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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:  I
Market Flag:  Y
Classification: 

HOMEX - Melbourne                                                     

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OPERATING EXPENSES

                                     1999          1998         Movt
                                       $M            $M            %

Personnel expenses                  1,732         1,854          -7%
Premises expenses                     314           347         -10%
Computer expenses                     344           341           1%
Other expenses                        813           776           5%
Restructuring (1)                      91           120         -24%

Total operating expenses            3,294         3,438          -4%

Employees (FTE) - Permanent        28,744        30,827          -7%
Employees (FTE) - Temporary         1,427         1,245          15%

Total employees                    30,171        32,072          -6%

(1) Restructuring expenses of $32 million relating to discontinued
    businesses were treated as abnormal in the year ended 30 September
    1998

Operating expenses reduced by 4% ($144 million) from 1998 ($62
million excluding the impact of the change in software capitalisation
policy and netting of sub-rental income) reflecting the Group's
continued focus on cost containment and objective of flat lining
costs. Costs were stable in the second half of 1999.

The decrease in personnel costs reflects the benefits of the Group's
restructuring programs, with the number of full time equivalent staff
falling by a further 6% from September 1998. This was offset to some
extent by increased performance related payments as trading profits
rebounded to more normal levels following the losses incurred in 1998
and sales incentive/performance schemes were introduced across the
Group.

Premises costs were down, as the Group exited surplus premises and
through the netting of sub-rental income. Computer expenses were up
on 1998 reflecting Year 2000 compliance work, and additional
expenditure incurred as the Group developed its e-Commerce presence,
partly mitigated by the capitalisation of software costs.

Other expenses were up on 1998, mainly in professional fees and
non-lending losses.

ASSET QUALITY

The charge for doubtful debts was determined under economic loss
provision principles (ELP) and derived from our risk management
models. The increase in ELP charge from $487 million to $510 million
reflects average net lending asset growth (9%) offset by an
improvement in the risk profile of the Group during the year. The
charge equates to approximately 43 basis points on average net
lending assets, down from 45 basis points at September 1998.

Actual loss experience or net specific provisions during the year
totalled $482 million, a reduction of $30 million from 1998. Net
specific provisions were lower than expected loss in Personal and
Corporate Financial Services, but still higher in International.

The current year net specific provisions include:

* $113 million on Asian exposures (mostly China) (1998: $263 million)

* $179 million on Australian and New Zealand exposures (1998: $139
  million)

* $118 million on Middle East exposures (1998: $60 million)

* $38 million on UK and Europe exposures (including Russia) (1998:
  $35 million)

* $26 million on South Asian exposures (1998: $17 million).

The Group's aggregate Asian exposure reduced by 8.2% (in US dollar
terms) over the year, from USD6.1 billion to USD5.6 billion (refer
page 61). The reduction was largely achieved in China, Indonesia and
Japan.

At 30 September 1999, the general provision stood at $1,395 million,
a surplus of $428 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 have decreased by $119 million on September
1998 to $1,543 million. New non-accruals of $293 million were booked
in Asia and $100 million in Middle East, offset by realisations and
write-offs, mainly in Australia including, the realisation of a large
non-accrual loan.

The Group remains well provided with a coverage ratio of 57%, up from
46% at September 1998.

Net non-accruals reduced by $243 million to $657 million and
represent 7.0% of shareholders' equity at September 1999.

                        1999               1998             % Movt
                  Gross      Net     Gross      Net    Gross      Net
                     $M       $M        $M       $M

Australia           623      345       852      561     -27%     -39%
New Zealand          50       30       116       83     -57%     -64%
Overseas Markets    870      282       694      256      25%      10%

Total             1,543      657     1,662      900      -7%     -27%


INCOME TAX EXPENSE

                                1999        1998
Effective tax rate 

- before abnormal items         31.3%       31.2%
- after abnormal items          31.3%       31.1%


There was no significant change in the Group's effective tax rate.

The Goods and Services Tax (GST) becomes fully operational from 1
July 2000. ANZ is well advanced on a program to implement the
technical requirements, to inform our staff and customers, and to
determine the impact on our products and services.

Most of ANZ's banking services are exempt from GST, that is, ANZ pays
GST on inputs but there is no GST collected on most of the services
provided. ANZ expects that the impost of GST will add approximately
$40 million to costs on an annual basis. It is the Group's intention
to seek to cover this additional cost through higher charges.

BALANCE SHEET

Group assets were stable on September 1998 at $149 billion.

Lending assets increased 8% reflecting:

* strong mortgage lending growth in Personal Financial Services, with
  growth of 16% in the mortgage portfolio ($6 billion including 
  Primary Industry Bank of Australia (PIBA) mortgage portfolio 
  acquisition of $1.4 billion)

* growth in Corporate lending in Australia and New Zealand, up 10%.

Trading and investment securities have reduced following the exit
from proprietary trading activities. Other assets are down due to
lower gross derivatives valuations. 

Group liabilities: 

* deposits increased by 2%, mainly in Australia
* interbank activity in London continues to reduce.

Total shareholders' equity increased by 12%, from the further issue
of USD 375 million preference shares in November 1998 and retained
profits.

The Group has announced that it plans to issue a new "tracking stock"
equity instrument in New Zealand in the first quarter of 2000.
Regulatory approvals are currently being sought.

MORE TO FOLLOW

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