Australia and New Zealand Banking Group Limited Background Briefing on New Zealand Tracking Stock David Ward General Manager Office of the Chief Executive Officer Presentation     Strategic Direction Business Strategies Current Performance Proposed Tracking Stock Issue ANZ: Financial Parameters        Assets A$149 billion Shareholder Equity A$9.2 billion Return on Equity 17.3% 30,000 staff Return on Risk Weighted Assets 1.2% Top 100 bank globally on Assets, profits and capital Market Capitalisation of A$16 billion (Eighth largest company in Australia) ANZ Profile Australia        New Zealand       International     $100B assets Full service 14% market share 4th largest bank 3 m customers Leader in Business Banking, Asset Finance, Credit Cards Bank of the Year - 1997 and 1998 $20B assets Full service 18% market share 4th largest bank 1 m customers Leader in Business Banking, Asset Finance $30B assets Niche commercial banking Widest Represented Australian Bank Leading foreign Bank in South Asia/Middle East (Grindlays) Span of International Operations UK & Europe • 3% of profit Americas • 4% of profit Asia Pacific • Pacific Since 1880 • Asia Since 1970 • 5% of profit South Asia/ Middle East ANZ Grindlays • Since 1854 • 7% of profit Australia • Since 1835 • 67% of profit New Zealand • Since 1840 • 14% of profit Business Unit Parameters Profit $m Assets $b Personal* 288 60 Corporate* 244 64 International 115 19 Centre 69 ___ 716 6 ___ 148 Total * Retail Asset Finance in Personal March 1999 Strategic Direction  Rebalance business mix largely organically  Focus on four strategic businesses      accelerate growth in personal build on strong position in corporate simplify and focus International build leading presence in e-Commerce Transform management process to ensure execution and delivery Optimising the Business Mix Return FX International Consumer Retail FM Personal Banking Trade Target Capital Markets Structured Finance Business Banking Asset Finance Proprietary Trading International Corporate Major Corporate Institutional Stockbroking Target Risk Business Strategies  Accelerate growth in personal financial services particularly in funds management by harnessing our distribution power  Build on our strength in the corporate sector, by growing services business, whilst reducing risk and improving return on assets  Simplify our international network to improve return, by focusing on Asia and the Pacific, by reducing risk and by investing in growth franchises  Swiftly build a leading e-Commerce presence, creating the banking platform of the future using internet technology Gains in Market Share 20 % Total Market Share 14 18 NAB CBA 16 WBC ANZ 12 20 Share of Housing Lending 13 12 14 10 % 1988 % 1993 11 10 Jun-94 1998 Share of Business Lending 30 % Feb-96 Oct-97 Jun-99 Share of Credit Cards 18 25 16 14 20 12 10 Jun-94 Feb-96 Oct-97 Jun-99 15 Jun-94 Feb-96 Oct-97 Jun-99 ANZ Has a High Quality Personal Customer Base Wealth Bands $(000) 20 60 100 200 70 80 500 1000 ANZ Other Industry Ave 0 10 20 30 40 50 60 90 100 Total Relationships (%) Source: Roy Morgan 1998 The Opportunity with Australian Customers Customer Base 2.7m All ANZ Customers High Value to ANZ High Value to True Retail Industry Market but limited ANZ business Source: Roy Morgan 98 Banking Makes up Roughly Half of Financial Services Estimated Value of An Australian Retail Customer (A$ Present Value) $6000 - 7000 General Insurance & Traditional Life Risk/Wealth Protection Investment Traditional Banking Non-traditional products A New Dedicated Business for Premier Customers     Premier Financial Package Dedicated Managers Premier Suites Dedicated Service Officers Build on Leading Corporate Position to Improve Returns  Market Leader in      Business Banking Auto Finance Foreign Exchange Investment Banking restructured Need to     Diversify Revenue Sources Reduce Risk Improve EVA Improve ROA Business Banking Australia: Risks reduced Shareholder Value Increased Risk Profile (% of Lending Assets) -50 Risk Level EVA by customer decile 0 50 100 Customer Deciles High 1997 1999 Low 1996 1999 1H Investment Banking Activities Restructured Restructured to focus on domestic markets and core products Withdrawn from non core activities such as London Capital Markets Reduction in risk levels and costs FX Money Trading Revenues( $m) Cumulative 350 300 No1 in FX in Australia (2nd year, BRW) Top 5 Asian FX house (Asia Money) 250 200 150 100 50 0 1-Apr-97 1-Aug-97 1-Dec-97 1-Apr-98 Only 1 negative week 1-Aug-98 1-Dec-98 1-Apr-99 Simplify and Focus International New York Money Centre Latin America Represntative Offices Closed UK Europe Money Centre & Private Banking Grindlays Leading foreign bank • 114 branches • 1-10% market share Asia •11 “footprint” branches •Trade and corporate •negligible market share Pacific Islands Leading bank • 36 branches • 20-60%share Simplify and Focus International Continue to Reduce Risk Imperatives for International Target Fewer, Deeper Positions Create Future Growth Platforms  Re-balance business mix towards consumer  Maintain strong lending policies  Target Top 2-3 foreign or Top 5 local position  Leverage strong positions and global capabilities  Deal with minor positions  Develop Asia-Pacific, e.g. Indonesia  Pursue acquisitions only where it creates a desired position, and can be managed Building a Leading e-Commerce Position Internet Banking Registrations Strategies    To build a strong e-financial services capability with rapid growth in registered users, online sales and site traffic To create a powerful set of new customer acquisition channels To develop new e-Commerce businesses, such as the E*Trade alliance, Auto Group 70000 60000 50000 40000 30000 20000 10000 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 1998 1999 Building a Leading e-Commerce Position Transform to new business • Personalised • Holistic • Lifestyle aggregated Customer Value ANZ Transact • Account Transfer • Applications • Transactions Inform • Basic presence • Brochureware Entry Level “Sticky” Customer Interact •Interactivity •Enquiry Visitor Functional Richness Advanced Execution is the Key      Difficult to differentiate strategically Aggressive targets to stimulate innovation Organic emphasis for the next 2/3 years New performance management discipline Real differentiation is through execution    Shareholder Performance Customer Experience Building Talent Out-delivering the competition is fundamental to success Organising to Deliver CEO John McFarlane Group Functions Strategy Alison Watkins Finance Peter Marriott People Governance Elizabeth Proust Activities Business Groups Personal Peter Hawkins Corporate Roger Davis International Elmer Funke Kupper Technology David Boyles Presentation     Strategic Direction Business Strategies Current Performance Proposed Tracking Stock Issue Momentum Evident in First Half $M 800 700 716 625 134 International 102 New Zealand 446 480 Australia Sep-98 Mar-99 550 600 500 182 400 70 97 300 200 373 100 0 Mar-98 Profit after Tax Risk and Costs Reduced 11.5 US$b Asian Exposure 6.1 5.8 75 % Cost Income Ratio 70 Sep-97 A$m 26 Equities Interest Sept-98 Mar-99 Market Risk (Var) 6 FX Sept-98 60 55 50 10 Mar-98 65 Mar-99 90 93 96 1H99 Relative Share Price Performance Index 100 - 1 October 1998 160 150 140 130 120 110 100 90 80 70 60 01-Oct-98 ANZ NAB WBC CBA 22-Dec-98 18-Mar-99 10-Jun-99 31-Aug-99 Second Half 1999   Second half broadly in line with market expectations Income up      flat net interest income growth in non-interest income Costs stable Provisioning stable Cost income ratio down Analyst’s Comments Alastair Hunter, J B Were Post FY98 Result Global concerns overshadow a strong domestic performance ... The reduction in the risk profile will add value to the shareholders... Post HY99 Result For further share price appreciation we will need to see: continued improvement in sentiment towards Asia, positive revisions to earnings forecasts, implementation of the strategic plan, improved confidence in management and a regeared balance sheet. Post Strategy Seminar ANZ has a clear vision and strategy in place. The key issue for investors now becomes confidence in management to execute the strategy. We are warming to the execution capability of ANZ…. Analyst’s Comments Mike Macrow, Merrill Lynch Post FY98 Result Our reduction in opinion reflects the higher asset quality risk inherent in a more commercially oriented bank Post HY99 Result The underlying result of $1.3b achieved our expectations. While ANZ has partially recovered from a chronic oversold position, some work is required to take the next step upwards. Post Strategy Seminar ANZ share price has underperformed CBA share price 30% and NAB by 15% since December 1996. Cost cutting and rationalisation of below hurdle activities suggest a price catch up is likely. ANZ Vision ANZ is a vibrant financial services company that delivers:  Superior performance and value for our shareholders  An experience which delights our customers  An environment where our people excel Presentation     Strategic Direction Business Strategies Current Performance Proposed Tracking Stock Issue ANZ Capital Management Principles Economic Capital Inner Tier 1 Equals Economic Capital Peers Rating Agencies Risk Adjusted Tier 1 Ratio Comparable to Peers Capital Structure ie, AA Status Shareholders Reduce Cost of Capital Cycle Manage Through The Cycle Rationale for Tracking Stock       Align shareholder base with location of assets/profits Increase ANZ Brand awareness Cost Efficient form of high “Equity Credit” Capital Diversify Shareholder Base/Reduce Cost of Capital Opportunity for Customers and Staff to own their Bank Increases ANZ weighting in the NZSE 40 ANZ New Zealand Tracking Stock Main Features An Investment in ANZ Group • Denominated in NZ$ • Dividends in NZ$ equal to ANZ’s dividend • Imputation Credits Attached • Ability to exchange to ANZ Shares • Mandatory Exchange after 30 years • Non Voting Exchange Mechanism    Both parties have the ability to trigger exchange at any time after initial period Slight discount applies if initiated by investor Investors can buy or sell the securities at any stage on the NZSE ANZ New Zealand Tracking Stock An Investment in ANZ Group  Key Differences Between This Security and ANZ Ordinary Shares     Is a Hybrid Security Expect New Zealand Investors to Receive Imputation Credits The Exchange Mechanism plus same Dividend Yield ensures price will track ANZ head shares Increases ANZ weighting in NZSE 40 New Zealand Tracking Stock Timing : Access : Q1 2000, subject to regulatory approvals Via Lead Managers, Usual Broker or ANZ Network Size : Sufficient to ensure liquidity Regulatory Approvals: Proceeding well Questions