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Half Yearly Report/ASIC Half Yearly Accounts

Document date:  Thu 26 Apr 2001
Published:  Thu 26 Apr 2001 15:06:18
Document No:  175940
Document part:  M
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)

GLOBAL CAPITAL MARKETS 
DAVID HORNERY

Provision of origination, underwriting, structuring, risk management, 
advice and sale of credit and derivative products.

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

Net interest income                       35              25
Other operating income                    46              44
Net inter business unit fees              (1)             (1)
Operating income                          80              68
External operating expenses              (19)            (18)
Net inter business unit expenses         (24)            (24)
Operating expenses                       (43)            (42)
Profit before debt provision              37              26
Provision for doubtful debts              (1)             (2)
Income tax expense and outside
equity interests                         (12)             (8)
Net profit attributable to members 
of the Company                            24              16
Operating expenses to operating income  53.8%           61.8%
Net specific provisions                    -               -
Total employees                          176             180

Global Capital Markets (GCM) is a specialised business unit 
operating in the derivatives and credit markets. The derivatives 
business covers a range of products including interest rate, credit 
and equity derivatives. The credit business incorporates all 
securities products, securitisation and loan syndication.

GCM derives and manages it revenue from the mark-to market of its 
trading portfolios less holding costs and receipt of fee income. For 
disclosures purposes, the business is required to separately 
identify net interest income, notwithstanding that performance is 
best assessed on a total revenue basis.

GCM's profit contribution increased by 33% to $24 million over the 
September 2000 half year result reflecting:

* business growth and development supported by strong line management 
and capabilities within each team

* a good performance from existing businesses including 
securitisation, credit trading and structured derivative product, the 
exit of non-strategic businesses such as client futures execution and 
clearing operations, and the introduction of Equity and Credit 
Derivative product businesses

* increased net operating income despite a difficult market trading 
environment, relatively low levels of liquidity and a contraction in 
margins

* operating expenses remain flat. Whilst employee levels are lower, 
overall capabilities are much stronger

Key achievements include:

* Arranger and Lead Manager of INSTO's Securitisation deal of the year

* IFR - Number 1 Lead Arranger Australian Syndicated loan league 
tables by number and Number 2 by volume in 2000

* IFR - Number 2 by number and volume NZ Syndicated Loans

* Lead Arranger INSTO Project deal of the year

* Number 1 issuer of Put Equity Warrants and Number 3 Overall Equity 
Warrants issue of the year to date

GCM has established a specialist group to review and replace its core 
infrastructure including the development of an eCommerce capability. 
The project is well advanced with expected releases of the technology 
over the next six months.

GLOBAL FOREIGN EXCHANGE
CHRIS COOPER

Provision of foreign exchange and commodity trading and sales related 
services to corporate and institutional clients globally

                                         HALF YEAR        HALF YEAR
                                          MAR 2001         MAR 2000
                                                $M               $M


Net interest income                            (5)              3
Other operating income                        125             102
Net inter business unit fees                    -              (1)
Operating income                              120             104
External operating expenses                   (24)            (21)
Net inter business unit expenses              (33)            (31)
Operating expenses                            (57)            (52)
Profit before debt provision                   63              52
Provision for doubtful debts                   (3)             (2)
Income tax expense and outside                
 equity interests                             (20)            (18)
Net profit attributable to                     40              32
 members of the Company
Operating expenses to operating 
 income                                      47.5%           50.0%
Net specific provisions                         1               -
Total employees                               197             199

Global Foreign Exchange (GFX) is a specialised business unit operating
in the foreign exchange and commodity derivatives markets. The foreign
exchange business covers foreign exchange sales, spot, forward and 
derivatives trading. It also offers an online foreign exchange 
management tool to business customers (FX Online). The commodities 
business includes derivatives trading in base and precious metals and 
is developing its soft commodities business. The bulk of customers are
directly serviced globally by specialist sales teams.

GFX has increased its contribution to the Group result by 18% to $40 
million for the half year. The growth in profit reflects:

* a 14% increase in income attributed to increases in customer 
activity and volatility in the spot and forward markets, together with
initiatives to provide extended coverage of European and US time 
zones. Derivative trading remained strong.

* a $6 million increase in operational expenditure due to the 
enhancement and upgrading of our risk management and client services 
systems, supporting existing foreign exchange business and expansion 
into commodities.

* our eCommerce investment in anz.com\fxonline.com. This has 
contributed strongly to our customer growth and accessibility, with 
over 700 FX Online users now registered, generating over 24,000 
transactions for the half year with a value in excess of $3 billion.

ANZ Global Foreign Exchange has maintained its leading market 
position, being rated:

* Number 1 AUD/USD Options Trading Team (1)
* Number 1 Foreign Exchange House in the Interbank Poll (2)
* A top 10 Asian FX House (3)

Strategically, the globalisation of Global Foreign Exchange's 
commodities business is progressing to plan. Complementing 
globalisation is the pursuit of other eCommerce opportunities to 
deliver commoditised foreign exchange products to its world-wide 
customer base.

(1) Euro money
(2) Greenwich
(3) Asia money

GLOBAL STRUCTURED FINANCE AND OTHER FINANCIAL SERVICES
GORDON BRANSTON

Provision of arranging, underwriting and advisory services, financial 
engineering solutions, the funding of large structured debt 
transactions and offshore institutional banking services. This 
business also includes Investment Bank back office functions.

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

Net interest income                       65             66
Other external operating income          111             84
Net inter business unit fees              (1)             -
Operating income                         175            150
External operating expenses             (122)          (120)
Net inter business unit expenses          45             48
Operating expenses                       (77)           (72)
Profit before debt provision              98             78
Provision for doubtful debts             (27)           (24)
Income tax expense and outside
equity interests                          14             15
Net profit attributable to members 
of the Company                            85             69
Operating expenses to operating income  44.0%          48.0%
Net specific provisions                   21              2
Net non-accrual loans                     48             39 
Total employees                          777            886

Global Structured Finance (GSF) and other Financial Services is a 
specialised business unit that provides a range of structured debt, 
corporate finance, leasing and leveraged financial products. GSF 
operates globally across a number of industry sectors, in particular, 
institutional banking businesses in London and New York. GSF delivers
tailored products and advice via its direct channel and by leveraging 
off Corporate and Institutional Banking, Asia and Pacific 
relationships.

The costs of total Investment Bank back office functions, which are 
included in this unit, are fully recovered from each Investment Bank 
line of business.

The Global Structured Finance and Other Financial Services result 
reduced by $4 million over the September 2000 half-year to $85 
million. Key drivers of the result were:

* a decrease in net interest income of $4 million with the current 
half impacted by the repayment of several high-yielding assets and 
offsetting volume growth

* a 9% increase in other income especially fees from structured 
financing areas

* reduced operating costs and employee levels

* volume related increase in the provision charge for doubtful debts 
in the current half. The September 2000 half benefited from a one-off 
release of provision no longer required for a sold entity.

During the September 2000 half, specific provisions were released in 
respect of a number of customers.

A substantial portion of the earnings of this business are denominated
in foreign currencies. Excluding the impact of exchange rate 
movements, costs in local currency terms were 8% lower than the 
September half.

Strategic initiatives focus on the selective use of the balance sheet 
to optimise growth in fee income and continually building specialised 
fee generative activities.

Balance sheet growth is in high quality assets and risk mitigated 
structured project finance, as well as selective growth in high 
quality corporate client loan assets.

The percentage of revenue represented by fee income continues to grow 
on the back of fee generative advisory and structuring activities.

GLOBAL TRANSACTION SERVICES
CAROLE ANDERSON (FROM 7 MARCH 2001)

Provision of cash management, trade finance, international payments, 
clearing and custodian services principally to institutional and 
corporate customers, and B2B eCommerce services.

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

Net interest income                       79             73
Other external operating income           98             91
Net inter business unit fees             (13)           (16)
Operating income                         164            148
External operating expenses              (47)           (41)
Net inter business unit expenses         (36)           (36)
Operating expenses                       (83)           (77)
Profit before debt provision              81             71
Provision for doubtful debts               -              -
Income tax expense and outside  
equity interests                         (27)           (25)  
Net profit attributable to members                              
of the Company                            54             46
Operating expenses to operating income  50.6%          52.0%
Net specific provisions                    -              1
Total employees                          848            825

Global Transaction Services (GTS) provides a range of specialist
products and services for corporate and institutional clients
including cash management, trade finance, payments, clearing,
custodian services and B2B eCommerce capabilities.

The GTS profit increased 35% over the September 2000 half year to $54 
million.

The growth in GTS primarily reflects:

* higher net interest income from growth in deposit volumes, partly 
offset by continued margin contraction from increased competitive 
pressures

* a 9% increase in other external income as a result of the 
introduction of new international payment products and a review of 
pricing structures

* a significant improvement in inter business unit income following 
successful implementation of workflow management and processing 
efficiencies in sales of international payment products

* contained operating expenses resulting from re-engineered and 
streamlined internal processes within trade, payments and transaction 
processing centres

* a one-off equity investment write off in September 2000.

During the half year to 31 March 2001, a number of projects were 
commenced to further improve cost structures, customer service and 
utilise internet technologies. These include the new joint venture 
trade processing business with enhanced system capability and 
web-enabling the corporate and institutional on-line banking portal 
and enquiry platform.

Business eCommerce's focus remains on realising the benefits from 
internal and external investments by continuing to deliver in core 
strategic areas:

* Corporate Banking Portal - the usage of established online services 
(FX Online and ANZ Connect) continues to grow, and the introduction of
web based workflow automation tools is improving customer service and 
operating efficiency

* eProducts - the first stage of a Secure Access and Authentication 
System, a key plank in our trust and authentication strategy, has been
implemented. Our investment in Identrus has been increased and our 
ePayments capability strengthened by an upgrade to the ANZ eGate 
platform

* B2B Trading Solutions - sales of anzebiz.com eProcurement and 
eAuctions have increased in the Australian and New Zealand markets. 
With our investment in Mosaic, the initial trading solutions offerings
have been completed.

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