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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:  F
Market Flag:  N
Classification: 

HOMEX - Melbourne                                                     

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CHIEF FINANCIAL OFFICER'S REVIEW (CONTINUED)

AUSTRALIA
 
Profit after tax increased by 29% on the March 1998 half-year
reflecting:

* Good growth in mortgage lending in Australia

* the net interest funding benefit of issuing Preference share
  capital

* good growth in retail lending and transaction fees offsetting the
  impact of lower brokerage fees following the closure of our
  institutional broking business

* the benefits of restructuring programmes on personnel and premises
  expenses

* the impact of the adoption of software capitalisation ($28 million)
  offset by

* higher computer contractor costs due to Year 2000 compliance
  testing and e-commence development

* dip in interest margins reflecting competitive pressures and the
  rebalancing of our portfolio towards mortgage lending and away from
  higher risk businesses.


Credit quality remains good in Australia.

There was an increase in the effective tax rate from 29.1% at March
1998 to 30.4% at March 1999 due to the lower levels of tax preferred
income. Other operating income in the September 1998 half-year was
boosted by the gain on the demutualisation of CRAA.

NEW ZEALAND

Profit after tax increased by 46% on the March 1998 half year, and
further improved on September 1998 reflecting:

* increased margins offsetting the impact of raising longer term
  finance to improve liquidity

* lower personnel costs flowing from lower FTEs as the benefits of
  restructuring programmes are now apparent
  
* lower premises costs.

Credit quality continues to be good notwithstanding the slow down in
the New Zealand economy in 1998.

INTERNATIONAL

Profit after tax has declined from March 1998, but it is up on
September 1998 after the significant trading losses in the latter 
half of 1998. 

The decline from March 1998 reflects:
* reduced profitability from investment banking and the wind back of
  money market activity in UK and Europe
  
* the funding drag of higher non-accrual levels in Asia and Middle
  East

* lower commercial lending volumes throughout the network,
  particularly in Asia, Middle East and South Asia as the Group has 
  focused on core strategic lending and as a result of difficult 
  economic conditions in those regions

* higher ELP charge reflecting deteriorated risk profile of the
  regions.

The Group's Aggregate Asian exposures reduced in US dollar terms over
March 1998 by USD 1.3 billion and by USD 0.3 billion over September
1998 to USD 5.8 billion. The reduction from September 1998 was
largely achieved in Indonesia, South Korea and China.

* Total non-accrual loans in International were $834 million, up from
  $694 million, mainly due to new non-accruals booked in Asia of $144
  million (including China).

* Net specific provisions totalled $147 million for International, of
  which $60 million related to Asia.

* Asian non-accrual portfolio continues to be well provided with a
  coverage ratio of 62%.

MORE TO FOLLOW

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