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Salomon Smith Barney Financial Services Conference
Global Institutional & Investment Banking –
Strong & consistent earnings growth
Dr Bob EdgarAustralia and New Zealand Banking Group Limited
4th March 2003
2 Global Institutional & Investment Banking
Outline
• Our business today– Definition– Performance– Credit Quality
• Why we are successful
• Strategy
• Outlook
3 Global Institutional & Investment Banking
Corporate Units – business relationships overview
Corporate Cards
Merchant acquiring
Wealth
Corporate Superannuation & risk
Mortgages
Consumer Banking
Foreign Exchange
(GFX)
Capital Markets (GCM)
Transaction Services (GTS)
Structured Finance (GSF)
Corporate Finance & Advisory
(CF&A)
Corporate Product Businesses
Customer Segments Personal Products Businesses
Global Institutional
Banking (incl Asia, North
America, Europe)
Corporate Banking
Small Medium Business
Micro-Business
4 Global Institutional & Investment Banking
GI & IB – delivering consistent profit growth across the franchise
95 106 115 128
6670 74
762429
3133
4246
4143
3938
4143
3834
4138
0
50
100
150
200
250
300
350
400
Mar-01 Sep-01 Mar-02 Sep-02
Institutional GTS GCM GFX GSF CFA
304323
343361
6%6%
5%
$m13%
12%
One third
ofANZ’s2002 NPAT
5 Global Institutional & Investment Banking
Profit growth has occurred despite relatively flat balance sheet growth
27.228.0
26.2 26.627.8
7.38.9 8.6
7.78.7
7.4 7.7 7.1 7.3
10.2
0
5
10
15
20
25
30
Sep-00 Sep-01 Mar-02 Sep-02 Jan-03
Institutional GSF Other*
Net Lending Assets$b
4.5%
* Other includes CFA, FX, GTS, & GCM
Some signs of domestic corporate borrowing
increasing again
Reductions in GSF driven by FX impact
and lower single customer limits (particularly for
corporate lending)
6 Global Institutional & Investment Banking
Transforming our offshore business
0
10
20
30
40
50
60
70
80
90
100
Domestic &core MNC
OffshoreCorporate
%
Lower single customer limits Focused strategy
• Corporate lending will be dis-aggregated from GSF, and managed on global industry lines from Australia
• Non-core lending being exited
41%
36%
23%
GSF StructuredGSF CorporateMultinational
Maximum unsecured lending (25% of 60%)
Maximum secured lending (80% of 60%)
Maximum –60% of
equivalent domestic
limits
US/Europe GSF limits
7 Global Institutional & Investment Banking
Asia delivering a diversified profit stream – less than 30% from corporate lending
# Corporate – principally corporate lending relationships* Other - principally includes FX, Trade, Capital Markets, and Structured Finance^ Consumer Asia – operates within the Asian network, however not part of GI&IB. Excl Panin
11%
1%
4%7%
4%
45%
12%
6%
2%
8%
Indonesia (exc Panin) Philippines
Mainland China Hong Kong
Japan Korea
Singapore Taiwan
Vietnam Other (incl HQ)
28%
58%
14%
Corporate #
Other*
Consumer Asia ^
2002 NPAT by country 2002 NPAT by activity
Total
$78m
8 Global Institutional & Investment Banking
Offshore issues containable, modest deterioration within expectations
7.5% 7.4% 7.5%
17.3% 16.8% 18.5%
27.5% 24.8%
43.7%
28.1%
42.8% 44.4%
Sep-01 Sep-02 Dec-02
AAA to BBB+
BBB to BBB-
BB+ to BB
BB-
Global Institutional and Investment Banking*
B+ to CCC
< CCC
2.7% 2.6% 2.9%
1.5% 1.9% 1.9%
• Exiting non-core lending
• Reducing industry concentrations
• Continue to expect Specific Provisions to be lower this year
* Based on lending assets
9 Global Institutional & Investment Banking
Outline
• Our business today
• Why we are successful– A strong franchise– Sophisticated MIS– Our customer proposition
• Strategy
• Outlook
10 Global Institutional & Investment Banking
Drivers of our success – simple, but hard to replicate
• Historically a strong corporate banking franchise
• Strength in product areas
• Continuing presence in Asia
A strong franchise
• Stability of structure and leadership
• Winning the war for talent
• Superior MIS
• Enhanced credit management
Good execution+
• Full product set
• Customer focus
• Understanding customer needs
• Industry specialisation
• Credit processes responsive to customer needs
Strong customer proposition+
11 Global Institutional & Investment Banking
What do customers think is important
•Relationship manager capability
•Industry knowledge
•Knowledge and understanding of needs
•Effective co-ordination of product specialists
•Creative ideas and solutions
•Strong advisory capacity
Source: Roberts Research
12 Global Institutional & Investment Banking
ANZ Westpac NAB CBA Citigroup* Source: Greenwich Associates
Total Customers
Significant R’ships
Lead Relationships
We have the strongest franchise, a product of consistent stewardship
70% 71%
64% 63%60%
57% 55% 54%
40% 38%
28%29%
46%43%
47%47%
54%53%
64%59%
15%6%
21%17%23%21%
31%26%37%
30%
0%
10%
20%
30%
40%
50%
60%
70%
80%
'01 '02 '01 '02 '01 '02 '01 '02 '01 '02
Institutional Customer Relationships
13 Global Institutional & Investment Banking
We have strong MIS capabilities
F. Mgmt Advis Serv TRADE GCM
Can view customer & portfolio Dataon Point of Control or booking point
Can view customer & portfolio DataBy on multiple dimensions eg trends,Risk, geography, products etc
Multiple performance measures areAvailable. NIACC (Net Income after Capital Charge) acts as primary Performance driver
Industry data used for managingConcentration limits and risk / returnPortfolio requirements
Can View data at all hierarchy levelsFrom base customer entity to totalBusiness units/ division levels (inclReconciliation to financials)
All key measures can be viewedAcross the Group’s 16 plus ProductLines to enable NIACC splits on bothProduct & relationship basis
ABC Customer Group
ABC Customer Master Group (total Relationship)ABC Subgroup Entity Level # 1 ABC Subgroup Entity Level # 2ABC Subgroup Entity Level # 3
etc ….
14 Global Institutional & Investment Banking
+19+10+10
+2+2-8
+35
+1
+ 64
+ 37
-40
-20
0
20
40
60
80
'01 '02 '01 '02 '01 '02 '01 '02 '01 '02ANZ Westpac NAB CBA Citigroup
GQI - difference from average
GQI combines 16 different qualitative measures into one score that reflects the overall
quality of service
Source: Greenwich Associates
We are regarded by our customers as providing the best service proposition
15 Global Institutional & Investment Banking
Outline
• Our business today
• Why we are successful
• Strategy– Extending our business model
• Outlook
16 Global Institutional & Investment Banking
GI & IB growth strategy overviewThe overall vision for the GI & IB businesses is to move revenue balance more towards a fee based advisory, solutions, value added proposition, with a low risk balance sheet
Strong revenue opportunities
New Products•Global Commodity Trade Finance
•Inventory swap and loan Asset Swaps products
•Expand commodities business
•Credit derivatives (immature)
Take the best of:
Investment Banking
(excluding equities)
Stronger Balance Sheet capability and
traditional product
capability
Better execution• Attract and retain first
class talent• Penetrate “sophisticated”
products into Corporate & SME segments
• Target larger Corporate Finance transactions
Existing Strong Corporate franchise
Extend capabilities in niche markets
• Establish stronger FX and IR business presence in Asia
• Extend securitisation capabilities into customer base
• Increase penetration of FX Online to offshore points
+ + =
17 Global Institutional & Investment Banking
Summary
• We are performing well, and continue to target double digit earnings growth
• Credit quality in good shape, international energy/telco issues containable
• We have a very strong franchise in the corporate market
• Our customers confirm that we have the no. 1 service proposition
• We will extend our capabilities further into ANZ’s customer base and other niche markets, with some further rationalisation of offshore operations
GI & IB will continue to
deliver strong, stable earnings growth for ANZ
19 Global Institutional & Investment Banking
We are regarded by our customers as providing the best service proposition
0
10
20
30
40
50
60
70
OverallSatisfaction
RM Capability
Knowscompanyindustry
Visit mostoften
Creativeideas andsolutions
No. 1
= No. 2
No. 1
No. 1
No. 1
Source: Greenwich Associates
% of superior evaluations
20 Global Institutional & Investment Banking
GI & IB Growth Strategy – more than a commercial bank
The Greenwich Survey indicates that ANZ has established a superior relationship proposition and is now recognised for it’s creativity.
32%
24%
20%
8%
12%
0.24
8%
28%
24%
28%
0% 10% 20% 30% 40%
Deutsche
Citigroup
Macquarie
Merrill Lynch
JP Morgan
CBA
UBS Warburg
Westpac
Citigroup
ANZ
Provides Creative Ideas & Solutions
Source: Greenwich Survey 2002
21 Global Institutional & Investment Banking
• Top Ten foreign bank• Only Australian/NZ bank• 50 Lending Relationships, 53% Inv Gr
• Only Australian/NZ bank• Highly regulated/competitive
environment• Largest number of corporate
relationships in Asia• 60 Lending Relationships, 68% Inv Gr
• Largest Australian/NZ Bank• 14,000 customers with deposit base of
$700m• 38 Lending Relationships, 83% Inv Gr
• Strategic for Asia & network Trade• Revenue largely booked outside Korea• 34 Lending Relationships, 52% Inv Gr
• Leading JV bank• 130,000 cards issued• 26 Lending Relationships, 69% Inv Gr
• One of a small group of fully licensed foreign banks
• Restricted transactions with locals expected to be lifted gradually with WTO membership
• 40 Lending Relationships, 95% Inv Gr
• Leading foreign bank in Vietnam• Only Australian/NZ bank• Fastest-growing Asian operation• 50 Lending Relationships, 72% Inv Gr
• Representative offices• Regional Trade Finance support• FI & correspondent banking
• Centre for GSF operations in ANZ Asia• Striving to carve a niche in the market
amongst global banks operating here• 4,000 customers/deposit base of $2b• 60 Lending Relationships, 87% Inv Gr
• Leading Australian/NZ bank• Focus to expand Trade Finance business• Excess liquidity driving margins down to
dangerously low levels• 60 Lending Relationships, 82% Inv Gr
• Product Support• Finance & Planning• Credit/Risk• Corporate Portfolio Management• Human Resource
Asia - circa 450 lending relationships with 85% investment grade
BEIJING & SHANGHAI, CHINA
HONG KONG
HANOI & HO CHI MINH, VIETNAM
SEOUL, KOREA
TOKYO & OSAKA, JAPAN
TAIPEI, TAIWAN
MANILA, PHILIPPINESMALAYSIA & THAILAND
REGIONAL OFFICE, SINGAPORESINGAPORE JAKARTA, INDONESIA
22 Global Institutional & Investment Banking
A selective asset writing strategy in AsiaCustomer Category Customer Description
Global MNCs Parent – Investment GradeTypically listed on local exchangeSubsidiaries in network countries per Cross Border Risk Policy (10/99)
Regional MNCs Parent – Investment GradeTypically listed on local exchange (Top 50 ‘blue chip’)Typically externally rated
Financial Institutions Well-established and high quality FIsIn top 20 FIs in countryStrong correspondent banking relationships
Major Local Corporates Top ranking, typically listed on local exchange and recognised as ‘blue chip’Investment Grade Significant foreign currency earnings in freely negotiable currenciesMarket capitalisation typically in excess of USD200m. Potential for significant non interest income, deposit, trade, FX or network opportunities
Middle Market Corporates Not target market
SMEs Not target market
• established high quality names/groups, including Asian conglomerates, that have survived Asian crisis; recent CPM ‘shadowing’ review has validated this;
• core relationships;• network business for Australia/NZ and Asia;• good product penetration potential;• leveraging relationships across Asia network.
Current/Target customer list represents:
Small exceptions for Trade where collateralised, eg. Vietnam
23 Global Institutional & Investment Banking
Offshore SCCLs in place
60%
100%
Australia/New Zealand OffShore Corporates
Comparative SCCL Customer Limits
25%
75%
100%
80%
> 100%Security
< 100%Security
Lending type SCCL % for offshoreCorporates (excl. GSF)
indicative based on BBB- grading
Direct Exposure(Including on and Off Balance sheet)
Indirect or Contingent Exposure
Market Related
Exposures
Capped at AUD 300m
Capped at AUD 100m
GSF Direct Exposures capped at AUD 450m for > 100% Security and AUD 200m for < 100% Security
24 Global Institutional & Investment Banking
The material in this presentation is general background information about the Bank’s activities current at the date of the presentation. It is information given in summary
form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the
investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an
investment is appropriate.
For further information visit
www.anz.comor contact
Philip GentryHead of Investor Relations
ph: (613) 9273 4185 fax: (613) 9273 4091
mob: (61) 411 125 474 e-mail: [email protected]