Personal Financial Services - Achieving growth

1. Personal Financial Services - Achieving growth Peter Hawkins Head of Personal Financial Services 18 July 2000

2. Today’s agenda: Specialisation and growth 1) Product businesses 2) New customer businesses 3) Tomorrow’s growth

3. 1) Specialist product businesses • Cards • Mortgages • Funds Management and Insurance • anz.com

4. In November 1997 we separated product from distribution: • It has delivered: • Higher profits/ lower costs • Strong individual product businesses • Doubled sales • 200,000 more customers • Increased share of wallet • More recently, customer segmentation was overlaid on distribution

5. Financial performance Income Profit $m % % Net Interest Margin (LHS) Non Interest Income (RHS) Provisioning $m Costs % % Cost to Assets (RHS) Cost to Income (LHS) Actual Credit Costs Economic Credit Costs

6. Cards % Share of Personal Profit Key Initiatives and Strategy • Continue to improve and leverage QTV programs • Build leadership in e-commerce acquiring and other high growth merchant acquiring segments • Implement common operating platform (Vision Plus) in Australia and New Zealand • Acquisition through cross-sell to other Personal customers • Leverage acquisition of EFTPOS New Zealand Cards Growth AUS NZ Cardholders (m) 2.0 0.3 Cards Issued (plastics) 2.9 0.4 Outstandings ($b) 2.4 0.3 (Growth) 35% 12%

7. Mortgages Market Share % Share of Personal Profit Apr-00 Key Initiatives and Strategy New Sales by Origination Source 1H 2000 • Leading products • Broad distribution • Active database marketing campaigns • Cost management • 4 account processing systems into 1 • 4 processing centres into 2 • 24% reduction in cost/asset ratio (1st half) • 28% annual increase in Auto Approval rate • Funding flexibility Origin 14% ANZ Network 63% Third Party Introducers 23% ANZ Branded

8. Mortgages Channel Comparison New Lending Mortgage Margins % % Origin TPMI ANZ Network Drawdowns (#) Drawdowns ($) • Cross sell of third party mortgages has been effective: • 86% customers have an ANZ deposit account • 51% have an ANZ credit card Average Loan Life EVA $ Index 100

9. Funds Management Share of Personal Profit Funds under Management $m Ranking Assirt Retail FUM #7 Assirt Retail Inflow #10 New experienced management team in place 15000 10000 5000 0 Mar-99 Sep-99 Mar-00 Total Retail FUM inc Gateway Total Retail & Wholesale FUM • Strategy • Leverage bank distribution strengths/customers • Optimise products and features • Reposition Asset Management • Leverage off universal a/c and targeted marketing to grow IFA channel

10. anz.com Active Users Internet Banking Signups Internet Banking Phone Banking Internet Banking Users % of Total Relationships Internet Transactions (% of Total) Source: Ord Minnett and Roy Morgan Research

11. anz.com Online Applications - Credit Cards Internet Banking Customers Lending Deposit Number of Products Profit Attrition myanz.com Balance Balance • Their share portfolio via ANZ’s My Portfolio service • Sport news • Search engine • Weather • Favourite links • Travel information • Their ANZ account balances • Australian and overseas news • Stock prices, market wrap and watchlist • Horoscopes • Entertainment news • ANZ products and financial tools ANZ E*Trade

12. myanz.com

13. The separation of product from distribution has driven strong performance across products while increasing the network effectiveness Index

14. 2) New customer businesses • Wealth Management • Small Business • General Banking

15. We are now moving from a product/ distribution focus to product and customer focus • Creation of three customer businesses • wealth management • small business • general banking • Keeping strong product monolines • operational efficiency • functional expertise • third party distribution • Drive to market leadership for anz.com 3 Customer Businesses 3 Product Businesses anz.com Wealth Management Small Business General Banking Funds Management Cards Mortgages Personal eCommerce Small Business Wealth Management General Banking

16. Develop a Wealth Management offer that will truly differentiate us Strategy • Schwab-like offer, but with higher level of lending • extensive third party offering for FM & I, in addition to proprietary FM product • heavily bricks-and-clicks • underpinned by Universal Account CMA • offers customers choice from a menu of options • advice • product • value Share of Personal Profit Share of High Net Worth Customers CBA Westpac ANZ NAB St George Source: Roy Morgan Research

17. Recapture Small Business market share Share of Personal Profit Strategy Make separate Business Unit for focus: • end-to-end product and service delivery with control over all levers of business • full relationship-based offer with segment-specific products • develop third-party originator channel • coalesce small business e-Commerce • integrated seamless offering across relationship, branches, call centres, internet • 50,000 customers already online (20%) Small Business Share of Debt % Source: Greenwich Associates

18. A General Banking business focused on continuing to improve productivity and the customer experience Strategy • optimise sales and service delivery for general banking customers • formation of unit with accountability for infrastructure supporting majority of customers • control over both distribution and transaction products creates single responsibility for customer experience and migration to self-serviced channels • leverage information analytics capabilities for sales efficiency Share of Personal Profit Share of Mass Customers Branch Activity CBA WBC NAB ANZ St George Branch Withdrawals (m) No. A/cs (m) Transactions per A/C

19. 3) Tomorrow’s growth • Building capabilities

20. The CRM capabilities we are building deliver a comprehensive, end-to-end revolution of the customer experience and relationship • Create a seamless customer experience across channels, products, service and sales • Recreate relationship management by providing insightful customer information at all touch points • Change the selling paradigm: “when they’re in your space, be ready to sell” • Focus proactive selling through rich profiling • Align credit and pricing decisions to the risk, behavioural, and value profile of the customer • Deliver straight through processing to both improve service levels and reduce costs Our Objectives

21. Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations Customers The customer database provides a mature data warehouse environment • established 1996 • group-wide coverage • comprehensive customer and product data • customer profitability

22. Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations Customers Campaign management provides comprehensive data analysis and modelling • continuous marketing capability • Valex campaign management tool • multiple daily targeted campaigns • trigger events

23. Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations Customers The customer decisioning engine provides central customer management capability • Strata software decision engine • sophisticated models to: • profile customers • predict behaviour • create actionable decisions

24. Customer value drives how the customer base is segmented and managed Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations Customers • Examples of customer initiatives: • propensity of buy models to target offers to best prospects • attrition risk predictors to get in early if good customers look shaky • target offers of better sales and service to qualifying customers

25. Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations Customers Enterprise “factory” operations support differentiated selling and servicing by customer segment • Examples of operational decisions: • make better credit assessments, for a new card, or transaction authorisation • replace a “one size fits all” approach to collections with a segmented approach

26. Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations Customers Customers are afforded multiple access channels and managed to maximise relationship value • Sales and Service Platform • browser based • Getronics • multi-channel • Processing efficiencies and enhanced customer experience

27. This is a substantial program which will deliver end-to-end transformation • reengineering and automating servicing and credit fulfilment processes • total capital investment in excess of $200 million • deployment of over $100 million in improved infrastructure to deliver a paperless environment • communications bandwidth to branches • specialist peripherals such as scanners • high performance workstations at all touchpoints • windows 2000 • middleware • payback of about 2 years • sales uplift of 5% in business case • other organisations have experienced up to 25% uplift • implementation begins November 2000, completed by end 2001

28. Summary: Personal Financial Services • Specialist Product Businesses well established • Customer Businesses being elevated • Capabilities being built to drive tomorrow’s growth