The Australian Banking Scene

1. The Australian Banking Scene - competing in a globalising world Presentation to XXXI World Congress of the International Association of Financial Executives Institutes John McFarlane Chief Executive Officer 10 October 2000

2. The four major banks account for a substantial share of the traditional banking market Source: Roy Morgan Research, Roberts Research, APRA

3. Superannuation is growing at the expense of deposits, but asset growth continues $ $ Source: APRA

4. Deregulation of the banking industry has transformed customer choice Source: ABA/RBA

5. Australia has been an early adopter of Internet Banking ANZ Sep-00 • Australia behind Scandinavian countries, but compares well to other countries • ANZ is leading Australian banks in terms of penetration of customer base Source: CSFB, ANZ

6. Increasing need to balance broader stakeholder objectives Shareholders Customers Staff Corporations Governments Communities

7. Forces driving change Globalisation Financial services War for talent Technology/internet Customer experience Imperative to perform Community expectations Need for growth Competition - costs/margins

8. Transitioning to the global new economy Liberalisation Globalneweconomy Oldeconomy Mobility of capital Digital world Revolution in Interaction Costs

9. Technology transforms what customers expect Cost of a 3-minute telephone call from New York to London Time required to find a high rate certificate of deposit 1996, $ 25 min Telephone 10 min www www with agent 1 min

10. %NIM Egg Launched Headline Net Interest Margin Halifax Net interest margin Lloyds/TSB Supermarkets Egg 95 96 97 98 99 We have no choice but to transform our economics %FUM Operating Costs Ratio Schwab to ANZ Retail 1.8 Retail Branch 1.2 Other 0.6 Operating Costs Other Salaries Example: Entry of US Monolines into UK Credit Card Market UK Interest Margins %NIM 20 15 ~30% margin compression 10 5 0 91 93 95 97 99 MBNA, Capital One

11. EDS IBM Yodlee Quicken Product Manufacturing Distribution Channels & Processing Sales & Marketing Customer Need Countrywide AHL House Purchase MBNA NextCard Credit Card Cash Deposit Egg ING Wealth Mgmt Fidelity Schwab Specialists are targeting segments of the value chain

12. Specialists have been more successful than integrators Schwab MBNA Lloyds TSB Global Mega Players Specialists Amex Santander Macquarie Citigroup 4 Market/Book Ratio CBA WBC Bank of America NAB ANZ StGeorge Geographic incumbents Geographic integrators 1 20 50 Book Equity

13. Fragmentation . . . to consolidation . . . and specialisation Leading to globalisation leading to globalisation Many Australian institutions focused on consolidation stage USA EUROPE AUSTRALIA ASIA

14. Sacrifice earnings to build growth Deliver earnings but sacrifice growth ANZ historically (1995-1999) Improving performance requires a good balance between EPS growth and increasing expectations PE Ratio Aspiration Improved EPS growth and higher PE ratio PE growth EPS growth EPS growth %

15. The basis of success is changing Incumbents’ historic advantages . . . Neutralised in some/most cases Privileged access to customers, technology, labour, and capital – hard for others to compete Access available to everyone – easier for new competitors to enter and for customers to compare and switch Familiarity with local ways of doing business needed Regional/global standards and protocols become common – local familiarity becoming less important Vertical integration the best model No real need for integration within the company – can be accomplished with external parties Protection from capital market pressure Capital market rewards the strong and punishes the weak

16. ANZ’s response • Proposition • Specialists will win over integrated firms • New technologies will deliver superior customer value and erode margins • Value creation requires a balance of earnings growth • Strategy • Reconceive ANZ as a portfolio of specialists • Become an “e-Bank with a human face” • Create portfolio of growth businesses which leverage capabilities • Implications • Concentrate resources in targeted businesses • Use technology to reduce costs and improve service proposition • Manage short term earnings growth to ensure realisation of longer term growth opportunities Specialisation e-Transformation Growth

17. Increasing job mobility More complexity multi-cultural/lingual technology literacy global acumen entrepreneurial skills Competing with start-ups Demand exceeds supply Importance of intangible assets know how know how relationships intellectual property Freedom to create Building wealth Modern values Learning Meritocracy Talent is a critical determinant of future performance War for talent

18. Change of emphasis in portfolio Substantial e-transformation reducing costs and focused service Performance optimised Eps, ROE, investment capital management Transformational cultural change Substantial portfolio shifts Narrower, more focused portfolio with leading positions Increased investment in high growth business Modern performance culture Higher stock rating ANZ in the medium term ANZ in 1 - 3 years ANZ in 4 - 7 years

19. Copy of presentation available on www.anz.com

20. 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.com or contact Philip Gentry Head of Investor Relations ph: (613) 9273 4185 fax: (613) 9273 4091 email: gentryp@anz.com