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Preliminary Final Report

Document date:  Wed 04 Nov 1998
Published:  Wed 04 Nov 1998 00:00:00
Document No:  142712
Document part:  F
Market Flag:  Y

HOMEX - Melbourne                                                     



                                          1998        1997       Movt 
                                           $M          $M         %
Fee income
 Lending                                   592         570       4%
 Other including commissions               914         823      11%
Total fee income                         1,506       1,393       8% 

Foreign exchange earnings                  373         237      57%
(Loss) profit on trading instruments       (83)        182      n/a
Other income                               303         298       2%
Total other operating income             2,099       2,110      -1%

A key objective of the Group has been the diversification of income
streams with an emphasis on building fee income. Growth in fee income

* higher card, transaction and funds management fee levels 
* an increase in structured finance fee income, notably in the 
  second half
* higher commercial bill volumes, offsetting contraction in margins 
  due to competitive pressures 
* some benefit from exchange rate movements internationally.

Foreign exchange income grew strongly as the Group's Treasury
benefited from market volatility, notably in Asian currencies.

The collapse in emerging market bond prices in the second half and
the impact of the Asian turmoil led to a $265 million turnaround in
trading performance. In view of the heightened risk from emerging
markets debt trading, this activity has now been exited.

Other income was affected by: 

* the strategic decision to reduce the risk profile of the Group by 
  transferring Funds Management capital, previously principally in 
  equities, into less volatile but lower yielding money markets. 
  Last year's earnings in other income of $65 million reflected bull 
  market conditions which were not repeated in 1998. 
* gain of $26 million on demutualisation of the Credit Reference
  Association of Australia (CRAA)
* lower compensation payments as a result of reduced tax preferred


                                     1998          1997        Movt
                                      $M            $M          % 

Personnel expenses                  1,854         1,949        -5%
Premises expenses                     347           362        -4%
Computer expenses                     341           330         3%   
Other expenses                        776           771         1%
Restructuring (1)                     120            90        33%
TOTAL OPERATING EXPENSES            3,438         3,502        -2%
Employees (FTE) - Permanent        30,827        35,926       -14%
Employees (FTE) - Temporary         1,245           978        27%
TOTAL EMPLOYEES                    32,072        36,904       -13% 

1  In addition, restructuring expenses of $32 million (1997:
   $327 million) were treated as abnormal

Operating expenses were reduced by $64 million but a declining
Australian dollar masked an underlying decrease in costs of $102
million. Expenses were down in Australia ($72 million) and New
Zealand ($49 million, $30 million excluding FX) but were up
internationally ($57 million, flat excluding FX), reflecting exchange
rate movements. These lower costs were key drivers behind the
reduction in the cost income ratio of 5.2% in Australia and 6.9% in
New Zealand.

The benefits of the Group's restructuring programs are now apparent:
* FTEs down 4,832 or 13% 
* personnel and premises costs down
* restructuring spend during the year was $344 million, leaving a 
  provision balance of $82 million.

Personnel expenses also reflect lower performance related bonuses to
trading staff.

Increases in computer expenses were modest, notwithstanding: 

* Year 2000 compliance work
* Euro 99 compliance work
* major projects to improve and standardise systems, both in
  Australia and New Zealand, and internationally.