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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:  G
Market Flag:  N
Classification: 

HOMEX - Melbourne                                                     

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CHIEF FINANCIAL OFFICER'S REVIEW (continued)

Improvement in income has been driven by growth in the mortgage book,
particularly in Australia, reflecting both the purchase of the PIBA
(now Origin Financial Services) business in October 1998 and organic
growth in our business volumes. The organic growth reflects the
improved sales focus in the branch network and successful marketing
campaigns resulting in strong improvement in our market share over
the six months. New Zealand has also experienced strong mortgage
growth. Income from the Cards business continued to increase due to
higher transaction activity levels.

Improvement in non lending fees is evident as fee structures were
realigned to reflect better the cost of providing services,
contributing to higher income levels. This offset the one-off gain of
$26 million in the second half of last year from sale of the
investment in CRAA.

Expenses have fallen mainly due to declining staff numbers following
completion of the "Branch of the Future" implementation in Australia
and New Zealand.

Asset growth was modest in Corporate Relationships as we continued the
process of reducing volumes in the higher risk end of the book. Growth
was noticeable in commercial bill volumes and fees, which offset the 
contraction in margins from the improving quality of the portfolio. 
Margins in wholesale asset financing were squeezed as higher margin 
business rolled off.

Foreign exchange income was down to reduction in market activity, as 
currencies became less volatile.

The cessation of institutional broking impacted capital market fees. 
Profit share payments that were provided for in March 1998 were no 
longer required in September 1998 following significant losses in 
Capital Market activities.

International showed a strong rebound in profitability from the
disappointing trading results in London in the second half of 1998.

There were lower commercial lending volumes throughout the network,
particularly in Asia, Middle East and South Asia and the funding drag
of higher non-accrual levels in Asia and Middle East, reduced net
interest income. This was partly offset by higher margins in
international corporate lending. Structured Finance and Corporate
Relationships in Americas showed strong performance in the March 1999
half-year. The higher ELP charge reflects the deteriorated economic
circumstances of the regions.

Capital Markets profitability is reduced as a result of the winding
back of wholesale banking market activity in UK and Europe and the
decision to exit the London capital markets operations.

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