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Preliminary Final Report

Document date:  Thu 26 Oct 2000
Published:  Thu 26 Oct 2000 09:29:18
Document No:  168995
Document part:  B
Market Flag:  Y
Classification:  Preliminary Final Report , Dividend Record Date , Dividend Pay Date , Dividend Rate

AUSTRALIA & NEW ZEALAND BANKING GROUP LI      2000-10-26  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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CHIEF EXECUTIVE OFFICER'S REVIEW OF 2000 ANNUAL RESULTS

WE HAVE DELIVERED ON OUR FINANCIAL COMMITMENTS 

Three years ago when I was appointed Chief Executive Officer, I made
a number of financial commitments to shareholders and outlined how we
intended to transform the company to make it more valuable and more
sustainable. I am very pleased to report that we have achieved these
objectives over this period:

                     COMMITMENT        2000 ACHIEVEMENT

Earnings Growth      10%               15%
Cost Income Ratio    53% from 63%      51.7%
Return on Equity     20% from 15%      18.3%

THIS YEAR'S PERFORMANCE WAS PARTICULARLY STRONG

2000 has been our most successful year, with record profits and share
price. Earnings and EPS were both up 15% on the prior year.
Consequently, we announced an increase of 14% in total dividends for
the year. Also for the first time in recent years we were able to
fully frank the dividend.

We have again improved the return on shareholders' equity to 18.3%
from 17.2% in 1999 through the strong earnings performance and our
capital management program, including the $1 billion buyback
announced in April. As at 30 September 2000 this buyback was
approximately 50% complete.

We were also successful in improving the cost income ratio to 51.7%
from 54.5%, comfortably within our target of 53%. This has been
achieved despite an 18 basis point contraction in our net interest
margin, and emphasises the need to grow other operating income and to
manage costs on an ongoing basis. Again we were able to hold our
costs flat in a period of significant volume growth.

WE HAVE ALSO IMPROVED OUR BUSINESS FOUNDATION

At the same time, we promised shareholders we would rebalance and
diversify our business portfolio to emphasise growth sectors and low
risk businesses. During the past three years, we have grown our
Personal businesses substantially, such that this portfolio is now
the largest contributor to profits at 45% of Group earnings, with 25%
growth in earnings in 2000. ANZ now generates more domestic
mortgages, credit cards and auto loans than any other competitor. We
have also grown substantially our e-commerce businesses with
consumers and with business, and have gained a reputation for
innovation and excellence in this area.

In this strategy we created 21 separate business units to provide a
much more focused, competitive and responsive approach to customer
and product segments. Included in the portfolio are three new
customer businesses - Wealth Management, Small Business and General
Banking. Each now has end-to-end responsibility for their total
customer experience. Together with the existing Corporate and
Institutional Banking businesses they will ensure that we harness the
customer synergies from our product businesses, and build our
strategic position in higher growth and higher return areas.

We have also decided that the creation of an "e-bank with a human
face" will enable us to offer higher levels of customer service at
significantly lower cost. We will do this by embracing new Internet
related technologies, by continuing the rationalisation of our
current technology and operating platforms, and by improving our
face-to-face presence with customers.

We also recognise that future success is a function of achieving
performance levels, which meet the expectations of shareholders,
whilst investing sufficiently in growth activities for the future. We
have therefore identified a number of segments for special investment
over the next three years.

WE WILL ACCELERATE THE IMPLEMENTATION OF THE STRATEGY AND RELATED
RESTRUCTURING 

Using the financial capacity provided by the abnormal profit from the
sale of Grindlays, we have decided to accelerate the implementation
of the new strategy by bringing forward the development of the 21
specialised businesses, the e-transformation of our technology and
operational platforms, and the freeing up of resources to fund the
development of the high-growth businesses that are essential for our
future success.

This will require a substantial restructuring of our current
technology, premises and operational infrastructure across the Group.
In this result therefore, we have recognised a special restructuring
provision of $361 million to cover the costs involved.

The program comprises some 35 major initiatives, spread across our 21
businesses and support activities. Each has specific implementation
plans, and will be rolled out at different times over the next two
years. Announcement of the detail of these programs will be made in
due course, internally and externally as appropriate. The main
initiatives include:

 The modernisation and reshaping of our metropolitan branches and
 sales and service outlets into specially tailored retail outlets,
 configured around the specific needs of our three new customer
 businesses of Wealth Management, Small Business and General Banking.

 The transformation of our General Banking delivery platform,
 including a new sales and service platform, and imaging technology to
 improve productivity of processes and workflow.

 A substantial reengineering and upgrading of the Esanda systems and
 operations environment.

 The upgrading of our EFTPOS network to reduce maintenance and
 telecommunication charges and to increase flexibility for future
 enhancements.

 The simplification of our Asia Pacific business platforms and
 centralisation of operations.

 The rationalisation of our IT platforms, including the
 decommissioning of mid range IT systems, workflow improvements and
 other hardware upgrades required for e-transformation.

The program is intended to be completed during this year and next,
and we expect to recover the majority of this expenditure by the
third year from annual productivity improvements and revenue
enhancements. These funds will be available to invest in our growth
businesses and to contribute to growth in earnings per share.

WE NEED TO IMPROVE THE EXPERIENCE FOR OUR CUSTOMERS

Our corporate and upscale personal customers today experience a truly
differentiated service, and we are well regarded for this. The real
challenge for the future lies in providing a similar differentiated
experience for investment, small business and general customers. We
believe we have a real opportunity for ANZ to be quite distinctive.
The creation of the three new customer businesses - Wealth
Management, Small Business and General Banking is a significant step
in developing a more customer-focused approach in these core
segments. These businesses will drive the modernisation and
reconfiguration of our branch network to create branch environments
tailored to the needs of their customers. The new Sales and Service
platform, together with Customer Value Management software is a
further key component in creating a significant improvement in the
experience for our customers. We look forward to these initiatives
making a real difference for our customers in the periods ahead.

PREPARING OUR PEOPLE FOR THE FUTURE

ANZ has demonstrated it is an enlightened organisation that cares
about its people. We now have performance incentives available to
management at all levels. We will again provide staff with $1000 of
ANZ shares, and a beneficial share purchase program. Almost every
member of staff is now an ANZ shareholder. This year we have equipped
our people to face the future through the pcs@home offer, where we
provided heavily subsidised PCs, printers and Internet access. More
than 10,500 staff have taken up for the offer, which will help them
become more computer literate and web-enabled. We will repeat this
offer in the future for those who were unable to take it up in the
first round.

We are also developing a substantial online learning program,
including Australia's first eMBA. Other staff-friendly initiatives
are the Employee Share Save Scheme, Child and Elder Care kits, our
Talent Program and opportunities for community involvement through
the ANZ Staff Foundation.

ANZ's people agenda delivered a record increase in staff satisfaction
as shown in the 2000 Staff Survey. Together with the strong
leadership team who share my passion for ANZ, we will continue to do
more to make this a great place to work.

WE HAVE IMPLEMENTED A BALANCED SCORECARD FOR OUR TOP EXECUTIVES

Last year, we introduced, with good success, a new process to setting
the performance objectives of each member of the Chief Executive's
Group. For the coming year, focus will be on the following generic
objectives by the whole management team:

Performance     Achieving superior revenue and cost performance 
Growth          Building new growth businesses and revenues 
Transformation  The transformation of our technology and operating 
                platforms 
Customer        Improvement in customer and community experience 
People          Upgrading the culture, morale and talent base of the
                Group 
Control         Reducing risk and improving controls and compliance 
Collaboration   Collaborating and achieving synergy between the 
                businesses

The performance of the management and their compensation will depend
on their success against the totality of these objectives.

WE ARE CONFIDENT WE WILL CONTINUE TO DELIVER IN THE FUTURE

We have demonstrated a good balance between good earnings performance
and investing to produce growth in earnings over the medium term. We
are also developing a reputation for delivering against our past
promises. Shareholders should now have confidence that, over the next
2/3 years, we will again deliver against our new commitments:

 Earnings per share growth above peer average (target 10%+)
 Return on Equity 20%
 Cost Income ratio comfortably in the 40's
 Inner Tier 1 capital ratio 6%
 Credit rating category AA maintained

We have robust plans to achieve these objectives, and I look forward
to announcing our progress against these each half year.


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