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Chairman`s Address to Shareholders/Presentation by CEO

Document date:  Mon 20 Dec 1999
Published:  Mon 20 Dec 1999 00:00:00
Document No:  156490
Document part:  A
Market Flag:  N

HOMEX - Melbourne                                                     


Ladies and gentlemen, good morning. I am Charles Goode- As your
Chairman, it is my pleasure to welcome you and to declare a quorum
present and open the 31st Annual General Meeting of the company. It
is with particular pleasure that I welcome shareholders living in
Sydney, who have not been able to attend previous AGMs or shareholder
information meetings. I also welcome shareholders listening an This is the first time we have webcast our meeting.

The final dividend of 30 cents per share is being paid today into the
bank accounts of those electing direct credit; while cheques,
Dividend Reinvestment Plan and Bonus Option Plan notices are in the
mail. The Shareholder Privilege Card will be mailed to eligible
shareholders with our publication, Shareholder Contact in January.

After we have handled the several items of business on the Agenda,
and the shareholders' questions, I hope you will join us for
refreshments, which will be served in the Harbourside foyer, after
the meeting.

Now allow me introduce to you the members of your Board, and the
executives on the podium.

Starting on your far right, Jerry Ellis. Jerry has extensive mining
and manufacturing experience both in Australia and overseas notably
during his long career with BHP. He is Chairman of Sandvik Australia
and the Australia Japan Foundation, a Director of Aurora Gold and
Pacifica Group: and also Chancellor of Monash University. Jerry
chairs ANZ's Risk Management Committee.

Next, Dr. Roderick Deane. Roderick lives in Wellington and is widely
recognised as one of New Zealand's Leading business executives with
experience in both the public and private sectors. Roderick is the
Chairman of Telecom New Zealand, having retired as Chief Executive
Officer earlier this year, and is a Director of Fletcher Challenge.
He is Chairman of ANZ Banking Group (New Zealand) Limited, and is
actively involved in the Intellectually Handicapped Children Society.

Then, Dr. Brian Scott. Brian lives in Sydney and has wide experience
in consulting particularly in human resources. He is Chairman of
Management Frontiers, WD Scott International Development Consultants
and the Australia Korea Foundation. He is also a Director of the
James N Kirby Foundation. Brian chairs ANZ's Human Resources

Next to me on my left is the Chief Financial Officer, Peter Marriott.
Peter joined ANZ in 1993 from KPMG where he was a partner involved in
their banking practice. Before being appointed to his current
position Peter was head of Risk Management.

On my right is John McFarlane, the Chief Executive Officer. John
joined us in October 1997. Before joining ANZ he had 23 years
experience in banking with Citibank and Standard Chartered. In 1995
John was awarded an OBE for his services to banking.

Next, John Dahlsen. John's backgound is in the law and he was a
partner at Corrs Chambers Westgarth. He is Chairman of Woolworths and
has other directorships including Southern Gross Broadcasting. John
is Chairman of the Melbourne Business School and is a director of The
Smith Family. He is Chairman of ANZ's Audit, Compliance and Finance

Then Margaret Jackson. Margaret's background is in accounting. She is
Chairman of the Victorian Transport Accident Commission and a
Director of BHP, Pacific Dunlop and Qantas. Margaret is also a Board
member of the Howard Florey Institute and a Director of the Brain
imaging Research Foundation. She chairs ANZ's Strategic Issues

Finally. Gary Toomey. Gary joined the Board in March 1998. He is
Deputy Chief Executive Officer at Qantas with responsibilities for
finance and operations. He is also a Director of Air Pacific.

I believe that with this collective experience and broad reach of
business and community involvement we have a well-qualified and
balanced board to fulfil its responsibilities and meet the
expectations of ANZ shareholders.

Behind me to my right are: Peter Hawkins, Head of Personal Financial
Services, David Boyles who heads our technology and e-Commerce area
and Roger Davis Head of Corporate Financial Services. These three
with John McFarlane and Peter Marriott, form the Executive Management
Committee of the Bank. As Roger Davis has only just joined us, a few
words about him, Roger is originally from Sydney and as an ex Wallaby
probably needs no introduction to rugby followers in this city. He
was also a Rhodes scholar. He spent 20 years with Citibank holding a
number of senior executive roles in North America and Asia. Roger is
the first member of the Bank's Executive Committee to be based in

Behind me on my left are Bruce Brook, Deputy Chief Financial Officer,
Peter Mathews, Company Secretary and Tim Paine Legal Counsel.

I encourage shareholders to take the opportunity to approach any one
of us during refreshments and introduce yourselves and to ask

At this point, I wish to express our appreciation for the
contribution and dedicated service of Colin Harper who retired as a
Director on 30 September. Colin was a Director of the company from
its incorporation in Australia in 1977. He brought to the Board table
a wealth of experience from his prior investment banking days and
from his Directorships of other companies. This depth of experience
and his wise counsel will be missed. We thank Colin for his
contribution and wish him and his family the very best for the

Review of 1999

I would now like to review 1999. I hope you have taken the
opportunity to read our 1999 Annual Report (hold up report) and like
the new format. We have tried to make it more appealing. We would
like to receive your feedback on the report, the conduct of this
meeting and on any other matter on which you would like to comment.
At the conclusion of the meeting will you please take a few moments
to complete the questionnaire, which was handed to you on

I would like to comment now on four aspects of 1999: our performance,
re-balancing of the business portfolio, strengthening of the
management team and capital management.

1999 was a very good year for the Bank, with particularly strong
performance in our domestic markets of Australia and New Zealand. The
17% growth in earnings per share was principally achieved by growing
income by 6% and reducing costs by 4%. We have made dramatic progress
over the last two years in improving ANZ's cost income ratio, from
being the worst of the four major banks to now being second best, and
closing fast on the leader. The beginning of the improvement
coincided with John McFarlane's arrival at ANZ.

There was also a reduction in the level of risk. Total non-accrual
loans were reduced, as was the specific provisioning requirement.
This was achieved mainly through further improvement in asset quality
in Australia and New Zealand. However, while our international loan
portfolio was reduced, non-accrual loans continued to increase in
China, Korea and the Middle East. With the closure of the emerging
market bond trading activities based in London, the level of traded
market risk was reduced substantially. As a result. the major rating
agencies improved our credit rating outlook from negative to stable,

All of this was very good for shareholders. The return on
shareholders' equity was lifted to 17.2%, which is well above our
cost of capital of 11%. For the first time, we have disclosed the
amount of Economic Value Added, which is the profit after deducting
our cost of capital. In 1999, the company created some $834 million
in Economic Value Added, 44% higher than in 1998. The dividend was
again increased, as was the level of franking.

We have continued to re-balance our business mix towards more
sustainable and lower risk businesses. With our Australian and New
Zealand businesses now accounting for 84% of Group profits, and half
of that from Personal Financial Services, the company is better
balanced, Of the international earnings 6% come from the mature
markets of Europe and USA and 10% from rest of our network.

In Personal Financial Services we have achieved strong growth in
transaction banking, mortgages and credit cards with significant
gains in market share for the latter two. The rollout of Premier
Banking underscores our commitment to improving the customer
experience. I might add that our Premier Branch in Martin Place
opened today, and I would encourage you to visit it. We are
particularly pleased with our progress in personal e- Commerce with
130,000 customers now registered for Internet banking. John McFarlane
will talk a little more about this shortly.

Our Corporate Financial Services businesses were also very successful
with the contribution to Group profits increasing by 17%. We continue
to build on our traditional strengths in the corporate market,
including the provision of credit and transaction services, auto
finance, structured finance, foreign exchange and trade finance.
Roger Davis's appointment to head this business reflects our
commitment to this area.

In International we have made also made progress in simplifying the
business and focusing on Asia and the Pacific and in markets where we
have, or can attain, a material position.

Another aspect of 1999 is the progress in building the senior
management team. With increasing competition and globalisation of the
finance industry, attracting and maintaining a high calibre
management team is fundamental to creating shareholder value.
Significant changes have occurred starting with the appointment of
John McFarlane two years ago. Under his leadership, a much more
internationally experienced, yet younger executive team has been put
in place, through both internal and external appointments. During the
last year we have recruited from overseas Roger Davis, Brian Hartzer
to lead the Cards business and Mark Lawrence as the head of Risk
Management. From Australia we have recruited Alison Watkins from
McKinsey to lead Group Strategy. We have also promoted high calibre
people internally, such as Elmer Funke Kupper to international and
Grahame Miller to investment banking. I am pleased to report that we
have in place a first class management team.

Some time ago, there were unfounded suggestions in the media
regarding the relationship between the management and the Board. We
could hardly have a better relationship. In fact, the Board gave Mr.
McFarlane 10 out of 10 on this aspect in his performance appraisal
for both last year and for the previous year.

It is our people at ANZ, who are the key to our future success. We
are placing increased attention on the training and continuing
education of all our staff. A special talent program has been
introduced to identify the most capable young managers and assist
them to gain the experience and develop the skills to fill tomorrow's
executive ranks. We have also more than doubled the intake of
graduates. Incentive schemes have been introduced for managers at all
levels, and for all front-line sales staff. Those who delivered on
their targets, earned bonuses, many for the first time.

It is important for a bank to be well capitalised. However, it is
also important to have an efficient capital structure. In 1998 we
took advantage of developments in capital markets, to issue US$775
million of hybrid capital in the form of preference shares. This,
together with the build up in retained earnings, meant that during
the last financial year we had capital above our normal levels. This
was a prudent approach in view of the uncertainties following the
Asian crisis. Since then, we have been successful with our risk
reduction program and the level of non-accrual loans has stabilised.
Further, it is looking increasingly unlikely that we will make a
major international acquisition during calendar year 2000, and we are
now moving to bring our capital ratios to more normal, yet prudent,
levels, initially through the buy-back, which is currently underway.

In summary, I believe ANZ's performance in 1999 demonstrates that the
bank is delivering on the commitments made to shareholders to provide
strong earnings growth, to reduce costs, to lower risk and to improve
the quality and sustainability of our businesses.

A critical area for banking on which I have not commented is
technology. I will ask our Chief Executive Officer, John McFarlane,
to update you on how ANZ is using technology to improve efficiency
and customer service. As we move into the 21st century and the so
called "information age", the effective use of technology is
mandatory for survival let alone progress for almost all companies.
This is particularly so in banking.