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ASIC Half Yearly Accounts/media release

Document date:  Wed 05 May 1999
Published:  Wed 05 May 1999 00:00:00
Document No:  148215
Document part:  D
Market Flag:  N
Classification: 

HOMEX - Melbourne                                                     

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CHIEF FINANCIAL OFFICER'S REVIEW (continued)

ASSET QUALITY

The charge for doubtful debts was determined General Provision under
economic loss provision principles (ELP) and derived from our risk
management models. The ELP charge was stable compared with the second
half of 1998, reflecting the Group's improved risk profile. Actual
loss experience was contained within ELP the ELP charge.

The charge of $258 million, up from $250 million in the second half
of 1998, equates to approximately 44 basis points (second half 1998,
approximately 45 basis points) of average net lending assets.

Actual loss experience or net specific provisions during the
half-year totalled $234 million including: 

* $60 million on Asian exposures (mostly China)  
* $87 million on Australian and New Zealand exposures 
* $50 million on Middle East exposures 
* $11 million on South Asian exposures 
* $20 million on UK and  Europe exposures. 

Net specific provisions were lower than our expected loss in our
Australia and New Zealand businesses and higher in International.

The Group's aggregate Asian exposure reduced by 5% (in US dollar
terms) over the half, from USD 6.1 billion to USD 5.8 billion (refer
page 64). The reduction was largely achieved in Indonesia, South
Korea and China.

At 31 March 1999, the general provision stood at $1,421 million, a
surplus of $457 million (on a pre-tax equivalent basis) over the 0.5%
of risk weighted assets guideline indicated by the Australian
Prudential Regulation Authority.
             
NON-ACCRUAL LOANS

Gross non-accrual loans increased by $57 million from September 1998
to $1,719 million. New non-accruals of $144 million were booked in
Asia (including China), offset by realisations and write-offs.

The Group remains well provided with a coverage ratio of 50%, up from
46%.

Net non-accruals reduced by $41 million to $859 million and represent
9.3% of shareholders' equity at 31 March 1999.

INCOME TAX EXPENSE

                             Half            Half            Half
                             year            year            year
                           Mar 99          Sep 98          Mar 98

Effective tax rate
- before abnormal items     31.0%            30.1%           32.1%
- after abnormal items      31.0%            29.8%           32.1%


The tax expense on operating profit increased by $26 million on March
1998, however the effective tax rate decreased by 1.1%, reflecting
the impact of lower profits from higher tax jurisdictions, mainly
India.

The increase in the effective tax rate before abnormals on September
1998 mainly reflects lower levels of tax preferred and non-assessable
income.

BALANCE SHEET

Group assets are steady on September 1998.

Lending growth of 5% in the loan portfolio was achieved:
* Personal Banking in Australia up 11%, with growth in the mortgage
  portfolio of $3.4 billion (includes PIBA $1.4 billion)

* Commercial lending in Australia up 15% ($2.5 billion).

Interbank lending, mainly in London, continues to reduce.

The reduction in trading and investment securities reflects the wind
down of market portfolios following the cessation of proprietary
trading activities. Sales have reduced the emerging market portfolio
to $40 million from $231 million.

The decline in other assets and other liabilities is mainly
attributed to decreases in unrealised gains and losses on derivative
instruments.

Deposits and borrowings increased by 3%, mainly in Australia.

Total shareholders' equity increased by 10%, mainly due to the
further issue of USD 375 million preference shares in November 1998.

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