Media Release & ASIC Half Yearly Accounts

Document date:  Mon 01 May 2000
Published:  Mon 01 May 2000 11:19:03
Document No:  161584
Document part:  B
Market Flag:  Y
Classification:  Half Year Audit Review , Half Year Directors' Statement , Half Year Accounts 

AUSTRALIA & NEW ZEALAND BANKING GROUP LI      2000-05-01  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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MEDIA RELEASE

CEO COMMENTS ON 2000 INTERIM RESULTS
JOHN MCFARLANE, CHIEF EXECUTIVE OFFICER, ANZ

On my appointment as Chief Executive Officer, I made a number of
commitments to shareholders, as to how we planned to transform the
company to improve performance and improve the consistency of returns
to shareholders. I am pleased to report that we have continued to
deliver well on these commitments in our first half. With the sale of
Grindlays we now have the foundation we want in place. Our future
strategic emphasis will be on growth.

Firstly, let me remind you of our commitments and our performance
against each. We said we would:

* ACHIEVE SUPERIOR FINANCIAL PERFORMANCE. 

Deliver double-digit earnings growth 
Improve return on equity 
Bring down our cost income ratio by 10 points, from 63%

* RE-BALANCE OUR PORTFOLIO. 

Increase proportion of Personal business 
Enhance leadership position in Corporate 
Simplify and focus our International business 
Build momentum in e-Commerce

* REDUCE RISK TO LEVEL OF DOMESTIC PEERS.

ACHIEVE SUPERIOR FINANCIAL PERFORMANCE

DELIVER DOUBLE-DIGIT EARNINGS GROWTH.

Earnings were up 14% on the first half, and up 7% on the second half
of last year. Earnings per share were 10% higher. As a result, we
announced an increase of 12% in the Interim Dividend. We also
announced the return to full franking earlier than expected.

IMPROVE RETURN ON EQUITY.

The Return on Shareholders equity for the first half was 17.8%, up
from 17.3% in 1999. Earnings growth was the key contributor to this,
but capital management is increasingly an important part of our
strategy to improve return on equity. By late March, we had
successfully completed the $500 million buyback announced on 3
November. Last week we announced a second buyback, for $1 billion,
which is one of the largest buybacks undertaken by Australian
companies. Our lower risk profile together with active capital
management will assist in bringing our Inner Tier 1 capital levels
down into our target range of 6.0% to 6.5%. This will enable a
higher, but safe leverage, and a higher potential return on equity.

Bring down our cost income ratio by 10 points, from 63%. 

Our cost income ratio in the first half is 51.4%, which is well ahead
of schedule, even after adjusting for one-off income gains in the
first half. Again we were able to hold our actual costs flat in a
period of solid growth.

RE-BALANCE OUR PORTFOLIO

INCREASE PROPORTION OF PERSONAL BUSINESS. 

Personal Financial Services now accounts for 45% of Group earnings.
It consolidated the strong gains made during 1999 in the face of
severe margin pressure in the first quarter, when wholesale rates
moved well ahead of the official cash rate. ANZ has consistently and
significantly increased its market share of mortgage lending to 13.6%
and its lead in credit card purchases to 27.8%. over the past two
years.

ENHANCE LEADERSHIP POSITION IN CORPORATE. 

Corporate Financial Services has strengthened its leadership position
in corporate and institutional banking. The division achieved good
income growth while restraining costs.

SIMPLIFY AND FOCUS OUR INTERNATIONAL BUSINESS. 

One year ago, we signalled our intention to focus our international
activity principally on Asia-Pacific. Last week, we announced the
sale of Grindlays to Standard Chartered Bank. In addition to
delivering good value for shareholders, this transaction achieves the
planned re-positioning of the business in a single move, quickly, and
without substantial restructuring costs. The price of $2.2 billion
achieved at 2.3 times asset backing and 14.2 times first half
annualised earnings, in addition to a $0.9 billion dividend from
retained earnings, yields substantial value for shareholders. Our new
co-operation agreement with Standard Chartered in the Middle East and
South Asia means that we can continue to serve our customers well
into the future. We can also now focus on building our more natural
presence in Asia-Pacific.

GOOD MOMENTUM ON E-COMMERCE. 

We have made strong progress in e-Commerce. We have a leadership
position in on-line banking in the business sector (B2B) and have
caught up with the leaders in the consumer segment (B2C). We now have
over 250,000 personal customers online with anz.com. In Australia
some 15% of those customers who regard ANZ as their main bank, are
now online - the highest penetration level of any major bank. ANZ
e-Gate was the first bank-operated and managed internet payments
gateway in Australia to facilitate online business. Our FX Online
product, which enabled customers to directly deal foreign exchange
has been converted to a web platform. Good progress is also being
made in converting our on-line transaction banking product, ANZ
Online, which is used by 75% of our corporate and institutional
customers, to the web platform. We have joined global digital
certificate entity Identrus. The alliance with E*Trade is working
well with over 50% of new registrations for the online broking
service coming via anz.com. Other initiatives include our free
Internet Service Provider offering through Free Net, and the
expansion of the range of online application and simulation tools for
customers.

REDUCE RISK TO LEVEL OF DOMESTIC PEERS

In the previous year we had substantially exited all higher risk
trading and lending activities. The sale of Grindlays will
substantially further reduce our exposure to non-core emerging
markets. On completion, emerging market exposures will be one third
of the level at which we entered the Asian crisis. We have now
brought down our overall level of risk into line with our domestic
peers. Strong growth in our personal loan portfolio has been
accompanied in the first half by a higher than expected level of
specific provision. We have taken action to regularise this issue.

STRATEGY GOING FORWARD

The actions that we have taken over the past two years have given the
bank a much stronger foundation to harness the opportunities that the
future presents, and to deal with the environment and change that
lies ahead. To help us steer our future course we have intensified
our strategic planning process including the involvement of
international expertise in e-Commerce. The programme is progressing
well, and we are planning a presentation for analysts and
shareholders on strategy in mid July. The core elements of our
strategy going forward are to:

* IMPROVE SUSTAINABILITY OF CORE FRANCHISE. 

Accelerate growth of up-scale segments in Personal 
Address retail funds management strategic position 
Seek value enhancing infill acquisitions in Personal 
Continue to build leadership in Corporate

* RADICALLY TRANSFORM THE BUSINESS. 

Revolutionise cost base with web-based technology 
Rapidly enable ANZ customers on anz.com 
Become a more customer-centric company 
Build culture and talent to compete in the new economy

* ACCELERATE GROWTH PROGRAM. 

Accelerate pace of investment in growth segments 
Build substantial portfolio of e-products and businesses
Accelerate medium-term search for transforming acquisitions 
Improve our capacity longer term to participate in industry 
 consolidation on our terms

* DEVELOP STRATEGIC INTERNATIONAL POSITIONS. 

Build semi-global niche positions in trade, FX, structured finance, 
cards, e-Commerce 
Rapidly roll-out e-Commerce investments in Asia

LOOKING FORWARD

I began my tenure as Chief Executive, by making financial commitments
to shareholders, and by honouring these. Looking forward, we now need
to update these in the light of the environment and the progress we
have made. Our new goals are to achieve:

* EPS growth that outperforms the average of our peer banks

* A cost income ratio comfortably below 50%

* Increased Return on Equity with a target of 20%

* An Inner Tier 1 ratio approaching 6%

* Maintenance of our credit rating in AA category

Our first half was a good performance in a very difficult competitive
and interest rate environment. For the second half we expect
continued good momentum in underlying earnings growth. The expected
$400+ million profit from the sale of Grindlays will additionally
enhance the profit in the second half. The buyback should also assist
in translating continued bottom-line performance into good earnings
per share growth. Beyond this, we believe that the strategic
initiatives that we are taking in the traditional businesses and in
the field of e-Commerce internally and externally, will start to
contribute to earnings from 2001 onwards.

ANZ's 2000 Interim Results are available now on www.anz.com

For media enquiries, contact:

Paul Edwards, Head of Group Media Relations 
Tel: +61-3-9273 6955, +61-409-655 550 (mobile) 
email edwardpl2@anz.com

For analyst enquiries, contact:

David Ward, General Manager 
Office of the Chief Executive 
Tel: +61-3-9273 4185 or +61-412-216 896 (mobile) 
email david.ward@anz.com

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