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Preliminary Final Report & On-Market Buy-Back

Document date:  Wed 03 Nov 1999
Published:  Wed 03 Nov 1999 00:00:00
Document No:  154638
Document part:  G
Market Flag:  Y
Classification: 

HOMEX - Melbourne                                                     

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CHIEF FINANCIAL OFFICER'S REVIEW

OVERVIEW

Australia and New Zealand Banking Group Limited (ANZ) recorded an
result before abnormals was $1,175 million (and $1,106 million after
abnormals). Earnings per ordinary share before abnormals was 90.6
cents, up 17% from 77.2 cents. The return on ordinary shareholders'
equity before abnormals was 17.2% (1998 15.5%).

This result has been achieved as the Group rebalances its business
mix toward lower risk consumer related activities. The cost income
ratio was reduced to 55.0% from 60.9%, reflecting the benefits of
efficiency programs put in place last year. Risk has been contained
with non-accrual loans stabilised and Asian exposures reduced
further.

The 1999 result includes the benefit of capitalisation of software
costs ($39 million after tax) and the replacement of debt funding
with preference share capital ($57 million after tax). After
adjusting for these, the profit increase was 18%.

Net interest income increased $98 million on 1998, with 16% mortgage
lending growth in Australia and New Zealand, and the replacement of
debt funding with preference share capital (4 basis points),
offsetting the reduction in wholesale assets offshore.

Strong growth in fee income reflected higher activity levels in
banking and funds management, and the realignment of fee structures
to better reflect the costs of service.

Other income benefited from profit and loss on trading instruments
returning to more normal levels after the losses incurred in 1998.

Operating expenses decreased 4% ($144 million) on 1998 ($62 million
excluding the impact of change in the software capitalisation policy
and netting of sub-rental income) reflecting the Group's continued
focus on cost containment. The cost income ratio was reduced to 55.0%
from 60.9% in 1998.

The economic loss provision (ELP) charge for the year to September
1999 was $510 million, up from $487 million in 1998, reflecting
average net lending asset growth of 9%, offset by the Group's
improved risk profile. Actual loss experience of $482 million (down
from $512 million in 1998) was contained within the ELP charge.

There were no abnormal items in 1999.

The final dividend will be increased to 30 cents, bringing the full
year dividend to 56 cents, up 8% on 1998. The dividend is franked to
80%, up from 60% in 1998, and is to be paid on 20 December 1999.

The Group's capital position is strong with a Group Tier 1 capital
ratio of 7.9%, up from 7.2% at September 1998. The total capital
ratio was stable on 1998 at 10.7%.

On 3 November 1999 the Group announced its intention to undertake an
on market ordinary share buyback of up to $500 million.

The Group is being managed to maximise value for our shareholders.
Internally, total return to shareholders is measured through EVA(TM)
(Economic Value Added) a measure of economic profit. EVA(TM) is based
on operating profits after tax adjusted for the cost of capital, the
assessed value of imputation credits, and economic credit costs, EVA
(TM) for the year ended 30 September 1999 was $834 million up from
$579 million for the year ended 30 September 1998, using a cost of
capital of 11% (a hurdle rate of 15% is used for internal purposes).

LINE OF BUSINESS PROFIT AFTER TAX

Personal Financial Services increased profits by 33% to $622 million
from $466 million and represents 42% of the profit (up from 40% in
1998). Strong growth was seen in the mortgage lending portfolio in
Australia and New Zealand ($7 billion growth in net lending assets),
non lending fees rose and costs were reduced. 

result reflected growth in commercial bill lending and reduced costs.

The International network contributed $176 million to the result,
down from the September 1998 result of $220 million. This reflects
the deterioration in asset quality and the decision to rebalance the
international network to reduce risk by reducing exposures.

The results of Group (including discontinued businesses) improved on
1998 mainly due to the exit from loss making businesses, with an $81
million turn around on the 1998 loss of $87 million before abnormals.

MORE TO FOLLOW

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