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:  N
Market Flag:  Y
Classification:  

HOMEX - Melbourne                                                     

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CHIEF FINANCIAL OFFICER'S REVIEW (continued)

BUSINESS SEGMENT - PERSONAL FINANCIAL SERVICES

                                       1999         1998     Movt
                                         $M           $M        %

Net interest income                   1,861        1,808       3%
Fee income                              896          784      14%
Other operating income                   58           41      41%

Net operating income                  2,815        2,633       7%
Operating expenses                   (1,778)      (1,840)     -3%

Operating profit before debt 
provisions                            1,037          793      31%
Provision for doubtful debts           (110)        (103)      7%
Income tax expense                     (305)        (224)     36%

Operating profit after tax before 
abnormals                               622          466      33%

Operating profit after tax before 
abnormals
Personal Banking                        532          396      34% 
Funds Management                         90           70      29%

                                        622          466      33%

Net specific provisions                  96           79      22%
Operating profit after tax as a % 
of average risk weighted assets (%)    2.0%         1.4%      n/a
Operating expenses to net 
operating income                      62.9%        69.9%      n/a

Total assets                         55,915       47,229      18%

The key factors influencing the result of Personal Financial Services
were: 

* record growth in mortgage lending, leading to increased market 
  share albeit with lower margins on third party origination business 
* increased volumes and realignment of fee structures to
  better reflect the cost of providing services 
* 14% increase in funds under management to $15 billion (Gateway now 
  exceeds $3 billion). 

Expenses continue to fall, driven by: 

* reduction in staff numbers to 12,919 following extensive platform 
  rationalisation 
* integration of Town and Country in Western Australia 
* capitalisation of software developed for Tasman project ($38 
  million).

The increased economic loss provision charge reflects growth in
average lending assets, offset by asset mix. Net specific provisions
and non-accrual loans have increased, reflecting the growth in
volumes. Asset quality has been relatively stable, other than in
Cards where relatively higher loss experiences on new products has
resulted in an increase in net specific provisions.

BUSINESS SEGMENT - CORPORATE FINANCIAL SERVICES 

                                        1999       1998      Movt
                                          $M         $M         %

Net interest income                      956        900        6%
Fee income                               596        527       13%
Other operating income                   307        359      -14%

Net operating income                   1,859      1,786        4%
Operating expenses                       (88)      (920)      -4%

Operating profit before debt provisions  976        866       13%
Provision for doubtful debts            (219)      (217)       1%
Income tax expense                      (207)      (177)      17%

Operating profit after tax before 
abnormals                                550        472       17%

Operating profit after tax before 
abnormals
Corporate Relationships                  445        361       23% 
Foreign Exchange                          63         78      -19%
Capital Markets                           42         33       27% 

                                         550        472       17%  

Net specific provisions                  111        109        2%
Operating profit after tax as a % of 
average risk weighted assets (%)        0.8%       0.8%       n/a
Operating expenses to net operating 
income (%)                             47.3%      51.5%       n/a

Total assets                          67,185     70,718       -5%

The growth in Corporate Financial Services primarily reflects: 

* growth in Corporate sector business in Australia and New Zealand, up
  10% 
* the windback of lower margin money market activity in UK 
  and Europe, offset by shrinking margins in Asset Finance 
* higher earnings in Structured Finance 
* strong growth in fee income through increased commercial bill 
  activity, particularly trade related bills and a new fee structure 
  in Esanda 
* growth in "ANZ On Line", the PC based banking product for Corporate 
  customers 
* reduction in personnel expenses (FTEs reduced 12% from September 
  1998 to 4,802), offset by increases in profit share payments as 
  trading profits returned to normal levels after the 1998 losses.

Esanda has acquired a 10% stake in Auto Group Limited, Australia's
largest automotive auction group. Auto Group has an expanding
e-Commerce presence through carnet.com.au and will enhance Esanda's
e-Commerce capacity. Esanda is already the leading provider of
on-line car loans.

The economic loss provision charge was stable with average net
lending asset volume growth of 9% offset by improved credit factors
as the portfolio continues to be rebalanced away from higher risk
customers.

BUSINESS SEGMENT - INTERNATIONAL
  
                                          1999       1998      Movt
                                            $M         $M         %

Net interest income                        569        597       -5%
Fee income                                 240        251       -4%
Other operating income                     144        189      -24%

Net operating income                       953      1,037       -8%
Operating expenses                        (521)      (533)      -2%

Operating profit before debt provisions    432        504      -14%
Provision for doubtful debts              (154)      (155)      -1%
Income tax expense                        (102)      (129)     -21%

Operating profit after tax before 
abnormals                                  176        220      -20%

Net specific provisions                    247        301      -18% 
Operating profit after tax as a % of 
average risk weighted assets (%)          1.2%       1.5%       n/a
Operating expenses to net operating 
income (%)                               54.7%      51.4%       n/a

Total assets                            18,078     19,232       -6%

The International business segment result is different from the
Overseas markets result included on page 19. International business
segment results are equity standardised and reflect management of the
commercial International network, thus excluding the Investment
Banking operations of the mature markets of UK, Europe and Americas,
which are included in Corporate Financial Services.

The key drivers of International's results were: 

* lower lending volumes in Asia 
* the funding drag of higher non-accrual loans, mainly in China and 
  Pakistan 
* the simplification of the international network as productivity 
  improvements followed implementation of the commercial banking 
  platform across international sites 
* decline in other operating income from 1998, when foreign exchange 
  earnings benefited favourably from the volatility in exchange 
  rates, particularly Asian currencies 
* small reductions in personnel expenses, as a result of a decrease 
  in the FTE numbers (down to 8,130), offset by award wage increases 
  in India and inflationary pressures in Middle East.

MORE TO FOLLOW

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