Australia and New Zealand Banking Group Ltd. — Interim / Quarterly Report 2014

Sep 21, 2014

2014

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

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New Zealand is “core” to ANZ’s strategy

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Strong well established domestic franchise

New Zealand major bank Net Loans & Advances[6 ]

The largest bank in NZ

ANZ NZ Geography • ~8,300 staff, ~2.1m customers vs NZDb ANZ NZ Division 120 July 14 Sep 13 Market share 100 • Retail InstitWealth • Mortgages: 30.7%[1 ] 22bp 80 utional • 28.7%[2 ] 29bp Total deposits: 60 • - Comm Agri Commercial • Commercial lending: 30.7%[3 ] 120bp 40 - Small Business • Credit cards: 28.8%[4 ] 68bp 20 • #1 lead Relationship banking position[5 ] 0

ANZ Peer 1 Peer 2 Peer 3

1. RBNZ C6 – July 2014; 2. RBNZ S8 – July 2014; 3. RBNZ S7 NZD claims, excludes Agriculture, Finance, Non-residents and Households – July 2014; 4. RBNZ S5 – July 2014. 5. Peter Lee Associates Large Corporate and Institutional Relationship Banking surveys New Zealand 2014. 6. as reported in 1H14 company reports

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2

A significant contributor to the Group

Operating revenue by geography (1H14, AUD)

Cash NPAT by geography Customer lending by (1H14, AUD) geography[1] (1H14, AUD)

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Australia APEA Australia APEA Australia APEA
20% 15%
19%
New New 19% New
62% 18% Zealand 58% 23% Zealand 66% Zealand
NZ geography: operating NZ geography: customer NZ geography: customer
revenue by business lending by business [1] deposits by business
(1H14, NZDm) (1H14, NZDb) (1H14, NZDb)
Commercial Commercial Commercial
719
22.5
57.3
32.7
Retail Retail Retail
636 36.9
317
13.6
6.9
227
Institutional 1.6 5.2 Institutional
Institutional
Wealth Wealth Wealth
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1. Customer lending represents Net Loans and Advances including acceptances

3

Our journey is to create New Zealand’s best bank

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ANZ Group Strategy
Built on common infra-
Connecting customers Strengthen our
PROFITABLE STRONG structure & enterprise
to faster growing position in our core ENTERPRISE
ASIAN CORE focus for greater
regional capital, GROWTH markets of Australia MARKETS responsiveness, APPROACH
trade & wealth flows & New Zealand
efficiency and control
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ANZ New Zealand’s Strategy

1. Leverage our scale advantage by building and enabling world class sales teams to capture cross sell and share growth

2. Empower customers and drive efficiency and sales through further developing digital and payments capability

3. Maximise our scale advantage by simplifying our products, processes, policies, technology & leveraging Group investment

4. Capitalise on our data advantage by improving our data and insights infrastructure and end-to-end leads processes

5. Improve our connections between frontline channels to support customer interactions

NZ’s Best Bank

Create Scale

How?

• One team

• One set of systems

• One product set

• One brand

• One branch network

2010-2013

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How?
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Leverage Scale How?

• Best brand consideration

• Hubs

• Integrated channels leveraging Group platforms

• Branch optimisation

• Leading brand recognition

• Data driven insights

• World class sales and service teams

• Automation of work flow

• Core remediation

• Core remediation • Optimised channel

• • Payment infrastructure investment

2013-2016 2017

NZ’s Best Bank

Our Vision:

„Helping Kiwis achieve more‟

Our Goal:

• 1 Service

• 1 Market Share

• Growing

• Visible in the community

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4

Significantly simplifying and focusing the business to create scale

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Create Scale Leverage Scale Scale advantage
2010 - 2013 2013-2016 2017
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	2010 (FY10)	2014 (1H14)	2017
Core systems	2	1	1
Brands	2	1	1
ANZ brand **consideration1 **	27%	43%	Market leading
**Staff engagement2 **	64%	78%	Best practice
NZ Geography - CTI	49.1%	**38.1%3 **	Market leading
- Cash profit(NZDm)	882	1,432 (FY13) 887 (1H14)
NZ Division - CTI	48.4%	41.5%	Market leading
- Cash profit(NZDm)	545	1,063 (FY13) 598 (1H14)
	• Brought 2 brands together • Moved to 1 core banking system • Created 1 mgt structure • Simplified and moved to a single set of policies, processes andproducts	• Leveraging global hubs and shared platforms • Improving branch coverage • Rolling out customer data focused sales strategy	• Natural competitive advantage in key markets • Enhancing digital offering for improved customer experience and banker efficiency

1. Brand consideration - sourced from IPSOS Brand Tracking (first choice, or seriously considered)

2. Staff engagement survey for 2014 as at July 2014

3. Including the one off insurance recovery related to the ING frozen funds (excluding: 39.97%) 5 Note: FY10 financials are based on underlying profit definition, subsequent years cash profit definition as detailed in respective Results Announcement documents

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5

Growth has been achieved through disciplined execution roductivit and efficienc , p y y

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New Zealand Geography New Zealand Division
Cost to Income Net Profit after tax Cost to Income ROE
NZDm
1,432
16%
49.1% 48.4%
27%
42.7% 12%
38.1% 882 887 43.5% 41.5%
697
8%
4%
0%
FY10 FY13 1H141 FY10 FY13 1H13 1H141 FY10 FY13 1H14 FY10 FY13 1H14
NZ Simplification Programme
NZ Simplification Programme
Loans and customer deposits Net Profit after Tax
NZDb NZDm
Loans Deposits Loan/Deposit Ratio (RHS)
1,063
200%
96.1 93.6 96.1 100.1 102.6 21%
180%
74.1 569 598
62.0 66.1 70.6 545 494
59.7
160%
140%
120%
Sep 10 Sep 11 Sep 12 Sep 13 Mar 14 FY10 FY13 1H13 2H13 1H14
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1. Including the one off insurance recovery related to the ING frozen funds (excluding: 39.97%) Note: FY10 financials are based on underlying profit definition, subsequent years cash profit definition as detailed in respective Results Announcement documents

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6

2014

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

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1H14 results saw New Zealand geographic CTI below 40% for the first time

NZ Division 1H14 NPAT up 21% to NZD 598 million

NZ Division ROE accretive to ANZ Group: up 235bps to 15.8%[1 ]

Efficiency

Market Share

Brand

CTI 41.5% for NZ  649 Division v Sep 2010[2] bps ( NZ Geog : 1,111bps to 38.1%[3] )

 20% Revenue per Branch

Both total lending & total deposit share have grown YTD[5,6 ]

 share

 22bps[Mortgage market share ] YTD[7]

Brand consideration compared to major #1 banks[10] – from last to first position in 3 years  17%[Uplift in brand ] consideration[10]

Improved footprint leading to:

• 7 percentage point

• 82% improvement in

• Branch mortgage sales via

• Coverage[4 ] Branch

Share of new mortgage sales in all major NZ #1 cities – the first time in Auckland & Christchurch[8 ]

• 14%[Retail new customer ] acquisition

• 47% KiwiSaver account sales via Branch

Commercial cross-sell  10% revenue from Institutional products

Commercial lending  20bps share - growth in all regions[9 ]

Small Business Banking  29% new customer acquisition

Note: All figures PCP unless otherwise stated; 1. ROE on Internal Expected Loss (IEL) basis; 2. CTI is against September 2010 – the reporting period immediately preceding the commencement of NZS; 3. Including the one off insurance recovery related to the ING frozen funds (excluding: 39.97%); 4. Branch Coverage measures the areas in which ANZ is represented relative to where New Zealanders do business – March 2014; 5. RBNZ S7 – February 2014; 6. RBNZ S8 – February 2014; 7. RBNZ C6 – February 2014; 8. Source: Terralink – March 2014; 9. RBNZ S7 NZD claims, excludes Agriculture, Finance, Non-residents and Households; 10. Source: IPSOS Brand Tracking (first choice, or seriously considered) – March 2011 v March 2014

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8

New Zealand Division delivered strong financial results in 1H14

Profit Before Provisions Movement Mar 2014 v Mar 2013

Customer Lending Movement Mar 2014 v Mar 2013[1]

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NZDb NZDb
19.0 794.0 0.7 94.8
2.6
8.0
44.0
1.0
90.5
723.0
Up 10% Up 5%
1H13 Retail Commercial Other 1H14 1H13 Retail SBB C&A 1H14
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Net Profit after Tax Customer Deposits Movement Mar 2014 v Mar 2013 Movement Mar 2014 v Mar 2013

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NZDb
14.0 598.0
45.0 1.2 55.2
1.1
45.0 1.3
51.7
494.0
Up 21%
Up 7%
1H13 Retail Commercial Other 1H14 1H13 Retail SBB C&A 1H14
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1. Gross Loans and Advances

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9

Continued improvement to credit quality across the New Zealand book

New Zealand Geography Net Impaired Assets

New Zealand Geography Total Provision Charge

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NZDm
Net Impaired Assets NIA as % GLA
1,685
1,307
1,169
991
1.74%
883
1.38%
662
1.23%
594
1.02%
0.89%
0.66%
0.57%
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NZDm IP Charge CP Charge
200 105
85
150 103 99
100 44
22
50 -39
0
-50
-100
1H11 2H11 1H12 2H12 1H13 2H13 1H14
New Zealand Division
90+ days delinquencies
2.0% 1
Mortgages Commercial Agri
1.6%
1.2%
0.8%
0.4%
0.0%
Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14
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Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Mar 14

1. Spikes in 2012 Commercial 90 day delinquencies are primarily due to internal classifications rather than any deterioration in underlying credit quality

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10

New Zealand home loan portfolio well diversified

1H14 Portfolio Statistics

Dynamic Loan to Home Loan Valuation Ratio portfolio by Region

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Total Number of Home Loan Accounts 484k 8% 3%
12%
10%
Total Home Loan FUM (NZD) $61b 39%
47%
18%
% of Total New Zealand Lending 59% 27%
% of Total Group Lending 11%
17% 7% 12%
Owner Occupied Loans - % of
76% 0-60% 61-70% Auckland Wellington
Portfolio
71-80% 81-90% Christchurch Rest of North
Average Loan Size at Origination 90%+ Rest of South Other
$254k
(NZD)
Mortgages have re-trended towards
Average LVR at Origination 63% fixed rates
Average Dynamic LVR of Portfolio 46% ANZ % Fixed Rate Sales Mix
100% mortgages in portfolio Variable
% of Portfolio Paying Interest Only [1] 21% 27%
Individual Provisions as a % of Gross Loans: 75%
2H12 1H13 2H13 1H14
Fixed
50% 73%
Group 0.43% 0.27% 0.24% 0.24%
NZ Home Loans 0.03% 0.02% 0.02% 0.02% 25%
Sep Sep Sep Sep Sep Sep Mar 1H14
08 09 10 11 12 13 14
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1. Excludes revolving credit facilities

11

Commercial Property and Agriculture well managed

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Commercial Property Outstandings by
Region
APEA (LHS) New Zealand (LHS)
Australia (LHS) % of Group GLA's (RHS)
$b
40 8.0%
35
7.5%
4.5
30 4.1
3.5
3.4 4.0
3.1
2.7 6.9 7.0%
25 5.3 6.1
5.0 4.9 5.4
4.7
20 6.5%
15
6.0%
10 20.7 [21.3 21.7 ] [22.1 ] [21.2 21.8 23.0 ]
5.5%
5
0 5.0%
Mar Sep Mar Sep Mar Sep Mar
11 11 12 12 13 13 14
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New Zealand Agri Exposure and Average Probability of Default

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NZD Total Credit Exposure (LHS)
NZDb Average PD (Non-Defaulted Customers) (RHS)
25 2.5%
20 2.0%
15 1.5%
10 21 19 1.0%
5 18 17 18 0.5%
0 0.0%
Sep 10 Sep 11 Sep 12 Sep 13 Mar 14
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Agriculture security levels

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8% 10% 6%
6% 4%
8% 11%
16%
26%
79%
70%
56%
Group Australia New Zealand
Fully Secured 80-100% Secured
60-80% Secured <60% Secured
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12

2014

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

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New Zealand benefiting from ANZ Corporate & Institutional position in Australia and growing strength in Asia

7 of the top 10 countries New Zealand trades with are from Asia Pacific region

Australia FDI accounts for 68% of all FDI in New Zealand

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NZ$b 4% CAGR
$80
$75
$70
Australia $14b South Korea $3.7b Greater China $21b
$65
Imports $6b Imports $2.1b Imports $8b $60
Exports $8b Exports $1.6b Exports $13b $55
$50
$45
$40
Japan $6b Singapore $3b 2007 2008 2009 2010 2011 2012 2013
Imports $3b Imports $2b
Singapore Japan Greater China Australia
Exports $3b Exports $1b
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China has surpassed Australia as New Zealand‟s largest trading partner with Chinese trade growing rapidly following the signing of a FTA in 2008.

In 2014 New Zealand signed a CNY/NZD direct convertibility agreement with China. This is expected to further facilitate trade and investment flows.

The majority of New Zealand‟s exports to China are agricultural products whilst most Chinese imports to New Zealand are manufactured goods.

ANZ’s FDI Strategy

Proactively identify specific FDI opportunities by leveraging ANZ NZ‟s market leading position and capabilities, deep industry knowledge and insights.

Conduct regular face-to-face meetings with existing and prospective foreign investors to clearly understand their investment objectives and criteria and focus on building trusted relationships first and then conducting business.

Leverage ANZ‟s “Super Regional” network and connectivity to provide a “whole of bank” superior solution to on-board or retain key customers and maximise growth and revenue opportunities.

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Source: Statistics New Zealand

14

NZ Economic Update

The foundations for solid growth remain in place .

• Financial conditions are still consistent with 3% growth (growth >3% is not sustainable given supply-side capacity of the economy, which we put at a little under 3%)

• Commodity prices (ex dairy and forestry) are holding up well

• A period of consolidation for house prices is welcome after the sharp run-up in 2013

• There are signs the trend rate of growth (i.e. beyond the business cycle) is higher

The economic picture is however becoming more fractured

• Dairy prices have dropped sharply, as have forestry prices. A sub $6 per kg MS milk price now looks a reality

• New Zealand‟s terms of trade peaked in Q2, and history shows commodity price booms tend to be short and sharp

• House prices – whilst rising strongly in annual terms have started to soften

• Financial conditions – a higher NZD and falling commodity prices – have tightened

Other key drivers of the economic expansion remain .

• Construction sector activity (projected to lift from 10 to 12% of GDP) is strong; this is supporting SME‟s in particular

• Net migration flows (around 1% of the population) are providing considerable impetus

• The unemployment rate is at a six year low and wage growth is lifting

• Business and consumer confidence remain elevated and productivity growth is robust

• Firms continue to express a strong desire to invest and unheralded factors behind NZ‟s economic upswing remain in play (unlocking natural resources, reasonable political platform, building Asia connectivity, progress in the free-trade arena, a very good collection of microeconomic initiatives and uplifts in productivity growth)

The expansion is now maturing from strong growth off lows to moderate growth off better levels

• The availability of labour as opposed to demand is becoming more relevant as constraints on firms.

Risks around the outlook are balanced

• Upside risks from better migration inflows & construction sector, downside risks from weaker dairy payout & global uncertainties

• Inflation pressures are benign

• Construction sector inflation is not spilling over into the broader economy, the high NZD continues to suppress tradable inflation and solid productivity growth is capping service sector inflation

• However, the RBNZ will remain alert to drivers of medium-term inflation trends (such as a falling unemployment rate)

The RBNZ is expected to keep the Official Cash Rate unchanged for the remainder of 2014

• A tightening bias remains intact and we expect rates to move up again (in a modest fashion) in 2015

The NZD has receded from extremes but remains elevated and is expected to do some for a while yet

• A glaring 300 point yield differential remains on offer with roughly 2/3rds the world (by GDP) still having cash rates sub 1%

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Still a lot of positives across the economy

GDP vs Confidence Composite – still a strong feel-good factor

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8 8
6 6
4 4
2 2
0 0
-2 -2
-4 -4
90 92 94 96 98 00 02 04 06 08 10 12 14
GDP (LHS)
Standardised
Annual % change
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Unemployment rate falling: surfeit of labour less apparent

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9
8
7
6
%
5
4
3
2
95 97 99 01 03 05 07 09 11 13
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ANZBO composite and current conditions (adv 5m, RHS)

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Residential building consents up across
the board – rebuild & housing shortages
16
14
12
10
8
6
4
2
0
92 94 96 98 00 02 04 06 08 10 12 14
Canterbury Auckland Rest of NZ
total)
Consents (000, 12m
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Strong net migration adding to housing
demand but also the labour pool
120
100
80
60
40
20
0
-20
90 92 94 96 98 00 02 04 06 08 10 12 14
Net PLT Immigration PLT Departures
Persons (12m total, 000)
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Sources: ANZ, Statistics NZ, RBNZ, Westpac McDermott Miller

16

More risks to manage and be mindful of

Average dairy farm profitability before tax – good 2014, more challenging 2015

Terms of trade still high despite falls in dairy prices

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4,000 Forecast
3,500
3,000
2,500
2,000
1,500
1,000
500
0
-500
$ per hectare
1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14p
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House prices and sales –
LVR restrictions and OCR hikes
at work
30 9
25 8
20 7
15
6
10
5
5
4
0
3
-5
-10 2
-15 1
-20 0
03 04 05 06 07 08 09 10 11 12 13 14
Prices (LHS) Sales (RHS)
dwellings
Annualised % change Sales per 000
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1400
325
1300
275
1200 225
1100 175
1000 125
900 75
88 90 92 94 96 98 00 02 04 06 08 10 12 14
OTI Terms of trade (LHS)
ANZ World Commodity Price Index (adv 3 mths, RHS)
Financial conditions have tightened –
NZD not adjusting as quickly as
commodity prices
8 97.8
6 98.2
4 98.6
99.0
2
99.4
0
99.8
-2
100.2
-4
90 92 94 96 98 00 02 04 06 08 10 12 14
GDP (LHS) FCI (adv 10 months, inverted, RHS)
Index
Index
Index
Annual % change
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Sources: ANZ, Statistics NZ, GlobalDairyTrade, Bloomberg

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17

Key thematics: solid growth, modest lifts in OCR, building boom but restrained consumer & inflation to rise gradually

Still solid growth for New Zealand

Auckland and Canterbury housing undersupply a major stimulus

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8 20
6 15
4 10
% 2 5
0 0
-2 -5
-4 -10
90 92 94 96 98 00 02 04 06 08 10 12 14 16
Quarterly % change Annual % change
Consumption needs to give way for a Inflation to rise gradually
construction boom
30 85
8
6
25 80
4
2
20 75
0
-2
15 70 CPI
88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 -4
Investment (LHS) Consumption (RHS) 95 97 99 01 03 05 07 09 11 13 15 17
shortages „000
Regional Housing
NTH AKL WAI BOP GIS HB TAR MAN WGN NM WC CTY OT SL NZ
% of GDP
% of GDP
Annual % change
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Sources: ANZ, Bloomberg, Statistics NZ, RBNZ

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18

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

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