Personal Financial Services - Achieving growth Peter Hawkins Head of Personal Financial Services 18 July 2000 Today’s agenda: Specialisation and growth 1) Product businesses 2) New customer businesses 3) Tomorrow’s growth 1) Specialist product businesses – Cards – Mortgages – Funds Management and Insurance – anz.com 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 Financial performance Profit $m Income % % 400 3.70 300 3.50 38 200 3.30 36 100 3.10 0 2.90 Mar-99 75 Sep-99 % 70 % Cost to Assets (RHS) 65 3 Sep-99 Mar-00 Provisioning 80 60 40 60 55 32 $m 100 4 2 Cost to Income (LHS) 20 0 50 1 Mar-99 Sep-99 Mar-00 40 34 Non Interest Income (RHS) Mar-99 Mar-00 Costs Net Interest Margin (LHS) Mar-99 Sep-99 Actual Credit Costs Economic Credit Costs Mar-00 Cards 30 Share of Personal Profit 9% % Share of Credit Card Spend 25 20 15 Jun-94 May-96 Apr-98 Mar-00 Key Initiatives and Strategy • Continue to improve and leverage QTV programs Cards Growth Cardholders (m) Cards Issued (plastics) Outstandings ($b) (Growth) • Build leadership in e-commerce acquiring and other high growth merchant acquiring segments AUS 2.0 2.9 2.4 35% NZ 0.3 0.4 0.3 12% • 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 Mortgages 15 Share of Personal Profit % Market Share 14 19% 13 12 11 10 Jun-94 New Sales by Origination Source 1H 2000 Origin 14% ANZ Network 63% Third Party Introducers 23% ANZ Branded Jun-96 Jun-98 Apr-00 Key Initiatives and Strategy • • • • 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 Mortgages 100 % Channel Comparison Origin 75 TPMI 50 ANZ Network 25 1.2 % New Lending Mortgage Margins 0.8 0.4 0 0 140 120 100 80 60 40 20 0 Drawdowns (#) $ Drawdowns ($) ANZ Network TPMI Origin Cross sell of third party mortgages has been effective: Average Loan Life EVA Index 100 • 86% customers have an ANZ deposit account • 51% have an ANZ credit card ANZ Network TPMI Origin Funds Management Share of Personal Profit 15000 15% $m Funds under Management 10000 5000 0 Mar-99 Sep-99 Mar-00 Total Retail FUM inc Gateway Total Retail & Wholesale FUM Strategy Ranking Assirt Retail FUM #7 Assirt Retail Inflow #10 New experienced management team in place • Leverage bank distribution strengths/customers • Optimise products and features • Reposition Asset Management • Leverage off universal a/c and targeted marketing to grow IFA channel anz.com Internet Banking Signups 300,000 Active Users 80 Internet Banking 60 Phone Banking 250,000 40 Australia 200,000 150,000 20 100,000 0 New Zealand 50,000 % of Active Customers 0 Oct-99 Jun-00 Internet Transactions (% of Total) 40 30 Feb-00 Average number of transactions per visit Internet Banking Users % of Total Relationships 10.2 8.9 8.9 7.9 5.1 Direct Banking Logins 20 10 BPAY Transactions ANZ 0 Oct-99 Feb-00 WBC NAB St G CBA Jun-00 Source: Ord Minnett and Roy Morgan Research anz.com Online Applications - Credit Cards 2000 Internet Banking Customers 300 1500 Index: 100 = average retail customer 1000 200 500 100 0 0 Oct-99 Lending Balance % Deposit Balance Number Profit of Products ANZ E*Trade Share of contract notes 30 Attrition Feb-00 myanz.com • Their ANZ account balances • Australian and overseas news • Stock prices, market wrap and watchlist 15 • Horoscopes 0 • Entertainment news Nov-99 Jan-00 Mar-00 May-00 Jun-00 • ANZ products and financial tools • Their share portfolio via ANZ’s My Portfolio service • Sport news • Search engine • Weather • Favourite links • Travel information myanz.com The separation of product from distribution has driven strong performance across products while increasing the network effectiveness Index 250 200 Sales events 150 Service events 100 Australasian Distribution staff (FTE) Jan1999 = 10,600 May 2000 = 8,975 50 0 Jan-99 Apr-99 Jul-99 Oct-99 Jan-00 Apr-00 2) New customer businesses – Wealth Management – Small Business – General Banking We are now moving from a product/ distribution focus to product and customer focus 3 Customer Businesses Wealth Management • • • Small Business General Banking 3 Product Businesses Funds Management 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 Cards Mortgages anz.com Personal eCommerce 100% Small Business 75% Wealth Management 50% 25% General Banking 0% Number of Customers FUM Develop a Wealth Management offer that will truly differentiate us Share of Personal Profit 45 40 35 30 25 20 15 10 5 0 Sep-97 14% Strategy Share of High Net Worth Customers CBA Westpac ANZ NAB • 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 St George Jun-98 Mar-99 Dec-99 Source: Roy Morgan Research Recapture Small Business market share Share of Personal Profit 9% 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 segmentspecific products % Small Business Share of Debt 16 14 • develop third-party originator channel • coalesce small business e-Commerce • integrated seamless offering across relationship, branches, call centres, internet 12 • 10 8 Jan-98 Jul-98 Jan-99 Jul-99 50,000 customers already online (20%) Jan-00 Source: Greenwich Associates A General Banking business focused on continuing to improve productivity and the customer experience Strategy • Share of Personal Profit optimise sales and service delivery for general banking 33% customers • formation of unit with accountability for infrastructure supporting majority of customers • Branch Activity 10 Share of Mass Customers transaction products creates single responsibility for customer 8 6 CBA 4 WBC 2 0 No. A/cs (m) Branch Transactions Withdrawals (m) per A/C NAB ANZ St George control over both distribution and experience and migration to selfserviced channels • leverage information analytics capabilities for sales efficiency 3) Tomorrow’s growth – Building capabilities The CRM capabilities we are building deliver a comprehensive, end-to-end revolution of the customer experience and relationship • Our Objectives 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 The customer database provides a mature data warehouse environment Front Office Customer Database Campaign Management Customer Decision Strategies • established 1996 • group-wide coverage • comprehensive customer and product data • customer profitability Channels Operations Customers Campaign management provides comprehensive data analysis and modelling Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations • continuous marketing capability • Valex campaign management tool • multiple daily targeted campaigns • trigger events Customers The customer decisioning engine provides central customer management capability Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations • Strata software decision engine • sophisticated models to: – – – profile customers predict behaviour create actionable decisions Customers Customer value drives how the customer base is segmented and managed Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations 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 Customers Enterprise “factory” operations support differentiated selling and servicing by customer segment Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations Customers 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 Customers are afforded multiple access channels and managed to maximise relationship value Front Office Customer Database Campaign Management Customer Decision Strategies Channels Operations • Sales and Service Platform – browser based – Getronics – multi-channel • Processing efficiencies and enhanced customer experience Customers 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 Summary: Personal Financial Services • Specialist Product Businesses well established • Customer Businesses being elevated • Capabilities being built to drive tomorrow’s growth