Net Profit after Tax - $mil
2002 Half Year Results Frank Cicutto, Managing Director and CEO Richard McKinnon, Chief Financial Officer May 9, 2002
national.com.au
Outline
1
n
Financial Overview
n
Business Unit Performance Analysis
n
Key Financial Drivers Analysis
n
Progress Against Strategies
n
Summary and Outlook
Record Net Profit $ 2.256 billion Net profit excluding significant items
$M's
§ Profit 11.4 % up on Mar 01 and 13.1% up on Sep 01
2500
§ ROE up 110bp to 20.1%
2000
§ ROA up 15bp to 1.23%
1500
§ Dividend per share up 5c to 72c
1000 500 0 H1/00
H2/00
H1/01
H2/01
Half Years
2
H1/02
§ Additional $1 billion buyback
Result Driven by Strong Growth in Ongoing Businesses
$M's
Cash Earnings from Ongoing Core Operations
2500
§ Asset quality maintained
2000
§ Margins broadly maintained
1500
§ Strong retail funds inflow
1000 500 0 H1/00
H2/00
H1/01
H2/01
Half Years
3
§ Up 13.8 % on Mar 01 and 6.4% on Sep 01
H1/02
Strong Business Unit Performances $ M’s 1000
Growth in Business Unit Net Profit 29.6%
Mar-01
Sep-01
Mar-02
750 19.5%
500 250 0
17.7% Financial Services Australia
4
16.1%
Europe
NZ
0.3%
7.1%
Wealth Wholesale Management
www.national.com.au
5
Record Net Profit - Benefits from Diversity Net profit excluding significant items $M's 2500 2000 1500 1000 500 0 H1/00
H2/00
H1/01
Half Years
6
H2/01
H1/02
Core Business Strength – Retail Banking Outstanding $M's
Cash Earnings from Ongoing Core Operations
2500 2000 1500 1000 500 0 H1/00
H2/00
H1/01
Half Years
7
H2/01
H1/02
6.2 % cash EPS growth reflects one off impacts of MNC sale and HomeSide write-downs Cash Earnings Per Share up 6.2% 6.8 % decrease from noncore and share dilution
13.0 % increase from ongoing core Wealth Capital & Retail Management Wholesale Funding Banking + 0.9 c + 20.4 c March 01 Cash EPS
( 0.1 ) c
( 5.7 ) c
Non Core ( 6.8 ) c
Outside & Dist
Share Dilution
+ 0.9 c
( 2.2 ) c
March 02 Cash EPS
126.8 c 119.4 c
8
Financial Services Australia - Strong Result
Net Profit after Tax - $mil
up 29.6% on H1/01
1,000 750 500 250
678
699
H1/01
H2/01
879
0
9
H1/02
Financial Services Australia - Strong Result Net Profit after Tax - $mil
§ Net profit of $879M up 29.6% up 29.6% on H1/01
1,000 750
§ Net interest income up 9.2%
500 250
§ Total income up 8.3%
678
699
879
§ Other operating income up 6.6% § Cost to income ratio 49.1%, down 0.7%
0 H1/01
H2/01
H1/02
§ Asset quality improved § Lower bad and doubtful debts charge § Net profit up 25.8% on H2/01
§ Expanded distribution capability for mortgage originations § Two introducer reward programs § Introduction of innovative wheat advance product - captured 15% of market 10
Business Lending Subdued
20.0 15.0 10.0 5.0 0.0
12 Mths to System
11
12 Mths to NAB
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
-5.0 Sep-00
% growth annualised
Business Credit
Business Lending Expected to Pick Up Business Confidence and Business Investment 40 INDEX
12 Mth to %
30
30
20
20
10
10
0
0
-10
-10 Underlying Business Investment (RHS) Business confidence (LHS)
-20
-20 -30
Jun-02
Sep-01
Dec-00
Mar-00
Jun-99
Sep-98
Dec-97
Mar-97
Jun-96
Sep-95
Dec-94
Mar-94
Jun-93
Sep-92
Dec-91
Mar-91
Jun-90
-30
12
40
Financial Services Europe - Strong Result
Net Profit after Tax - $mil 500 400 300 200
394
432
471
H1/01
H2/01
H1/02
100 0
13
up 19.5% on H1/01
Financial Services Europe - Strong Result Net Profit after Tax - $mil 500
up 19.5% On H1/01
400 300 200
394
432
471
H1/01
H2/01
H1/02
100 0
§ Net profit of $471M up 19.5% § Total income up 13.5% § Net interest income up 15.6% § Other operating income up 9.0% § Cost to income ratio 49.2%, down 2.1% § Asset quality improved § Net profit up 9.0% on H2/01
§ Strong growth in Rapid Repay mortgage & Tailored business loans § Launch of Wealth Management financial planning and investment services § Opening of second European call centre 14
Financial Services New Zealand - Strong Result
Net Profit after Tax - $mil
up 17.7% on H1/01
200 150 100 50
113
111
133
H1/01
H2/01
H1/02
0
15
Financial Services New Zealand - Strong Result Net Profit after Tax - $mil 200 150 100 50
113
111
133
H1/01
H2/01
H1/02
up 17.7% on H1/01
§ Net profit of $133M up 17.7% § Total income up 6.6% § Net interest income up 10.2% § Cost to income ratio 50.4%, down 3.3%
0
§ Asset quality improved § Net profit up 19.8% on H2/01
§ 14% increase in deposits, driven by new demand deposit products § Enhancements to CRM leads generation
16
Wholesale Financial Services – Stable
Net Profit after Tax - $mil 400 300 200
374
366
373
H1/01
H2/01
H1/02
100 0
17
In line with H1/01
Wholesale Financial Services – Stable Net Profit after Tax - $mil
In line with H1/01
400 300 200
374
366
373
100
§ Net profit of $373M is in line with H1/01 in challenging environment § Higher doubtful debts due to a small number of large provisions § Total income up 3.7%
0 H1/01
H2/01
H1/02
§ Underlying profit up 2.2% § Asset quality satisfactory § Net profit up 1.9% on H2/01
§ Leading position in Australian corporate bond market § Continued growth in sales of risk management products
18
Wealth Management - Solid Performance Total Growth 16.1%
$M 448 386 237 189
197
211
H1/01
H1/ 02
344
Revaluation Profit
($) 15 10 5 -5 -10 -15
Operating Profit
Volatile investment markets
Mar-01
Jun-01
Sep-01
Aust S&P ASX 200
Dec-01
Mar-02
Global MSCIWN
Note: Graph illustrates growth of $1 in the Australian and Global markets in the year to Mar 2002
§ Funds under Management growth 8% § Retail Risk Annual In Force Premiums growth 20% § UK Investment Service - 4000 new customers & ave. account size doubled since launch 19
Strong Revaluation Profit $M
6,788 183
797 Growth
402
(427) Change In Net Assets 370 Revaluation
5,991
Business Change in Shareholder’s assumptions Transfer of and roll economic net assets businesses forward assumptions 137 244 (337) 168
Directors’ Valuation September 2001
Directors’ Valuation March 2002
§ International business restructure on 1 January 2002. § Transferred WM international businesses to subsidiaries of Australian Life Company accounted for in a “mark to market” environment under AASB 1038 § Aligned management and statutory reporting/corporate governance and control 20
HomeSide § Normalised Profit of $37M § Amortisation charge A$752M consistent with run-off § Statistical correlation on the hedge 98.7% for the half § MSR valuation compares favourably with industry benchmarks § Sale of operating platform completed
21
$M's
Net Interest Income - Margins Maintained
5.00%
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 -
4.00% 3.00% 2.00% 1.00% 0.00% H1/01
H2/01
H1/02
Retail Banking (incl. Corporate Centre) Wholesale
22
H1/01
H2/01
H1/02
Financial Services Europe Group (Excl. Earnings on Excess Capital) Financial Services Australia Financial Services New Zealand Wholesale
$M's
Other Operating Income – Solid Retail Banking Growth 2,500
Retail Banking (incl. Corporate Centre)
2,000
Banking fees
1,500
Money transfer fees
1,000
Other banking income
500
8.0% 14.9%
0 100 200 300 400 500 600 $M's
H1/01 H1/02 H1/02 Other HalfalYears Wholesale Financi Servic es Retail Banking (incl. Corporate Centre)
23
6.1%
H1/01 Growth on H1/01
Expenses Contained Retail Banking (including Corporate Centre)
2,500 2,000 1,500
400 300 200
1,000 500 -
100 -
H1/01 Personnel
24
Wholesale Financial Services
H2/01
H1/02
Occupancy
H1/01 Communication, postage & stationary
H2/01
H1/02
General Expenses
Cost Income Ratio Improved – by Line of Business Financial Serv ices Australia
49.1%
0.7%
Financial Serv ices Europe
49.2%
2.1%
Financial Serv ices New Zealand
50.4%
Wholesale Financial Serv ices
38.1%
Ongoing Core operations (ex cluding WM)
25
0.9% 48.0%
0%
3.3%
10% 20% 30% 40% 50% 60%
1.4%
Gross Non Accrual Loans - Remains Sound Gross Non-Accrual Loans
$M Gross NALs (Ex MNC)
4000
Top 5 NALs
Gross NALs / Gross Loans & Acceptances (Ex MNC)
6.0%
3,708
3500 3,357
5.0%
3000 2500 2000 1500
4.0%
2,261 1,625
1,444 1,181
1,377
1,497
1,758 1,732
1,750
1,336
3.0% 2.0%
1000 500 0
26
1.0% 0.78% 0.74% 0.75% Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Mar-01 Sep-01 Mar-02
0.0%
Regional Quality - Gross Non Accrual Loans Gros s NA Ls
Gros s NALs
Gross NA L s / G ros s Lo ans & Ac ce ptance s
1 ,2 00
1.4%
1 ,0 00
1.2% 958
9 59
8 00
91 2
6 00 5 79 4 00
0 .5 4%
64 3
0.77 % 568
0.6 0%
0.76%
0.69%
0.59 % 0.48 %
2 00
S e p-9 9
Mar-0 0
S ep-00
Mar-0 1
S ep-01
Gross NALs
4 .4 5%
78
4.33 %
4.0%
1.3 7%
1 .2 %
1.24% 1.07%
1 .0 %
1 .0 7% 0.87%
0 .8 % 0 .6 % 0 .4 % 0 .2 %
-
0 .0 % Sep -99
Mar-00
Se p-0 0
Mar-01
Sep-01
Mar-02
New Zealand - Non-Accrual Loans
G ross NALs
Gross NALs / Gross Loans & Acceptances 2.0%
1 20
1.8% 1 00
1 04
1.6% 89
80
Mar-00
3.0%
60
2.0%
40
1.4%
87 66
1.0%
62
Se p-0 0
43 36
0.7 2%
53
-
27
1 .4 %
0.8%
1 .89%
48
Sep -9 9
580
0.95%
Mar-99
5.0%
1 .6 %
644
30 0
10 0
2 20
69 3
1.2%
50
Mar-99
1 .2 5%
$M
3 .4 7%
89
1.18%
Gro ssl NALs / Gross L oans & Acce ptances
200
100
40 0
0.2%
6.0%
688
585 535
Mar-02
250
150
64 6
50 0
20 0
USA (Ex MNC) - Non-Accrual Loans
$M
1 .8 %
70 0
0.4%
0.0%
Mar-99
2 .0 %
1.0%
0.6%
Gros s NALs / Gros s Loans & Ac ce ptanc es
80 0
60 0
0.8% 669
Europe - Non-Accrual Loans
$M
Au stralia - Non -Accrual L oans
$M
46
31
Mar-0 1
Sep-01
20
1.0%
0 .67%
0.0% Mar-0 2
0.51 % 0 .4 4%
0 .4 0%
0.32%
0.27%
Mar-9 9
Sep -99
Mar-00
Se p-0 0
Mar-01
0.6% 0.4% 0.2%
0.18%
0.15 %
Sep-01
Mar-0 2
0.0%
Specific Provision Balance Specific Provision Balance as at March 2002 by size
2 Customers
> $100m
=< $5m 3 Customers 4 Customers
28
> $10m & =< $50m
> $5m & =< $10m
Total Provision Charge $M 700
Total Provisions Charges By Line of Business (Excl MNC) 578
600 500 400 300 200 100 0
27
397 47 82
417 29 146
202
146 113 H1/01 Financial Services Australia Financial Services New Zealand Other (Excl MNC)
29
134
188
211
46 H2/01
H1/02 Financial Services Europe Wholesale
Coverage Ratio - Remains Strong Coverage Ratio Total Provisions to Total Gross Loans & Acceptances (Excluding Housing) 1.80%
1.77%
1.77%
1.73%
1.75% 1.70% 1.65%
1.63%
1.60% 1.55% 1.50%
30
Sep-00
Mar-01
Sep-01
Mar-02
Asset Composition - Well Secured & Investment Grade Quality Asset Composition - March 2002 WFS SubInvestment 4%
WFS Investment 19%
WFS Composition by Equivalent S&P Rating March 2002 Investment Grade 84%
BFS Secured 26%
PFS Unsecured 3% BFS Unsecured 5% PFS Partly Secured 12%
31
PFS Secured 20% BFS Partly Secured 11%
BB+ to BB12%
B+ to B 3% B- to CCC 1%
Leading Indicators Favourable 110 100
Market Segmentation: Early Warning System Numbers - Business Financial Services (Australia)
90daysPastDue
2.00% 1.80% 1.60%
80 70 60 50
1.40%
Early Warning System Index
90
1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Business Customers with borrowings over A$250k are captured with Early Warning system numbers
Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2001 2001 2001 2001 2001 2001 2001 2001 2001 2001 2002 2002 2002
Index: Sep-2000 = 100
40 Sep-00 Jan-01 Mar-01 May-01 Jul-01 Sep-01 Nov-01 Jan-02 Mar-02
32
HomeLoans
Personal Loans
Overdraft
Credit Cards
Group
Capital Position
%
12
10.2
10.6
2.7 1.0
2.7 1.1
5.4
6.4
6.8
H1/01
H2/01
H1/02
10
9.0
8
2.6 1.0
6 4 2 0 H1/00
H2/00
Half Years
Tier 1
33
Tier 1 (hybrid instruments)
Tier 2 (less deductions)
Capital Management § Strong internal capital generation from core businesses § Active approach to efficient capital management and shareholder value creation § Continue ongoing policy to buy-back all new shares issued § $1bn increase to on-market buy-back § Place cap on DRP at 15,000 shares per shareholder
34
www.national.com.au
35
Financial Services Australia Net Profit after Tax - $mil
up 29.6%
1,000 750 500 250
678
699
H1/01
H2/01
879
0
36
H1/02
Financial Services Australia Strategic Intent
Net Profit after Tax - $mil up 29.6%
1,000 750 500 250
678
699
879
0 H1/01
H2/01
H1/02
To be the leading provider of integrated financial services in Australia §
§
No. 1 market share and share of wallet in business and agri-business No. 1 share of wallet in premium and private segments
§ Increase share of wallet particularly in wealth management products § Leverage infrastructure including CRM to enhance efficiency and improve sales capability § Further improve pricing for risk and margin management § Improve customer satisfaction and retention
37
Financial Services New Zealand Net Profit after Tax - $mil
up 17.7%
200 150 100 50
113
111
133
H1/01
H2/01
H1/02
0
38
Financial Services New Zealand Net Profit after Tax - $mil 200
up 17.7%
150 100 50
113
111
133
H1/01
H2/01
H1/02
0
Strategic Intent Be the leading provider of integrated financial services in New Zealand § No 1 business and retail banking § Top 2 in wealth management
§ Re-engineering of banker wealth management distribution § Leverage technology & CRM capability § Pricing for risk & margin management § Improve customer satisfaction and retention
39
Financial Services Europe Net Profit after Tax - $mil 500 400 300 200
394
432
471
H1/01
H2/01
H1/02
100 0
40
up 19.5%
Financial Services Europe Net Profit after Tax - $mil 500 400 300 200
394
432
471
100 0 H1/01
H2/01
H1/02
up 19.5%
Strategic Intent To provide market leading integrated financial services § Targeted operating strategies across franchises § Leverage product including wealth management and wholesale
§ Upgrade front end systems and call centre capabilities & capacity to drive sales & service effectiveness § Launch of new products (eg) Structured solutions manufactured by Wholesale § Roll out of market leading wealth management offering through bank channels leveraging bank customer base § Improve pricing for risk and margin management 41
Wholesale Financial Services Net Profit after Tax - $mil 400 300 200
374
366
373
H1/01
H2/01
H1/02
100 0
42
In line with Mar 01
Wholesale Financial Services Net Profit after Tax - $mil
In line with Mar 01
400 300 200
374
366
373
H2/01
H1/02
Be a high quality and innovative financial services partner § No. 1 Wholesale Bank in Australia & NZ § Grow relationship based banking business to support core clients in Europe
100 0 H1/01
Strategic Intent
§ Niche strategy for Asia and US
§ Core client relationship focus § Increasing delivery of innovative structured products to our wholesale segment § Expanding penetration of tailored wholesale product to non-wholesale client segments § Building our operation in the UK § Rationalise business platform 43
Wealth Management 448 $M 197 344
44
386 237
Revaluation Profit
197
211
Operating Profit
H1/01
H1/ 02
189 211
Wealth Management $M
386 189
Strategic Intent
448 237
Revaluation Profit
§
§
197 344
211
H1/01
H1/ 02
Operating Profit
§
Lead the market evolution towards holistic financial advice Be the preferred business partner and outsource provider for advisers Comprehensive advise and implementation provider to Business and Corporate clients and their employees
§ Build next generation adviser platform to remain preferred outsourcing partner and business coach to advisers § Leverage bank customer base to increase wealth management penetration § Build distinctive investment platform with multi channel distribution capability in the UK § Lead market evolution in Asia through differentiated distribution and investment approach 45
Positioning for Growth confirmed robust organic growth plans § Strategic focus
§ $370M p.a. cost reduction by 2004
§ Leverage past investments & capabilities
§ Increased revenues with 1380 new positions
§ Capture growth opportunities § Revitalise organisation
46
Positioning For Growth
§ Over $400M of investment in Wealth Management and Europe § Cultural change program
Summary § Strong results underpinned by core businesses § Key measures improved including ROE, ROA and Cost to Income § Asset quality remains sound § Capital position strong. Buy-back extended. § Positioning for Growth outcomes will enhance momentum 47
www.national.com.au
48
national.com.au
Outline
1
n
Financial Overview
n
Business Unit Performance Analysis
n
Key Financial Drivers Analysis
n
Progress Against Strategies
n
Summary and Outlook
Record Net Profit $ 2.256 billion Net profit excluding significant items
$M's
§ Profit 11.4 % up on Mar 01 and 13.1% up on Sep 01
2500
§ ROE up 110bp to 20.1%
2000
§ ROA up 15bp to 1.23%
1500
§ Dividend per share up 5c to 72c
1000 500 0 H1/00
H2/00
H1/01
H2/01
Half Years
2
H1/02
§ Additional $1 billion buyback
Result Driven by Strong Growth in Ongoing Businesses
$M's
Cash Earnings from Ongoing Core Operations
2500
§ Asset quality maintained
2000
§ Margins broadly maintained
1500
§ Strong retail funds inflow
1000 500 0 H1/00
H2/00
H1/01
H2/01
Half Years
3
§ Up 13.8 % on Mar 01 and 6.4% on Sep 01
H1/02
Strong Business Unit Performances $ M’s 1000
Growth in Business Unit Net Profit 29.6%
Mar-01
Sep-01
Mar-02
750 19.5%
500 250 0
17.7% Financial Services Australia
4
16.1%
Europe
NZ
0.3%
7.1%
Wealth Wholesale Management
www.national.com.au
5
Record Net Profit - Benefits from Diversity Net profit excluding significant items $M's 2500 2000 1500 1000 500 0 H1/00
H2/00
H1/01
Half Years
6
H2/01
H1/02
Core Business Strength – Retail Banking Outstanding $M's
Cash Earnings from Ongoing Core Operations
2500 2000 1500 1000 500 0 H1/00
H2/00
H1/01
Half Years
7
H2/01
H1/02
6.2 % cash EPS growth reflects one off impacts of MNC sale and HomeSide write-downs Cash Earnings Per Share up 6.2% 6.8 % decrease from noncore and share dilution
13.0 % increase from ongoing core Wealth Capital & Retail Management Wholesale Funding Banking + 0.9 c + 20.4 c March 01 Cash EPS
( 0.1 ) c
( 5.7 ) c
Non Core ( 6.8 ) c
Outside & Dist
Share Dilution
+ 0.9 c
( 2.2 ) c
March 02 Cash EPS
126.8 c 119.4 c
8
Financial Services Australia - Strong Result
Net Profit after Tax - $mil
up 29.6% on H1/01
1,000 750 500 250
678
699
H1/01
H2/01
879
0
9
H1/02
Financial Services Australia - Strong Result Net Profit after Tax - $mil
§ Net profit of $879M up 29.6% up 29.6% on H1/01
1,000 750
§ Net interest income up 9.2%
500 250
§ Total income up 8.3%
678
699
879
§ Other operating income up 6.6% § Cost to income ratio 49.1%, down 0.7%
0 H1/01
H2/01
H1/02
§ Asset quality improved § Lower bad and doubtful debts charge § Net profit up 25.8% on H2/01
§ Expanded distribution capability for mortgage originations § Two introducer reward programs § Introduction of innovative wheat advance product - captured 15% of market 10
Business Lending Subdued
20.0 15.0 10.0 5.0 0.0
12 Mths to System
11
12 Mths to NAB
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
-5.0 Sep-00
% growth annualised
Business Credit
Business Lending Expected to Pick Up Business Confidence and Business Investment 40 INDEX
12 Mth to %
30
30
20
20
10
10
0
0
-10
-10 Underlying Business Investment (RHS) Business confidence (LHS)
-20
-20 -30
Jun-02
Sep-01
Dec-00
Mar-00
Jun-99
Sep-98
Dec-97
Mar-97
Jun-96
Sep-95
Dec-94
Mar-94
Jun-93
Sep-92
Dec-91
Mar-91
Jun-90
-30
12
40
Financial Services Europe - Strong Result
Net Profit after Tax - $mil 500 400 300 200
394
432
471
H1/01
H2/01
H1/02
100 0
13
up 19.5% on H1/01
Financial Services Europe - Strong Result Net Profit after Tax - $mil 500
up 19.5% On H1/01
400 300 200
394
432
471
H1/01
H2/01
H1/02
100 0
§ Net profit of $471M up 19.5% § Total income up 13.5% § Net interest income up 15.6% § Other operating income up 9.0% § Cost to income ratio 49.2%, down 2.1% § Asset quality improved § Net profit up 9.0% on H2/01
§ Strong growth in Rapid Repay mortgage & Tailored business loans § Launch of Wealth Management financial planning and investment services § Opening of second European call centre 14
Financial Services New Zealand - Strong Result
Net Profit after Tax - $mil
up 17.7% on H1/01
200 150 100 50
113
111
133
H1/01
H2/01
H1/02
0
15
Financial Services New Zealand - Strong Result Net Profit after Tax - $mil 200 150 100 50
113
111
133
H1/01
H2/01
H1/02
up 17.7% on H1/01
§ Net profit of $133M up 17.7% § Total income up 6.6% § Net interest income up 10.2% § Cost to income ratio 50.4%, down 3.3%
0
§ Asset quality improved § Net profit up 19.8% on H2/01
§ 14% increase in deposits, driven by new demand deposit products § Enhancements to CRM leads generation
16
Wholesale Financial Services – Stable
Net Profit after Tax - $mil 400 300 200
374
366
373
H1/01
H2/01
H1/02
100 0
17
In line with H1/01
Wholesale Financial Services – Stable Net Profit after Tax - $mil
In line with H1/01
400 300 200
374
366
373
100
§ Net profit of $373M is in line with H1/01 in challenging environment § Higher doubtful debts due to a small number of large provisions § Total income up 3.7%
0 H1/01
H2/01
H1/02
§ Underlying profit up 2.2% § Asset quality satisfactory § Net profit up 1.9% on H2/01
§ Leading position in Australian corporate bond market § Continued growth in sales of risk management products
18
Wealth Management - Solid Performance Total Growth 16.1%
$M 448 386 237 189
197
211
H1/01
H1/ 02
344
Revaluation Profit
($) 15 10 5 -5 -10 -15
Operating Profit
Volatile investment markets
Mar-01
Jun-01
Sep-01
Aust S&P ASX 200
Dec-01
Mar-02
Global MSCIWN
Note: Graph illustrates growth of $1 in the Australian and Global markets in the year to Mar 2002
§ Funds under Management growth 8% § Retail Risk Annual In Force Premiums growth 20% § UK Investment Service - 4000 new customers & ave. account size doubled since launch 19
Strong Revaluation Profit $M
6,788 183
797 Growth
402
(427) Change In Net Assets 370 Revaluation
5,991
Business Change in Shareholder’s assumptions Transfer of and roll economic net assets businesses forward assumptions 137 244 (337) 168
Directors’ Valuation September 2001
Directors’ Valuation March 2002
§ International business restructure on 1 January 2002. § Transferred WM international businesses to subsidiaries of Australian Life Company accounted for in a “mark to market” environment under AASB 1038 § Aligned management and statutory reporting/corporate governance and control 20
HomeSide § Normalised Profit of $37M § Amortisation charge A$752M consistent with run-off § Statistical correlation on the hedge 98.7% for the half § MSR valuation compares favourably with industry benchmarks § Sale of operating platform completed
21
$M's
Net Interest Income - Margins Maintained
5.00%
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 -
4.00% 3.00% 2.00% 1.00% 0.00% H1/01
H2/01
H1/02
Retail Banking (incl. Corporate Centre) Wholesale
22
H1/01
H2/01
H1/02
Financial Services Europe Group (Excl. Earnings on Excess Capital) Financial Services Australia Financial Services New Zealand Wholesale
$M's
Other Operating Income – Solid Retail Banking Growth 2,500
Retail Banking (incl. Corporate Centre)
2,000
Banking fees
1,500
Money transfer fees
1,000
Other banking income
500
8.0% 14.9%
0 100 200 300 400 500 600 $M's
H1/01 H1/02 H1/02 Other HalfalYears Wholesale Financi Servic es Retail Banking (incl. Corporate Centre)
23
6.1%
H1/01 Growth on H1/01
Expenses Contained Retail Banking (including Corporate Centre)
2,500 2,000 1,500
400 300 200
1,000 500 -
100 -
H1/01 Personnel
24
Wholesale Financial Services
H2/01
H1/02
Occupancy
H1/01 Communication, postage & stationary
H2/01
H1/02
General Expenses
Cost Income Ratio Improved – by Line of Business Financial Serv ices Australia
49.1%
0.7%
Financial Serv ices Europe
49.2%
2.1%
Financial Serv ices New Zealand
50.4%
Wholesale Financial Serv ices
38.1%
Ongoing Core operations (ex cluding WM)
25
0.9% 48.0%
0%
3.3%
10% 20% 30% 40% 50% 60%
1.4%
Gross Non Accrual Loans - Remains Sound Gross Non-Accrual Loans
$M Gross NALs (Ex MNC)
4000
Top 5 NALs
Gross NALs / Gross Loans & Acceptances (Ex MNC)
6.0%
3,708
3500 3,357
5.0%
3000 2500 2000 1500
4.0%
2,261 1,625
1,444 1,181
1,377
1,497
1,758 1,732
1,750
1,336
3.0% 2.0%
1000 500 0
26
1.0% 0.78% 0.74% 0.75% Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Mar-01 Sep-01 Mar-02
0.0%
Regional Quality - Gross Non Accrual Loans Gros s NA Ls
Gros s NALs
Gross NA L s / G ros s Lo ans & Ac ce ptance s
1 ,2 00
1.4%
1 ,0 00
1.2% 958
9 59
8 00
91 2
6 00 5 79 4 00
0 .5 4%
64 3
0.77 % 568
0.6 0%
0.76%
0.69%
0.59 % 0.48 %
2 00
S e p-9 9
Mar-0 0
S ep-00
Mar-0 1
S ep-01
Gross NALs
4 .4 5%
78
4.33 %
4.0%
1.3 7%
1 .2 %
1.24% 1.07%
1 .0 %
1 .0 7% 0.87%
0 .8 % 0 .6 % 0 .4 % 0 .2 %
-
0 .0 % Sep -99
Mar-00
Se p-0 0
Mar-01
Sep-01
Mar-02
New Zealand - Non-Accrual Loans
G ross NALs
Gross NALs / Gross Loans & Acceptances 2.0%
1 20
1.8% 1 00
1 04
1.6% 89
80
Mar-00
3.0%
60
2.0%
40
1.4%
87 66
1.0%
62
Se p-0 0
43 36
0.7 2%
53
-
27
1 .4 %
0.8%
1 .89%
48
Sep -9 9
580
0.95%
Mar-99
5.0%
1 .6 %
644
30 0
10 0
2 20
69 3
1.2%
50
Mar-99
1 .2 5%
$M
3 .4 7%
89
1.18%
Gro ssl NALs / Gross L oans & Acce ptances
200
100
40 0
0.2%
6.0%
688
585 535
Mar-02
250
150
64 6
50 0
20 0
USA (Ex MNC) - Non-Accrual Loans
$M
1 .8 %
70 0
0.4%
0.0%
Mar-99
2 .0 %
1.0%
0.6%
Gros s NALs / Gros s Loans & Ac ce ptanc es
80 0
60 0
0.8% 669
Europe - Non-Accrual Loans
$M
Au stralia - Non -Accrual L oans
$M
46
31
Mar-0 1
Sep-01
20
1.0%
0 .67%
0.0% Mar-0 2
0.51 % 0 .4 4%
0 .4 0%
0.32%
0.27%
Mar-9 9
Sep -99
Mar-00
Se p-0 0
Mar-01
0.6% 0.4% 0.2%
0.18%
0.15 %
Sep-01
Mar-0 2
0.0%
Specific Provision Balance Specific Provision Balance as at March 2002 by size
2 Customers
> $100m
=< $5m 3 Customers 4 Customers
28
> $10m & =< $50m
> $5m & =< $10m
Total Provision Charge $M 700
Total Provisions Charges By Line of Business (Excl MNC) 578
600 500 400 300 200 100 0
27
397 47 82
417 29 146
202
146 113 H1/01 Financial Services Australia Financial Services New Zealand Other (Excl MNC)
29
134
188
211
46 H2/01
H1/02 Financial Services Europe Wholesale
Coverage Ratio - Remains Strong Coverage Ratio Total Provisions to Total Gross Loans & Acceptances (Excluding Housing) 1.80%
1.77%
1.77%
1.73%
1.75% 1.70% 1.65%
1.63%
1.60% 1.55% 1.50%
30
Sep-00
Mar-01
Sep-01
Mar-02
Asset Composition - Well Secured & Investment Grade Quality Asset Composition - March 2002 WFS SubInvestment 4%
WFS Investment 19%
WFS Composition by Equivalent S&P Rating March 2002 Investment Grade 84%
BFS Secured 26%
PFS Unsecured 3% BFS Unsecured 5% PFS Partly Secured 12%
31
PFS Secured 20% BFS Partly Secured 11%
BB+ to BB12%
B+ to B 3% B- to CCC 1%
Leading Indicators Favourable 110 100
Market Segmentation: Early Warning System Numbers - Business Financial Services (Australia)
90daysPastDue
2.00% 1.80% 1.60%
80 70 60 50
1.40%
Early Warning System Index
90
1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Business Customers with borrowings over A$250k are captured with Early Warning system numbers
Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2001 2001 2001 2001 2001 2001 2001 2001 2001 2001 2002 2002 2002
Index: Sep-2000 = 100
40 Sep-00 Jan-01 Mar-01 May-01 Jul-01 Sep-01 Nov-01 Jan-02 Mar-02
32
HomeLoans
Personal Loans
Overdraft
Credit Cards
Group
Capital Position
%
12
10.2
10.6
2.7 1.0
2.7 1.1
5.4
6.4
6.8
H1/01
H2/01
H1/02
10
9.0
8
2.6 1.0
6 4 2 0 H1/00
H2/00
Half Years
Tier 1
33
Tier 1 (hybrid instruments)
Tier 2 (less deductions)
Capital Management § Strong internal capital generation from core businesses § Active approach to efficient capital management and shareholder value creation § Continue ongoing policy to buy-back all new shares issued § $1bn increase to on-market buy-back § Place cap on DRP at 15,000 shares per shareholder
34
www.national.com.au
35
Financial Services Australia Net Profit after Tax - $mil
up 29.6%
1,000 750 500 250
678
699
H1/01
H2/01
879
0
36
H1/02
Financial Services Australia Strategic Intent
Net Profit after Tax - $mil up 29.6%
1,000 750 500 250
678
699
879
0 H1/01
H2/01
H1/02
To be the leading provider of integrated financial services in Australia §
§
No. 1 market share and share of wallet in business and agri-business No. 1 share of wallet in premium and private segments
§ Increase share of wallet particularly in wealth management products § Leverage infrastructure including CRM to enhance efficiency and improve sales capability § Further improve pricing for risk and margin management § Improve customer satisfaction and retention
37
Financial Services New Zealand Net Profit after Tax - $mil
up 17.7%
200 150 100 50
113
111
133
H1/01
H2/01
H1/02
0
38
Financial Services New Zealand Net Profit after Tax - $mil 200
up 17.7%
150 100 50
113
111
133
H1/01
H2/01
H1/02
0
Strategic Intent Be the leading provider of integrated financial services in New Zealand § No 1 business and retail banking § Top 2 in wealth management
§ Re-engineering of banker wealth management distribution § Leverage technology & CRM capability § Pricing for risk & margin management § Improve customer satisfaction and retention
39
Financial Services Europe Net Profit after Tax - $mil 500 400 300 200
394
432
471
H1/01
H2/01
H1/02
100 0
40
up 19.5%
Financial Services Europe Net Profit after Tax - $mil 500 400 300 200
394
432
471
100 0 H1/01
H2/01
H1/02
up 19.5%
Strategic Intent To provide market leading integrated financial services § Targeted operating strategies across franchises § Leverage product including wealth management and wholesale
§ Upgrade front end systems and call centre capabilities & capacity to drive sales & service effectiveness § Launch of new products (eg) Structured solutions manufactured by Wholesale § Roll out of market leading wealth management offering through bank channels leveraging bank customer base § Improve pricing for risk and margin management 41
Wholesale Financial Services Net Profit after Tax - $mil 400 300 200
374
366
373
H1/01
H2/01
H1/02
100 0
42
In line with Mar 01
Wholesale Financial Services Net Profit after Tax - $mil
In line with Mar 01
400 300 200
374
366
373
H2/01
H1/02
Be a high quality and innovative financial services partner § No. 1 Wholesale Bank in Australia & NZ § Grow relationship based banking business to support core clients in Europe
100 0 H1/01
Strategic Intent
§ Niche strategy for Asia and US
§ Core client relationship focus § Increasing delivery of innovative structured products to our wholesale segment § Expanding penetration of tailored wholesale product to non-wholesale client segments § Building our operation in the UK § Rationalise business platform 43
Wealth Management 448 $M 197 344
44
386 237
Revaluation Profit
197
211
Operating Profit
H1/01
H1/ 02
189 211
Wealth Management $M
386 189
Strategic Intent
448 237
Revaluation Profit
§
§
197 344
211
H1/01
H1/ 02
Operating Profit
§
Lead the market evolution towards holistic financial advice Be the preferred business partner and outsource provider for advisers Comprehensive advise and implementation provider to Business and Corporate clients and their employees
§ Build next generation adviser platform to remain preferred outsourcing partner and business coach to advisers § Leverage bank customer base to increase wealth management penetration § Build distinctive investment platform with multi channel distribution capability in the UK § Lead market evolution in Asia through differentiated distribution and investment approach 45
Positioning for Growth confirmed robust organic growth plans § Strategic focus
§ $370M p.a. cost reduction by 2004
§ Leverage past investments & capabilities
§ Increased revenues with 1380 new positions
§ Capture growth opportunities § Revitalise organisation
46
Positioning For Growth
§ Over $400M of investment in Wealth Management and Europe § Cultural change program
Summary § Strong results underpinned by core businesses § Key measures improved including ROE, ROA and Cost to Income § Asset quality remains sound § Capital position strong. Buy-back extended. § Positioning for Growth outcomes will enhance momentum 47
www.national.com.au
48
