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Half Yearly Report/ASIC Half Yearly Accounts

Document date:  Thu 26 Apr 2001
Published:  Thu 26 Apr 2001 11:36:52
Document No:  175940
Document part:  K
Market Flag:  Y
Classification:  Half Yearly Report , Half Year Audit Review , Half Year Directors' Statement , Half Year Accounts , Dividend Record Date , Dividend Pay Date , Dividend Rate , Other

AUSTRALIA AND NEW ZEALAND BANKING GROUP       2001-04-26  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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CHIEF FINANCIAL OFFICER'S REVIEW (CONTINUED)

SMALL BUSINESS
GRAHAM HODGES

Provides a full range of banking services for metropolitan based 
small businesses.

                                                   HALF        HALF
                                                   YEAR        YEAR
                                                   MAR 01      MAR 00
                                                   $M          $M

Net interest income                                121         122
Other external operating income                     30          31
Net inter business unit fees                       (26)        (29)

Operating income                                   125         124
External operating expenses                        (34)        (36)
Net inter business unit expenses                   (10)        (14)

Operating expenses                                 (44)        (50)

Profit before debt provisions                       81          74
Provision for doubtful debts                        (8)         (5)
Income tax expense and outside equity interests    (25)        (24)

Net profit attributable to members
 of the Company                                     48          45

Operating expenses to operating income              35.2%       40.3%
Net specific provisions                              7           6
Net non-accrual loans                               13          16
Total employees                                    673         777

Small Business manages banking relationships with metropolitan based 
small to medium enterprises (less than $10 million turnover) and the 
manufacturing and distribution of business lending, transaction and 
deposit products. In addition, Small Business distributes products 
sourced from products businesses including Cards, Mortgages, 
Investment Management, Asset Finance and Global Transaction Services.

Small Business is in its start up phase as a stand alone service
proposition. Profit increased 9% to $48 million over the September
2000 half. This result has been achieved by maintaining a low risk
profile and focusing on cost management. Key factors of the result
are:

* net interest remained flat and balance sheet growth subdued in line
with the broader economic environment faced by our customers, and
reduced margins on deposits, but also partly due to an increased
focus on the management of credit risk

* the subdued balance sheet growth has resulted in flat lending fee 
income

* the flat market conditions have led to a strong focus on cost 
management and costs overall have come down resulting in the 
improved profit result

Small Business is in the process of implementing an enhanced customer
focused service proposition. This proposition will enable service to
be provided via a number of different channels including traditional
face to face service and eCommerce channels. Small Business is also
driving the development of web based customer tools to enable
customers to run sensitivity analysis of their businesses. An example
of the enhanced eCommerce proposition is the initial release of
'runningmybusiness' on anz.com.


WEALTH MANAGEMENT
CRAIG COLEMAN

Private Bank and Premier staff provide investment advice and 
comprehensive financial solutions to meet the wealth creation, 
management and protection needs of high net worth customers

                                                   HALF        HALF
                                                   YEAR        YEAR
                                                   MAR 01      MAR 00
                                                   $M          $M

Net interest income                                 46          39
Other external operating income                     12           6
Net inter business unit fees                        26          39

Operating income                                    84          84
External operating expenses                        (57)        (54)
Net inter business unit expenses                    (9)         (6)

Operating expenses                                 (66)        (60)

Profit before debt provision                        18          24
Provision for doubtful debts                        (1)         (1)
Income tax expense and outside equity interests     (6)         (8)

Net profit attributable to members
 of the Company                                     11          15

Operating expenses to operating income              78.6%       71.4%
Net specific provisions                              1           1
Net non-accrual loans                                1           1

Total employees                                    886         853

Wealth Management provides advice-focussed financial management to
high net worth customers. It manufactures and distributes lending,
transaction and deposit products including cash management and margin
lending products while sourcing and distributing investment,
Mortgages, Cards and third party products including ANZ E*Trade.

Wealth Management commenced as a stand-alone service proposition on 
1 October 2000. Key factors contributing to the result are:

* increased net interest income with volume growth being partly
offset by market rate cuts of 0.75% adversely affecting interest
margins on deposits

* other operating income has increased as a result of growth in
product sales, including third party investment products, consistent
with our strategy to offer investment choice

* inter business unit income has reduced in the current half year as
result of an increase in the up-front commissions paid to General
Banking as part of a campaign to strongly promote the sale of
investment products, and a GST related increase in processing fees

* operating costs reducing by 3%

The bringing together of the Private Bank and Premier Financial
Services businesses delivers a scale which makes it possible to
extend this proposition to the broader mass affluent market in an
efficient way. This will be achieved by leveraging our existing
distribution capacity and further developing our direct channels.

Wealth Management's cash management, margin lending and online share
trading product businesses, together with expertise in capital
markets and other specialist products, provide the foundation for the
development of a comprehensive offering including ANZ and third party
product, which enables our customers to confidently consolidate their
business with ANZ.


CARDS
BRIAN HARTZER

Provides consumer and commercial credit cards, personal loans, and 
merchant payment facilities in Australia, New Zealand, and selected 
overseas markets.

                                                   HALF        HALF
                                                   YEAR        YEAR
                                                   MAR 01      MAR 00
                                                   $M          $M

Net interest income                                155         125
Other external operating income                    180         151
Net inter business unit fees                       (31)        (37) 

Operating income                                   304         239
External operating expenses                       (119)        (94)
Net inter business unit expenses                   (32)        (28)

Operating expenses                                (151)       (122)

Profit before debt provision                       153         117
Provision for doubtful debts                       (63)        (57)
Income tax expense and outside equity interests    (32)        (26)

Net profit attributable to members
 of the Company                                     58          34

Operating expenses to operating income              48.7%       51.0%
Net specific provisions                             64          59
Net non-accrual loans                                2           3

Total employees                                    869         590

Cards provides proprietary and co-branded credit cards to consumers
and businesses in Australia, New Zealand and Hong Kong. Integrated
merchant payment facilities are available to customers in Australia,
and New Zealand through subsidiary EFTPOS New Zealand Ltd. Unsecured
personal lending to consumers through instalment loans and revolving
lines of credit is a further Cards product.

Cards profit increased 29% over the September 2000 half year to 
$58 million. Key drivers of the result are:

* net interest income increasing 12%, due to modestly increased
margins, and a 14% increase in total credit card outstandings. Market
share of credit card outstandings has increased to 18.4%(1)

* other external income increasing 9% through increased volumes, the
introduction of new fees, and a rebalancing of fee pricing

* operating expenses increasing $19 million and $10 million over each
of last two half years, primarily as a result of the purchase of
EFTPOS New Zealand on 1 June 2000. This purchase resulted in the
addition of 189 staff. The launch of a new Cards Issuing business in
Hong Kong will result in the addition of 47 staff and an annualised
cost of $10 million. The introduction of GST has added $3 million to
operating costs in the half year.

Cards includes the unsecured personal lending portfolio. Changes to 
the credit scoring cut offs for this product have decreased the level 
of provisioning required. Loss rates on the residual portfolio remain 
unacceptable but are declining as the portfolio ages. Specific 
provisions on personal loans totalled $32 million, decreasing from an 
annual $76 million in 2000.


(1) Source: Reserve Bank of Australia Transaction Cards Statistics 
    Bulletin - January 2001


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