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Half Yearly Report/ASIC accounts

Document date:  Fri 26 Apr 2002
Published:  Fri 26 Apr 2002 10:17:23
Document No:  189561
Document part:  B
Market Flag:  Y
Classification:  Half Yearly Report , Half Year Audit Review , Half Year Directors' Statement , Half Year Accounts , Dividend Rate


HOMEX - Melbourne                                                     


I am pleased to report our 7th successive increase in half-yearly
profit, up 17% on the same period last year. We were also up 8% on a
very strong prior half. Equally, earnings per share were up 19% and
8% respectively. We ended the half well on track against our public
financial targets and with a strong financial and capital position.

MEASURE                   2003 TARGET                MARCH 2002

EPS growth                   10%                        18.8%
Return on equity             20%                        21.6%
Cost-income ratio            45%                        46.5%
Credit rating                AA category                AA-
Inner tier 1                 6.0%                       6.8%

As at 31 March 2002 our capital position was above the target range,
in order to absorb the capital contribution following the recently
announced wealth management joint venture with ING. Both Moody's and
Standard & Poor's affirmed our strong AA category rating.

Notably, and for the first time in recent cycles, ANZ has emerged
largely unscathed from a period of significant global economic
weakness and instability. Traditionally, ANZ's performance has been
closely linked to the vagaries of the economic cycle as demonstrated
in 1992, when our shareholders saw how vulnerable we used to be.
Today ANZ is a different bank.

In recent years we have undertaken a wide range of initiatives to
reduce risk, to improve performance, to reshape our portfolio of
businesses and to create a high performance culture. While we still
have some way to go, the collective impact of these initiatives is
now increasingly evident in the quality and consistency of our
financial results, and in our ability to withstand unexpected
surprises such as the collapse of Enron, which was the cause of the
increased specific provision in the half.

Consistent with our philosophy of holding prudent capital and
reserves, we took the opportunity to increase our general provision
for doubtful debts by $250 million. This enhances our capacity to
deal with similar issues should they arise.

Earlier this year, we also settled the longstanding litigation with
the National Housing Bank in India. This enabled us to recover $248
million of the provision we made when the Group sold Grindlays Bank
to Standard Chartered Bank in 2000.

In the last year, we have seen the rapid and unexpected collapse of
several large corporations that have caused significant credit
problems for the banking industry. As a consequence, specific
provisions for the half were higher than expected and rose to $366
million. We were able to absorb this and still produce a good result.

As an important step in continuing to lower the risk profile of ANZ,
we have taken steps to mitigate the impact of such circumstances in
the future by reducing our single customer concentration limits and
by increasing our general provision to one of the strongest in the

During the half we also experienced an environment of low interest
rates and higher economic uncertainty. This impacted our businesses
in different ways. Strong consumer confidence supported growth in
Consumer Finance, Small Business and Wealth Management. Increased
volumes in the deposit market were offset by tighter margins from
competitive pricing. Mortgage growth was reasonable but margins
stabilised. Despite subdued financial market activity and lower
levels of business investment, our Corporate and Investment Banking
businesses generally performed well.

All but three of our 16 businesses grew their profits over the last
year and the majority achieved double-digit growth. This demonstrates
the strength of our specialised business strategy and the benefits of
a diversified portfolio of businesses. It also highlights our caution
on risk, our tight cost discipline, our management capability and our
performance-oriented culture.

At the end of the half, we announced a wealth management joint
venture with ING. This is an exciting strategic development that
fills this strategic gap. In a single move, it creates a unique
strategic position in this high growth sector, and takes us jointly
to the number four position in retail funds management in Australia
and to the number one position in New Zealand. Importantly also, it
creates an opportunity for further organic growth from over 6,000
professional financial advisers in addition to ANZ's own distribution
network, and provides a strong platform for further strategic moves.

Looking forward, our aim is to be in a leadership position in all of
our businesses. We already achieve this in a number of corporate and
personal businesses, but we need to achieve higher growth in the
others, particularly on the personal side through organic growth,
further reshaping of our business portfolio, and through the creation
of new growth options.

We are also positioning ANZ to take advantage of more significant
strategic opportunities as they arise while maintaining our strategic
options for the potential consolidation of the industry.

We continue to face the challenge of balancing the interests of
shareholders, staff, customers and the community. Making real
progress in these areas is fundamental, not only for the reputation
of ANZ and the industry, but also for sustainable value creation. In
the recent past we launched a range of initiatives, which we believe
are now differentiating ANZ in the community:

* simpler low cost transaction accounts for everyone 
* free transaction banking for customers over 60 
* a Customer Advocate to help prevent and to resolve disputes 
* a firm stand on rural branch closures

As a result, our customer retention is rising and an increasing
number of people are opening new accounts with us.

Staff satisfaction is also improving across the board. Almost all our
staff own shares in ANZ. Since its recent launch, over 3,000 managers
and staff have taken part in our cultural development programme
"Breakout", and we plan to train a further 3,000 this year. We
believe the calibre of our people, the way we work together and the
unique culture we are creating will give us the platform to
outperform our competitors.

With regard to the immediate outlook, we expect the Australian and
New Zealand economies to perform relatively well and for overseas
markets to begin to strengthen from their low base. Loan demand is
expected to remain reasonably subdued, and rising domestic interest
rates are likely to cause a squeeze on mortgage margins, partially
offset by an improvement in deposit margins. Loan losses tend to lag
the economic cycle and these are expected to remain moderately high,
although at levels that are manageable. Expense growth is being
managed within the revenue growth rate, which should lead to further
improvement in the cost-income ratio.

In summary, we had a very credible first half, particularly in the
light of the subdued domestic environment, the international
recession, the aftermath of September 11, and the collapse of Enron.
For the first time in recent memory ANZ came through the cyclical
downturn with consistent earnings performance, containable loan
losses and in a strong financial condition.

Our unique strategy, a more favourable environment, our seasoned
management team, the strong internal energy inside ANZ, and our good
external momentum should create an environment for continued
performance and value creation. Notwithstanding a very strong second
half last year, we continue to expect a favourable operating
performance in the second half.

Our 2002 and 2003 targets remain unchanged.