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INVESTO
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Michael HawkerMichael HawkerGroup Executive
Australian Business &Personal Banking
March 2000
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DisclaimerDisclaimer
The material contained in the following presentation isintended to be general background information on WestpacBanking Corporation and its activities as at 17 March 2000.
The information is supplied in summary form and istherefore not necessarily complete. Also, it is not intendedthat it be relied upon as advice to investors or potentialinvestors, who should consider seeking independentprofessional advice depending upon their specificinvestment objectives, financial situation or particular needs.
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AGENDAAGENDA
• Operating environment
• Strategy
• 5 Point strategic plan
• Financial performance
• Outlook
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OPERATING ENVIRONMENTOPERATING ENVIRONMENT
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Economic outlookEconomic outlook
• Growth to hold around 4% in 2000• Housing strong momentum to slow in
second half - GST effect• Credit growth to stay around 10%• Core inflation to increase to around 3%
by end 2000• Interest rate up further 0.5% mid-year• AUD weak - recovery to around US 0.65
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Information and Technology
Economic and RegulatoryEnvironments
DEM
AN
D S
IDE SU
PPLY SIDE
• Direct economic andregulatory impacts
• Financial deepening andsophistication
• Changing productdemands
• Increasing technologypenetration
• Buyer behaviour
• Emerging valuepropositions
• Broadening of the financialservices market place
• Changing market structure
• Price and cost pressure
• Consolidation &globalisation
• Value chain unbundling
• Strategic alliances andrelationships
ChangingCustomerDemands
ChangingNature of
Competition
Rapid change in external environmentRapid change in external environment
• Processing & storage• Electronification• Communication• Systems & platforms
Capacity/cost/access:
• Technical standards
• Economic cycle & monetary policy• Supervision & prudential regulation• Fiscal policy & tax regime• Consumer protection• Industry standards• Direct market intervention
FinancialServices
Marketplace
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e-Business environmente-Business environment
• Increasing rate of technology change• Real-time, 7 by 24, frictionless economy• Branding is critical• Rapid execution of new business models• Co-ventures and alliances with content
providers & specialised aggregators• Consumers want multi-channel
relationship
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Banks well positionedBanks well positioned
• Established customer base
• Customer data rich
• Deal directly with their customers
• Multi-channel platform
• Banking & finance products generallyideal for electronic delivery
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STRATEGYSTRATEGY
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StrategyStrategy
Capture the significant valueembedded in our franchise through:
- a customer centric focus,
- delivering individualised financialsolutions,
- via a fully e-enabled, multi-channelplatform.
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5 POINT STRATEGIC PLAN5 POINT STRATEGIC PLAN
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1 Organise around where & how we createvalue
2 Optimise the ‘old’ production functions
3 Extend the enterprise and create newbusinesses
4 Deepen & broaden customer relationships
5 Build the capabilities & culture to succeed
5-POINT STRATEGIC PLAN5-POINT STRATEGIC PLAN
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•Customerservice
•Transactionprocessing
•Delivery
•Productmanagement,development &sourcing
•Riskmanagement
•Sales & marketing•Customerinformation & needsmanagement
•Brand management
Sales &Marketing
ProductSolutions
Servicing &ProcessingCustomer
Step 1. Step 1. Organise around where &Organise around where &how we create valuehow we create value
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New organisational modelNew organisational model
ProductSolutions
Servicing& Processing
Sales &Marketing
Shared Services (Cost-effective, client driven services)
Corporate Core (Strategy & oversight)
• AustralianBusiness &Personal Banking
• InstitutionalBanking
• WestpacTrust NZ
• Banking &Financial ServicesSolutions
• Technology &Operations
Request Service
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Strategic playsStrategic playsCustomer Focus
Product Focus
Man
ufa
ctu
rin
g F
ocu
s
Retailin
g F
ocu
sAggregator
Broker
Specialist
Manufacturer
• Superior customer understanding and information management
• Acts as trusted objective advisor, proactively sourcing andintegrating a broad array of best available products & services tomeet customer needs
• Emphasis in product management shifts from development anddesign to sourcing and alliance management
• Acts as a single point of contact, acting on behalf of customers forpost sale service
• Outsources non core/non customer critical operations
• Targets profitable market/customer segment niches
• Specialises in a narrow range of innovative products, providingflexibility via multiple derivations
• Largely automated delivery via screening criteria
• Requires different point of contact for each product (pooledservice resources)
• May outsource manufacturing and processing
• Uses search/compare engines to match customers to products
• Acts as a broker, reacting to current customer needs andsourcing ‘off the shelf’ products from multiple manufacturers
• Compiles delivery information to meet manufacturers’requirements
• Mass market focus
• Standard commodity products, with ability to mass customise
• Use simple criteria to automate delivery
• Requires different point of contact for each product (pooledservice resources)
• Leverages scale in processing
ProductSolutions
Servicing& Processing
Sales &Marketing
Major value chain focus
ProductSolutions
Servicing& Processing
Sales &Marketing
ProductSolutions
Servicing& Processing
Sales &Marketing
ProductSolutions
Servicing& Processing
Sales &Marketing
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Evolutionary shift in ourEvolutionary shift in ourstrategic modelstrategic model
Fully IntegratedManufacturer/Distributor
• Products mainly manufactured in-house
• Relatively narrow product range andmass market orientation (limitedcustomisation
• Individual product view of eachcustomer fragmented across multiplecontact points
• Resource intensive around in-housemarketing, operations & servicing
Trusted aggregator of financialsolutions
• Matching customer needs with bestavailable offering in the market
• Broad product range aggregatedacross suppliers to create individualfinancial solutions
• Integrated customer understandingindependent of contact point
• Focus on sales and service (productprocessing performed externally)
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IT E
nabl
edTr
ansf
orm
atio
nStep 2. Optimise the ‘old’ Step 2. Optimise the ‘old’
production functionsproduction functions
Extend theEnterprise
Create aNew Business
•Web enablement•Out & in-sourcing, JVs etc.•Supply chain
Low
Low
High
High
Potential for new customersand
Likelihood of alliances
EnhanceBusinessExecution
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ADSH
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Management
CorporateCore
Technology
StrategicSourcing
CallCentres
BankingOperations
NetworkDevelopment
RegionalInfrastructure
NewZealand
Creditcosts &
processes
TransTasman
General &admin. expense
reductions
FinanceRe-eng / SS
HR Re-eng /Shared
services
estpacPerformanceEnhancement
Program
IT Out-sourcing
ITEfficiencies
Operationscentres
Performance Enhancement ProgramPerformance Enhancement Program
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IT E
nabl
edTr
ansf
orm
atio
nStep 3. Step 3. Extend the enterprise andExtend the enterprise and
create new businessescreate new businesses
EnhanceBusinessExecution
Extend theEnterprise
CreateNew Business
• Web enablement
•Out & in-sourcing, JVs etc.
•Supply chain
• Increase business scope
• Reconfigured businessnetworks
• New - networks - value propositions - business models
Low
Low
High
High
Potential for new customersand
Likelihood of alliances
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e-Business - integrated acrosse-Business - integrated acrossthe Westpac Groupthe Westpac Group
Westpace-Business
Advisory Council
e-BusinessCentre of Excellence
ITPlatform
NewZealand
InstitutionalBank
Businessand
Personal
Strategyand
Alliances
• Run e-Businessas a business
• Integrated
• Consistent
• Optimise value
• Set charter
• Coordinatemessage
• Prioritise
• Define & monitor
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eBusinesseBusiness progress progress• F2 ‘Domain’ alliance• Discount share broking• eMarket - secure on-line payments for merchants• eBonds - bond distribution platform• Extranets
- Healthpay- IntroducerNet- PlannerWeb- DeskBank Extranet for Governments
• IMPEX - on-line Trade Finance platform
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200
400
600
800
1000
1200
1400
1998 1999E 2000E 2001E 2002E 2003E
b2c CAGR 68%b2b CAGR 99%
The b2b explosionThe b2b explosion
US$b
Source: Forrester Research
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eBusinesseBusiness - the next 12 months - the next 12 months
• eProcurement
• b2b tradingcommunities
EnhanceBusinessExecution
Extend theEnterprise
Create aNew Business
• Electronic bill presentment
• Online financial centre
• Additional extranets• Wireless Internet Access (WAP) rollout
• Real time decisioning (mortgages)
• Business online applications
• Bandwidth expansion
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• ‘Front end’ Customer RelationshipManagement (CRM) applications providing- message-enablement- workflow capability
• Specialised CRM training utilising EnActfrom Customer Analytics
• Leading edge data mining & marketanalysis technologies
Step 4. Deepen & broaden customer relationships
Step 4. Step 4. Deepen & broaden Deepen & broaden customer relationshipscustomer relationships
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Consumer customer value byConsumer customer value bysegmentsegment
0
5
10
15
20
25
Customer Value Segments
% in Segment $ Value per customerLow High
%
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Customer value and channel migrationCustomer value and channel migrationstrategies are deliveringstrategies are delivering
450
500
550
600
650
700
J-99 F-99 M-99 A-99 M-99 J-99 J-99 A-99 S-99 O-99 N-99 D-99
Consumer - PriorityCustomers
1500
1600
1700
1800
1900
2000
2100
2200
J-99 F-99 M-99 A-99 M-99 J-99 J-99 A-99 S-99 O-99 N-99 D-99
Consumer - Low valuecustomers
1.95
1.96
1.97
1.98
1.99
2
2.01
2.02
2.03
2.04
2.05
J-99 F-99 M-99 A-99 M-99 J-99 J-99 A-99 S-99 O-99 N-99 D-99
Consumer - Products percustomer (total base)
M-99 A-99 M-99 J-99 J-99 A-99 S-99 O-99 N-99 D-99
Consumer - Value percustomer
(000
s)
(000
s)
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Step 5. Step 5. Build the capabilities & Build the capabilities & culture to succeedculture to succeed
• Increasingly about intellectual capital• Strategic & executional skills critical
- not primarily technological• A performance culture built on
- strategic insights- speed & responsiveness- flexibility & adaptability
• Everyone becoming eBusiness savvy
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FINANCIAL PERFORMANCEFINANCIAL PERFORMANCE
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• Sustained returns on economiccapital well in excess of the cost ofcapital
• EPS growth consistently exceedingunderlying growth in the economy
• Flat expense line through to FY2001(adjusted for one-off accountingimpacts)
Financial performance targetsFinancial performance targets
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INVESTOR ROADSHOW INVESTOR ROADSHOWFinancial perform
ance
1995
1996
1997
1998
1999
70.1
70.0
58.9
53.51995
1996
1997
1998
1999
1342
1291
1132
10151995
1996
1997
1998
1999
Profit*R
OO
E*
$1,456m16.8%
EPS* 77.0¢47¢
15.5
14.6
13.91995
1996
1997
1998
1999
*All figures stated pre abnormals
Dividends
28
33
39
43
17.0
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Shareholder Value ScorecardShareholder Value ScorecardMeasure Target Progress
EPS growth Above peer avg. 9.6% - 2H99
Return on Capital At least 5% > CofC 17.2% - 2H99
TSR (rolling 3 yr) Top (1st)quartile 2nd quartile
Efficiency At least peer avg 57.1% - 2H99
Risk Profile AA- rating Maintained
Capital Tier 1 - 6.5% 7.0% - Sep 99
Loan Growth At least system avg12 mos to 12/99 = 14.3%
14.7%
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1999 - a tale of two halves1999 - a tale of two halves
Westpac Peer Average
Peer Rank
Net profit (pre abs) 6.6% 2.8% 1
Underlying profit 5.6% 0.4% 1EPS diluted (pre abs) 9.6% 2.7% 1ROOE 94bp 12bp 1Non-interest income 6.1% 3.5% 1Operating expenses -0.8% 2.7% 1
Note 1: Peer group - WBC, CBA, ANZ & NAB (all FY 1999 results).
Growth / change (H199 to H299)
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EPS growthEPS growth
2.0
4.5
8.1
0123456789
2H98-1H98 1H99-2H98 2H99-1H99
%
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Strong volume growthStrong volume growth
1998 1999 Growth Australia $bn $bn %
Housing 35.4 40.5 14.6
Credit cards 3.0 3.8 27.0
Non-housing loans 19.9 22.5 13.1
At call deposits 25.6 28.2 10.2
Funds under manag’t 20.2 23.8 17.6
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eBusinesseBusiness performance performance
• 200,000 on-line banking customers ( 4% of consumer base)
• Value transfers running at over$3 billion p.a.
• Rapid growth in on-line origination• High levels of customer satisfaction
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45
50
55
60
65
1996 1997 1998 1999 2H99WBC Peer Average
Expense to income*%
* Excludes goodwill
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Asset quality and provisionsAsset quality and provisionsAsset quality and provisions
0
2
4
6
8
10
1996 1997 1998 1999
WBC Peer Average
Net impaired assets to equity &general provision
%
0
50
100
150
200
250
1996 1997 1998 1999
WBC Peer average
%Total provisions to total
impaired assets
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Capital & risk profileCapital & risk profile
Capital Ratios
-2
2
6
10
14
1994 1995 1996 1997 1998 1999
%
Tier 1 Tier 2
A2/A+
A1/A+
1996199519941993 1997 1998 1999
Aa3/AA-
External Debt Ratings
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OUTLOOKOUTLOOK
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OutlookOutlook
• Financial performance remainson plan
• Positive outlook for meetingfinancial performance targets
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