking

Wealth Management

Corporate

Institutional

GCM

GFX

GSF

GTS

Asset Finance

Investment Management

Pacific

Asia

Note: Size of bubble approximates relative profitcontribution

Regional Banking

Corporate

Personal

Int. & Subsidiaries

Page 15

Substantial growth opportunities in Personal

Existing revenue $2.6b

10

0

Customer #’s (m)

40% 50%*

Peer Average

Share of Customer Wallet

Potential revenue $650m

* Average share of wallet for CBA, NAB, SGB, WBC - source: Roy Morgan Research

System Growth

• Underlying credit growth ~ 8-10% pa

Market Share

• Product businesses growing customer numbers and mkt share

• Customer #’s increasing by 1.0m - translates to $650m in additional revenue pa

Increase Wallet

• Customer businesses deepening wallet share

• $650m revenue gain by matching our peers

– Created customer businesses

- Sales programs- CRM

4

5

Potential revenue $650m

Total potential revenue growth - $1.5b

7.3

Increased wallet on higher share

$160m

Page 16

Our breakout approach is differentiating us

Strategy

Staff

Customers

eTransformation

Risk

• Specialised businesses• First class execution (no surprises)

• 91% of managers on individual contracts• 12% rise in staff satisfaction

• Establishment of Customer Charter, Customer Advocate and distinctive customer and community initiatives

• Leading cost income ratio• Highest internet banking penetration

• Leading financial disclosure & transparency• EVA embedded in culture

Page 17

Developing a breakout performance culture

Average

SuperiorDistinctive

* Benchmark - 33 Australasian companies surveyed over 1999-2000

Coordination and control

Financial OperationalPeople

Distinctive (Top 10%)

Superior (Top 25%)

Average

Motivation

Rewards &recognition

Opport-unities

Values

+

where we are where we want to be

Targets/goals

Consequencemanagement

Mission/aspiration

Organisationalapproach

BU Performance feedback

Page 18

ANZ’s aspiration

A high performing company, exceeding expectations• Revenue growth• Cost leadership • Risk mitigation• EPS• ROE

Positioned in growth markets• Actively managed portfolio• Annual investment in growth ideas• Higher than peer revenue growth

More dynamic than competitors• High P/E rating• Performance culture• Lean and agile• The e-bank with a human face• A breakout mentality

Grow

Breakout

AND

Perform

Page 19

We are on track to deliver on our 3 year commitments

Measure

EPS growth

ROE

Cost-income ratio

Inner Tier 1

Credit rating

3 Year Commitment

> 10%

> 20%

mid 40’s

6%

maintain AA category

Achievement

13%

19.1%

49.4%

6.2%

maintained

• We have also committed to improving customer satisfaction, and will publicly report our progress

Page 20

Summary

• We are performing well

• Cost management momentum – eTransformation has just begun…

• Risk reduction continues

• Our new strategy is creating value and better positioning us for growth

• We are differentiating ourselves through our Breakout program

We are on track

to achieve

our goals

Page 21

The material in this presentation is general background information about the Bank’s activities current at the date of the presentation. It is information given in summary

form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment

objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is

appropriate.

For further information visit

www.anz.com

or contact

Philip GentryHead of Investor Relations

ph: (613) 9273 4185 fax: (613) 9273 4091 e-mail: [email protected]

Supplementary Information

2001 Interim Results and credit quality information

Page 23

Strong income growth, with good progress across the board

700

800

900

1,000

1,100

930

2H 2000 2001 1H

2H 2000 Continuing

Abnormal/ Discontinued

Items 104

826

Interest Income

84

Non-Interest Income

76

Profit on sale of St George

65

Provisioning (14)

Write downs(84)

Expenses(34)

Tax(12)

895907

Discontinued(12)

2001 1H Continuing

Eftpos NZ acquisition and GST ($26m)

$m

Page 24

“Unusual” items – St George profit offset by write downs in investments

• St George - $99m profit ($65m after tax)– regulatory issues- not critical to strategy– attractive price

80

130

180

230

280

Oct-00 Dec-00 Feb-01 Apr-01

• Panin - $43m writedown#

– long term growth prospects remain positive

• E*Trade - $21m writedown#

– online broking service provides core customer offering

• Other - $20m writedown#

– a number of small eCommerce related investments

Panin Share Price

0.30

0.80

1.30

1.80

2.30

Oct-00 Dec-00 Feb-01 Apr-01

E*Trade Share Price

# - no tax relief on these writedowns

$

IDR

Page 25

Income drivers*

%

3.22

3.683.56

3.35 3.23

2.622.81

3.12

3.48 3.45

1.911.901.901.731.64

1

2

3

4

Mar-99 Mar-00 Mar-01

PFS

International

CFS

351 372

496560

14017344

32126

143

1H 2000 1H 2001

Lending Fees

Other Fees

FX

Trading

Other

Margins stabilised in first half

Non-interest income continues to grow

• Benefit from differential between 90d BBSY and cash rate

• Greater focus on improving margins

• Driven by higher non-lending fee income

• FX profits higher, reflecting AUD volatility

* For continuing businesses

Page 26

1000

1500

2000

2500

3000

3500

Sep-97

Mar-98

Sep-98

Mar-99

Sep-99

Mar-00

Sep-00

Mar-01

45

50

55

60

65

70ExpensesIncomeCTI

Cost-income ratio on track to meet target of mid 40’s

• Reduction in Cost Income ratio driven by revenue growth and cost control

• Approximately $65m of restructuring provision used

– two year program, with benefits principally 2002 and beyond

• eTransformation will continue to drive costs down

$m CTISale of Grindlays

Page 27

Personal portfolio

• Mortgages and Cards reinforce value of our specialisation strategy

• Clear opportunities for customer businesses to replicate success of product businesses

• Significant market share growth opportunities remain

– creation of Metrobanking and Regionalbanking

– a 1% increase in market share for customer businesses worth $100m+ revenue

Profit Breakdown

Mort27%

Cards14%

Wealth3%

Region18%

Metro27%

Small Bus11%

250

450

650

850

1050

1250

Sep-99 Mar-00 Sep-00 Mar-01

Interest Income

Other Income

Expenses

$m

Page 28

Corporate portfolio – fee income driving profit growth

• Five of six businesses delivered profit growth greater than 10%

• “Non-traditional” income for Corporate Banking grew 40%+ on annualised basis, largely by executing Wall St to Main St strategy

Profit Breakdown

GTS15%

GCM7%

Corp18%

GSF24%

GFX11%

Inst25%

250

300

350

400

450

500

550

600

Sep-99 Mar-00 Sep-00 Mar-01

Interest Income

Other Income

Expenses

$m

Page 29

International & Subsidiaries – risk reducing, profits up

• Asset Finance reconfiguring back office platform to deliver substantial efficiencies

• Negative profit growth for Investment Management due to tax changes and increased growth spend

• Asia showing positive signs, on track to record significant profit growth for the full year

Profit Breakdown

Asset Finance

35%Asia23%

Pacific16%

Inv Mgmt26%

11.1

20.4

12.7

10.0

14.1

24.4

26.0

28.843.8

52.0

13.75.0

15.5

3.03.0

7.4

4.05.1

Sep- 99 Sep- 00 'March- 01

AAA to BBB+

BB+ to BB

BB-

B to CCC

Non-accrual

BBB to BBB-

Asian Credit Quality

Page 30

Capital management will continue

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

Mar-99 Mar-00 Mar-01100

110

120

130

140

Tier 1

Inner Tier 1

RWA's

% $b

7.77.9

7.5

7.4

6.7 6.96.5

6.4Progress• $413m in share buybacks in the

half year• New framework for allocating

capital for operating risk implemented

• Capping of DRP/BOP

Capital ManagementPhilosophy:• Maintain capital consistent with

ANZ’s AA status and peer group ratings

– Tier 1 (6.5 - 7.0%)– Inner Tier 1 (6.0%)7.3

6.2

Page 31

We continue to actively manage and reduce risk

0%

20%

40%

60%

80%

100%

ANZ1991

ANZ1996

ANZ2001

CBA NAB WBC

Lending Profile by Asset Type*

business

consumer

• Exiting higher risk businesses

• More emphasis on lower risk businesses

• Corporate balance sheet deliberately constrained – focus on fee income

• Risk based approach embedded through EVA

* CBA as at 31/12/00, NAB & WBC as at 30/9/00

Page 32

Total non-accrual loans continue to fall, but increase in Australia

1662

1543

13911295

872

727699657

900

428

0

300

600

900

1200

1500

1800

1997 1998 1999 2000 2001 1H0.0%

0.5%

1.0%

1.5%

2.0%Gross Non-Accrual Loans (LHS)

Net Non-Accrual Loans (LHS)

$mNon-Accrual Loans/Loans & advances (RHS)

Historic

858

59

749

8972

495

651681

457

0

200

400

600

800

1000 Mar-00

Sep-00

Mar-01

Aust InterNZ

Geographic

Gross Non-Accrual Loans$m

Page 33

Arrears analysis indicates no systemic deterioration

% personal lending assets over 60 days in arrears

0.00

0.50

1.00

1.50

2.00

2.50

Mar-00 Sep-00 Dec-00 J an-01 Feb-01 Mar-013.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

Mar-00 Sep-00 Dec-00 J an-01 Feb-01 Mar-01

Business FDAs

Housing Loans

RILs*

Overdrafts

Credit Cards

Personal Loans

%%

• Small upturn in arrears in Jan-Feb

largely reversed during March

• Arrears broadly in line with same period last year

• Increase in credit card arrears reflects seasonal influences

• Personal loan arrears continue to increase in % terms due to reducing book

* Residential Investment Loans

Page 34

Corporate book holding up well, despite a few one off “issues”

Risk actively managed

• Quarterly strategy reports prepared for all high risk accounts

• June to October 2000 - all BB rated accounts within Corporate reviewed in expectation of downturn

• New accounts > $3m to be referred “one level higher”

11.7% 12.3% 11.7%

18.2% 19.1% 19.4% 20.3%

26.7% 26.9% 27.4%

37.9%

5.3% 4.1%4.0% 3.6%

9.3%

26.4%

38.4% 38.9%38.4%

Sep-99 Mar-00 Sep-00 Mar-01

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

Corporate risk grade profile

>B = B, B-, CCC& non-accrual

Page 35

Credit quality is sound in some of our larger industry exposures - Australia

Lending Assets (AUDm)% of Portfolio (RHS scale)% in CCR 7D-8G (RHS scale)

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 01

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 01

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 01

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 010.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 01

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0bn

2bn

4bn

6bn

8bn

10bn

Sep- 98 Mar- 01

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Real Estate Operators & Dev.

Manufacturing Retail Trade

Agriculture Accomm. Cafes & Restaurants

Construction

% in CCR 9-10 (RHS scale)x

Page 36

Group risk grade profile continues to improve

17.3% 17.3% 15.6%

19.2%15.8%

14.6%

41.5%45.3% 49.7%

16.2%

14.1%

14.7%

50.5%

14.8% 16.2% 16.9%

Sep 1998 Sep 1999 Sep-2000 Mar-01

$114.6bn $141.0bn$134.9bn$126.5bn

AAA to BBB+

BBB to BBB-

BB + to BB

BB-

> B

ELP (bp’s)

• Risk grade profiles by division and geography in appendix

45 43 38 35

7.2%

5.4%3.9%

3.8%

>B = B, B-, CCC& non-accrual

Page 37

Provisioning levels remain strong

500

700

900

1100

1300

1500

1700

1373

241

(181)

27 1460

1012

2000 1H 2001 APRA Guideline

s

ELP charge

Net SP transfer

FX impact

ELP - Economic Loss Provision

SP - Specific Provision

$m

Surplus448

1.06

0.97

1.02

0.98

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

ANZMar-01

CBADec-00

NABJun-00

WBCJun-00

GP/Lending Assets*%

* includes acceptances

represents 3 years

expected losses

Page 38

Current provisioning in line with expectations

-40

-20

0

20

40

60

80

100

120

140

Mar-00

Sep-00 Mar-01 Mar-00 Sep-00 Mar-01 Mar-00 Sep-00 Mar-01

Personal Corporate Int & Sub.

Actual SP v ELP charge

ELP chargeSP charge

$m

• ELP is a function of volume (on and off balance sheet), risk grade profile, and level of security

• Specific Provisions tend to be less volatile in Personal businesses and track more closely to ELP

Page 39

ELP Charge = Loan Amount x

Probability loss x Loss Given default

Plus

ELP charge will vary from year to year based on:• changes in lending volumes• change in risk grade profile• security levels• product and geographic mix

Economic Loss Provisioning

An adjustment to ensure the GP balance is sufficient to cover:

• Volatility around expected loss (using statistically quantified variance)

• Remaining term of loan portfolio

• Balance sheet growth

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

GP % net lending assets

General Provision balance

P&L Charge Actual SP’s

Actual Losses are funded from the General Provision

Page 40

Summary of forecasts - Australia

Real GDP growth 4.7 3.7 1¾ 3¾

Inflation 1.5 4.5 4.0 1½

Unemployment (Dec) 6.7 6.2 7.0 6 ¾

Current account deficit (%GDP) -5.8 -4.0 -2.3 -3.3

Housing starts (‘000) 157 147 123 135

90-day bill yield (% pa, Dec) 5.48 6.20 4.75 5.1

10-year bond yield (% pa, Dec) 6.64 5.50 5.9 6.2

1999 2000 2001 2002

Calendar years

Sources: ABS; RBA; Economics@ANZ.

A$ (US cents, Dec) 65.8 55.8 55.0 62.0

Page 41

Outlook

• System credit growth forecasts*

– housing 12.4%

– personal 11.1%

– business 6.5%

• Personal to exceed system credit growth

• Corporate credit growth - continuing higher quality focus

• Margin compression will continue

• Costs flat

• Challenges ahead, however we are well placed to continue to perform well, and achieve our targets over the medium term

* forecast for year ending 30 September