2 15 RESULTS PRESENTATION 8: INVESTOR DISCUSSION PACK Index 1H15 Result Overview CEO Presentation 3 CFO Presentation 14 Treasury 42 Risk Management 53 Group Overview 69 Divisional performance 79 Australia Division 80 New Zealand Division & Geography 88 International and Institutional Banking Division 97 Global Wealth Division 106 Home Loan Case Study 110 All figures within this investor discussion pack are presented on Cash basis in Australian Dollars unless otherwise noted. In arriving at Cash Profit, Statutory Profit has been adjusted to exclude non-core items, further information is set out on page 86 of the 2015 Half Year Consolidated Financial Report. Common growth rate abbreviations used in this presentation include PCP: Prior comparable period growth rate (for instance 1H15 vs 1H14, 2H14 vs 2H13); HoH: Half on Half growth rate (for instance 1H15 vs 2H14, 2H14 vs 1H14) 2 2 15 Mike Smith Chief Executive Officer Financial performance 1H15 ($m) Growth (1H15-1H14) Statutory Profit ($m) 3,506 3% Cash Profit ($m) 3,676 5% Cash Earnings per Share (cents) 133.6 4% 14.7 (80)bps 12.4 - 8.7 40bps ROE (%) CET1 (%) Internationally harmonised APRA basis • Good, well balanced result in the context of a constrained macro environment • Our result highlights our strategy is continuing to deliver • Strong business performances; some challenges 4 Highlights of the result Highlights • Australia Retail & Commercial strong, consistent growth Drivers & outcomes • Maintained margins in a competitive environment • Invested in frontline, digital & NSW • Small business lending up 15% • 5 yrs above system mortgage growth • Best in class productivity Cash Profit & growth PCP 8% $m 1,602 8% 956 Aus Div Aus Retail 8% 646 Aus Comm 5 Highlights of the result Highlights Drivers & outcomes • Australia Retail & Commercial strong, consistent growth • PBP up 6% in Retail & up 9% in • New Zealand performance to the next level • Winning customers: #1 Mkt position & Commercial growing mortgage & cards share • Invested in Auckland, Christchurch & small business • Continuing strong credit quality Productivity & Efficiency CTI Rev per FTE (RHS) 45.2% 41.3% 1H13 1H14 40.1% 1H15 NZ$k 300 200 100 0 6 Highlights of the result Highlights Drivers & outcomes • Australia Retail & Commercial strong, consistent growth • Past Markets investments delivering • New Zealand performance to the next level • 49% of markets income from APEA; • Markets customer income at record levels led by Asia growth • 79% markets income customer linked diversified regional & product growth driving IIB Asia growth of ~15% • #4 Corporate Bank in Asia1 Markets income $m 1,228 1,242 22% 21% 78% 79% 1,242 49% 37% 14% APEA Aus NZ 1H15 1H14 1H15 Balance Sheet Customer linked 1. Greenwich Associates 2014 Asian Large Corporate Banking Study. 7 Highlights of the result Highlights Drivers & outcomes • Australia Retail & Commercial strong, consistent growth • Transaction numbers via Digital: • New Zealand performance to the next level • Award winning apps “GoMoney” & • Markets customer income at record levels led by Asia growth • NSW expansion; opening Myanmar & • Investing in digital & other innovation, strengthening NSW • 74% in Aus, 65% in NZ “Grow by ANZ” Thailand • “Transactive” in 17 countries Australia New Zealand Sales numbers via Digital1 (%) Sales revenue via Digital2 (%) 52% 14.4% 6.6% 9.5% 1H14 1. 2. 38% 1H15 1H14 7.6% 1H15 Sales includes the number of sales events through the Retail distribution network, including all Retail, Commercial and Wealth products. Revenue from sales completed through Digital channels. 8 Highlights of the result Highlights Drivers & outcomes • Australia Retail & Commercial strong, consistent growth • Strong capital, liquidity & funding • New Zealand performance to the next level • No material change to CP overlays • Markets customer income at record levels led by Asia growth • Investing in digital & other innovation, strengthening NSW • Strong risk management positions • Strong credit quality: maintaining risk disciplines in competitive markets $m 700 Provision charge CP IP 599 598 500 300 IP/Avg. NA (RHS) 528 510 461 0.27% 0.24% 0.24% 0.21% 1H13 2H13 1H14 2H14 100 -100 0.17% 1H15 9 Highlights of the result Highlights • Australia Retail & Commercial strong, consistent growth • New Zealand performance to the next level • Markets customer income at record levels led by Asia growth Drivers & outcomes • Integrated Regional Delivery Network • Supporting a consistent, higher quality customer experience • Improving efficiency - operations costs down 3%, operational volume up 7% • Investing in digital & other innovation, strengthening NSW • Strong risk management Operations efficiency1 ~50% improvement over 4 ½ years Indexed to FY10 100 102 105 FY10 FY11 FY12 122 136 145 FY14 1H15 • Enterprise approach FY13 1. Operations efficiency measured by operations productivity improvement, which is the difference in operations costs and volume growth. 50% productivity improvement over 4 ½ years. 10 Challenges and areas to improve Challenges/Areas to improve Drivers & outcomes • Expenses • +4% (ex FX) front running investment • Targeting ~3% FY15 • Global liquidity squeezing loan margins, deferring benefit of Institutional cash build out • Building deposits faster • Lifting cross-sell & key ‘corridors’ growth • Managing returns, more balanced bank • Trade pressured by commodity prices and lower hedge revenue • Strong core business experiencing cyclical pressure • Returns up despite tough conditions • Progress on structural realignment of the business • Esanda Dealer Finance sale • RWA growth 7%, ~50% FX driven • Disciplined capital management 11 SUPER REGIONAL STRATEGY STRONG CORE MARKETS PROFITABLE ASIAN GROWTH ENTERPRISE APPROACH STRONG LIQUIDITY AND CAPITAL MANAGEMENT DISCIPLINED AND EXPERIENCED MANAGEMENT CEO PRIORITIES FY14-16 Improving customer experience Diversifying revenue Improving productivity Improving returns 12 Summary • Good, well balanced result • Very positive about Australia despite challenging global environment • Investing in Australia’s future: helping customers, creating jobs, supporting small business • Strategy has delivered good progress to date for shareholders – confident we can balance short and long term growth, investments and return • We will deliver our CTI commitment • We remain committed to ROE discipline 13 2 15 Shayne Elliott Chief Financial Officer Summary of results 1H15 – 1H14 $m change Revenue 10,185 5.3% Expenses (4,593) 7.2% 5,592 3.9% (510) (3.4%) 3,676 4.6% PBP Provisions Cash Profit Stat. adjustments (170) Statutory Profit 3,506 3.4% 133.6 3.8% 86 3.6% 14.7% (80)bp Cash EPS (cents) DPS (cents) ROE 15 Impact of FX translation 1H15 Growth Revenue Expenses 7.2% 2.1% 2.8% 1H15 Earnings Composition (by currency) FX Adj Growth 1H15 1H13 $3,676m $3,179m Other1 11% CNY USD 5% 6% 10% 3% 4% 3.2% 4.4% PBP 3.9% 1.7% 2.2% Provisions (3.4)% 1.6% (5.0)% NPAT 4.6% 1.8% 2.8% (80)bp (30)bp (50)bp ROE 1. 5.3% FX impact NZD 22% AUD 56% 18% 65% major currencies in “other” category includes TWD, MYR, PGK and IND – no one currency greater than 2% 16 Operating environment and key actions What we said at FY14 Actions – 1H15 Expanded coverage • Additional Aus. Division front office staff: ~600 • NSW expansion Improved Customer Experience • Digital capacity & capability • “GoMoney”, “Grow”, “Smart Choice” & “Transactive” enhancements • “Tap and Pin” ATM: world first • Rolled out “Transactive” China and Philippines • Single digital access to Cash, Trade and Markets in 4 Asian markets Enhanced Productivity & Capital Efficiency • Hubs & Ops unit costs down ~10% average • Esanda Dealer Finance sale 17 DRIVERS OF GROUP EARNINGS Revenue drivers A$m 102 35 10,185 264 202 9,870 (59) 9,668 (7)% 14 (41) (3)% 2% 6% 4% 13% 3.2% 5.3% 1H14 FX translation 1H14 FX Adj. Global Loans Global Markets TB Retail Comm. P'Ships/ Other Notes. TB: Transaction Banking, Retail: Retail Australia, Retail New Zealand, Retail Asia Pacific and Global Wealth, Comm: Corporate & commercial Banking Australia and Commercial NZ 1H15 19 NIM drivers bps 212 209 3.0 (3.0) (2.0) 208 (1.0) (2.0) 204 (3.0) (1.0)bps (8.0)bps 2H14 FX 2H14 FX Adj. Business Asset Pricing Retail Asset Pricing Deposits 1H15 Pre Aus. one-off Retail Impacts Remediation Markets & Treasury 1H15 20 Expense drivers A$m 113 4,399 60 71 4,530 63 4,593 4,286 3.0% 4.4% 1H14 FX Translation 1H15 FX Adj. BAU D&A 1H15 pre Discretionary Invest. investment 1H15 21 Portfolio credit quality remains sound Collective provision balance by source A$m 54 102 3 2,914 - 5 (7) $m 1,000 800 600 400 200 0 -200 2,757 Total Provision Charge 599 598 528 461 510 1H13 2H13 1H14 2H14 1H15 CP charge • Predominantly Australia Division - consumer cards & mortgages Gross Impaired Assets $m 5,000 4,685 4,000 4,264 3,620 3,000 1,000 0 Fx Risk Mgt Credit overlay Growth 2,889 2,708 2,000 1.9% ex FX Sep 14 IP charge Mix Mar 15 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 < $10m $10-$100m > $100m 22 DI VI SI ONAL PERFORMANCE Divisional contribution to profit growth Divisional Cash Profit (1H15–1H14) A$m 91 16 25 3,676 119 (90) 3,515 8.0% 6.7% 2.9% 10.7% 4.6% 1H14 Australia IIB NZ Wealth GTSO & Group 1H15 24 Australia – consistent growth & return, plus accelerated investment Retail lending growth 1.95% $b 1.97% 1.97% 2.01% 199 206 212 220 Mar 13 Sep 13 Mar 14 Sep 14 NLAs Commercial lending growth 87% 1.97% 229 87% 67 $b 87% Mar 15 Mar 13 NLAs NIM (%) 68 68 Sep 14 Mar 15 66 Sep 13 Mar 14 1 EAD by CCR (6 or stronger) Strong operating performance % $’000 1H15 profit growth (PCP) 450 400 38.1 37.0 88% 63 Improving productivity 37.4 88% 36.6 36.7 6.5% 6.0% 5.2% 350 300 1H13 2H13 1H14 CTI (%) 2H14 1H15 250 Revenue Expenses PBP Revenue per FTE (RHS) 1. CCR = Customer Credit Rating 25 Australia - Retail a highlight Customers Retail products per customer FUM 120 115 Home Loans FUM 1 retail product % of total customers Indexed 110 105 43.4% 100 Total Retail customer numbers 106 95 Mar-13 Indexed Mar-15 Cards and Payments FUM 110 104 Indexed Mar 13 % of total customers 49.0% 100 100 47.6% 95 Mar-13 Mar 15 115 110 Mar 15 2-3 retail products 105 102 98 Mar 13 41.6% Mar-15 Retail Deposits FUM Indexed Mar 13 4+ retail products % of total customers 105 9.4% 100 95 Mar-13 FUM Mar 15 9.0% Mar-15 FUM/Customer Mar 13 Mar 15 26 New Zealand Division – scale benefit driving growth Retail lending growth NZ$b 2.52% 2.61% 2.62% 2.65% Commercial lending growth NZ$b 2.72% 88% 91% 92% 93% 96% 57.3 59.4 62.1 Mar 14 Sep 14 Mar 15 35.8 36.4 36.9 37.1 37.4 53.6 55.2 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Mar 13 Sep 13 NLAs NIM NLAs Improved productivity EAD by CCR 1(6 or stronger) Operating performance % 45.2 NZ$k 1H15 PCP growth (NZ$) 300 41.9 41.3 280 40.6 40.1 7.8% 5.6% 260 240 220 1H13 2H13 1H14 CTI 2H14 1H15 200 2.5% Revenue Expenses PBP Revenue per FTE (RHS) 1. CCR = Customer Credit Rating 27 Global Wealth – focused on quality & growth m FUM net flows2 Retail Life lapse rates Wealth customers1 $m Australia 11% 2.1 1.9 686 883 13.3% 12.1% 11.6% 1.6 (442) Sep-13 Mar 14 Mar 15 1H13 Improved productivity3 1H14 1H13 1H15 1H14 1H15 Operating performance3 1H15 PCP growth % CTI 14.6% 62.4 60.4 57.5 6.9% 1.9% 1H13 1. 2. 3. 1H14 1H15 ANZ Wealth customers directed through ANZ channels Global Private Wealth and Funds Management netflows Excluding the impact of the Trustees sale Revenue Expenses PBP 28 Digital investment – delivering results ANZ Smart Choice Australia Transaction numbers via Digital2 (%) Sales numbers via Digital1 (%) 14.4% 73.9% 70.4% 9.5% 1486 Online rollover innovation released 1600 1400 1200 3,500 3,000 1000 1,500 1H15 1H14 14.0% 0 Mar 13 FUM ($m) 1H15 Mar 14 Mar 15 Ave Weekly Rollovers Transactive Mobile A$b Transaction numbers via Digital2 (%) 60 k 7,000 65.0% 50 6,000 12.0% 5,000 40 10.0% 7.6% 59.1% 30 6.0% $55 20 $37 4.0% 10 2.0% 0 0.0% 1H14 1. 2. 3. 1H15 500 435 New Zealand Sales revenue via Digital3 (%) 1,000 1,619 0 6.6% 2,000 600 200 8.0% 2,500 3,404 775 800 400 1H14 4,000 1H14 1H15 $0 FY12 3,000 2,000 1,000 $20 FY13 Value 4,000 FY14 FY15x Volume (RHS) Sales includes the number of sales events through the Retail distribution network, including all Retail, Commercial and Wealth products. Transactions refers to the number of value transactions through all channels including internet, mobile, teller and ATM. Revenue from sales completed through Digital channels. 0 29 IIB revenue – re-balancing A$m 3,786 3,622 Loan margins Customer Acq. & penetration FVA Asia Growth Commodity prices Cash volumes Interest Rates Trade volumes Regulatory changes Market Sales FX 4.5% 1H14 Macro Headwinds Diversification & growth 1H15 30 IIB – improving the mix IIB 1H15 Revenue Growth IIB 1H15 profit by region A$m, % growth PCP (4)% A$ % growth PCP 20% 688 167% (33)% 24% 596 14% 1% 95 Aus / NZ Asia 10% 80 EMEA -2% Pacific P’ships IIB Asia Productivity Retail Cash Trade Loans IIB Asia Profitable growth US$k 300 US$m 61% 1.23% 55% Markets -4% 54% 0.46% 200 1.51% 1.63% 0.77% 0.81% 451 489 324 1H13 CTI 1. 1H14 1H15 Rev/FTE (RHS) 100 1H13 NPAT RoRWA IIB1 1H14 1H15 RoRWA IIB ex Pship1 RoRWA’ equals Net Profit After Tax divided by average Basel III risk weighted assets. 31 Markets income by type A$m 800 Sales 687 700 Trading ex Balance Sheet Balance Sheet Valuation Adjustments for Derivatives 632 600 556 500 400 321 300 329 288 245 276 273 200 100 -14 -100 1H13 1H14 1H15 1H13 1H14 1H15 1H13 1H14 1H15 1H13 32 1H14 -48 1H15 32 BALAN CE SH EET STREN GTH Risk Weighted Assets Total RWA $b 361 CRWA growth 362 339 56 387 47 53 $b 30.8 1.7 16.1 51 340 288 305 309 Other Lending growth 15.4 FX -2.4 Risk 1H15 change HoH +4.7% (FX adjusted) Sep 13 Mar 14 Credit RWAs Sep 14 Mar 15 Market & Operational RWAs 1.Credit Risk Growth = EAD growth, includes portfolio mix and risk improvement 2.Credit Risk Other = Initiatives, Model changes, Regulator changes, FX 34 Liquidity successfully transitioned to LCR September 2014 March 2015 $b $b LCR 111% Surplus $15b 17 19 49 17 LCR 119% Surplus $28b 49 24 3 3 116 104 121 81 Liquid Assets 1 HQLA 1 HQLA 2 1. 2. 3. 4. Net Cash Outflows 3 Internal RMBS Other Alternative Liquid Assets Post haircut market value as defined in APS210. 1H15 includes $54bn Committed Liquidity Facility. Basel III LCR 30 day stress scenario cash outflows. Other include off-balance sheet and cash inflows. Liquid Assets1, 2 Net Cash Outflows 3 Customer deposits and other4 Wholesale funding 35 Strong capital levels domestically and internationally % 12.2 12.4 1.02 8.32 8.79 (0.22) (0.21) 8.72 (0.64) (0.02) (7)bps 40bps Mar 14 1. 2. 3. 4. Sep 14 Cash 1 NPAT RWA Capital Dividends Other Usage2 Deduct 3 Mar 15 Mar 14 Mar 15 Internationally Comparable 4 Cash profit net of preference share dividends. Includes EL vs. EP shortfall. Represents the movement in retained earnings in deconsolidated entities, capitalised software and other intangibles. Methodology per Australian Bankers’ Association: International comparability of capital ratios of Australia’s major banks (August 2014) 36 Outlook and focus • Responsible investment in Australia Retail & Commercial • Quality expansion in Asia based around Trade & Capital corridors • Group wide productivity • Further steps on portfolio rebalancing & Capital Efficiency 37 2 15 CFO Appendix Provision charge drivers Credit Impairment Charge contribution $m Australia Division 528 IIB NZ Division 38 27 (34) 51 510 Comm. Mar 15 2 (102) (3.6)% Mar 14 Retail Comm. Markets & Loans TB Retail TB: Transaction Banking 39 Enterprise approach – continuing momentum Operations volume growth 1H15-1H14 9% 6% 9% 7% Continued improvement in quality Manual Payments: Defects Per Million 7% 670 -83% 495 400 Australia IIB NZ Wealth Total 1H12 1H13 83 Australia 117 2H13 1H14 2H14 1H15 -44% 100 -4% 126 Australian customer complaints. 1H12 index = 100 2% -2% 151 Better customer experience Operations costs growth 1H15-1H14 AUD growth 2H12 180 75 73 69 67 -3% 56 -5% IIB NZ Wealth Total 1H12 2H12 1H13 2H13 1H14 2H14 1H15 40 New Zealand highlights Key drivers • • Strengthening market leadership % Increasing sales capacity Simplifying products and processes • Delivering leading digital solutions • Expanding customer awareness Home Loans1 30.6 Improving revenue per branch2 4.5 6.3 5.5 1H14 28.4 Mar 14 Mar 15 Mar 13 All values in New Zealand Dollars. 1. Source: RBNZ - Mar 2015, relates to NZ Geography. 2. based on NZ Division. Mar 14 Mar 15 Gross Retail Gross Small Business Banking customer acquisition customer acquisition2 82k 1H15 28.9 Growing customer numbers 59k 1H13 31.2 27.4 Mar 13 NZ$m 31.0 Credit Cards1 1H13 67k 1H14 3.4k 3.5k 1H14 1H15 2.6k 1H15 1H13 41 2 15 Treasury Treasury Regulatory capital Capital Update • Basel 3 Common Equity Tier 1 (CET1) generation1 1H15 organic capital of 59 bps modestly above recent first half performance. APRA Common Equity Tier 1 ratio 8.7%. Target range for CET1 ratio remains around 9% on an APRA basis. • Internationally CET1 ratio is ~3.7% higher than under APRA basis. Reflects variances between Basel III under APRA and Basel standards. • 1.5% discount for 1H15 Dividend Reinvestment Plan aims to achieve ~20% participation on a full 12 month basis. This level of participation is consistent with average observed since 2012 and capital planning. Mar 14 APRA APRA CET1 movement - Mar 15 v Sep 14 1.02 12.4% 8.7% Sep 14 Mar 15 Internationally Comparable 2 Total RWA movement - Mar 15 v Sep 14 $b (0.22) 8.79 8.8% 8.3% Comparable2 % 12.7% 12.2% (0.21) 15.4 8.72 (0.64) (0.02) 16.1 (0.7) 361.5 1.5 386.9 (6.9) Credit RWA +$30.8bn Sep 14 Cash NPAT 3 RWA Capital Net 5 Usage 4 Deductions Dividend Other Mar 15 Sep 14 Growth FX Impact Other 6 Market & IRRBB RWA Op Risk RWA Mar 15 1. Organic capital generation = cash profit - RWA growth - capital deductions. 2. Methodology per Australian Bankers’ Association: International comparability of capital ratios of Australia’s major banks (August 2014). March 2014 comparatives has been restated based on current methodology. 3. Cash profit net of preference share dividends. 4. Includes EL vs. EP shortfall. 5. Represents the movement in retained earnings in deconsolidated entities, capitalised software and other intangibles. 6. Other includes risk and portfolio data review impact. 43 Treasury Internationally Comparable regulatory capital position APRA CET1 Tier 1 Total Capital 8.7% 10.6% 12.6% 10% / 15% allowance for equity investments and DTA APRA requires 100% deduction from CET1 vs. Basel framework which allows concessional threshold prior to deduction 0.9% 0.9% 0.8% Mortgage 20% LGD floor APRA requires use of 20% mortgage LGD floor vs. 10% under Basel framework 0.4% 0.4% 0.5% IRRBB RWA (APRA Pillar 1 approach) APRA includes in Pillar 1 RWA. This is not required under the Basel framework 0.2% 0.2% 0.3% Specialised Lending (Advanced treatment) APRA requires supervisory slotting approach which results in more conservative risk weights than under Basel framework 0.4% 0.4% 0.5% Corporate undrawn EAD and unsecured LGD adjustments Australian ADI unsecured corporate lending LGDs and undrawn CCFs exceed those applied in many jurisdictions 1.5% 1.8% 2.0% Other Includes impact of deductions from CET1 for capitalised expenses and deferred fee income required by APRA 0.3% 0.4% 0.4% 12.4% 14.7% 17.1% Internationally Comparable1 1. Internationally Comparable methodology per Australian Bankers’ Association: International comparability of capital ratios of Australia’s major banks (August 2014). 44 Treasury ANZ’s CET1 ratio compares favourably to global peers adjusting for regional methodology differences 10.9% 12.1% +30bps 11.4% 11.9% 11.6% Europe Peer Average 2 ANZ (UK basis) ANZ (Canada basis) ANZ (Internationally Comparable) 1 Canada Peer Average 2 9.8% 8.7% ANZ (APRA) 11.5% +70bps Europe ANZ (Europe basis) +60bps Singapore Peer Average 2 +270bps 12.5% Singapore ANZ (Singapore basis) UK UK Peer 2 Average 12.4% Canada 1. Methodology per Australian Bankers’ Association: International comparability of capital ratios of Australia’s major banks (August 2014). 2. Peer estimates are based on RWA weighted average of G-SIB/D-SIBs (ex Singapore which is based on DBS and OCBC) fully loaded Basel III capital ratios per most recent disclosures. 45 Treasury Common Equity Tier 1 ratio, dividend timing and regulatory capital generation APRA Basel III CET1 Ratio Common Equity Tier 1 generation (bps) 9.0% First half average 1H12 – 1H14 8.5% 8.0% 7.5% Mar-15 Dec-14 Sep-14 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Note: shaded quarters represent declaration of dividends. Basel III basis. • • Cash profit 102 102 RWA growth (29) (22) Capital deductions (18) (21) 55 59 (70) (72) Dividend Reinvestment Plan 14 8 Core change in CET1 capital ratio (1) (5) Other non-core and nonrecurring items 11 (2) Net change in CET1 capital ratio 10 (7) Net capital generation 7.0% Under Basel III, dividends are only deducted from regulatory capital in the quarter in which they are declared. This results in volatility in quarterly reported capital ratios. To assess the underlying regulatory capital position, dividend payments should be adjusted to accrue evenly over the year, aligned with profit generation. 1H15 Gross dividend 46 Treasury Stable balance sheet composition – March 2015 $738bn $738bn Other ST Liabilities 4% Short Term Liquids 17% 29% ∆+3% Other Short Term Assets & Trade 12% Lending 69% Long Term ST Funding 8% Term Funding <12M 4% 30% ∆+3% Other Customer Deposits 14% 71% ∆ -3% Stable Customer Deposits 1 50% Structural funding position has remained stable with growth in short-term funding invested in liquids and other short-term assets Customer Deposits +$34bn or +8% vs. Sep 14 70% ∆-3% Term Funding >12M 12% Fixed Assets & Other 2% SHE & Hybrids 8% Assets Funding Note: ∆ represents the change in % of funded balance sheet from 30 September 2014 to 31 March 2015. 1. Stable customer deposits represent operational type deposits or those sources from retail / business / corporate customers and the stable component of Other funding liabilities. 47 Treasury Term wholesale funding portfolio Term Funding Profile Issuance1 26 24 24 $bn Maturities 23 24 Annual indicative issuance volume 21 16 16 12 11 10 10 FY20 FY21+ 7 FY10 FY11 FY12 FY13 FY14 Senior Unsecured 1H15 2H15 FY16 Covered Bonds 13% 69% 6% 8% 18% 68% 8% 9% 18% 20% 74% 71% Sep 13 Sep 14 FY19 Portfolio by Currency 1% Government Guaranteed Tier 2 Domestic (AUD,NZD) 6% 34% 24% Covered Bonds Senior Unsecured North America (USD, CAD) UK & Europe (€,£,CHF) 35% Sep 12 FY18 Tier 2 Portfolio by Type 9% 9% FY17 Asia (JPY, HKD, SGD, CNY) Other Mar 15 All figures based on historical FX and excludes hybrids. 1. Includes transactions with a call or maturity date greater than 12 months as at 30 September in the respective year of issuance. 48 Treasury Liquidity management successfully transitioned to LCR Date Sep 14 Mar 15 LCR 111% 119% LCR Surplus $15bn $28bn $b 173 17 150 145 135 17 19 49 49 24 3 3 116 104 121 81 Liquid Assets 1 HQLA 1 HQLA 2 1. 2. 3. 4. Net Cash 3 Outflows Internal RMBS Other Alternative Liquid Assets Post haircut market value as defined in APS210. 1H15 includes $54bn Committed Liquidity Facility. Basel III LCR 30 day stress scenario cash outflows. Other include off-balance sheet and cash inflows. Liquid 1, 2 Assets Net Cash 3 Outflows Customer deposits and other4 Wholesale funding 49 Treasury Foreign currency hedging 1H15 Earnings Composition (by currency) Net FX Impact (EPS) 1.7% 1.6% AUD 56% Other 22% IDR 1H15 v 1H14 NZD 22% 1H15 v 2H14 Translation Rates (inclusive of hedges) • The key objective of hedging is to manage short term EPS volatility arising from foreign currency earnings • Hedges currently in place: • • • FY15: ~80% of remaining earnings. FY16: ~70% of NZD and ~ 25% of USD (inc. currencies that are highly correlated to AUD/USD) earnings. Hedging has reduced the impact of a 5% movement of the AUD on FY15 EPS to less than 1%. 1.35 1.05 1.30 1.00 1.25 0.95 1.20 0.90 1.15 0.85 1.10 0.80 1.05 1H13 2H13 1H14 NZD Translation (LHS) 2H14 1H15 0.75 USD Translation (RHS) 50 Treasury FX sensitivity (excluding the impact of revenue hedges) Metric Approx. annualised impact of 5% fall in AUD1 Comments Income statement Revenue 2% Impact of translation of non-AUD revenue Operating expenses 2% Impact of translation of non-AUD expenses Cash profit 2% Net result of revenue and expense FX effects, excluding the impact of foreign currency hedges. Net interest margin (1 bp) Mix impact due to a higher relative contribution from lower risk and lower margin APEA assets Cost to income ratio +2 bps FX effect on revenue and expenses largely offset each other, however average cost to income ratios in non-AUD denominated businesses are marginally higher Balance sheet • CP overlays booked in AUD vs. a proportion of CRWA denominated in foreign currencies Collective provision coverage (0.5 bp) • Further impact from higher CRWA on FX derivatives with no Funding +$4 bn Collateral flows under cross currency swaps used to hedge existing offshore funding liabilities Return on equity +3 bps corresponding CP as derivatives are marked-to-market and attract CVA • Driven by positive FX effect on cash profit (see above) partially offset by increase in FCTR • Minimal impact on CET1 ratio 1. Impact from a lower AUD relative to foreign currencies. Analysis based on 1H15 results (excluding the impact of foreign currency revenue hedges). 51 Treasury Regulatory landscape Status Capital Leverage ratio • • APRA draft standard Sep 2014 No minimum currently specified, BCBS 3% Leverage ratio 4.5-5.5% at 1H15 depending on final calibration Level 3 capital adequacy “Conglomerates” • • APRA draft Level 3 standards Aug 2014 Finalisation and implementation deferred until Financial System Inquiry recommendations considered by government/APRA No material impact expected based on current draft standards Basel Standardised and floors • BCBS consultation papers released Dec 2014 propose changes to Standardised risk weights, introduction of Advanced approach capital floors ANZ has participated in BCBS QIS. Impact of any changes subject to final BCBS calibration and APRA implementation. • Financial Stability Board proposal released Nov 2014 details minimum TLAC requirements for G-SIBs Proposal currently does not apply to D-SIBs. If applied to ANZ, wide range of outcomes depending on calibration including basis for measuring capital base, D-SIB minimum etc Liquidity Coverage Ratio • • Full implementation from Jan 2015 Disclosure timetable to be determined by APRA Full compliance at 1H15 (LCR 119%) Net Stable Funding Ratio • • BCBS standard Jan 2014 APRA standard yet to be finalised, expected implementation 2018 Do not expect NSFR to require any material change to balance sheet composition • Key recommendations to government: • Set standards such that Australian ADI capital ratios are unquestionably strong • Raise Advanced IRB mortgage risk weights to narrow difference with Standardised approach • Implement loss absorption and recapitalisation framework in-line with international practice • Introduce Basel framework leverage ratio Final round consultation closed 31 March 2015 Refer to ANZ’s submission on the Final Report of the Financial System Inquiry published 1 April 2015 Total Loss Absorbing Capacity (TLAC) Funding Other ANZ’s position Financial System Inquiry • 52 2 15 Risk Management Risk Management Provision Charge Provision charge $m 700 599 598 528 500 300 0.27% Individual provision charge composition 510 461 0.24% 0.24% 0.21% 2H13 1H14 2H14 100 -100 1H13 0.17% 1H15 Individual Provision (IP) Charge Collective Provision (CP) Charge IP Charge as % Avg. Net Advances (RHS) Individual provision charge by segment $m 700 600 $m 1,500 1,250 1,000 750 500 250 0 -250 -500 572 602 1H13 2H13 1H14 New Increased 542 455 2H14 1H15 Writebacks & Recoveries Individual provision charge by region $m 595 572 602 700 542 500 455 400 600 595 572 602 542 500 455 400 300 300 200 200 100 100 0 595 1H13 2H13 Institutional 1H14 Commercial 2H14 1H15 Consumer 0 1H13 2H13 Australia 1H14 New Zealand 2H14 1H15 APEA 54 Risk Management Historical Loss Historical observed loss rates Group regulatory expected loss bps bps EAD 250 200 IP Loss Rate (LHS) 1990-2014 median bp loss rates (LHS) Corporate Gearing lagged 15 months (RHS) 150 75 69 Mar 12 120 100 80 60 61 62 54 100 50 Mar 11 % Mar 13 Mar 14 Mar 15 40 20 0 0 Sep 90 Sep 94 Sep 98 Sep 02 Sep 06 Sep 10 Sep 14 Corporate gearing remains low • Corporate gearing ratios1 were compared with the Group IP loss rates from 1990. Lagging corporate gearing 15 months provides a reasonably strong relationship, with corporate gearing a leading indicator of loss • Current IP loss rate (annualised) as at Mar’15 was 17bps which is similar to that observed between 2005 and 2007 • The annualised 1H15 IP loss rate (17 bps) is the 6th lowest rate over the time period analysed since 1990 1. Debt to equity ratios for listed Australian Corporations sourced from the RBA. 55 Risk Management Impaired Assets Control list New impaired assets by division $m 2,000 Index Sep 09 = 100 120 100 1,500 80 1,000 60 1,571 1,541 1,327 1,197 500 40 20 Sep 09 Sep 10 Sep 11 Control List by Limits Sep 12 Sep 13 Sep 14 0 1H13 4,685 3% 3% 9% 11% 3,620 2,889 3,000 1H14 New Zealand 2H14 IIB 1H15 Other Impaired assets concentration by number of customers1 3% 4,264 4,000 2H13 Australia Control List by No of Groups Gross impaired assets by size of exposure $m 5,000 1,716 3% 8% 5% 8% 16% 5% 11% 2,708 2,000 83% 88% 84% 76% 84% Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 1,000 0 Mar 13 Sep 13 < $10m Mar 14 $10-$100m Sep 14 Mar 15 > $100m $10-50m $51-100m $101-200m >$200m 1. Only >$10m customers. 56 Risk Management Collective Provision CP Balance Growth CP coverage The collective provision balance increased by $157m in the first half of FY15, to $2,914m, predominantly driven by: • Foreign exchange, particularly the depreciation of the AUD against the USD and against the NZD, which accounted for $102m, or 65%, of this increase • Portfolio growth of $54m, specifically the Australia Division (67%), driven by the retail portfolios $b 275 305 309 1.01% 1.00% 0.93% 0.89% Mar 13 Collective provision by division 0.86% Sep 13 Mar 14 Sep 14 Mar 15 Credit Risk Weighted Assets Collective Provision as a % of CRWA (RHS) Collective provision by source $m $m 102 2,914 102 61 2,757 Sep 14 340 288 AUS 54 (2) (3) IIB NZ (1 ) Wealth & FX Other Movement Mar 15 2,757 5 Sep 14 Risk 2,914 3 (7 ) Lending Growth Portfolio Mix Mgmt. Overlay Fx movement Mar 15 57 Risk Management Risk Weighted Assets Group EAD & CRWAs Total risk weighted assets $b $b Op-Risk Risk Weighted Assets 741 813 39.8% 38.9% 39.2% 38.0% 38.1% Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 692 Market & IRRBB Risk Weighted Assets 891 779 Credit Risk Weighted Assets 387 339 29 23 361 362 32 32 24 21 33 14 Exposure at Default CRWA / EAD (RHS) CRWA movement - Mar 15 v Sep 14 $b 288 305 309 15.4 340 16.1 339.7 1.7 308.9 (2.4) Sep 13 Mar 14 Sep 14 Mar 15 Sep 14 Risk Lending Growth Portfolio FX Impact Data Review Mar 15 58 Risk Management Portfolio composition Exposure at default (EAD) as a % of Group total Category ANZ Group Total Group EAD (Mar 15) $869b1 % of Group EAD % of Portfolio Portfolio Balance in Non in Non Performing Performing Mar 14 Mar 15 Mar 14 Mar 15 Mar 15 Consumer Lending 40.3% 38.2% 0.2% 0.2% $608m Finance, Investment & Insurance 16.4% 18.7% 0.1% 0.1% $93m Property Services 7.0% 6.8% 1.7% 1.3% $757m Manufacturing 6.1% 6.5% 0.6% 0.5% $297m Agriculture, Forestry, Fishing 4.2% 3.9% 3.5% 2.1% $728m Government & Official Institutions 3.8% 4.4% 0.0% 0.0% $0m 4% Wholesale trade 3.9% 4.0% 0.6% 0.4% $154m 4% Retail Trade 2.7% 2.6% 0.6% 0.4% $101m Transport & Storage 2.4% 2.2% 3.0% 1.3% $257m Business Services 1.9% 1.8% 1.3% 0.9% $151m Resources (Mining) 2.3% 2.2% 0.7% 0.5% $97m Electricity, Gas & Water Supply 1.7% 1.6% 0.1% 0.1% $10m Construction 1.6% 1.6% 1.9% 1.7% $240m Other 5.7% 5.5% 0.6% 0.5% $220m 2% 2% 6% 2% 2% 2% 3% 4% 38% 6% 7% 19% 1. EAD excludes amounts for ‘Securitisation’ and ‘Other Assets’ Basel asset classes. 59 Risk Management Risk Weighted Assets and Value at Risk Risk weighted asset and VaR outcomes • Traded Market Risk VaR usage remained moderate to low • Traded Market Risk 1-day 99% VaR and RWA declined YoY through disciplined approach to managing our exposures to market disruption and stress • RWA for Interest Rate Risk in Banking Book (IRRBB) declined YoY primarily due to higher embedded market value, reduced credit spread volatility and shortening the duration of the Investment Term of Capital Traded market risk weighted asset trends $b 10 IRRBB risk weighted asset trends $b $m 50 25 8 40 20 6 30 15 4 20 10 2 10 5 0 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 0 Mar 15 Market Risk RWA Traded Market Risk RWAs Traded VaR Traded Market Risk 1-day VaR (RHS) 0 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 IRRBB RWA 60 Risk Management Resources Portfolio Resources exposure by sector (% EAD) Total EAD (Mar 15) As a % of Group EAD $19.5b 2.2% 42% Oil & Gas AUS ($b) NZ ($b) ASIA ($b) EA & Other ($b) 9.8 0.9 4.3 4.5 24% 22% 76% 78% NZ ASIA 49% 39% 23% Metal Ore Mining 23% (includes Coal Iron Mining Ore 10%) 14% 16% 15% Services To Mining Other Mining Resources exposure credit quality by geography (EAD) 16% AUS Investment Grade 91% OTHER Sub-Investment Grade Resources portfolio management • Portfolio is skewed towards well capitalised and lower cost resource producers. Over a third of the book is less than one year duration. • Investment grade exposures represent 67% of 6% portfolio. Mix of investment grade exposures in portfolio has increased across all geographies in 1H15. 6% 1H15 51% 9% 1H14 • Trade accounts for 21% of the Total Resources EAD. • Mining services customers are subject to heightened oversight given the cautious outlook for services sector. 61 Risk Management Agri portfolio Agriculture exposure by sector (% EAD) Total EAD (Mar 15) As a % of Group EAD $34.0b 3.9% Dairy New Zealand Agri credit quality NZ$ b 21 1.23% 40% Horticulture/Fruit/Other Crops Forestry & Fishing/Agriculture Services 9% 1 0.94% 16% Grain/Wheat 18 18 17 1.55% 10% Sheep & Other Livestock 18 2.11% 14% Beef 19 Sep 10 11% Sep 11 Sep 12 0.81% Sep 13 Sep 14 0.96% Mar 15 NZD Total Credit Exposure 1 Average PD (Non-Defaulted Customers) (RHS) Group Agriculture EAD splits 1% 7% 2% 17% 38% 61% Australia Int Markets 98% New Zealand 5% Productive Impaired 71% <60% Secured 60 - < 80% Secured 80 - < 100% Secured Fully Secured 1. PD model changes account for 11bps increase in 1H15. 62 Risk Management Commercial property portfolio Commercial Property outstandings by region1 Commercial Property outstandings by sector1 $b 8.0% 30.6 4.0 5.4 32.0 34.4 33.9 4.5 4.1 4.1 6.1 26% Offices 35.5 4.6 Retail 7.5% Residential 30% 22% 6.9 7.8 6.9 Industrial Tourism 7.0% Other 4% 3% 15% 6.5% Property peer comparison2 21.2 21.8 23.0 22.9 23.1 6.0% 5.5% Mar 13 Sep 13 Mar 14 Sep 14 Dec 14 5.0% APEA New Zealand Australia % of Group GLA's (RHS) $m ANZ Peer 1 Peer 2 Peer 3 Property Portfolio EAD 51,039 68,739 72,935 57,994 Property EAD Growth Rates 7.9% (1.6%) 13.9% 7.0% Property EAD/Total EAD Impaired Assets Property Impaired Assets/Property EAD 1. As per ARF230 disclosure. 2. As per APS330 disclosure. ANZ includes property services, not consistent across peers. 5.73% 7.57% 8.50% 6.42% 424 1,497 726 318 0.83% 2.18% 1.00% 0.55% 63 Risk Management Industry Themes and Guidelines for Quality Areas on Watch 1. Commercial Property Land and buildings primarily leased to third parties or new buildings constructed to be leased or sold to third parties. 2. Residential Property Residential Land and/or buildings ANZ Lending Principles Examples 1.1 Focus on key markets in Australia, New Zealand, Singapore and Hong Kong 1.2 No appetite for speculative development 1.3 Limited appetite to lend against third party leased specialised buildings 2.1 Triggers and controls guide growth in investment, interest only and high LVR-band lending • Variable or fixed rate • Owner occupied, investor, equity loan • Interest only or Principal & Interest 2.2 Very limited appetite for Self Managed Super Fund lending 3. Resources Sector 3.1 Relationships focused on low cost producers Industry sectors include: 3.2 We are focused on intermediating trade and FX flows • • • • • Metal Ore (Including Iron Ore) Mining and Mining Services Mining infrastructure Oil and Gas Coal 2.3 No appetite for reverse home loans or subprime loans 3.3 Mining infrastructure cost sustainability monitored 3.4 Preference for equipment leasing over unsecured lending 64 Risk Management Australia Division Australia Home Loans 90+ day delinquencies by state1 Australia Division credit exposure (EAD) 1% Home Loans 0% 6% Mar 14 Mar 15 0.6% Consumer Cards 24% Personal Loans 0.4% 0.2% 69% 0.0% Other Australia Division 90+ day delinquencies1 VIC NSW & ACT QLD WA Portfolio Australia Home Loans portfolio by state1 2 Home Loans (inclusive of hardship change) 3 Corporate & Commercial Banking Consumer Cards Mar 15 29.4% 27.0% 17.7% 16.2% 9.7% Mar 14 29.1% 26.2% 18.2% 16.5% 9.8% 1.08% 1% 1.04% 0.57% 0% Oct 10 Mar 13 0.8% Corporate and Commercial 2% Mar 12 1.0% Oct 11 Oct 12 Oct 13 Oct 14 0% 25% VIC NSW & ACT 50% QLD 1. Exclusive of Non Performing Loans. 2. Hardship changes implemented Apr 2013. For comparison: 90+ excluding hardship changes as at Mar 2015 is 0.46%. 3. Includes Small Business, Commercial Cards and Esanda Retail. 75% WA 100% Other 65 Risk Management Australia Home Loans portfolio 1H15 portfolio statistics1 Total Number of Home Loan Accounts Dynamic loan to value ratio5 934k % of Portfolio 50% Sep 12 45% Total Home Loans FUM % of Total Australia Geography Lending $218b 60% Mar 13 40% Sep 13 35% Mar 14 30% Sep 14 Mar 15 25% % of Total Group Lending Owner Occupied Loans - % of Portfolio2 Average Loan Size at Origination (1H15 average)3 ,4 39% 60% 20% LVR >90% 4.08% (Mar 15)9 15% 10% 5% $376k Average LVR at Origination (1H15)3 ,4 ,5 71% Average Dynamic LVR of Portfolio4 ,5 ,6 51% % of Portfolio Ahead on Repayments7 ,8 43% % of Portfolio Paying Interest Only8 35% 0% 0-60% 61-75% 76-80% 81-90% 91-95% 95%+ Individual provision as % of average NLA FY12 FY13 FY14 1H15 Group 0.38% 0.25% 0.22% 0.17% Australia Home Loans 0.02% 0.02% 0.01% 0.01% 1. Home Loans (inclusive of NPLs, exclusive of offset balances). 2. Excludes Equity Manager. 3. Originated 1H15. 4. Unweighted. 5. Including capitalised premiums. 6. Valuations updated Mar 2015 where available. 7. % of customers >30 days ahead of repayments. 8. Excludes revolving credit. 9. Excluding capitalised premiums, the % of portfolio with LVR >90% as at Sep 2014 is 2.35% (Mar 2015 was 2.6%) 66 Risk Management New Zealand NZ Geography net impaired assets NZDm 1,685 NZ Geography total provision charge Net Impaired Assets NZDm 200 NIA as % GLA (RHS) 150 85 105 103 99 44 100 50 22 (39) 30 31 0 1,307 -50 1,169 -100 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 991 1.74% IP Charge 883 1.38% NZ Division 90+ days delinquencies 662 1.23% CP Charge 1.5% 594 1.02% 1.0% 483 0.89% 0.66% 322 0.58% 0.5% 0.46% 0.29% Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 0.0% Sep 07 Sep 09 Home Loans Sep 11 Commercial Sep 13 Agri 67 Risk Management New Zealand mortgages portfolio Dynamic loan to valuation ratio 1H15 portfolio statistics Total Number of Mortgage Accounts 494k Total Mortgage FUM (NZD) $64b 0-60% % of Total New Zealand Lending 59% 61-70% % of Total Group Lending1 11% Owner Occupied Loans - % of Portfolio 75% Average Loan Size at Origination (NZD) $289k Average LVR at Origination2 64% Average Dynamic LVR of Portfolio3 49% % of Portfolio Paying Interest Only4 22% 71-80% 8% 49% 19% 81-90% 90%+ 18% Mortgage portfolio by region Auckland 12% Wellington Individual provision as % of average NLA FY12 Group1 FY13 FY14 1H15 0.38% 0.25% 0.22% 0.17% New Zealand Mortgages5 0.07% 0.04% 0.06% 0.01% 6% 3% 41% Christchurch Other North Island 26% Other South Island Other 7% 11% 1. As % of group average NLA. 2. Average LVR at Origination (not weighted by balance). 3. Average dynamic LVR as at (not weighted by balance) – Dynamic LVR graph as at Feb 2015. 4. Excludes revolving credit facilities. 5. Individual Provision as % average NLA. 68 2 15 Group Overview Group Overview Profit & Loss contribution by division Operating Income by Division Operating Income by Division 1H15 $m 12,000 Australia New Zealand IIB Wealth 8% 10,000 8,000 6,000 42% 4,000 37% 2,000 0 -2,000 1H12 2H12 1H13 2H13 1H14 2H14 1H15 Australia New Zealand IIB Wealth GTSO/Gp Centre 13% Net Profit after Tax by Division Net Profit after Tax by Division $m 4,000 3,000 2,000 1,000 0 1H12 2H12 1H13 2H13 1H14 2H14 1H15 -1,000 Australia Wealth New Zealand GTSO/Gp Centre IIB 6% 6% 6% 6% 40% 32% 11% 44% 8% 7% 9% 7% 38% 38% 39% 37% 40% 11% 12% 15% 16% 15% 15% 45% 44% 44% 42% 44% 44% -4% -3% -4% -6% 2H13 1H14 2H14 1H15 -1% 1H12 Australia -1% 2H12 1H13 New Zealand IIB Wealth GTSO/Gp Centre 70 Group Overview Profit & Loss contribution by geography Operating Income by Geography Australia $m New Zealand APEA Operating Income by Geography 1H15 Australia New Zealand 12,000 APEA 18% 10,000 8,000 20% 6,000 25% 4,000 2,000 0 62% 1H12 2H12 1H13 2H13 1H14 2H14 1H15 Net Profit after Tax by Geography $m 4,000 3,000 APEA Network APEA Network Revenue1 represents income generated in APEA plus income generated in Australia & New Zealand as a result of referral from ANZ’s APEA network. Net Profit after Tax by Geography 15% 18% 14% 17% 16% 18% 18% 19% 19% 23% 68% 65% 68% 64% 57% 64% 59% 1H12 2H12 1H13 2H13 1H14 2H14 1H15 15% 20% 20% 21% 2,000 1,000 0 1H12 2H12 1H13 2H13 1H14 2H14 1H15 Australia New Zealand APEA Australia New Zealand APEA 1. APEA Network Revenue represents income generated in Australia & New Zealand as a result of referral from ANZ’s APEA network. 71 Group Overview Total Credit Exposure (EAD) by Geography Exposure at Default1 by Geography Exposure at Default by Line of Business2 Total Exposure at Default (Mar 15) - $869b1 Australia New Zealand APEA $515.8b $149.5b $204.1b 16% 29% 31% UK & Europe 4% Americas 4% Pacific 1% Singapore APEA 24% 4% Hong Kong 22% New Zealand 17% 94% Australia 59% 53% 49% 3% Other North East Asia 6% 2% Other South East Asia 6% Australia Retail 1. EAD excludes amounts for ‘Securitisation’ and ‘Other Assets’ Basel asset classes. 2. Institutional includes exposure to Bank and Sovereign counterparties and ANZ’s Liquidity portfolio. New Zealand Institutional APEA Commercial 72 Enterprise Approach Regional delivery network and common platforms Regional delivery network • Providing full service regional coverage across our operating time zones • Developing centres of excellence across the Chengdu Hong Kong Bangalore network around key business domains: Manila Suva Singapore Sydney Melbourne Auckland Payments • Voice • Markets • FIO, AML and • Trade • Secured Lending • Wealth Operations • Unsecured Lending • Technology • Wholesale Lending Sanctions Wellington Global Wholesale Digital (Transactive) Common platforms • Global Retail Digital (goMoney, Grow) Global Process Management (PEGA, FileNet) 17 countries 7 countries 15 countries Global Payments (Global PayPlus) Global FX (Wallstreet) Global Customer Registry (IBM MDM) 10 countries 13 countries 25 countries 73 Enterprise Approach Enterprise approach delivering a consistent, higher quality experience for our customers Operations efficiency Delivering productivity initiatives • More effective resourcing • Improved project delivery • Processes reengineered Operations productivity improvement1 Index: FY10=100 100 102 105 FY10 FY11 FY12 145 136 122 Improving customer experience • Easier on-boarding • Faster approvals • Consistency across channels FY13 FY14 Quality and service Customer satisfaction by channel2 91.4% 90.2% 88.9% 88.7% Smart 4 device Branch Personal Banker Reducing operational risk • Consistent standard processes • Upgraded infrastructure and systems 1H15 Website 3 1. Operations efficiency measured by operations productivity improvement, which is the difference in operations costs and volume growth. 45% productivity improvement over 4 ½ years. 2. Roy Morgan Research. Satisfaction with channel, experience amongst MFI customers who have used service in the last 4 weeks. Base: ANZ Main Financial Institution (MFI) Customers, age 14+, rolling 12 months to March 2015. 3. Internet Banking using institution’s website. 4. Internet Banking using an app on mobile phone or tablet. 80.8% Financial Adviser 74 Enterprise Approach Enterprise approach – higher volumes at lower cost through regional network & common platforms Record volumes on platforms Operations volume growth 1H14-1H151 9% 9% 7% 6% 7% • New “single-day” retail activity records (Dec 14): • 1,746 loan settlements& releases • 1.6m goMoney logons • 10m merchant payment transactions Australia IIB NZ Wealth Total • “Transactive” volumes in FY15 >5x 2013 levels (on track for $280b in FY15) Operations costs growth 2% 1H14-1H151 • 723,000 ATM transactions • Supported by 1H15 simplification initiatives: -2% -4% Australia -3% -5% IIB NZ Wealth Total • Retired over 5,000 business applications • Wholesale loans from >100 to 10 core products 1. Volume growth represents YTD Mar 2015 vs YTD Mar 2014. 75 Enterprise Approach Adopting common platforms, utilising regional delivery network to improve customer experience & productivity An enterprise approach to operations and technology Building Common Technology Platforms across all main business lines to drive standardisation, simplification and automation. Utilising our Regional Delivery Network to improve customer experience and drive down cost to serve. Delivers a stronger and more efficient bank Improving customer experience: • Easier on-boarding and faster approvals • Quality service • Consistency across channels Driving operational productivity: • Absorb significant volume growth • Sustainable cost reduction • Simplified processes Reducing operating risk: • Consistent, standard processes • Reduced error rates • Upgraded infrastructure and security systems Benefiting our customers, employees and shareholders 40bps Operations cost to income 10% Operations productivity 28% Customer complaints (Australian Ops) 76 Enterprise Approach Annual investment program delivering broad-based enterprise capabilities supporting super regional growth Annual investment spend Capability Risk Risk Management Infrastructure Security 12% 15% Wholesale Lending Retail Lending Payments Markets 26% • Minimised operating risks • Maintain the confidence of our customers and regulators Stability • Upgraded infrastructure • Enhanced resilience • Reduced cost-to-serve Productivity • Simplify and integrate end-to-end 19% Process Automation Workflow Benefits workflow • Increase systems and process standardisation • Re-engineer and automate high-priority enterprise domains Product Lines • Coordinated approach to end-to-end wholesale lending • Global capabilities Wholesale Digital Consumer Digital Data and Analytics for consumer lending 28% • Modern, resilient payments network • Supporting markets growth with scalable platforms FY14 per year on ANZ invests approximately technology-based capabilities. Disciplined management is allowing us to fund an increasing proportion of this annual investment from the productivity gains in our wider delivery cost base. AUD1,200m1 Digitisation • Consistent customer experience across channels • Supporting our segment-based businesses • Enterprise-wide data management 1. Excludes technology run costs. 77 Sustainability Sustainability – managing our business to account for social, environmental, economic risks and opportunities ANZ’s Corporate Sustainability Framework distinguishes between three key priority areas of the sustainability agenda that are distinctive to ANZ, and five ‘Licence to Operate’ areas we consider essential to a large company operating in a sustainable, responsible and ethical way. Priority Areas We report biannually on our sustainability performance. Our 2014 Corporate Sustainability Report is available on anz.com. Progress • Increased lower-carbon power generation lending in Project Finance by 16% since 20111 Sustainable Development • Portfolio summary: Coal fired 25.0%, gas fired 25.5%, renewables 49.5% • In 2014, ANZ financed projects with lower than average emissions intensity: • Australia: 0.69 tCO2/MWh2 (20% lower than average Australian intensity) • Offshore: 0.24 tCO2/MWh2 (17% lower than average intensity in relevant countries) • All roles in Australia and NZ are now flexible, to support a diverse and inclusive workplace Diversity and Inclusion • Focus on gender balanced leadership through structural, behavioural and programmatic interventions • FY14 employee engagement score: 73%, with a target of 75% in FY15 Financial Inclusion and Capability • MoneyMinded financial education program: >294,000 participants in 20 countries • Go Money: >125,000 customers registered in the Pacific, with ~71,000 new to bank 1. As a proportion of our total project and structured finance power generation portfolio. Our target is to increase the proportion by 15-20% by 2020. 2. Represents average emissions intensity of electricity generation from projects financed by ANZ. tCO2/MWh represents tonnes of CO2 per megawatt hour of electricity generated. 78 2 15 Divisional Performance Australia Division Aus. Division Profit and Loss – delivering growth with continued investment, improved productivity & efficiency Revenue and Expenses CTI: 38.1% $m 3,869 37.0% 36.7% 4,241 4,001 CAGR 4.7% 1,556 1,479 1,475 2.7% Australia Division 1H13 Income 1H14 1H15 Expenses Income Expenses PBP Provisions NPAT Retail Income Expenses PBP C&CB Income Expenses PBP PBP, Provisions, NPAT $m 2,394 1,409 386 1H13 PBP 2,685 2,522 1,483 402 1,602 $m 1H15 4,241 1,556 2,685 395 1,602 Growth % PCP 6.0% 5.2% 6.5% (1.7%) 8.0% 2,576 1,015 1,561 7.8% 6.3% 8.9% 1,665 541 1,124 3.3% 3.2% 3.3% 1H profit driven by volume growth CAGR $m Net interest income 5.9% 153 6.6% 23 43 6 15 7 (77) 1,483 1,602 (51) 395 1H14 1H15 NPAT Provisions 1H14 Vol. Margin Retail Vol. Margin OOI Exp Prov Tax 1H15 C&CB 80 Australia Division Aus. Division Balance sheet – growing FUM and improving mix Lending composition Loans & Deposits $b 262 163 156 146 Mar 13 $b 298 278 Mar 14 Lending Mar 15 Deposits 278 63 11 66 10 188 202 218 Mar 13 Mar 14 Mar 15 Home Loans Other Consumer Lending flows $b 90 0.4 0.4 (70) (67) Repay/ Refis / Other Net Personal Loans and Cards New Fundings & Redraws Mar 14 Repay/ Refis / Other Net Personal Loans and Cards New Fundings & Redraws Mar 13 298 278 262 68 12 Business Lending Deposit mix improving Mar 15 83 298 262 10% 11% 12% 41% 37% 31% 14% 14% 16% 35% 38% 41% Mar 13 Mar 14 Mar 15 Transact & Save Online TD Offset 81 Australia Division Delivering to strategy, managing margins & costs while maintaining credit standards Balanced margin management1 2.53% Investing for growth Percent mix of Retail Sales and Service FTE 2.50% 2.50% 60% 55% 50% 45% 1H13 1H14 1H15 40% Mar 13 Mar 14 Service FTE Mar 15 Credit quality Improving Cost to Income Cost to Income Sales FTE Net Impaired Assets / Net Loans & Advances 38.1% 0.39% 0.26% 37.0% 0.22% 36.7% 1H13 1H14 1H15 1H13 1H14 1H15 1. NIM %: Half year period average. 82 Australia Division Delivering innovative solutions that are aligned to changing customer needs Delivering innovative solutions • World first to roll out ‘Tap and Pin’ contactless ATMs • 813 Smart ATMs deployed • Rolled out WiFi into branches, enabling goMoney app activation at account opening • Market leading multi-factor authentication • Innovative home loan solution for mobile lenders (Your Home Loan 360) … leading to increasing digital usage Percent Sales1 via Digital 12.9% Percent Transactions2 via Digital 14.4% 70.4% 9.5% 1H14 2H14 1H14 1H15 72.4% 2H14 73.9% 1H15 … while reducing customer complaints Average Monthly Complaints • Digital tools and calculators -19% -9% -17% • Interactive Insights for frontline bankers in Corporate Banking • Digital A-Z reviews across Retail and C&CB FY12 FY13 FY14 1. Sales includes the number of sales events through the Retail distribution network, including all Retail, Commercial and Wealth products. 2. Transactions refers to the number of value transactions through all channels including internet, mobile, teller and ATM. 1H15 83 Australia Division Growth is being delivered sustainably Building our sales reach 600  63% Additional sales FTE from 1H14 40k Hours of training for C&CB staff in 1H15 Investing in priority segments – Small Business, Emerging Corporate, Health 670 Additional Retail staff trained in sales of Home Loans, Wealth, and Small Business products Growth in Digital sales from 1H141 Enhancing the customer experience 1. 2. 3. 4. 17% Increase in Home Loan sales across all channels Expanding customer awareness  #51 most valuable brand globally and ranked #2 of the 4 major Australian banks3 Deployed a global asset finance platform providing faster and easier applications and fulfilment  2015 Australian Lending Awards – Best customer experience, Best Investor Lender, Mortgage Lender of the year Drop in average monthly complaints from FY14 #2 Purchase intention for Australian banks4 74% Transactions2 via digital channels, up from 70% in 1H14  17% Increasing sales capability Sales include Retail, Wealth, and Commercial sales and referrals through Retail digital channels. Transactions refers to value transactions through internet, mobile, teller, and ATM. 2014 BrandZ Top 100 most valuable global brands by Millward Brown. Ipsos, Mar 2015. 84 Australia Division Retail Deeper customer relationships Growing customer acquisition Customer numbers 2.9% Retail Products per customer % of total customers 9.0% 9.3% 9.4% 47.6% 48.6% 49.0% 43.4% 42.1% 41.6% 1.8% 1.3% Mar 13 Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 4+ Increasing Sales Sales Events Mar 14 2-3 Mar 15 1 Growing market share APRA Traditional Banking Market Share1 Index Sep 12 = 100 103 7.1% 102 101 100 99 98 1H14 2H14 1H15 97 Sep 12 Mar 13 ANZ Sep 13 Peer 1 Mar 14 Peer 2 Sep 14 Mar 15 Peer 3 1. Inclusive of Deposits, Home Loans and Cards, Source: APRA. 85 Australia Division Corporate & Commercial Banking Targeting key growth segments & leveraging super regional connectivity Continuing to grow the business Growth in Customer numbers 43.5 1H13 46.8 1H14 Lending ($b) • Investments to enhance Small Business and Emerging Corporate propositions contributing to performance 68.4 65.7 63.2 • Prioritising higher growth opportunities to drive outperformance 5% 6% Deposits ($b) 49.7 • Supporting customers across the region with dedicated specialists, cross-border processes, research and insights • Increasing banker capability and connectivity through super regional experience, training and specialist tools 1H15 1 Customers ('000) .. With strong growth in our priority segments Small Business Banking2 Emerging Corporate2,3 15% 20% Can service my business needs across Australia, New #1 Zealand and Asia4 46 1H14 Lending 1H15 Revenue 1H14 Lending 1H15 ANZ 38 36 35 Peer 1 Peer 2 Peer 3 Revenue 1. Customers exclude Esanda contracts. 2. Percentages represent lending growth. 3. A subset of Business ank, lending greater than 10m and turnover greater than 40m. 4. Proportion of Commercial customers ($1m to <$40m turnover) associating institution with the statement ‘can service my business needs across Australia, New Zealand and Asia’, rolling 3 month average, DBM Business Financial Services Monitor, Mar 2015. 86 Australia Division Australia Division - strengthening ANZ's position in core markets by delivering a leading customer experience ANZ Group Strategy Strengthen our position in our core markets of Australia & New Zealand STRONG CORE MARKETS Connecting customers to faster growing regional capital, trade & wealth flows PROFITABLE ASIAN GROWTH Built on common infrastructure & enterprise focus for greater responsiveness, efficiency and control ENTERPRISE APPROACH Australia Division’s contribution • • • • • Deliver customers an easy, connected and insightful experience that puts the customer in control Achieve consistent above system growth focused in priority segments Maintain strong margins, cost discipline and risk profile Leverage our Super Regional advantage to bring the whole of ANZ to customers Take an enterprise wide approach and leverage global assets Banking on Australia is transforming our Retail and Corporate & Commercial businesses based on a deep understanding of customer needs Customer Needs Customer Value Proposition Transformation Financial Outcomes Developing a deep understanding of customer needs in our target segments Building a compelling customer value proposition that is aligned to their needs Investing through our Banking on Australia program to meet changing customer needs Growing market share, managing margins and costs and maintaining asset quality 87 New Zealand Division NZ Division Profit and Loss Revenue and Expenses NZ$m 1,437 1,361 1,319 2YR CAGR 4.4% 596 576 562 -1.7% New Zealand Division 1H13 Income 1H14 1H15 Expenses PBP, Provisions, NPAT NZ$m 861 799 723 601 605 494 Income Expenses PBP Provisions NPAT Retail & SBB Income Expenses PBP CommAgri Income Expenses PBP 1H13 PBP (37) 1H14 NPAT Growth % PCP 5.6% 2.5% 7.8% large 0.7% 968 440 528 3.9% 1.4% 6.0% 460 126 334 7.2% 1.6% 9.9% Productivity & Efficiency 2YR CAGR 9.1% NZ$’000 45.2% 41.3% 10.7% 36 NZ$m 1H15 1,437 576 861 20 605 40.1% 20 1H15 Provisions 1H13 CTI 1H14 1H15 Revenue per FTE (RHS) 300 250 200 150 100 50 0 All values in New Zealand Dollars. All data relates to New Zealand Division, which comprises Retail and Commercial business units. 88 New Zealand Division NZ Division Balance Sheet Net loans, Deposits and NIM NZ$b LDR 173% LDR 171% LDR 162% 1H13 1H14 1H15 Lending Deposits NZ$b 2.5% 3.2 15.7 15.7 16.1 17.4 2.4% 56.0 59.6 62.7 Mar 13 Mar 14 Mar 15 2.3% Home Lending Rural Lending NIM (RHS) Customer lending flows1 NZ$b 12.5 Gross Impaired Assets / Gross Loans and Advances2 90.5 1.40% 13.7 (9.5) (7.3) (9.9) 94.8 Business Lending Other Lending Credit Quality 9.1 8.6 3.3 3.0 15.8 14.7 2.6% 61 55 52 2.7% 100 94 89 Lending composition (7.7) 100.0 0.75% Mar 15 Repay Exit TopUp New Mar 14 Repay Exit TopUp New Mar 13 0.44% Mar 13 Mar 14 Mar 15 All values in New Zealand Dollars. All data relates to New Zealand Division, which comprises Retail and Commercial business units. 1. Gross Loans and Advances excluding capitalised brokerage/mortgage origination fees, unearned income and customer liabilities for acceptances. 2. Includes capitalised brokerage/mortgage origination fees, unearned income, and customer liabilities for acceptances. 89 New Zealand Division NZ Retail and Small Business Banking Products per customer Market share1 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Mar 13 Home loans Mar 14 Household deposits % of Retail customers Mar 15 18% 59k 1H13 67k 1H14 CAGR 15% 82k 1H15 2.6k 1H13 18.4% 46.7% 47.3% 46.7% 39.1% 37.1% 34.9% Mar 13 Mar 14 Mar 15 4+ 3.4k All values in New Zealand Dollars. 1. Source: RBNZ - Mar 2015, relates to NZ Geography. 2. Customer groups acquired. 3. Revenue and FTE based on NZ Division. 1 3.5k NZ$m NZ$k 2 Yr CAGR: 4.5 234 1H14 2-3 Revenue per Branch and FTE3 Gross Small Business Banking customer acquisition2 CAGR 15.6% Credit cards Customer numbers Gross Retail customer acquisition 14.2% 1H15 18% 5.5 261 1H13 1H14 Revenue per Branch 10% 6.3 282 1H15 Revenue per FTE (RHS) 600 500 400 300 200 100 - 90 New Zealand Division Commercial & Agri Market share1 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Mar 13 Credit quality Mar 14 EAD distribution by Credit Rating groups Mar 15 Focus on Quality 10% Agri deposits Commercial lending Agri lending Loans and deposits NZ$b 40.0 30.0 20.0 Loans CAGR 5% Deposits CAGR 10% UDC Agri Commercial 10.0 - 65% 25% Commercial deposits Mar 13 Mar 14 Mar 15 Mar 13 Mar 14 Mar 15 All values in New Zealand Dollars. 1. Source: RBNZ - Mar 2015, relates to NZ Geography. 2. Retail includes Small Business Banking. Risk Rating Stronger Agri 68% 26% 6% Commercial 35% 38% 38% 58% 58% 58% 7% 4% 4% 67% 28% 5% Weaker Mar 13 Mar 14 Mar 15 Mar 13 Mar 14 Mar 15 Commercial cross-sell recognised in other segments2 Institutional NZ$m Retail & Wealth 30.1 17.0 23.5 30.4 34.5 1H13 1H14 42.4 1H15 91 New Zealand Division Home loans #1 in Auckland and Christchurch2 Home Loan Market Share1 31.0% 30.6% 31.2% Share of total home loans registrations in Auckland 29% 30% Mar 13 Mar 14 1H13 Mar 15 MMM Broker Small Business Banking 22% 22% 32% 38% 17% 12% 28% 29% 1H13 1H15 28% 25% 28% 26% 1H15 1H13 ANZ Leading peer bank 1H15 Home Loan book composition Home Loan sales by Channel3 Retail 30% 29% Share of total home loans registrations in Christchurch 100% ANZ % Fixed Rate mortgages in portfolio Sales mix 27% 75% 73% Fixed 50% 25% Mar 09 All values in New Zealand Dollars. 1. Source: RBNZ - Mar 2015, relates to NZ Geography. 2. Source: Core Logic. Leading peer bank Auckland – ASB, Christchurch – Westpac. 3. Retail – Branch and Contact Centre, MMM - Mobile Mortgage Manager. Variable Mar 11 Mar 13 Mar 15 Mar 15 92 New Zealand Division Growth is being delivered sustainably Building our sales reach 62%  38% Of frontline are now made up of Sales Staff, compared to 59% in 1H14 Investing in priority segments – Auckland, Christchurch, Migrants, Small Businesses and Corporate Agri Increase in sales revenue from Digital sales, compared to 1H14 Increasing sales capability 30k More hours created for Sales and Service staff through process improvements  Increased staff training hours and credit writing capabilities 100% Mobile Sales force with iPad capability to enable better customer interactions on the go Expanding customer awareness Enhancing the customer experience 200k Card PINs set digitally in 7 months, since the introduction of the capability 44% Continuing to have the best customer consideration1 score amongst the top 4 banks  New systems providing staff the ability to better manage and action customer feedback 65% Transactions via digital channels, up from 59% in 1H14 20% Drop in the average number of problems reported by customers from FY14 10% Increase in Commercial & Agri customers belief that ANZ provides insights that deliver value to their business 1. Source: McCulley Research Limited (first choice or seriously considered) – Mar 2015. 93 New Zealand Division Creating New Zealand’s best bank ANZ Group Strategy Strengthen our position in our core markets of Australia & New Zealand Connecting customers to faster growing regional capital, trade & wealth flows STRONG CORE MARKETS PROFITABLE ASIAN GROWTH Built on common infrastructure & enterprise focus for greater responsiveness, efficiency and control ENTERPRISE APPROACH ANZ New Zealand’s Strategy Attract, develop and retain world class service and sales teams Develop our digital and payments capability Improve the use of bank wide data for better customer interactions Improve the way our channels work together so it’s easier for customers Continue to simplify our products and processes NZ’s Best Bank Leverage Scale Create Scale How?  One team  One set of systems  One product set  One brand  One branch network 2010-2013 How?  Global hubs  Branch optimisation  Improve brand recognition • World class sales and service teams • Upgrade core systems • Digital and Payments infrastructure 2013-2016 NZ’s Best Bank How? • Best service recognition • Best brand consideration • Integrated channels • Leveraging Group capabilities • Data driven customer insights • Automation of work flow • Optimised channel investment Our Vision: ‘Helping Kiwis achieve more’ Our Goal: • #1 Service • #1 Market Share • Growing • Visible in the community 2017+ 94 New Zealand Geography NZ Geography Profit and Loss Revenue and Expenses NZ$m NZ$m 1,931 1,904 1,760 2YR CAGR 4.7% 767 739 725 -1.8% New Zealand Geography 1H13 Income 1H14 1H15 Expenses Income Expenses PBP Provisions NPAT NZ Division Income Expenses Institutional Income Expenses Wealth Income Expenses PBP, Provisions, NPAT NZ$m NZ$m 993 887 697 841 1H13 PBP (39) 1H14 NPAT 1,437 576 5.6% 2.5% 335 93 5.0% 1.1% 156 70 (31.6%) 4.5% NZ$k 240 43.6% 230 9.6% 220 9.8% 43 Growth % PCP1 1.4% 1.9% 1.1% large (5.2%) Productivity & Efficiency 2YR CAGR 1,192 1,179 NZ$m 1H15 1,931 739 1,192 31 841 38.1% 38.3% 31 1H15 Provisions 210 200 190 1H13 CTI 1H14 1H15 180 Revenue per FTE (RHS) All values in New Zealand Dollars. All data relates to New Zealand Geography, which comprises the New Zealand components of New Zealand Division, IIB, Global Wealth, GTSO and Group Centre divisions. 1. Excluding one off insurance recovery related to the ING frozen funds PCP growth rates: Income 6.5%, PBP 9.6%, NPAT 2.3%, Wealth Income 13.0%. 95 New Zealand Geography NZ Geography Balance Sheet Net loans, Deposits and NIM1 NZ$b 109 103 98 2.7% 80 74 69 LDR 141% LDR 138% LDR 136% 1H13 1H14 1H15 Lending Deposits Lending composition 2.6% NZ$b 3.3 3.5 16.1 2.5% 15.8 21.7 22.5 24.9 2.4% 57.1 61.0 64.4 Mar 13 Mar 14 Mar 15 2.3% Home Lending Rural Lending NIM (RHS) Customer lending flows2 Business Lending Other Lending Credit Quality NZ$b 13.7 15.7 3.4 Gross Impaired Assets / Gross Loans and Advances3 15.2 9.3 109.6 (10.7) (9.0) 103.3 (10.0) (8.7) 99.0 1.29% 10.8 0.82% Mar 15 Repay Exit TopUp New Mar 14 Repay Exit TopUp New Mar 13 0.48% Mar 13 Mar 14 Mar 15 All values in New Zealand Dollars. All data relates to New Zealand Geography, which comprises the New Zealand components of New Zealand Division, IIB, Global Wealth, GTSO and Group Centre divisions. 1. New Zealand Geography NIM excludes Markets. 2. Gross Loans and Advances excluding capitalised brokerage/mortgage origination fees, unearned income and customer liabilities for acceptances. 3. Includes capitalised brokerage/mortgage origination fees, unearned income, and customer liabilities for acceptances. 96 International & Institutional Division (IIB) IIB has grown revenue and profit Revenue has grown 5% $m $m 3,786 3,622 3,277 Increasing OOI 2 Yr CAGR 3,277 7% 1,771 1,627 1,454 1,629 1,759 1,775 1,993 2,027 1H13 1H14 1H15 1,502 10% 3,786 3,622 PCP 5% 9% IIB 1H13 Income 1H14 1H15 Expenses Delivering 7% NPAT growth $m 2,015 1,995 1,823 1,199 1,368 1,459 162 1H13 1H14 1H15 NPAT Provisions PBP 98 NII Improving revenue per FTE 2 Yr CAGR 5% $k 500 10% 44% PCP 184 OOI 45% 47% 400 300 1% 200 7% 1H13 CTI 1H14 Rev per FTE (RHS) 1H15 100 OOI / FTE (RHS) 97 International & Institutional Division (IIB) Our Balance Sheet is growing prudently IIB Balance Sheet Institutional client franchise assets A benefit of ANZ’s Super Regional Strategy: surplus deposits contribute strongly to the Group’s Liquidity 201 Coverage Ratio (LCR) 16 172 $b 156 152 13 10 136 11 114 8 6 185 159 146 141 128 108 Loans Dep. Mar 13 Loans Dep. 1.38% Gross impaired assets as a % of GLAs 1H14 NLAs 1H15 1 RoRWA (RHS) RWA Strong risk grade profile2 By total exposure (%) 1.70% 1.23% 1.25% 1H13 IIB credit quality remains high 141 124 104 Mar 15 180 162 141 Loans Dep. Mar 14 Institutional Retail $b 22% 20% 22% By tenor – 1H15 (%) 29% 1.06% 0.67% Mar 13 IIB Total 0.49% Mar 14 0.65% IIB Asia 0.46% Mar 15 77% 75% Mar 13 Default Mar 14 79% Mar 15 Sub Inv Grade 64% 63% 36% 37% Aus NZ 71% Asia Inv. Grade Tenor >1Yr Tenor <1Yr 1. RoRWA equals Net Profit After Tax divided by average Basel III risk weighted assets. Insto customer includes Global Loans, Global Transaction Banking, Global Markets Sales, and Global Markets Trading ex Balance Sheet. 2. Institutional exposures only. 98 International & Institutional Division (IIB) Revenue and profit composition APEA now represents over half of the division’s NPAT Revenue is geographically diverse $m $m 3,786 3,622 1,412 37% 41% 565 313 8% 11% 150 55% 48% 41% 1,467 8% 291 51% 1,864 2,061 1H14 APEA 1H15 NZ Aus 12% 30% 17% 41% 2,966 2,992 361 356 12% 877 845 28% 500 549 18% 33% 1,228 Higher 31% ROE 1H14 Markets 1,242 42% Global Loans Trade 36% 156 11% 653 771 53% 1H14 1H15 NZ Aus APEA OOI growth is strong $m 8% 29% 63% 1,629 129 474 1,026 1H14 1H15 Cash 532 APEA Growing higher ROE businesses1 $m 1,459 1,368 APEA Aus 1,759 183 11% 445 25% 1,131 64% 1H15 NZ 1. Excludes Retail and partnerships. 99 International & Institutional Division (IIB) The corridor strategy is gaining momentum Major trade corridors are forecast to grow significantly USDb Source: ANZ Economics 300 Corridor strategy is delivering strong growth Revenue Growth (1H15 PCP) forecasts 48% 250 200 150 59% 30% 22% 100 50 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Total Australia-China goods trade Trade revenue has a multiplier effect 1H15: $1 of Trade income = $1.40 of Cross-Sell1 1.00 Trade Revenue Aus/ China Aus/ Singapore China/ HK Aus/ HK Increasingly winning multi country mandates2 Number of multi country customer mandates won 170 2.40 134 Combined Revenue 1H14 147 1.40 Markets & Cash income from Cross Sell 2H14 1. Cross-sell multiple based on a pool of customers that have a minimum of Trade, Markets and Cash Management with ANZ. 2. Payments and Cash Management mandates, based on Transactive Asia Strategic transactions for client with 2 or more countries. 1H15 100 International & Institutional Division (IIB) Trade and Cash Management are delivering in tougher conditions Deposit growth is strong PCM Revenue is at record levels $m 549 500 81 420 67% 68% 70% 13% 17% 14% 14% 18% 19% 1H14 1H15 1H13 APEA NZ Aus Trade revenues have remained broadly flat $m 322 41% 5% 361 356 37% 36% 6% 6% 93 $b 7% > 180 days 31% 90-180 days 36% 31-90 days 26% 0-30 days 64 Mar 13 Mar 14 Mar 15 Trade revenues broadly flat despite a significant decline in commodity prices Oil Price movement ANZ Trade Book 43% 13% 58% 54% 57% 1H13 1H15 1H14 APEA NZ 1H15 Aus 44% 1H15 Resources Agriculture DI 101 International & Institutional Division (IIB) Global Markets delivered record income Customer facing Global Markets revenue is growing $m 1,108 22% 27% 51% 1H13 Balance Sheet 1,228 1,242 22% 21% 26% 24% 52% 55% Delivering growth across a diverse product range Income by region ($m) 1H13 APEA 33% $m 3% 9% 12% 23% 29% 48% 47% 1H15 Aus NZ FX 1H13 1H15 Rates Commodities Others Capital Markets Risk position remains conservative $ 3 6% 6% 17% 49% 41% 1H14 1H15 Trading ex BS Sales 1.18% 2 37% 46% Asia Global Markets revenues have significant growth potential, given low market share FX Market share 1,242 14% 1,108 13% >75% customer facing Income by product1 ($m) 300 200 300 200 100 100 0 0 North Asia SEA NZ 1. Excludes Balance Sheet. 2. Euromoney, 2014. 3. Peter Lee Associates 2014 Foreign Exchange survey, New Zealand. 1H13 2H13 Sales/Trading per $ VaR 1H14 2H14 1H15 Balance Sheet per $ VaR 102 International & Institutional Division (IIB) Balance Sheet usage is increasingly targeted Global Loans margin compression was partially offset by volume growth $m NIM impacts most severe in Australia 3% 93 877 2% 845 (120) (6) 1% 1H14 Vol OOI Rate 0 1H15 1H13 Continuing to diversify the Global Loans balance sheet 2H13 Aus NIM 1H14 2H14 1H15 Asia NIM Clear focus on generating cross-sell $b (NLA) 41 56% 40 6 7% 5 37% 26 26 Mar 13 35 Mar 14 APEA NZ 42 46% 7 7% 42 Mar 15 Aus 56% 31% 28% 51% 69% 7 72% 47% 42 1H14 3+ products IIB provides 3+ products to 72% of lending clients 1H15 < 3 products 103 International & Institutional Division (IIB) IIB Asia is growing profitably IIB Asia NPAT has grown 8% PCP… USDm 1.63% 1.51% 1.23% 489 451 … with revenue growth in higher ROE businesses2 … USD m 24% 143 148 126 18% 25% 149 177 178 25% 8% 52 59 64 9% Higher ROE 324 43% 1H13 1H14 NPAT 1H15 RoRWA1IIB … and increasingly from OOI … 257 330 1H13 1H14 Markets Cash 48% 334 1H15 Global Loans Trade … with improving productivity USDm 1.5 USDk 300 1.0 54% 56% 55% 61% 0.5 0 200 46% 45% 44% 1H13 1H14 1H15 OOI NII 1. ‘RoRWA’ equals Net Profit After Tax divided by average Basel III risk weighted assets. 2. Excludes Retail and Partnerships. CTI 1H13 55% 1H14 Rev/FTE (RHS) 54% 100 0 1H15 OOI/FTE (RHS) 104 Making progress on our strategic priorities IIB PRIORITIES Connecting More Customers by Providing Seamless Value Delivering Leading Products through Insights Intensifying Balance Sheet Discipline Scaling & Optimising Infrastructure Outcomes for the business • Corridor Management strategy gaining traction, with revenues up ~30% pcp along the 3 main Australia-Asia trade corridors - China, Hong Kong and Singapore • • # 1 for overall and lead bank penetration in Australia1 • # 4 corporate bank in Asia and narrowed the gap to # 33 # 1 for overall and lead bank penetration in New Zealand and widened the gap with # 22 • # 1 in AU & NZ Bonds4 & # 1 in AU & NZ Syndicated Loans5 • Best Trade Finance Bank – AU & NZ5 & Best Bank for Cash Mgt Asia Pacific6 • Best Foreign Exchange Provider, Asia Pacific 7 • Precious Metals House of the Year, Asia8 • Several initiatives were completed resulting in >$1bn RWA reduction • Progress on transitioning of non-core customers • Electronic channel utilisation for payments increased from 39% to 45% • Enterprise approach delivering a 2% cost reduction PCP despite a 7% increase in IIB Operations volumes • Personnel expenses are well controlled – Flat PCP (excluding FX impact) 1. Peter Lee Associates: 2014 Large Corporate and Institutional Relationship Banking survey, Australia. 2. Peter Lee Associates: 2015 Large Corporate and Institutional Relationship Banking survey, New Zealand (widening based on lead bank relationships). 3. Greenwich Associates 2014 Asian Large Corporate Banking Study. 4. Dealogic by lead bank apportioned deal value, Jan 2015. 5. Thomson Reuters, Global Syndicated Loans Review FY 2014. 6. Trade & Supply Chain Finance Awards, Global Finance, 2015. 7. Best Foreign Exchange Provider Awards, Global Finance, 2015. 8. Energy Risk, Asia, 2014. 105 Global Wealth Global Wealth performance continues to strengthen Revenue & Expenses Growth % Growth (ex Trustees) 1H15 PCP PCP 850 5.3% 6.9% Net Interest 88 10.0% 10.0% Other Operating 97 (19.2%) (10.2%) FM & Insurance 665 9.6% 9.6% Expenses 489 1.0% 1.9% PBP 361 11.8% 14.6% NPAT 259 10.7% 13.6% Funds Mgt 78 20.0% 20.0% Insurance 143 45.9% 45.9% 43 (2.3%) 13.2% 199 23.6% 28.4% New Zealand 62 (12.7%) (12.7%) APEA (2) Large Large $m 807 744 $m 850 CAGR 465 489 484 6.9% 2.5% 1H13 Global Wealth 1H14 Income 1H15 Expenses Improved productivity (CTI)1,2 Income 1,2 NPAT contribution: Business % 62.4 490bps 60.4 57.5 Private Wealth Geography Australia 1H13 1H14 1H15 1. 1H14 revenue normalised for Trustees related income of (-$12m) and Trustees related expenses of ($4m). 2. 1H13 revenue normalised for Trustees related income of (-$10m) and Trustees related expenses of ($7m). 106 Global Wealth Positive volume growth in Private Wealth and Funds Management Funds Management Average FUM1 $b $b 64.6 60.6 Private Wealth2 15.6 2YR CAGR 12.3 CAGR 53.2 10.2% 9.9 5.8 25.5% 6.2 6.0 3.3% 1H13 1H13 1H14 1H15 Funds Management $m netflows1 Reshaping our funds business to customer centric digital solutions $m 1,087 1,526 558 883 686 1H14 1H15 Net Loans and Advances Average Customer Deposits 1H15 netflows 706 444 169 34 (442) 1H13 (1,024) (1,057) 2H13 1H14 2H14 1H15 ANZ Smart Choice Super ANZ KiwiSaver ANZ Private Wealth OneAnswer Frontier Open customer solutions 1. Average FUM and netflows includes Private Wealth Investment FUM and netflows. 2. Net loans & advances excludes Corporate banking deposits and includes E*TRADE investment lending. Oasis Voyage Retail Employer Super Closed solutions 107 Global Wealth Focus on profitable Insurance business lines is delivering strong growth in Embedded Value Continued improvement in Australian Retail Life Insurance Lapse Rates Stable mix of Life Insurance In-force $m 1,445 1,468 1,636 30% 10% 23% 12% 24% 12% 60% 65% 64% Mar 13 Mar 14 Mar 15 -50bp 13.3% 12.1% 11.6% Group - Australia Individual - New Zealand 1H13 1H14 1H15 Individual - Australia Consistent product mix in Individual Life Insurance 1,006 1,132 1,246 27% 28% 28% 73% 72% 72% $m 3,883 98 174 95 144 4,394 4,218 (176) Mar 15 Net Transfers Subtotal Risk Disc. & FX Experience Deviations Expected Return Mar 13 Mar 14 Mar 15 Lump Sum Income Protection Value of New Bus. 13% Sep 14 $m Significant contribution to Embedded Value growth over 1H15 108 Global Wealth Delivering on our strategy Global Wealth strategic objectives Growing solutions through ANZ channels Wealth Solutions Held 1 Deepen relationships with existing ANZ customers #m 3.3 2.9 2 3 Simplify the business with self-directed solutions Drive value from existing businesses 1.0 1.9 Mar 13 Simplifying with self-directed solutions CAGR +9.4% 3.4 2.3 2.5 Mar 14 Mar 15 ANZ channels +15.0% Online 1600 ANZ Smart rollover • Received 5 stars by CANSTAR in every1400 Choice innovation 1200 released superannuation category 1000 775 • Over a 300% increase in customer 800 rollovers since the introduction of the 600 paperless rollover service (70% self 400 1,619 directed) 200 435 • Over 150,000 downloads with an 0 activation rate of 66% Mar 13 Mar 14 • Deepening relationship with the Bank (2.1%) Digital delivering growth • Exceeding $3 billion in FUM ANZ Smart Choice Super Non-ANZ channels 0.9 1.0 FUM ($m) 1486 4,000 3,500 3,000 3,404 2,500 2,000 1,500 1,000 500 0 Mar 15 Ave Weekly Rollovers 109 2 15 Home Loan case study Home Loan Case Study Long term growth through leading proposition, investing in capability to make it easy for customers Building our sales reach 43% $30b 17% $8.6b 5 years Enhancing the customer experience 12mth increase in Mobile Lending loan writers with NSW up 50% Assessment available 6 days 6-days a week Same delivering same day day assessment for over 90% of applications 1H15 Home Loan Sales across all channels vs. PcP 1,000 hours per month 1H15 Home Loan FUM growth of $8.6b, up from $6.7b 1H14 Complaint reduction over 3 years through 53% end-to-end process re-engineering & reliable settlements Sustained above System growth1 300k Process improvements freeing up front line capacity to serve more customers per month Number of hits per month on ANZ.com tools and calculators Expanding customer awareness Consistently award winning 2015 Australian Lending Awards; • Best Customer Experience • Best Investor Lender • Mortgage Lender of the year We help our customers be informed Over 180,000 ANZ property profile reports distributed over the last 12 months Providing super-regional capability Expanded our Non Resident proposition to residents of 14 countries 1. 5 years above APRA System quarter on quarter growth to Dec 2014. 111 Home Loan Case Study Consistent above system growth, balanced across the portfolio Balanced growth across segments particularly in NSW Delivering 5 years of consistent above system market share growth Strong sales volumes offset by industry high levels of repayments Home loan flows ($bn) 2 24 Sep 14 Redraw 1.3x 1.2x Repay. /Other Increased portfolio share in NSW/ACT 58% Mar 15 SA WA Qld/NT 0.9x 0.8x NSW/ ACT 1.1x Vic/Tas Broker Inv 1.0x Prop. 1.3x 1.0x 57% 46% 47% 218 8% annualised New Sales Net OFI Refi excl Refi-in 1.1x ANZ Home Loan Portfolio (%) Prop 3 Broker Equity Inv OO 7 (24) 209 ANZ Growth vs system by segment1 Feb 15 YTD OO Household Lending Market Share Growth (%) Index Sep 12 = 100 102.7 103 102.2 102 101 100 99 98.0 98 97 97.0 96 Sep 12 Sep 13 Sep 14 ANZ Peer 1 Peer 2 Peer 3 36% 38% 6% 5% Mar 14 Mar15 54% 53% Mar 14 Mar 15 26% 27% 33% 33% 18% 17% 16% 7% 16% 7% NSW/ ACT VIC/ TAS QLD/ NT WA SA Mar 14 Mar 15 1. Customer Segments (Owner Occupier and Investor) defined by APRA. Channel performance relative to overall market growth. Geography sourced from Cannex. 2. Source: Comparator quarterly benchmarking. 3. Proprietary, comprising Branch, Mobile and Other. 112 Home Loan Case Study Actively assessing and managing our home lending risk across the end-to-end value chain Multiple checks during origination process Quality assurance, info verification & policy reviews Pre-application Application Income & Expenses Know Your Customer Income Verification Serviceability Income Models Expense Models Interest Rate Buffer Collateral / Valuations Fulfilment • • • • • Pre-sales (digital & marketing) Proprietary sales and/or verification of 3rd parties1 In-house loan origination, assessment, fulfilment Balance sheet ownership Collections activity Originate to hold philosophy • Currently all lending is on balance sheet Effective hardship & collections processes Dedicated hardship team LVR Policy • • LMI policy Full recourse lending Valuations Policy Credit Assessment End-to-end home lending responsibility managed within ANZ Credit History Bureau Checks Documentation Security • Early warning based on system triggers Multiple actions to manage potential losses ANZ assessment process across all channels • • • • ANZ network Broker Digital Mobile 1. 3rd party sales channels (e.g. Broker) require ANZ accreditation and are subject to ongoing compliance monitoring to distribute ANZ home lending products. 113 Home Loan Case Study Australian Market attributes Strong sustained population growth • • Main markets of Sydney, Melbourne, Brisbane & Perth all growing Australian population growth currently 1.8% vs US 0.7% & UK 0.6%1 Housing supply Continues to trail population growth (with the exception of certain historical ‘hot spots’ e.g. Gold Coast 2007-2009) Culture of repayment • • • Interest is non tax deductible on primary residence Full recourse lending Accelerating repayments (~16% loan ‘buffer’ based on latest RBA report2) Strong underwriting standards • • Extremely limited subprime / low doc lending since 2008 Low levels of 100% LVR lending Banks ‘own’ their credit risks • • Lenders perform income verification Very low level of securitisation (2% of total housing finance and declining3) aligns origination and underwriting 1. Source: WorldBank 2013. 2. Source: RBA Financial Stability Review Mar 2015. 3. Source: APRA banking statistics. 114 Home Loan Case Study Australia Home Loans portfolio 1H15 portfolio statistics1 Total Number of Home Loan Accounts Dynamic loan to value ratio5 934k % of Portfolio 50% Sep 12 45% Total Home Loans FUM % of Total Australia Geography Lending $218b 60% Mar 13 40% Sep 13 35% Mar 14 30% Sep 14 Mar 15 25% % of Total Group Lending Owner Occupied Loans - % of Portfolio2 Average Loan Size at Origination (1H15 average)3 ,4 39% 60% 20% LVR >90% 4.08% (Mar 15)9 15% 10% 5% $376k Average LVR at Origination (1H15)3 ,4 ,5 71% Average Dynamic LVR of Portfolio4 ,5 ,6 51% % of Portfolio Ahead on Repayments7 ,8 43% % of Portfolio Paying Interest Only8 35% 0% 0-60% 61-75% 76-80% 81-90% 91-95% 95%+ Individual provision as % of average NLA FY12 FY13 FY14 1H15 Group 0.38% 0.25% 0.22% 0.17% Australia Home Loans 0.02% 0.02% 0.01% 0.01% 1. Home Loans (inclusive of NPLs, exclusive of offset balances). 2. Excludes Equity Manager. 3. Originated 1H15. 4. Unweighted. 5. Including capitalised premiums. 6. Valuations updated Mar 2015 where available. 7. % of customers >30 days ahead of repayments. 8. Excludes revolving credit. 9. Excluding capitalised premiums, the % of portfolio with LVR >90% as at Sep 2014 is 2.35% (Mar 2015 was 2.6%) 115 Home Loan Case Study Australia Division Australia Home Loans 90+ day delinquencies by state1 Australia Division credit exposure (EAD) 1% Home Loans 0% 6% Mar 14 Mar 15 0.6% Consumer Cards 24% Personal Loans 0.4% 0.2% 69% 0.0% Other Australia Division 90+ day delinquencies1 VIC NSW & ACT QLD WA Portfolio Australia Home Loans portfolio by state1 2 Home Loans (inclusive of hardship change) 3 Corporate & Commercial Banking Consumer Cards Mar 15 29.4% 27.0% 17.7% 16.2% 9.7% Mar 14 29.1% 26.2% 18.2% 16.5% 9.8% 1.08% 1% 1.04% 0.57% 0% Oct 10 Mar 13 0.8% Corporate and Commercial 2% Mar 12 1.0% Oct 11 Oct 12 Oct 13 Oct 14 0% 25% VIC NSW & ACT 50% QLD 1. Exclusive of Non Performing Loans. 2. Hardship changes implemented Apr 2013. For comparison: 90+ excluding hardship changes as at Mar 2015 is 0.46%. 3. Includes Small Business, Commercial Cards and Esanda Retail. 75% WA 100% Other 116 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 This presentation may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to ANZ’s business and operations, market conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management practices. When used in this presentation, the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such statements constitute “forward-looking statements” for the purposes of the United States Private Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. For further information visit www.anz.com or contact Jill Craig Group General Manager Investor Relations ph: (613) 8654 7749 fax: (613) 8654 9977 e-mail: jill.craig@anz.com