Australia and New Zealand Banking Group Ltd. - Annual Report 2010

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

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ANZ has established a strong business foundation

A clear company wide focus on our super regional strategy:

•	Organised our business around three key geographies and our customers	p. 3-16
•	Maintaining strong businesses in our home markets:
	• Australia	p. 17-22
	• New Zealand	p. 33-37
•	Investing for strong organic growth in Asia	p. 23-32
•	A redefined and clear focus in our global institutional business	p. 38-51
•	Supported by a strong capital and funding position	p. 52-61
•	Strengthened governance and risk systems and an improving credit outlook	p. 62-69
•	Economic updates	p. 70-90

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Overview and strategy

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ANZ is structured by Geography & Segment

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Asia Pacific, Europe & America (APEA)
Retail
Commercial
(including Wealth Institutional
(emerging)
partnerships)
Australia
Retail Wealth Commercial Institutional
New Zealand
Retail Wealth Commercial Institutional
Institutional is a global business
4
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Super Regional strategy progressing well

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TRANSFORM
OUT PERFORM
RESTORE
•
Quality on par with Create
• Institutional back
global leaders in our
to system markets a leading Super
•
Restore “jaws” – • Best of breed Regional bank
increase revenue
customer experience
faster than costs Global quality,
•
• In-fill mergers and
Drive Asia profit
acquisitions in Asia regional focus
• Capture existing
(core geographies)
opportunities
• Strategic cost • Unlock the value of
our franchise
management
1 to 2 years 2 to 5 years 5+ years
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Launched December 2007

ANZ Australia NZ Asia Pacific target ~60% of all ANZ profit ~20% ~20% 2012

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Super Regional Strategy

Asian, Australian & New Zealand interconnectedness increasing:

Following and supporting our customers to the region, developing relationships to work both ends of the trade flows.
Trade flows between Asia and Australia and New Zealand continue to grow.
Significant intra-Asia trade flows are also growing

Australian 2 way trade weights US & Europe[1]

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Strengthens and broadens the Group balance sheet:

Asia[1]

Leveraging deep liquidity pools within Asia where there is a higher propensity to save
Diversifies the balance sheet
Source: ANZ, RBA. ASEAN 6: Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam

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Regional and intra-regional trade and investment flows are substantive

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Denotes two way trade flow (2008)
FDI inward flow (US$b, 2008)
Asia [1] -Europe Asia [1] -USA
Trade: US$1.1trn Trade: US$1.0trn
CN
TW
108
5
IND HK
42 VN 63 Pacific-Asia [1]
8 Trade: US$7b
INDON
Intra-Asia [1] 8
Aus/NZ-Pacific
Trade: US$2.5trn
Trade: US$5b
Aus/NZ-Asia [1]
Trade: US$235b
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Asia includes China, Cambodia, India, Indonesia, Hong Kong, Japan, Korea, Laos, Malaysia, Philippines, Singapore, Taiwan and Vietnam Data source: UN Comtrade database; country statistics; ADB website; press searches; Datamonitor, McKinsey Global Banking Pools, APRA, CEIC

Building a genuinely pan regional business - connectivity provides a competitive advantage

Linked through flows of trade, capital and population

Growth in trade and capital flows between Asia and Australia are tracking 17% to 25% pa

Surplus savings

Key focus is to bridge gaps across the region: Asia generates surplus liquidity, Australia and NZ generate hard and soft commodities

Over 50% of domestic customers depend on Asia for over 25% of their business

Strategy extends beyond banking Australia / NZ customers into Asia, we are actively facilitating intra-Asia cash management, trade and markets transactions for Asian customers

There is approximately $60b in direct foreign investment into Australia from the Asian region

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Commodity
consumers
Commodity
producers
Migration &
Investment
Natural resources account for $80b or 30%
of Australian and New Zealand exports
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Soft commodities account for $40b or 15% of Australian and New Zealand exports

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Strategy is supported by a disciplined approach to M&A – RBS Asia acquisition

Acquired RBS¹ businesses in six countries, aligned with current strategy:
Retail, wealth & commercial businesses in Taiwan, Singapore Indonesia² and Hong Kong;
Institutional businesses in Taiwan, the Philippines and Vietnam
Purchase price US$50m (˜A$60m) premium to fully provided recapitalised net tangible book value³. Equates to ˜1.1 x net tangible book value
Transaction includes ˜US$7bn (A$9bn) deposits, ˜US$3bn (A$4bn) loans,˜2m affluent and emerging affluent customers, 49 branches

Country	Business	Branches	Customers	Deposits
Taiwan	Retail Commercial Institutional	21 & 16 licenses	~1.3m	~US $2.5b
Hong Kong	Retail Commercial	5	~30k	~US$1.4b
Singapore	Retail Commercial	5	~350k	~US$1.8b
Indonesia	Retail Commercial	18	~450k	~US$700m
Vietnam	Institutional	-	~60	~US$20m
Philippines	Institutional	-	~100	~US4m

Transaction is largely a sale of assets and liabilities, not companies, of businesses held by ABNAMRO mainly through branches, RBS will retain a presence in some countries.
The Indonesian retail, wealth and commercial businesses will be acquired through ANZ‟s 99% owned subsidiary ANZ Panin.
Based on RWA calculated by ANZ under a Basel II standardised approach as at 31 May 2009.
On a fully provided recapitalised basis

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Strategy is supported by a disciplined approach to M&A - ING Australia and New Zealand Joint Ventures

Acquired ING Groep‟s (ING) 51% interest in ING Australia and ING NZ (the JVs) for $1,760m [1]
~11x multiple of normalised 2008 earnings [2]
1.2x multiple of embedded value (EV) [3]
Cash EPS accretive in FY10 [4]
Delivered immediate scale – FUM, In-force premiums, and distribution
~$42b of FUM, $1.3b of in-force premiums
~1,700 aligned dealer group advisers (Aus)
Historically around 2/3[rd] of operating income from wealth management, one third from risk
Australia – No. 3 in life insurance [5] , No. 5 in retail funds mgt, largest aligned adviser force

Australia

Acquired ING's 51% in ING Australia manufacturing and distribution of investment life & GI products, the Equity owned advisor networks and administration platforms

Australia FUM: $39b

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Mezzanine 4%
Oasis Wrap 13% Wholesale 1%
OneAnswer Mastertrust 40%
Employer Super 27%
Other Retail15%
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New Zealand – No. 5 in life insurance [5] largest KiwiSaver provider, No. 2 funds manager
Funded from existing resources, capital impact ~(70)bps, pro forma Tier 1 post acquisition 9.5% [6]

New Zealand

Acquired ING's 51% in ING New Zealand: Wealth Management and Retail, Wholesale and Property Investment Management

Transaction completed 30[th] November 2009
Announced OnePath branding August 2010

1 Purchase price. Separately ANZ made a payment of $55m to acquire ING‟s share of the NZ Diversified Yield Fund (DYF) & Regular Income Fund (RIF) redeemable preference shares 2 Earnings for the year to 30 September 2008 incorporating normalised long term expectations 3 As at 31 December 2008 4 Based on current share price 5 By in-force premium share 6 As at 30 June 2009 adjusted for $2.2b SPP and impact of RBS acquisition

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Strategy is supported by a disciplined approach to M&A - Landmark Loan and D it book epos

Overview of transaction

Overview of Landmark

Acquisition of Landmark Financial Services (LFS) loan and deposit book from AWB‟s rural service business Landmark:
Net book value on fully provided, nil premium basis
~$2.2b lending assets & ~$0.4b deposits
Leading Australian agribusiness company, offering merchandise, fertiliser, farm services, wool, livestock, finance, insurance and real estate
Largest distributor of merchandise and fertiliser, with ~2,000 employees servicing ~100,000 clients across over 400 outlets
~10,000 banking customers
~100 Relationship Management Staff

Acquired the LFS loan and deposit books, the lending and deposit taking divisions of Landmark

~45 Support staff
ANZ / Landmark to enter exclusive customer referral agreement:
Access to ~100,000 Landmark rural service customers (~85% of Australian farming entities)
Access through extensive network

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Finance
Fertiliser Insurance
Landmark
Real
Livestock
Estate
Merchandise
Farm
Wool
Services
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ANZ has continued to invest for growth notwithstanding recent tougher economic conditions

Revenue and Expenses

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17% Pro Forma
Basis [1]
12%
12%
10%
9%
8% 8% 7% 8%
6%
FY06 FY07 FY08 FY09 FY10
Revenue Expenses
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Net Profit by region

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Net Profit after tax[2]

Provision charges

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Pro forma basis assumes ING Australia and New Zealand, Landmark and Royal bank of Scotland Asia acquisitions took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results.

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FY06-07 presented on a cash basis, FY08-10 presented on an underlying basis adjusted to reflect the ongoing operations of the Group.

Group loans and deposits

Group Customer Deposits (A$b)

Group Net Loans and Advances (including acceptances) (A$b)

Loan to Deposit Ratio Sep 2010 – 140%

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Loan to Deposit Ratio Sep 2006 – 171%
1 1
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Includes Wealth and Other

Regional performance: Overview

Net loans and advances[1] by geography

APEA (USD)	APEA (USD)	APEA (USD)	APEA (USD)
FY07	FY08	FY09	FY10
31%	99%	(14%)	45%

NLAs include acceptances 2. Retail includes Wealth and Group Centre

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Regional performance: Overview

Customer deposits by geography

APEA (USD)	APEA (USD)	APEA (USD)	APEA (USD)
FY07	FY08	FY09	FY10
26%	69%	31%	72%

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Retail includes Wealth and Other

Regional performance: Overview

Diversified lending portfolio, weighted to secured mortgage portfolio

Net Loans and Advances (including acceptances) by product line

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(A$b) 361
1 (A$b) 172
1
47
(A$b) 90
52
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Includes Wealth.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Australia Division

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Australia Division – high value strategy has delivered

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Pro Forma Basis [2]
Australia Division Revenue & Expense growth [1]
Profit Before
Provisions growth
Pro Forma
Basis [2]
Provisions
Net Profit after tax
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2005 to 2008 based on “Personal Division” structure, 2009 and 2010 based on “Australia Division” structure,
Pro forma basis assumes ING Australia and New Zealand and Landmark a acquisitions took effect from 1 October 2008.

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Australia

ANZ’s Super Regional strategy provides opportunities across our Australian business

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Retail
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By 2015 15% of the Australian population will be of Asian origin
Student volume is driving much of the in-flow from Asia (particularly China, India and Korea)
Implementation of a global retail operating model coupled with supporting infrastructure

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Wealth
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Differentiated services for Asian customer segments linked to our regional proposition and product offer including the Private Bank

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Commercial
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Over 50% of domestic customers depend on Asia for over 25% of their business
Links into our Institutional strategy – supported by investment in trade, cash and markets products
Customer insight in particular around resources, agriculture and infrastructure

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In-country Business
Migrant banking
Development
platforms
Managers
Asian banking
Cultural competency
specialists across
education programs
major capital cities
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Regional product
Private Bank
propositions
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Building Common Building Common
products & platforms strategic disciplines
Regional
Regional customer
talent
proposition
pool
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Retail building on a strong customer franchise, revenues im fee chan and hi her cost of funds pacted by ges g

Pro Forma Basis[3]

Market share[2]

iKnow platform providing frontline staff with improved customer insights and support

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iKnow platform providing frontline staff with
Revenue growth
improved customer insights and support (% of market share )
• Renewed focus on customer service and
execution in Mortgages. More in-branch and
Mobile Managers and increased investment
in back office support
• Deposit growth delivered through
disciplined strategy
Expense growth • New products and packages including
Merchant EPOS, GoMoney iPhone app, ANZ
Extras package and prepaid cards
Leader in customer
satisfaction amongst the
2010 mortgage growth
Provision growth major Australian banks [1]
(Multiple of system) [3]
85 % satisfied or very satisfied [1]
80 Growth of 1.4x system
75
NPAT growth 70
65 ANZ Peer 1
Peer 2 Peer 3
60
Oct-08 Apr-09 Oct-09 Apr-10 Oct-10
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Roy Morgan Research ; Aust Main Financial Institution Pop‟n aged 14+, % satisfied (very or fairly satisfied), rolling 6 months 2. APRA / RBA statistics, Cannex. 3. APRA statistics
Pro forma basis assumes ING Australia and New Zealand and Landmark a acquisitions took effect from 1 October 2008.

Australia: Commercial

Pro Forma Basis[3]

Acquired Landmark Financial Services
Revenue growth ($2.2bn lending, $400m deposits) • Invested in more small business specialists.

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Acquired Landmark Financial Services Growing market share [1]
Revenue growth ($2.2bn lending, $400m deposits)
• Invested in more small business (% of market share)
specialists.
• Esanda transitioned to a purely auto
financier with business equipment asset
finance now in ANZ Commercial channels
• Commercial Banking lending growth of
Expense growth
10% (5% ex. Landmark)
• Deposits relatively flat, impacted by
debenture run-off in Esanda ($1.5bn from
FY09)
Provision growth Credit approvals increasing Growing share of wallet [2]
Credit approvals (3mth rolling avg) [3]
Index: Jan 2010= 100 Up 27%
NPAT growth
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DBM Business Financial Services Monitor, overall lending and deposit FUM,
Finance industry statistics, 3. Business Bank and Small Business Banking.
Pro forma basis assumes ING Australia and New Zealand and Landmark a acquisitions took effect from 1 October 2008.

Australia: Wealth

Pro Forma Basis[1]

ANZ assumed full ownership of ING's superannuation, investment and insurance businesses

Insurance in-force premiums

Revenue growth

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$m Up 14%
1,312
1,155 1,230
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•
•
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Combined with ANZ Private and Investment & Insurance businesses to form a single Wealth unit
Strengthened customer

proposition, offering manufacturing and distribution of investment and insurance products and advice, private banking, trustees, investment lending and E*TRADE broking.

Expense growth

Funds under Management

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ETrade volumes
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Provisions

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contract notes per day (6 month avg)
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$b Up 2%
40.7 41.7 41.7
Sep- Sep- Sep- Sep- Sep- Sep-
00 02 04 06 08 10
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FY10: 36m credit vs FY09 charge of 67m 2H10: 33m credit vs 3m credit in 1H10

NPAT growth

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Pro forma basis assumes ING Australia and New Zealand acquisition took effect from 1 October 2008.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

The Asia Pacific Europe & America Division

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Deep onshore presence and strong network model delivers connectivit to clients y

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Franchise
Franchise Markets
Network
Core markets for Institutional, Commercial, Retail & Wealth Hubs
• Greater China
•
Greater Mekong [1]
• India
• Indonesia
•
Malaysia
• Pacific
Regional Business Hubs Greater China
(33)
• Singapore • Hong Kong
Greater Mekong
India (1) (31)
Institutional Network markets
Malaysia
Pacific (60)
Singapore (6)
Network markets are crucial to delivering pan-regional
integrated solutions to clients
• Korea • UAE Indonesia (28)
• Japan • Europe
• Philippines • America () - Number of branches and
• Thailand representative offices in each country
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Regional Business Hubs
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Focus on Vietnam

Since 2008, we have prioritised our build out, enabling us to become a credible competitor

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1H 2008
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Today
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North East Asia, Europe & Americas Hubs South and South East Asia	• Institutional network • Formed partnership with AmBank • Pan-regional Institutional/commercial business • Top 4 foreign bank in Indonesia • Largest foreign bank franchise in Greater Mekong • Pre-approval for Indian banking licence • AmBank an outperformer
	• Limited Institutional business • Two branches in China • Stand alone Europe & America business • Pan-regional institutional banking network and customer base • Taiwan –full franchise • China – Branches in top 4 cities + rural bank • Europe & America - Interconnectivity
	• Limited institutional business with few customers • Ex-pat focused Private Bank • Deep on shore Institutional capability • Full Retail and Wealth, Private Bank and Commercial businesses • Full banking license in both Hubs

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APEA: Balance sheet momentum[1]

APEA loans & deposits (US$b)

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RBS [2] Dep. Loans
2H10 5.0 2.8
1H10 1.5 0.4
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APEA Current & Saving accounts (CASA) (US$b)

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Includes accounts from
RBS acquisition
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2010 loan and deposit growth by region

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APEA Asia Pacific Europe &
America
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2010 loan & deposit growth by segment

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Retail Asia Retail Pacific Instit. Wealth
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All figures based on USD financial information. 2. loans and deposits (in US$b) for the RBS acquisition, includes Vietnam, Philippines & Hong Kong in 1H10, Taiwan, Singapore & Indonesia in 2H10

APEA

Business strategy allows for efficient use of APEA's liquidity surplus

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Business
Strategy
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Focus on affluent and emerging affluent client segments
Building a substantive DCM and Cash Management capability and investor client base

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Efficient use of APEA
Liquidity surplus
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This focus allows us to:

Fund our own regional growth in a less expensive and sustainable way
Take Australian and New Zealand clients to the Asian debt markets
Opportunity to provide Australian and New Zealand clients with diversified funding structures, through assets written in Asia
Access deep pools of liquidity throughout the region in particular in North East Asia (e.g. Japan, Taiwan)
Contribute positively to the Group balance sheet

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Becoming a top four Institutional bank in Asia Pacific

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Customer Segments
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Institutional
MNC / Regional Corporate
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Value Proposition
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Be a core wholesale bank to our clients
Leveraging our strengths:
Regional network and connectivity
AA rating

Commercial Emerging Corporate / SME Financial Institution & Public Sector

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Deep insights – geographic, industry, client
Experienced Asian bankers
Out-deliver on service and speed
Focused and deep product capabilities – Cash, Trade, Rates and FX, Commodities and Debt Capital Markets

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We are delivering for Institutional and our clients across Asia and the Pacific

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Regional Connectivity
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Examples
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European and US Multinational
companies accessing Asia
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Mandated Lead Arrangers with BNP and HSBC
US$411m (2.7x launch size)-maiden Asian syndication bond

Asia Funding for Australian and New Zealand institutional clients

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Raised US$1,100m (3.7x launch size), most investors new to client
Demand driven by companies with strong Asian business links

Asian migration into Australia and New Zealand – trade, investment and people

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Lead arranged the 3-year club syndication refinancing facility for LaSalle Investment Management Asia's 50% stake in Westfield Doncaster Retail Mall.

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Intra-Asia trade and investment
flows
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Joint lead managers for NZD225m Kauri bond issuance
Demand from New Zealand (59%) and Asia
(37%)

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Intra Pacific and Asia deals
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Lead arranger of US$14b financing for PNG LNG project
Largest debt raising in Asia Pacific

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Our Retail & Wealth and Private Bank will deliver local and regional banking to the affluent in each market

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Customer segments
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HNW, Affluent & Emerging Affluent
Owners, management and staff of our institutional and commercial clients

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Position and Value Proposition
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Retail and Wealth
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Three critical value proposition themes – “Understands and recognises me”
Based upon relationships, customer advice not product led
Accessible across the region – Pan regional Signature Priority Banking branches
Banking the family
Meeting the holistic financial needs – savings, protection to credit

Private Bank

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A trusted advisor with an understanding of personal, professional and business needs
Leveraging ANZ‟s Institutional and Commercial business to attract customers

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Five key partnerships expand our organic agenda

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Partnership Model
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Significant influence
Exposure to growth markets and segments we can‟t currently access
ANZ adds value through
leadership & management,
product development,
technical expertise and
two way customer flows
Double play in high growth, high return market

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Focus on our key segments (Commercial, Affluent & Emerging Affluent)
Scale (Number 5 by assets & deposits) in a closed market

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ANZ significant driver of leap in performance (market cap increase 56.4% 2008 – 2010)
Exposure to Shanghai – Top Commercial / Wealth City in China

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Focus in Commercial & Retail segments complements our organic focus

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Solid financial returns for ANZ

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Play on fourth largest city Commercial Centre in China
Provides exposure in a market in which we do not have a branch presence
Potential for long term strategic positioning

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Fourth largest credit card issuer
Provides access to profitable segment of retail market

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Organic growth a key driver of strategy

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2008 2009 2010 2011 2012+
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Develop strategy and
build business model
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Continue organic
growth with bolt-ons
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Extend and deepen franchise

Build substantive Institutional business
Organic growth anchored by Institutional / Commercial
Deepen organic growth in hubs and franchise countries
•
Build Singapore and Hong Rapid build out of Retail and Kong hubs Wealth and Private Bank
Build South East Asia business • Complete RBS acquisition and integration
Created business model for Retail and Wealth and Private • Continue to focus on liability Bank – scaled up with RBS growth
Commence build-out of franchise in second wave markets
Seek inorganic opportunities to build scale
•
Build risk and governance Deepen influence in five key model partnerships
Obtained licences
Continue to build out technology and operational platforms

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

The New Zealand Division

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Our strategy is to fully leverage ANZ’s leading market osition to deliver su erior rowth and returns p p g

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Two strong banking brands with a
powerful market presence
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Leveraging leading market share positions[1]

Market share[1]

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39% 39%
33%
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Well diversified portfolio, weighted

Net Loans & Advances including Acceptances March 2010

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RBNZ and TNS New Zealand Ltd Business Finance Monitor 2. Commercial Main Bank Share

New Zealand - Retail & Wealth

Retail

Wealth

Pro Forma Basis[2]

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• •
Asset growth flat, system growth Wealth profitability favourably
Revenue growth
rates subdued impacted by ING NZ full ownership
•
Income impacted by removal of • $1.5 billion KiwiSaver FUM with
exception fees, margins over 360,000 customers, #1 with
improving, costs impacted by
growing market share (24.1%)
marketing phasing
•
19.4% growth in ING Life
•
Share of new mortgage business
Expense growth Businesses InForce book
increasing in the <80% LVR market
and overall mortgage growth in the • ANZ Private Bank named Best
later part of 2010 Private Bank in New Zealand [1]
Retail Net Profit after Tax Wealth growth rates
FY10
Provision growth NZD m
NPAT growth 2H10
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2010 Euromoney Private Banking Survey
Pro forma basis assumes ING Australia and New Zealand, Landmark and Royal bank of Scotland Asia acquisitions took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results.

New Zealand - Commercial

Commercial

Rural

Pro Forma Basis[1]

Higher Rural incomes with Fonterra forecasting the third highest dairy payout on record
Leveraged Shanghai Expo as an
Revenue growth opportunity to connect customers to Asia and demonstrate regional capabilities
• Privately Owned Business Barometer consolidates thought leadership and customer connections as market leader
Expense growth • Strong UDC performance taking advantage of relative strength in finance company sector

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Revenue growth
opportunity to connect customers to
Asia and demonstrate regional on record
•
capabilities
• Privately Owned Business Barometer
consolidates thought leadership and in product prices
customer connections as market leader •
Expense growth • Strong UDC performance taking
advantage of relative strength in
finance company sector •
• Clear improvements in customer farmers de-leverage
satisfaction, with ANZ score increasing •
from 58% to 69%
Provision growth
Commercial NPAT
Rural NPAT
(excl. Rural)
NZD m
NZD m
NPAT growth 113
66
49
(5)
1H09 2H09 1H10 2H10
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ANZ continues to support customers through this period of increased volatility in product prices
Greater focus by borrowers on cash returns and liquidity with many using increased incomes to reduce debt
Provisions are expected to improve as farmers de-leverage
Seminars conducted across the industry covering topics such as governance, large business management and financial understanding for young farmers

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Pro forma basis assumes ING Australia and New Zealand, Landmark and Royal bank of Scotland Asia acquisitions took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results.

New Zealand - Institutional

Pro Forma Basis[2] • ANZ continues to dominate the NZ institutional segment

2010 Financial Performance

Revenue growth

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Trading revenue
down 161m
Customer revenue
down 14m
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Second half expense growth driven by investment in payments systems
Connecting customers to Asia and demonstrating ANZ regional capability with Shanghai World Expo and Kiwi Day roadshows in Asia

Expense growth

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•
•
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Awarded INFINZ bank of the

year for focus on customers and developing growth opportunities for NZ

Strong Customer Relationships

New Zealand Relationship Market Penetration[1] (%)

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ANZ Peer 1 Peer 2 Peer 3
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Extending its position as clear market leader with customers (outstanding results across 5 Peter Lee Associate surveys)

NPAT growth

Leadership of Debt Capital Markets and Syndication loan league tables
Market leading innovative client solutions, e.g. 1st HKD bond issue, ECA financing

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Source: Peter Lee Associates Relationship Banking survey, New Zealand, 2010. Sample size 2009 N=132, 2010 N=135
Pro forma basis assumes ING Australia and New Zealand, Landmark and Royal bank of Scotland Asia acquisitions took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

The Institutional Business

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Global Institutional business focus redefined

Foundations laid

Strengthened the Institutional Leadership Team, additional team members with international experience
Starting to execute the technology and operations roadmap
Improving capital discipline
Exiting non-core businesses
Delivering record pre provision profits
Substantive progress in remediation completion

Clear goals set

Revenue Contribution by Product

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To become the bank of choice for Resources and Infrastructure in the region
Building leading cash, trade and markets platforms with capabilities across Australia, NZ and Asia
Targeting significant growth in customer relationships

Global Markets Lending Trade & Transaction Banking

Generating well balanced and sustainable earnings across geographies and segments

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Increased focus on core customers and geographies

Over 3,500 active Institutional and Corporate customers supported by over 5,000 staff

Corporate banking customers: t/over $40-400m
Institutional customers: t/over >$400m

A single global team services customer needs across the network

Global representation supports customers based in Australia, New Zealand, Asia Pacific, Europe and America geographies

Customer relationship sectors

Banking a full range of customers
Building dominance in a limited number of segments

Global lines

Natural resources
Priority segments
Infrastructure
Agribusiness
Financial institutions & public sector
Domestic presence in Australia and New Zealand for over 170 years
Asian representation commenced over 40 years ago and we now have a presence in 15 Asian markets
Institutional regional hub established in Hong Kong (centralised support functions for APEA institutional business)
Branches in Europe and North America ensure global network coverage

Other lines

Property
Diversified industrials
Consumer and services
Telco‟s, media, entertainment and technology
Corporate Banking

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Regional networks, superior insights & service underpin the competitive advantage

Regionally Networked Model

Competing globally requires superior insights and service

Offering

A lead regional bank servicing clients with pan regional needs
A strong regional branch footprint
Single platforms for Cash, Trade and Markets offering fully networked seamless platforms across the region
Deliver insight through industry sector and regional specialisation
Building platforms offers viable alternatives
Offering a global service proposition and setting clear service expectations

Why?

Have a sound network through Asia Pacific to build upon
Uniquely placed to offer better insight to region
- Research and innovation at the core provides a competitive advantage over scaled and standardised models
Invest in technology and product development
Grow relationship teams in key
How? geographies
Focus on lead sectors and products
Drawing on insights into customer industries, the region and the financial markets adds significant value

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Global Institutional – a focus on growing core customer relationships supporting income performance

Cross Border Income

Customer Income[1]

Customer Growth

Super Regional strategy increasingly capturing cross border revenue flows

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1,100 new relationship managed
customers ex-acquisitions
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Domestic Cross
Booked Border 21%
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14% CAGR
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Strong Customer Relationships

Debt Capital Markets a key strength

Peter Lee Associates survey of corporate and institutional clients in Australia ranked ANZ:
1 Bookrunner in Australia/NZ for Q1-Q3 2010 in terms of volume and number of transactions
First, or equal first, on 14 of the 26 qualitative relationship categories (up from 8 in FY09)
- 1 Mandated Lead Arranger in Asia-Pacific (ex Japan) for Q1-Q3 2010 in terms of number of transactions
First in "overall penetration" (domestic plus offshore)
Peter Lee Associates survey of corporate and institutional clients in New Zealand ranked ANZ first on overall satisfaction, relationship strength, penetration and a further 17 measures
These results reflect the strength and quality of our client relationships
1 Arranger of syndicated loans in Asia-Pacific (ex Japan) over the last five years in terms of total loan volume on a cumulative basis
1 on the A$ Corporate Bond League Table (INSTO)
1 in the utilities & infrastructure sector - ANZ has led over half of all Australian utility and infrastructure transactions and raised over A$2.3bn in this sector

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Total income adjusted for Global Markets trading income.

Global Markets

Global Markets Income Sales & Trading Mix (A$m)[1]

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2,062
1,816
49%
1,225 43%
857 36%
29%
51% 57%
71% 64%
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Capital Markets growth underlines the benefits of Asian network expansion, ensuring we are well placed to connect our institutional customers with Asian liquidity pools.
Income diversification by geography and product line helping to offset revenue normalisation as volatility recedes.
2H10 investment in Global Markets management team to deliver scalable growth in coming years.
FX Adjusted.

Product Contribution % Total Income

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Whilst lower than 2009, market volatility evident in 2010

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Global Institutional

Global Institutional P&L drivers

Underlying Performance[1] YOY Movement (FY10 vs. FY09) A$m

Business Segment Performance[1] YOY Movement (FY10 vs. FY09) A$m

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large 14% (22%) large
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2
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2% 14% (46%) 23%
Up 29%
2H10 vs
3% 10% (29%) 2% 13%
1H10
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Geographic Performance[1] YOY Movement (FY10 vs. FY09) A$m

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Pro forma basis assumes Royal bank of Scotland Asia acquisition took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results. .
Increase largely due to provisions in FY09 related to divested custody business.

Investing across the business in systems and people

Expense Growth[1]

Asia Pacific, Europe & America

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YOY HOH
31% 13%
10% 8%
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Continued investment in growing the Asia franchise and driving customer acquisition
Investment in support infrastructure to underpin revenue growth

Australia

Investment in frontline capability - people and CRM tools - to drive revenue uplift
Rollout of cash management platform (Transactive) - with in excess of 2,500 Institutional clients now on boarded.
Investment in systems to enhance process automation and integrated work flow management and in enablement staff to ensure an efficient, well controlled environment

New Zealand

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(1%) 16%
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Strong cost management led to a YoY reduction in expenses
HoH increase reflects investment in payments systems (including settlement before interchange) and in cash management platform

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Pro forma basis assumes Royal bank of Scotland Asia acquisition took effect from 1 October 2008 and also adjusts for exchange rate movements which have impacted the FY10 results.

Global Institutional

Predicated on disciplined execution

Implementation priorities

Sustained customer growth

Deepening relationships with existing 3500 active clients
Targeting a significant number of new customer relationships already identified:
Over 50% of customer growth expected from APEA, 25% from Corporate

Process redesign

Simplifying operating platforms and standardising procedures

Risk management

Effectively partnering with risk and introducing industry specialists in priority markets

Equipping the team

Building a high performance culture
Recruiting and training across
Asia, Operations, Relationships, Cash, Markets and Trade
Investing heavily in institutional banking executive leadership and product expertise

Significant growth opportunities

Estimated addressable Cash Management Revenue pools

($b)

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17%
of pool
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Significantly expanding research capabilities within priority segments

* Korea, Thailand, Vietnam

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Priority segments – Natural resources & Agriculture

Natural resources

Agriculture

Well positioned to develop a super regional natural resources business linking Australian producers with Asian processors and consumers
Clients and representation in all major domestic cities, major financial centres globally and 15 Asian markets
Strong Australian natural resources client base and an established and growing network in Asia
Growing soft commodity demand from Asia
Well positioned for Australian and NZ Corporate and Institutional agriculture clients
Primary emphasis on providing Markets, Working Capital and supply-chain solutions to clients
Revenue streams centred on trade and FX which are already core competencies
Revenues exceed that of the other 3 major domestic banks combined
Specialists mineral mining, oil & gas, mineral and oil and gas processing, commodity trading, primary services segments
An organic growth strategy with increasing wallet penetration of existing clients as well as capturing identified targets.
Markets include cereals & sugar, protein cotton, Dairy and Oil Seeds

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Priority segments – Infrastructure

Goal to become a leading commercial Infrastructure Bank in the Asia Pacific Region
Maintain dominant position in Australia and NZ and invest selectively in Asia

Addressable revenue in APAC Infrastructure market set to grow to $5.5b

Debt Markets Txn. Banking Debt Capital Mkts. Advice Equity

(A$m)

Infrastructure specialists , by adding Advisory, Equity placement, underwriting and DCM to lending and markets capabilities.
Focus on power and utilities corresponding with Asia demand in this category
ROE enhancing by reduced requirement of balance sheet
Segments include Power & Utilities, Economic Infrastructure (roads, airports etc) and Availability Infrastructure
The New Zealand Government has announced a significant National Infrastructure Plan and we are uniquely positioned to assist

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Priority products – Cash Management & Trade

Cash Management

Vision to be a lead provider of pan-regional cash management solutions via a single transactional interface
Estimate the Asia Pacific wallet for cash management services at $20b

Trade

Support trade flows between our core operating geographies
Build on strong market position in Australia and established presence and reputation as a trade bank in Asia
A significant driver of cross-sell revenue
Investment agenda centred around people and technology and designed to accommodate substantial growth in customer numbers and transaction volume

Estimated market share of Australian Institutional Trade Business

Rolling out ANZ Transactive, a web-based cash management platform purpose-built for institutional, corporate and large business clients

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International Peer
Domestic Peer
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Priority products – Regional Rates and FX; Commodities and Debt Capital Markets

Commodities

Commodity revenue split:
Hedging exposures of commodity producers and consumers ~ 60% of revenue
Trading for customers ~ 40%
Growth opportunities include capturing hedging opportunities in domestic agri/ middle market and commodity consumers in Asia

Debt Capital Markets

Uniquely positioned with Super Regional strategy, with significant Asian Capital Market revenue pools
Borrower / investor multiplier effect
We raise more debt capital in Asia for Australian and New Zealand borrowers than anyone else ANZ

Borrowers		Global Capital Markets	Investors
Seeking access to low cost capital and related hedging • Corporates • Financial Institutions • Public sector		Team • Research, advice • Loan syndication • Bonds • Securitisation • Hedging	Seeking diverse and quality credit exposure • Wholesale (funds • insurers) • Public sector

Regional Rates and FX

Largest domestic markets business
FX revenues growing at 40% pa since 2007,
Aus/NZ/Pacific Niche, opportunity to expand into Asian currencies & clients (to become Asian USD specialist)
Rates revenues growing at 75% pa since 2006
5 key rates components, natural growth opportunity as Institutional expands:
Hedging client interest rates
Hedging client currency futures and swaps (as driven by rate differentials)
Selling investors Gvt. and Semi Gvt. bonds
Rates and credit trading
Managing ANZ‟s balance sheet

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Our Institutional client transactions tell the story

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Debt Capital Markets Project, Asset & Export Financing
USD 600mn SGD 1bn AUD 1.75bn USD 600mn USD 263.7mn AUD 1.179bn
Senior Unsecured Bonds Senior Unsecured Bonds Acquisition of CSR Limited‟s Term Facilities to refinance Hope Finance for deliveries from Finance of the acquisition of
sugar and renewable energy Downs 1 & fund development of Nokia Siemens Network Port of Brisbane by Q Port
Joint Lead Manager andBookrunner Melco Crown Entertainment Joint Lead Manager andBookrunner Temasek Wilmar International business, Sucrogen LimitedFinancial Advisor Hope Downs 4 in Western AustraliaMandated Lead Arranger Hope Downs Iron Ore Pty Ltd iron ore projects Lender Telkomsel ECA: Finnvera Mandated Lead Arranger, Facility Agent and Security TrusteeHoldings Consortium
2010 2010 2010 November 2010 2010 November 2010
PHP 2bn SGD 500mn AUD 3.1bn AUD 461.572mn AUD 478mn NZD 150mn
Senior Unsecured Bonds Senior Unsecured Bonds Structuring and arranging for Project Financing of Collgar Construction and Term Facilities Finance for Meridian‟s purchase
expansion of coal export Wind Farm for the 206MW Collgar Wind of Siemens wind turbines for the
terminal to 53Mtpa ECA: EKF/ELO Farm in Western Australia Te Uku wind farm
Metrobank Card Corporation Singapore Airlines Newcastle Coal Collgar Wind Farm Mandated Lead Arranger, ECA ECA: ELO/EKF
Joint Lead Manager andBookrunner Joint Lead Manager andBookrunner Financial Advisor Infrastructure Group Managed Lead Arranger,ECA Arranger & Advisor Arranger and Agent, Facility Agent and Security Trustee Meridian Wind Farm Arranger & ECA Agent
2010 June 2010 2010 June 2010 March 2010 April 2010
Syndication Transaction Banking
AUD 2.3mn & INTEGRATED AUD GBP 75mn
USD 1.1bn USD 200mn
USD 200mn 65mn SOLUTION USD 150mn
Syndicated Term Loan Facility Syndicated Term Facility Cash & transaction Financing and working capital Bi-lateral Letter of Credit
management, FX/Interest rate for palm oil plantation interests Facility to meet regulatory
Woodside Petroleum Ltd Origin Energy Starhill Global REIT hedging and secured financing New Britain Palm Oil QBE Group requirements in UK and US
Mandated Lead Arranger andBookrunner Mandated Lead Arranger and Bookrunner Acquisition of David Jones Building in Perth Mandated Lead Arranger Letter of Credit Facility
2010 2010 2010 2010 November 2010
TRANSACTION CASH
AUD 430mn USD 1.0bn SGD 223mn
BANKING MANAGEMENT
Syndicated Term Loan Facility Syndicated Term Facility Internet banking platform for Sole Provider of Transaction Securitisation warehouse –
Sinochem Hong Kong regional hub Banking and Merchant Services credit card receivables
(Group) Company Limited in Australia
Mandated Lead Arranger, Underwriter and Bookrunner Qantas Airways Limited Term Loan Facility Mandated Lead Arranger & Bookrunnerguarranteed by Group Sinochem CMC Markets Singapore Vodafone Hutchison Australia Card Centre Asset Purchase Company
2010 August 2010 2010 December 2010 September 2010
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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

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Treasury

ANZ’s strong capital ratios are fully reflected when measured consistently across various jurisdictions

	Sep 09	Mar 10	Sep 10	FSA Sep 10
Core Tier 1(1)	9.0%	8.5%	8.0%	11.3%
Tier 1	10.6%	10.7%	10.1%	13.5%
Total Capital	13.7%	13.0%	11.9%	15.2%

Capital Update:

ANZ‟s capital strength reflects ongoing economic and regulatory uncertainty and the Group‟s aim to maintain flexibility
Net organic Tier-1 generation +22bps:
Underlying earnings net of dividends +119bps;
RWA growth -48bps (principally non traded market risk);
Profit retention in Insurance and banking associates (-23bps) and software (-11bps)
Impact of acquisitions reduced Tier-1 by 131bps, partly offset by net Tier-1 hybrid issuances (+63bps)

Capital Agenda:

Continue to be well capitalised and consistent with “AA” long term credit rating category
Manage Basel 3 implementation:
- Final Basel 3 regulations on capital deductions, minimums and buffers, and Tier-1 and Tier-2 regulations expected Dec-10
- Engage APRA throughout FY11 on interpretation and implementation of these changes
- Full alignment to proposed Basel 3 guidelines would result in an increase in Core Tier-1 ratio from current levels
- However, APRA have indicated the Basel 3 rules are likely to be viewed as a minimum standard
74 cent Final Dividend up 32% PCP (FY10 $1.26 up 24% PCP)
1.5% DRP discount retained to provide capital flexibility and continuity for shareholders
„Core Tier 1‟ = Tier 1 excluding hybrid Tier 1 instruments

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Treasury

Core Tier-1 level remains strong and well positioned

Capital Position (Core Tier-1 Ratio)

Portfolio growth & mix 19bp decrease Risk migration 3bp increase Portfolio data review 4bp increase ING 79bp decrease Non credit RWA 27bp decrease RBS 20bp decrease Landmark 7bp decrease Integration Costs 10bp decrease ING Debt Funding 9bp decrease

Net organic up 34bp Down 91bp

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1 3
2
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Underlying NPAT. 2. Includes impact of movement in Expected Loss versus Collective Provision shortfall, 3. Includes ING Insurance Business, Asian Banking Associates, Capitalised Costs and Software, FX, Net Deferred Tax Assets, Pensions, MTM gains on own name included in profit

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Treasury

Tier-1 position reduced during FY10 due to recent acquisitions partially offset by Hybrid issuance

Capital Position (Tier-1 Ratio)

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Portfolio growth & mix 23bp decrease
Risk migration 4bp increase
Portfolio data review 5bp increase ING 79bp decrease
Non credit RWA 34bp decrease RBS 24bp decrease
Landmark 9bp decrease
Integration Costs 10bp decrease
ING Debt Funding 9bp decrease
Net organic up 22bp
Down 46bp
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1 3
2
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Underlying NPAT. 2. Includes impact of movement in Expected Loss versus Collective Provision shortfall. 3. Includes ING Insurance Business, Asian Banking Associates, Capitalised Costs and Software, FX, Net Deferred Tax Assets, Pensions, MTM gains on own name included in profit

Treasury

Reconciliation of ANZ’s capital position to FSA Basel 2 uidelines g

APRA regulations are more conservative than current FSA regulations, in that APRA requires:

A 20% Loss Given Default floor for mortgages (FSA: 10% floor)
Interest Rate Risk in the Banking Book (IRRBB) included in Pillar I risks (FSA: Pillar II)
Capital deductions for investments in funds management subsidiaries (FSA: RWA assets)
Insurance subsidiaries to be a mixture of Tier 1 and Tier 2 deductions (FSA: transitional regulations permit Total Capital deductions under certain circumstances)
Expected dividend payments (net of dividend reinvestments) to be deducted from Tier-1 (FSA: no deduction)
Collective Provision to be net of tax when calculating EL v CP deduction (FSA: tax effect difference between EL and CP on gross basis)
Associates to be a mixture of Tier-1 and Tier-2 deductions (FSA: permits proportional consolidation under certain circumstances)

	Core Tier-1	Tier 1	Total Capital
Sep-10 under APRA standards	8.0%	10.1%	11.9%
RWA (Mortgages, IRRBB)	1.2%	1.4%	1.6%
ING Funds Management and Life Co. businesses	0.8%	0.8%	0.3%
Final dividend accrued net of DRP & BOP	0.5%	0.5%	0.5%
Expected Losses v Collective Provision	0.2%	0.2%	0.3%
Insurance subsidiaries (excluding ING businesses)	0.2%	0.2%	0.0%
Investment in associates	0.2%	0.2%	0.4%
Other1	0.2%	0.1%	0.2%
Total adjustments	3.3%	3.4%	3.3%
Sep-10 FSA equivalent ratio	11.3%	13.5%	15.2%

Other includes Net Deferred Tax Assets, Capitalised Expenses, Deferred Income and roundings.

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Treasury

Basel 3 & APRA Regulatory reform - Capital

Basel Committee Announcements

To date, the Basel Committee has announced:

New capital targets and buffers
Timetable and transition rules for implementation of Basel 3 from 2013 – 2019
Higher Core Tier-1 capital deductions: insurance businesses, banking associates, and shortfall of EL v CP, partly offset by 10/15% threshold allowance for insurance/banking associates and deferred tax assets
Higher RWA charges for market & credit risks and securitisation assets
Leverage ratio based on Tier-1 capital

What remains outstanding under B3?

Methodology for determining countercyclical buffer
Final requirements for Tier-1 & 2 instruments
Contingent and „bail-in‟ capital requirements
Capital overlays for systematically important banks

ANZ position under B3 rules:

ANZ‟s estimated Core Tier-1 position under full B3 rules is above the proposed 7.0% min.
Position will remain uncertain until APRA finalises domestic rules and re-calibration. Recent indications are that local rules will at least meet the proposed new global standards
Leverage ratio unlikely to be a binding constraint

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Core Tier-1 surplus
over 7.00% 9.5%
~9.2% [1]
Counter
8.0% cyclical
7.0% buffer [2]
0-2.5%
Capital
Buffer:
2.5%
Additional Basel 3 Full alignment to Basel Minimum
requirements target:
~ -140bps ~ +260bps 4.5%
2
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Subject to change pending final form of regulations
Counter-cyclical buffer expected to be comprised of Core Tier-1, Tier-1 Hybrids and contingent capital.

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Treasury

Improved funding profile achieved, stable term debt issuance

Stable term funding profile

Key Funding Metrics

82% of all funded assets financed by equity, deposits & LT debt (was 78% as at Sep „09 & 71% Sep „08)

Issuance

Maturities

$26.4b of term funding (including $2.4b of pre funding and $2b CPS2 hybrid) issued in 2010
Weighted average term of new issuance was 4.7yrs
Similar term funding task for FY11 of ~$25bn; 10% of which has been pre funded
$13.5b of surplus APEA funding provided to Aus/NZ
Offshore short-term wholesale debt makes up 2% of total funding for the Australian & NZ geographies

Funding Composition Improved

Short Term Wholesale Funding Term Debt < 1 year Residual Maturity Term Debt > 1 year Residual Maturity Customer Funding

Shareholders equity & Hybrid Debt

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Treasury

ANZ’s term debt issuance consistent and well diversified

APEA funding benefit reduces term debt issuance by ~10%

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APEA surplus
deposits
Domestic
AUD/NZD
Offshore Private
Placements
Multi-currency
Japan
JPY
North
America
UK & Europe USD/CAD
EUR / GBP / CHF
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Offshore public benchmarks account for less than half of ANZ’s annual term debt issuance

Marginal term funding costs have stabilised but average costs continue to increase as portfolio reprices

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Treasury

Strong Liquidity Position leading into proposed B3 changes

Basel III Liquidity Developments

Maintaining post GFC liquidity position ($b)

Reduction in required core funding of mortgages from 100% to 65%

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Improved treatment of „Retail‟ and „SME‟ deposits
Allowance for high grade corporate and covered bonds as liquid assets
Recognition of jurisdictions (incl. Australia) that have insufficient qualifying liquid assets. Allowance for a committed liquidity facility from a central bank to be used – at a fee
Extended transition period

Impacts

Liquidity Coverage Ratio will require additional liquid assets (where available) to be held resulting in higher core funding requirements (remaining deficit meet via central bank facility)

Composition of liquid asset portfolio ($66.7b)

This is primarily driven by non-operational deposits from Corporates and Financial Institutions, and short term wholesale debt
Australian bank‟s no longer discouraged from holding mortgages on-balance sheet

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Class 1 Class 2 Class 3
$28.9b $7.3b $30.5b
Govt. Bank or Corporate Internal RMBS
paper rated AA or
better
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Given the lack of eligible liquid assets in Australia, APRA will allow banks to meet their LCR requirements through a committed liquidity facility at the RBA backed by repo eligible stock

Government/ Semi Govt. / Govt. Guaranteed bank paper, NZ cash with RBNZ, supranational paper

The banks will pay a fee for this facility in line with cost of holding BIII eligible liquid assets

Priority of use

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Treasury

AUD strength presents a headwind for future earnings

~1.2% negative impact, including current hedging positions, on FY11 EPS growth expected if the AUD maintains current levels
NZD remains the most significant single currency revenue exposure
USD and Asian local currency earnings expected to grow as a proportion of total Group revenue as
Super Regional Strategy gains momentum
Hedging approach remains to put in place macro and specific currency hedges only when the $A is perceived to be significantly below fair value

FY10 profit before tax by currency

	NZD	USD & Asian
	earnings	currency earnings
FY10 earnings: effective average translation rate	1.221	0.899
FY10 EPS impact	(0.3%)	(2.7%)
Hedging in place for	~40%	~40%
FY11	@ 1.20	@ 0.91
EPS sensitivity to 5c move inc hedging	~0.1%	~0.5%

In addition there is typically A$500m–750m of secondary FX risk due to non AUD & NZD revenues generated primarily by Markets business in Australia and New Zealand.

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Treasury

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Risk Management

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Credit Risk Weighted Assets

Total Credit Risk Weighted Assets Credit RWA Movement FY10 vs. FY09

A$b

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Acquisitions Impact:
RBS $4.6b
Landmark $2.3b
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Risk

Impaired Asset balance has reduced ex-acquisitions

Gross Impaired Assets By type

Gross Impaired Assets By size of exposure

A$m

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A$m
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New Impaired Assets

NPCCD – Non Performing Credit Commitments and Contingencies

By Segment

A$m

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Risk

Watch & Control Lists and Risk Grade Profiles

Watch & Control List by limits (Mar 2009 Watch List index =100)

Group Risk Grade profile by Exposure at Default

Index

Top 5 Watch List Industries

By Exposure	By No. Groups
Agriculture, Forestry & Fishing	Agriculture, Forestry & Fishing
Mining	Property Services
Finance & Insurance	Manufacturing
Property Services	Wholesale Trade
Manufacturing	Construction

Watch List - An alert report of customers with characteristics identified which could result in requirement for closer credit attention

Control List - A report of high risk accounts which may or may not have defaulted

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Risk

90+ days past due Australia

Australia Mortgages 90+ day delinquencies

Australia Cards 90+ day delinquencies

Australia Commercial 90+ day delinquencies

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Risk

Australia Mortgages

Portfolio Statistics

All lending is on a full recourse basis

Dynamic Loan to Valuation Ratio

Sep 2010 - 84% 12% 4%

Approvals require demonstrated serviceability
~830,000 loans on book
65% of portfolio owner occupied lending
Average loan size at origination ~$226k
Average LVR at origination - 63%
Average dynamic LVR – 46%
No subprime mortgages
LoDoc 80 loans (80% LVR) make up less than circa 1.3% of portfolio and closed to new flows

Application Quality Average Score New Applications

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Risk

New Zealand – Risk Performance

Total Impaired Assets and as % Gross Lending Assets

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(NZ$m)
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Total Provision Charge

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(NZ$m)
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90+ Days Arrears

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Commercial Property Credit Exposure

Commercial Property Exposure GLA by Region (A$b)

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7.5% of Group GLA‟s
29.6
28.2
27.7
27.2 26.7
26.1
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Commercial Property Exposure by Sector

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Economics

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Exceptionally strong investment outlook over next few years

0 10 20 30 40 50 60 70 80	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn
	Communication sub-total Water & sewerage Sub-total Manufacturing Sub-total Uncertainty
				Gas Pipeline sub-total Electricity Sub-total Mining Sub-total
				~~Energy Sub-total~~ Airports Sub-total Rail sub-total Ports sub-total
				~~Roads Sub-total~~





	2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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Sources: Access Economics and ANZ

The outlook for mining investment has rarely been stronger

ABARE Advanced Mining Projects, June 2010

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Sources: ABARE

Record population growth coupled with undersupply

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Population growth vs. dwelling completions
225,000
450,000
Annual population
gain (lhs)
400,000
200,000
350,000
175,000
300,000
250,000 150,000
200,000
125,000
150,000
Annual dwelling completions
(rhs)
100,000 100,000
76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
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Sources: ABS, ANZ Economics and Markets Research

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Housing shortage has reached unprecedented levels

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Housing market balance
„000
400
360
320
280
240
Underlying demand
200
160
120 Completions
80
Cumulative Shortage
40
0
-40
-80 Surplus
86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
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Sources: ABS, ANZ Economics and Markets Research

Recovery in dwelling prices has been broadly-based

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Australian dwelling prices
Price index value
125
Top 20%
120
115 Middle 60%
110 Bottom 20%
105
100
95
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10
Source: RP Data Rismark
75
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Changing composition in those seeking finance approvals

Housing finance approvals (value)

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Sources: ABS, RBA, ANZ Economics and Markets Research

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Distribution of debt rather than the aggregate debt is a key factor…

Increased household debt has been directed towards residential property, not personal consumption

And has been taken up by higher income households with the capacity to service

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Source: RBA paper “Aspects of Australia‟s finances” 15 June 2010

Complexion of household debt

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Source: RBA paper “Aspects of Australia‟s finances” 15 June 2010

Household debt up but also total
assets held by households
•Debt largely used to acquire assets
•Financial assets (i.e. ex housing) now equivalent to 2.75 years of income up from 1.75 years of income in the early 1990‟s
•Increased debt mostly taken on by households in the strongest position to service it (high income quintile)
•Households in the top two quintiles account for 75% of all outstanding debt
•Bottom two income quintiles account for 10% of household debt

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Australian house prices

Fundamentals are sound

Nominal house prices and ratio to income elevated
House price to income ratio ignores interest rates / debt servicing
Fundamentals are currently very supportive
Housing shortage worsening
Cyclical upturn underpinned by resources boom and authorities well placed to respond to any future crisis

Household sector well placed

Economy/labour market solid, unemployment falling – few forced sales (historically a pre-requisite for significant price falls)
Low delinquencies reflect comfortable debt servicing
Lending standards critical to sustainability

Financial system solid

On balance sheet lending = incentives re. sustainable serviceability
Conservative lending = low delinquencies
Full recourse lending cf. US = less incentive to default
Variable interest rate policy works

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Conservative lending, supportive policy and strong economy has meant a very resilient housing market

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Source : RBA

Australian house prices have broadly tracked incomes since 2004 (incomes rising strongly due to terms of trade)

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House price to income ratio
Index
18
Australia US UK New Zealand
16
14
12
10
8
6
4
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
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Sources: RP Data-Rismark, RBA, ANZ Economics and Markets Research

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A structural lowering (halving) of mortgage rates has significantly improved debt serviceability

Mortgage interest rates

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20
Australia US
18
UK NZ
16
14
12
10
8
6
4
On average, mortgage rates have halved justifying a
near doubling of house price to income ratios
2
0
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81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Sources: ABS, Datastream, ANZ Economics and Markets Research

Increase in house price to income ratio almost fully accounted for by the halving of mortgage rate

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Median house Average household House price to
Mortgage rate
price income income
$000's $000's %
ratio
600 120 16
6
14
500 100
5
12
400 80
4
10
300 60 8
3
6
200 40
2
4
100 20
1
2
0 0 0
0
1985 2009 1985 2009 1985 2009
1985 2009
Sources: ABS, RBA, ANZ Economics and Markets Research
83
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Household incomes and consumption

Household disposable income & consumption

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%
10
Gross disposable income Consumption spending
Savings rate
8
Forecasts
6
4
2
0
-2
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
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Source: ANZ, RBA, ABS

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Labour market is strong and supporting household confidence

Monthly employment and labour force growth, ‘000 people (trend)

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40
Labourforce growth (trend)
Employment growth (trend)
30
20
10
0
-10
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
'000 change per month
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Source: ABS

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1990’s commercial property downturn characterised by significant oversupply vs other downturns[1]

Supply Pipeline as a % of Total Stock Australian CBD Office Market

Source: Jones Lang LaSalle. 1. with the exception of WA & QLD

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Australia has run a current account deficit for most of the past 150 years

Current account deficit

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The current account deficit is the gap between national saving and national investment
That Australia has run a deficit for such a long period suggests the country has more investment opportunities than it can fund out of domestic saving
By running such deficits and capitalising on these investment opportunities, Australia has been able to grow its economy and labour market at a much faster rate than if it had relied solely on domestic saving. Our living standard will have been considerably lower on domestic saving alone.
A natural consequence of running continual current account deficits (flow) is a build up in net foreign liabilities (stock) – from 40% of GDP in 1989 to 60% of GDP in 2009.

Sources: ABS, RBA, Butlin

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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Economics – Forecasts

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Economic updates

Australia New Zealand

	2009	2010	2011	2012	2009	2010	2011	2012
GDP	0.9	2.7	3.2	4.1	-2.5	1.5	2.3	4.3
Inflation	1.3	2.8	3.0	3.2	2.0	1.5	4.91	2.3
Unemployment	5.8	5.2	5.2	4.9	7.1	6.4	5.5	5.5
Current A/C (% GDP)	-3.3	-3.6	-2.6	-4.0	-3.3	-3.8	-3.7	-3.9
Cash rate	3.00	4.50	5.25	5.75	2.50	3.00	3.75	4.75
10 year bonds	5.36	4.96	5.80	5.70	5.8	5.0	5.9	5.8
AUD/USD	0.88	0.97	1.02	0.95	N/A	N/A	N/A	N/A
AUD/NZD	1.22	1.32	1.36	1.34	1.22	1.32	1.36	1.34
Credit	1.7	3.3	3.8	4.7	3.6	0.6	4.5	5.7
- Housing	7.6	8.0	5.3	5.6	3.9	3.0	3.5	5.1
- Business2	-4.6	-3.7	1.1	3.3	3.6	-2.8	5.9	6.5
- Other	-5.5	2.8	5.2	4.5	-1.8	2.2	4.1	4.9

Source - ANZ economics team estimates. Based on 30 September bank year.

Impacted by an increase in the Goods and Services tax rate from 12.5% to 15% effective 1 October 2010
NZ Business includes Rural lending

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Growth Forecasts – Asia

Emerging Asia GDP Growth Forecasts	Emerging Asia GDP Growth Forecasts	Emerging Asia GDP Growth Forecasts	Emerging Asia GDP Growth Forecasts	Emerging Asia GDP Growth Forecasts	Emerging Asia GDP Growth Forecasts	Emerging Asia GDP Growth Forecasts
2007 2008 2009 2010 2011 2012
China	13.0	9.6	9.1	10.1	9.6	9.5
India	9.5	7.3	6.8	9.2	8.4	9.3
NIEs
HongKong	6.4	2.4	-2.7	6.5	5.0	5.2
Korea	5.1	2.3	0.2	6.2	4.3	4.6
Singapore	8.5	1.8	-1.3	14.5	4.2	5.9
Taiwan	5.9	1.1	-1.9	10.6	5.9	5.7
ASEAN
Indonesia	6.4	6.0	4.5	5.9	6.3	6.3
Malaysia	6.5	4.7	-1.7	6.5	3.5	5.6
Philippines	7.1	3.7	1.1	6.9	4.5	6.8
Thailand	5.0	2.5	-2.3	7.8	3.4	4.5
Vietnam	8.5	6.3	5.3	6.6	6.5	6.8

Total	10.3	7.3	6.1	9.1	8.0	8.3
Total(ex. China & India)	6.1	3.3	0.4	7.4	4.9	5.5
Sources: CEIC, ANZ Economics.

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Based on calendar year.

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: [email protected]

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AI assistant

Australia and New Zealand Banking Group Ltd. — Annual Report 2010

10425_rns_2011-01-09_c30861e0-43ce-4d46-a327-56f534c4b28f.pdf

ANZ has established a strong business foundation

A clear company wide focus on our super regional strategy:

ANZ is structured by Geography & Segment

Super Regional strategy progressing well

Super Regional Strategy

Asian, Australian & New Zealand interconnectedness increasing:

Australian 2 way trade weights US & Europe[1]

Strengthens and broadens the Group balance sheet:

Asia[1]

Regional and intra-regional trade and investment flows are substantive

Building a genuinely pan regional business - connectivity provides a competitive advantage

Surplus savings

Strategy is supported by a disciplined approach to M&A – RBS Asia acquisition

Strategy is supported by a disciplined approach to M&A - ING Australia and New Zealand Joint Ventures

Australia

Australia FUM: $39b

New Zealand

Strategy is supported by a disciplined approach to M&A - Landmark Loan and D it book epos

Overview of transaction

Overview of Landmark

Acquired the LFS loan and deposit books, the lending and deposit taking divisions of Landmark

ANZ has continued to invest for growth notwithstanding recent tougher economic conditions

Revenue and Expenses

Net Profit by region

Net Profit after tax[2]

Provision charges

Group loans and deposits

Net loans and advances[1] by geography

Customer deposits by geography

Diversified lending portfolio, weighted to secured mortgage portfolio

Net Loans and Advances (including acceptances) by product line

Australia Division – high value strategy has delivered

ANZ’s Super Regional strategy provides opportunities across our Australian business

Retail building on a strong customer franchise, revenues im fee chan and hi her cost of funds pacted by ges g

Pro Forma Basis[3]

Market share[2]

Australia: Commercial

Pro Forma Basis[3]

Australia: Wealth

Pro Forma Basis[1]

Insurance in-force premiums

Revenue growth

Expense growth

Funds under Management

Provisions

NPAT growth

Deep onshore presence and strong network model delivers connectivit to clients y

Since 2008, we have prioritised our build out, enabling us to become a credible competitor

APEA: Balance sheet momentum[1]

APEA loans & deposits (US$b)

APEA Current & Saving accounts (CASA) (US$b)

2010 loan and deposit growth by region

2010 loan & deposit growth by segment

Business strategy allows for efficient use of APEA's liquidity surplus

This focus allows us to:

Becoming a top four Institutional bank in Asia Pacific

We are delivering for Institutional and our clients across Asia and the Pacific

Our Retail & Wealth and Private Bank will deliver local and regional banking to the affluent in each market

Private Bank

Five key partnerships expand our organic agenda

Organic growth a key driver of strategy

Extend and deepen franchise

Our strategy is to fully leverage ANZ’s leading market osition to deliver su erior rowth and returns p p g

Leveraging leading market share positions[1]

Market share[1]

Well diversified portfolio, weighted

New Zealand - Retail & Wealth

Retail

Wealth

Pro Forma Basis[2]

New Zealand - Commercial

Commercial

Rural

Pro Forma Basis[1]

New Zealand - Institutional

2010 Financial Performance

Revenue growth

Australia and New Zealand Banking Group Ltd. Annual Report 2010