Preliminary Final Report/Media Release/Financial Statements

Document date:  Thu 25 Oct 2001
Published:  Thu 25 Oct 2001 13:47:58
Document No:  182866
Document part:  O
Market Flag:  Y
Classification:  Preliminary Final Report , Full Year Accounts , Dividend Record Date , Dividend Pay Date , Dividend Rate 

AUSTRALIA AND NEW ZEALAND BANKING GROUP       2001-10-25  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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CHIEF FINANCIAL OFFICER'S REVIEW (continued)

INVESTMENT MANAGEMENT

BRUCE BONYHADY

Sourcing and product development of managed investments and insurance 
products
                                               HALF    FULL    FULL
                                               YEAR    YEAR    YEAR
                                              SEP 01  SEP 01  SEP 00
                                                $M      $M      $M

Net interest income                               32      60      57
Other external operating income                  152     286     264
Net inter business unit fees                     (42)    (82)    (75)
Operating income                                 142     264     246
External operating expenses                      (50)   (106)    (94)
Net inter business unit expenses                  (8)    (16)    (15)
Operating expenses                               (58)   (122)   (109)
Profit before debt provision                      84     142     137
Income tax expense and outside equity
 interests                                       (43)    (67)    (67)
Net profit attributable to members of
 the Company                                      41      75      70
Operating expenses to operating income          40.8%   46.2%   44.3%
Net specific provisions                            -       -       - 
Total employees                                  670     670     627

Retail FUM ($B)                                 12.6    12.6    11.6
Net Retail flows                                 0.3     1.4     0.8
Assirt ranking Flows(1)                         14th     5th     9th
Wholesale FUM ($B)                               4.6     4.6     4.8
Underlying expenses as a % of total
 average FUM                                    0.69%   0.72%   0.71%

(1) Full year Sep 01 and Full year Sep 00 based on data for year 
ended 30 June: Half year Sep 01 based on data for quarter ended June 
30: Half year March 01 based on data for quarter ended 30 March.

Investment Management operates three businesses: funds management,
insurance and trustees. The funds management business manufactures
and sources a range of retail and wholesale investment management
products for distribution predominantly by ANZ customer businesses.
The insurance business sources and underwrites risk products and
third party general insurance. The trustee business manages
charitable trust assets and private estates for individuals and
executors.

The Group has not sought to structure funds management entities in a 
way that allows the market value of the entities to be recognised in 
the financial statements, consequently these results do not include 
any appraisal or embedded value profits. Half on half comparison of 
the components of the result is complicated by the requirement of 
AASB 1038 to consolidate the Policyholder income tax and 
superannuation contributions tax expense along with the 
corresponding Policyholder income that funds these tax expenses. 
This gross up of tax expense and operating income was $14 million 
higher in the second half due to greater contributions tax 
(traditional second half seasonality and record corporate 
superannuation flows), partly offset by lower income tax on 
investment income due to weak equity markets. Reversing the gross up 
to focus on the underlying result for shareholders leads to the 
following key features:

* operating income increased by $6 million (5%), due to growth in 
funds under management and higher margins on the V2 Plus cash 
management product. Notwithstanding both wholesale and retail net 
inflows during the second half, total FUM remained stable due to the 
impact of weaker equity markets

* operating expenses decreased by $6 million, due to higher product 
development and marketing costs in the first half

* tax expenses increased by $5 million, in line with the increased 
profit

Investment performance continues to be strong with ANZ Investments 
being the only fund manager having four funds in the top 25 
risk-adjusted returns over the past five years as measured by ASSIRT. 
A strategic joint venture with a global fund manager is currently 
being explored in order to achieve the full potential of the 
Investment Management business.


ASIA

JOHN WINDERS

Provision of primarily corporate and institutional banking services
in 11 Asian countries

                                               HALF    FULL    FULL
                                               YEAR    YEAR    YEAR
                                              SEP 01  SEP 01  SEP 00
                                                $M      $M      $M

Net interest income                               58     123     113
Other external operating income                   47      90      72 
Net inter business unit fees                       -       -       - 
Operating income                                 105     213     185
External operating expenses                      (44)    (92)    (98)
Net inter business unit expenses                  (8)    (16)    (18)
Operating expenses                               (52)   (108)   (116)
Profit before debt provision                      53     105      69
Provision for doubtful debts                      (9)    (17)    (15)
Income tax expense and outside equity
 interests                                       (12)    (25)    (35)
Net profit attributable to members of
 the Company                                      32      63      19
Operating expenses to operating income          48.6%   50.2%   62.2%
Net specific provisions                           (2)    (11)     81
Net non-accrual loans                             80      80     178
Total employees                                  565     565     592

The Asia business manufactures and distributes a large range of 
corporate/institutional and trade finance products together with 
personal lending, deposits and retail credit card products. Asia's 
business mix is 85% corporate/institutional and 15% retail. Asia's 
branches and overseas offices provide a distribution/relationship 
management network for Asia manufactured products as well as ANZ 
Investment Bank products.

Asia's profit increased by 3% to $32 million in the second half. Key
features of the result are:

* lower net interest margins in the second half reflecting the focus
on attracting high quality assets, partly offset by higher volumes

* higher fee income from structured finance activities and higher
foreign exchange revenue, resulting from market volatility were
partly offset by reduced other income, due to $5 million one-off
gains in the first half from a property sale and winding up of a
pension fund

* operating expenses reduced by $4 million, reflecting strong cost
management

During 2001, there were specific provision recoveries in Hong Kong, 
Korea and Singapore. Net specific provisions in 2000 included $81 
million provided for two corporate customers.


PACIFIC

BOB LYON

Provision of primarily retail banking services in 10 countries in the 
Pacific region


                                               HALF    FULL    FULL
                                               YEAR    YEAR    YEAR
                                              SEP 01  SEP 01  SEP 00
                                                $M      $M      $M

Net interest income                               44      85      80
Other external operating income                   39      73      60
Net inter business unit fees                       -       -       - 
Operating income                                  83     158     140
External operating expenses                      (31)    (62)    (57)
Net inter business unit expenses                 (10)    (20)    (15)
Operating expenses                               (41)    (82)    (72)
Profit before debt provision                      42      76      68
Provision for doubtful debts                      (5)     (9)     (7)
Income tax expense and outside equity             
 interests                                       (11)    (20)    (20)
Net profit attributable to members of
 the Company                                      26      47      41
Operating expenses to operating income          49.4%   51.9%   51.4%
Net specific provisions                            3       5      13
Net non-accrual loans                             11      11      10
Total employees                                1,237   1,237   1,297

ANZ's operations were extended in the September half, following
completion of the purchase of the Amerika Samoa Bank and the opening
of a branch in East Timor, which is included in Pacific (B=both
effective 1 April 2001). Effective 1 October 2001, the Group acquired
75% of the Bank of Kiribati. An agreement has also been reached to
purchase the business activities of Bank of Hawaiian PNG, Fiji, and
Vanuatu, subject to gaining regulatory approval.

Pacific's profit increased by 24% to $26 million in the second half.
Key features of the result are:

* higher net interest income largely attributable to the new
operations

* other income increased by $5 million emanating from both the new
operations and the existing business, with higher foreign exchange
revenue, particularly in PNG

* expenses in the new operations were largely absorbed within the
existing cost base as efficiencies were achieved elsewhere in the
region

* the higher provision for doubtful debts reflects volume growth,
with net specific provisions remaining below economic loss
provisioning levels


CORPORATE CENTRE, TECHNOLOGY AND FINANCE

PERTER MARRIOTT DAVID BOYLES

Comprises the results of asset and liability management earnings on 
central capital, costs relating to hedging capital positions, 
technology and payments operations and certain central costs

                                               HALF    FULL    FULL
                                               YEAR    YEAR    YEAR
                                              SEP 01  SEP 01  SEP 00
                                                $M      $M      $M

Net interest income                              103     174     143
Other external operating income                   10      31      27
Net inter business unit fees                       2       9      (9)
Operating income                                 115     214     161 
External operating expenses                     (384)   (750)   (709)
Net inter business unit expenses                 295     593     596
Operating expenses                               (89)   (157)   (113)
Profit before debt provision                      26      57      48
Provision for doubtful debts                     (41)    (42)     (8)
Income tax expense and outside equity             
 interests                                        (3)    (33)     24
Net profit attributable to members of
 the Company                                     (18)    (18)     64
External assets                                16,270  16,270 15,129
Deposits and otehr borrowings                  20,399  20,399 28,089
Other external liabilities                     27,551  27,551 20,353
External liabilities                           47,950  47,950 48,442
Total employees                                 4,095   4,095  4,195

The operations of Corporate Centre, Technology and Finance resulted 
in a loss of $18 million in the second half. Key features of the loss 
were:

* interest rates in Australia and the USA peaked during the first 
half and declined significantly during the remainder of the year. 
This increased net interest earnings in the second half from managing 
the mismatch between asset and liability interest rates

* losses on foreign currency hedges, offset by gains on other hedging 
activities

* higher second half expenditure on restructuring and the Perform, 
Grow & Breakout program, increased brand advertising expenditure and 
higher non-lending losses

* a $41 million central allowance to reflect the impact of September 
11 on economic loss provisioning (refer page 7)

All functions are currently reviewing their activities and 
re-engineering processes to deliver greater operating efficiencies. 
Progress on activity value analysis has assisted in reducing staff 
numbers. Our innovation in financial reporting was recognised when 
ANZ Communication of Shareholder Value.

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