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Corporate
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Corporate

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  • 1. Corporate & SME Banking Graham Hodges Managing Director 12 June 2003 Australia and New Zealand Banking Group Limited
  • 2. Outline • Business Overview • Financial & risk performance • Market position & trends • SME Banking strategy update • Corporate Banking strategy update • Summary 2 UBS Presentation
  • 3. Overview of the businesses SME Banking Corporate Banking • Traditional relationship • Proposition ranges from management traditional relationship banking to • Segment: $50K business FUM to sophisticated financial solutions $10M turnover • Segment: turnover between $10- • 21 Business Districts (Metro $100M Aust); total staff of 1021 (642 frontline); approx 35,000 • 15 Corporate Regions (Aust); customers total staff of 505 (380 frontline); approx 2,700 customers • Manage end-to-end for customer • Product, Risk & Solutions -Frontline -Business Products Specialists co-located -Centralised Ops -Centralised Credit • Approx 45% of customer wallet in -Scoring/Modelling other business units’ NPAT -Portfolio Management • Approx 20% of customer wallet in other business units’ NPAT 3 UBS Presentation
  • 4. Segment has strong financial momentum $m SME $m Corporate 90 90 Strong NPAT growth More modest NPAT growth 80 8.6% 80 9.5% 70 70 11.5% 60 60 10.2% -4.0% 4.0% 50 50 40 40 30 30 20 20 10 10 0 0 2H 01 1H 02 2H 02 1H 03 2H 01 1H 02 2H 02 1H 03 • Continue to exceed target of 15%+ pa • Lending growth in Corporate more NPAT growth subdued, with focus on non- • EVA growth in line with NPAT growth traditional products to drive growth across the Bank 4 UBS Presentation
  • 5. SME – Disciplined investment strategy paying off High investment $b Contributing to strong % levels % 14 balance sheet growth 8 35 12 7 34 6 10 Lending 5 33 17% CAGR 8 4 3 32 6 2 31 1 4 Deposits 0 30 2 13% CAGR 1H 02 2H 02 1H 03 Revenue Growth Cost Growth 0 CTI (RHS) 1H 01 2H 01 1H 02 2H 02 1H 03 • ‘Virtuous cycle’ of stronger revenues Annualised growth 8 mths to end May 03 allowing increased cost (investment) • lending growth: 23.4% • Efficient business platform • deposit growth: 7.3% • Effective investment in business 5 UBS Presentation
  • 6. Corporate – creating value across the bank Total customer $m NIACC/EVA* growing 90 strongly • Total Customer profit 80 10% (NIACC/EVA) has continued 70 16% to increase strongly 7% 60 • The Corporate franchise 50 contributes strongly to other Business Units 40 • Major NIACC contributions 30 to other Business Units in 20 H1 03 included: - CF&A $3.4m 10 - Trans Services $7.6m 0 - Cap Mkts & FX $12.8m 2H 01 1H 02 2H 02 1H 03 - Cards/AAF $9.5m NIACC NPAT * NIACC - Net income after capital charge, an EVA based measure of customer profitability 6 UBS Presentation
  • 7. Decreasing level of specific provisions reflects quality of portfolio 2H 01 1H 02 2H 02 1H 03 Specific Provisions ($m) SME 12 7 6 2 Corporate 18 20 15 6 Total 30 27 21 8 ELP ($m) SME 7 7 7 7 Corporate 20 18 16 16 Total 27 25 23 23 ELP rate (bps) 38 37 34 33 7 UBS Presentation
  • 8. Lending growth in SME sector has not been at the expense of credit quality Portfolio is well secured Behavioural risk profiles improving % 6 % of customers exhibiting 100% higher risk characteristics * 90% 5 80% 4 70% 3 60% 2 50% 1 40% 0 'Mar Sep-01 Mar-02 Sep-02 Mar-03 30% 01 20% 10% 0% • Portfolio reviewed dynamically via >BB+ BB+ - BB <BB behaviour scoring on quarterly basis Fully Secured Partly Secured • New business of equivalent credit Unsecured standard to existing business • Portfolio is ~80% fully secured with higher security at weaker end * Drop in Mar ’03 partly due to scorecard enhancement 8 UBS Presentation
  • 9. Market position & trends SME Banking Corporate Banking Market share* - underweight Market share – stronger at top end % 30 27 % 40 25 35 20 18 17 30 15 13 25 10 20 5 15 0 10 ANZ CBA NAB WBC $50-100m $20-50m $10-20m Source: Nelson Sofres Business Finance Report 2002 Customer turnover Trends Trends • Healthy SME sector; credit growth • Good profitability; low gearing broadly tracks nominal GDP • Industry consolidation; uncertain • GST has driven improved customer environment cashflow management • Less demand for credit and • Businesses are in good financial shape increased capacity to amortise debt • Customers seeking “business • Growing need for smarter products understanding, dealings with decision and customised solutions makers, flexibility, pro-activity” Source: Roberts Research 2002 * Market share measured by lending 9 UBS Presentation
  • 10. SME – Delivering on our commitments In August 2001, we said: What’s happened: • We were revitalising the business: • Customer proposition competitive - Focus on customer proposition • Behavioural & credit scoring embedded - Re-engineering business & credit • Straight through processing loan processes origination operating: - MIS to support the strategy - Intranet based (EVA based customer - 4 hour proposition within reach profitability) Staff satisfaction Customer Satisfaction • We were shifting ‘mind-sets’ to: 100 100 - Customer first Benchmark Benchmark 80 80 - Culture of ‘business ownership’ 60 60 - 80% staff & customer satisfaction by 2004 40 40 • Average earnings growth of 15%+ 20 20 to 2005 0 0 'Mar Mar- Sep- Mar- 'Sep Mar- Sep- Mar- • Our relatively weak market 01 02 02 03 01 02 02 03 position created growth • Cultural shift from admin focus to sales opportunities focus • Growth opportunities – unleashed energy 10 UBS Presentation
  • 11. SME – Continuing to invest for growth Our August 2001 Investment Footprint Expansion Roadmap is being delivered • New SME staff ( yr to May ’03 ) - 98 in frontline roles Sept 04 - 18 in specialised businesses Sept 03 Specialised businesses a success in achieving focussed growth Sept 02 Bolt on business • Steady growth in monthly services revenue from Franchising sector Industry sector specialisation • Rapid growth in monthly VALUE Sept 01 revenue from Broker introduced Increase footprint business Increase share of wallet Bolt on services • e-Com led sales slow Build a distinctive service proposition • SME Development Capital product launch Jul ‘03 TIME 11 UBS Presentation
  • 12. SME – Building a sustainable competitive position The ‘virtuous cycle’ can be sustained to deliver NPAT growth Meeting customer requirements Effective investment Winning new a prerequisite business (not just Increase ‘Virtuous X-sell) is key to Balance between: in costs cycle’ accelerating the • near-term revenue Drives ‘cycle’ opportunities more Disciplined revenue • medium-term execution and platform developm’t front-line leadership New business and platform efficiency critical to achieving sustainable growth 12 UBS Presentation
  • 13. Corporate – Dual strategy in place Lower end Business has a strong • Underweight share creates position in a more opportunity for new business mature market place growth • Proven business model • Focus on new customers but • Efficient platforms & maintain x-sell discipline delivery Dual strategy • Moderate profit growth being from ‘traditional’ product followed range Higher end • Very strong position at top- • Strong cross-sell via co- end located specialists • Growing demand for • Customer segment sophisticated solutions generates significant additional profit growth for • ‘Wall St To Main St’ other ANZ businesses Strategy 13 UBS Presentation
  • 14. “Wall St to Main St”- Customers seeking more sophisticated solutions % Likely to use one or • Strength of franchise, people and 50% more sophisticated products positions us well products* 45% • Investment banks less active in the 40% middle market. Our points of 35% differentiation are: 30% Ø Large number of relationships Ø We are with the client before, during and 25% after the transaction 20% Ø We can provide both expertise and a 15% balance sheet 10% • Opportunity is substantial, driven by: 5% Ø Generational change 0% Ø Business expansion Ave Other Aust Foreign Ø Industry consolidation/divestments Majors Ø Changes in ownership (MBO, Public/Private) 2001 2002 * Source: Roberts Research 2002 14 UBS Presentation
  • 15. ‘Wall St to Main St’ strategy requires investment in skills… Phase 1 (pre 2000) Phase 2 (’00-’02) Phase 3 (’03-’05) • It takes time ‘Lender’ ‘Trusted Advisor ‘Strategic Partner’ to develop ‘Wall St to Detailed customer Significant training Increased strategy plans investment Main St’ capabilities Appointed dedicated Regional Executives investment banking Industry knowledge • We are well key transactors specialists and focus progressed generating opportunities • Opportunities Some non- Created awareness traditional financing and generated will increase deals-mainly debt ‘different’ Proactively building focused discussions client awareness Significant deal-flow Goal is to create further mid market demand for this service 15 UBS Presentation
  • 16. …and success in converting opportunities Corporate Life Cycle and ‘Wall St to Main St’ Solutions Maturity A typical example of a completed deal Leverage debt, originated in 2000 and public equity, Performance Variables capital markets, completed in 2003: securitisation, Declining/ • MBO transaction Growth M&A generational Leverage debt, change • Private equity public equity, M&A (approx $7m): profit $10.5m Private equity, • Debt tranches; Private MBO’s, equity & SME divestments senior / mezzanine; development and M&A W/C line:~ $1.1m capital NII & $0.1m fees Time Periods of dramatic change 16 UBS Presentation
  • 17. Summary Goals for 2003 to 2005 • Businesses performing well, and we are delivering on our • Double digit earnings commitments growth for segment • Risk performance strong, • Continue growth and but watchful for emerging risks diversification of customer revenue mix • Further opportunities for growth • Achieve 80% customer satisfaction and maintain • Investment effectiveness, business leadership and staff satisfaction over disciplined execution are 80% keys to sustained • Performing loans remain performance at 99% of total book 17 UBS Presentation
  • 18. Copy of presentation available on www.anz.com
  • 19. 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 int o account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate. For further information visit www.anz.com or contact Philip Gentry Head of Investor Relations ph: (613) 9273 4185 fax: (613) 9273 4091 e-mail: gentryp@anz.com 19 UBS Presentation

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