Preliminary Final Report

Document date:  Thu 24 Oct 2002
Published:  Thu 24 Oct 2002 12:11:41
Document No:  196680
Document part:  J
Market Flag:  Y
Classification:  Preliminary Final Report , Periodic Reports - Other , Dividend Record Date , Dividend Pay Date , Dividend Rate 

AUSTRALIA AND NEW ZEALAND BANKING GROUP       2002-10-24  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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CHIEF FINANCIAL OFFICER'S REVIEW (continued)

ING AUSTRALIA/SOLD BUSINESSES
John Wylie Elmer                                         Funke Kupper

ING Australia, the joint venture between ANZ and ING Group, provides
integrated manufacture and distribution of wealth creation,
management and protection products and services aligned to ANZ
distribution and the open market

The table shows the results of the INGA joint venture for 5 months of
the half year ended September 2002, and the results of the ANZ
business sold into the joint venture, for one month of this half
year.

                                             FULL     FULL     MOVT
                                             YEAR     YEAR     SEP 02
                                             SEP 02   SEP 01   V 
                                                               SEP 01
                                             $M       $M       %
                                             TOTAL    TOTAL

Net interest income                           (17)      5        n/a
Other operating income                        116     170       -32%
Operating income                               99     175       -43%
Operating expenses                            (43)    (80)      -46%
Profit before debt provision                   56      95       -41%
Provision for doubtful debts                    -       -        n/a
Profit before income tax                       56      95       -41%
Income tax expense                            (23)    (50)      -54%
Net profit after income tax                    33      45       -27%
Total employees                               105     673       -84%
FUM ($B)(1)                                   n/a     7.2        n/a
Gross Retail flows ($M)(1)                    n/a   2,530        n/a
Net Retail flows ($M)(1)                      n/a     486        n/a
Plan for Life Ranking - Gross Retail flows(1) n/a      10        n/a
Plan for Life Ranking - Net Retail flows(1)   n/a      11        n/a

(1) Australia only. As the joint venture commenced on 1 May 2002,
prior period comparatives are for ANZ Investments only. Market
rankings of gross and net retail flows exclude cash and are based on
Plan for Life information with a three month lag.

2002 RESULTS

The 2002 result includes 7 months' trading of the businesses sold to
the INGA joint venture and 5 months' trading of our share of the
joint venture. The joint venture's overall contribution to ANZ was
below expectations principally due to lower investment earnings on
capital partly offset by a gain on an investment hedge taken out by
ANZ to reduce its exposure to equity risk held by the joint venture.
This is in line with ANZ's policy not to take general market equity
risk. Lower managed investment income was largely offset by higher
insurance income. Employees of sold businesses will progressively
migrate to the joint venture.

FEATURES OF THE SECOND HALF

The joint venture contributed a net loss of $7 million, made up as
follows:

* ANZ's equity accounted share of the joint 
  venture profits                                         $20 million 

* Investment earnings hedge income (net of tax)            $5 million

* Funding cost (net of tax)                              ($14 million)

* Amortisation of notional goodwill                      ($18 million)

The joint venture has maintained its relative market ranking in gross
and net retail inflows, however funds under management has been
adversely impacted both by market performance and slowing in the
absolute level of net and gross inflows.

A profit of $15 million was made by the sold businesses in the half
year to September 2002 and reflects a combination of the underlying
business performance for April 2002 plus accounting adjustments prior
to transfer into the joint venture.

ACHIEVEMENTS

* Enhanced products - OneAnswer Mastertrust launched to ING advisors
and ANZ Wealth Management financial planners.

* Repositioned ING Australia owned advisor network with the launch of
a new advisor group "Tandem Financial Services" aimed at growing the
wealth accumulator market.

* Enhanced adviser support services to the ANZ financial planner
network and established tailored service levels for open market
adviser segments.

* Reduced headcount below joint venture integration targets and
locked in near term cost reductions.

* Launched claims management and efficiency initiatives in the Life
risk business.

* Commenced initiatives to create a 'Fast, Focused, Open' culture.

* Redefined Management Information needs and agreed and commenced
rollout of an IT systems roadmap.

BUSINESS ENVIRONMENT AND OUTLOOK

* Revenue has been generally weaker than expected with the adverse
impact of volatile investment markets on capital and customer
investments.

* Investor caution, in a period of volatile investment returns, has
resulted in lower sales volumes and funds under management growth.

* Revenues from the Risk business have been better than expected
reflecting a number of initiatives to improve the efficiency.

* Expenses have been managed closely and are in line with
expectations. Cost reduction initiatives pursued over the next 12
months are expected to deliver improved efficiency.

OBJECTIVES

* Profitable growth - deliver shareholder expectations.

* Relevant in market - top 3.

* Deliver customer focused solutions - grow aligned distribution and
economically capture open market channel funds under management and
premiums.

* Become a low cost operator.


CORPORATE BUSINESSES
Bob Edgar

Comprises Corporate Banking, Global Institutional Banking (including
Asia) and Global Transaction Services

                                             FULL     FULL     MOVT
                                             YEAR     YEAR     SEP 02
                                             SEP 02   SEP 01   V 
                                                               SEP 01
                                             $M       $M       %
                                             
Net interest income                           665     669        -1%
Other external operating income               720     665         8%
Net inter business unit fees                  (36)    (38)       -5%
Operating income                            1,349   1,296         4%
External operating expenses                  (306)   (303)        1%
Net inter business unit expenses             (139)   (147)       -5%
Operating expenses                           (445)   (450)       -1%
Profit before debt provision                  904     846         7%
Provision for doubtful debts                 (144)   (149)       -3%
Profit before income tax                      760     697         9%
Income tax expense and outside 
 equity interests                            (233)   (231)        1%
Net profit attributable to members 
 of the Company                               527     466        13%
Net loans & advances including acceptances 38,694  40,075        -3%
Other external assets                       4,128   4,170        -1%
External assets                            42,822  44,245        -3%
Deposits and other borrowings              21,758  17,790        22%
Other external liabilities                 18,615  19,343        -4%
External liabilities                       40,373  37,133         9%
Net interest average margin                  2.34%   2.27%        3%
Return on assets                             1.23%   1.04%       18%
Return on risk weighted assets               1.01%   0.87%       15%
Operating expenses to operating income       32.9%   34.6%       -5%
Operating expenses to average assets         1.04%   1.00%        3%
Net specific provisions                        94     119       -21%
Net specific provision as a % of 
 average net advances                        0.24%   0.29%      -17%
Net non-accrual loans                         172     400       -57%
Net non-accrual loans as a % of net advances 0.44%   0.98%      -56%
Total employees                             2,207   2,268        -3%


CORPORATE BANKING
Bob Edgar

Managing customer relationships and developing product strategies for
medium sized businesses (turnover $10 million to $100 million) in
Australasia

                                             FULL     FULL     MOVT
                                             YEAR     YEAR     SEP 02
                                             SEP 02   SEP 01   V 
                                                               SEP 01
                                             $M       $M       %
                                            
Net interest income                           222     234        -5%
Other external operating income(1)            150     143         5%
Net inter business unit fees                  (12)    (12)        -
Operating income                              360     365        -1%
External operating expenses                   (85)    (83)        2%
Net inter business unit expenses              (40)    (42)       -5%
Operating expenses                           (125)   (125)        -
Profit before debt provision                  235     240        -2%
Provision for doubtful debts                  (43)    (50)      -14%
Profit before income tax                      192     190         1%
Income tax expense and outside 
 equity interests                             (58)    (64)       -9%
Net profit attributable to members 
 of the Company                               134     126         6%
Operating expenses to operating income       34.7%   34.2%        1%
Net specific provisions                        37      53       -30%
Net non-accrual loans                          72     130       -45%
Total employees                               653     691        -5%

(1) Includes commercial bill income

2002 RESULTS

Profit before tax was 1% higher, with the benefit of the reduction in
the Australian tax rate leading to 6% growth in profit after tax.
Growth in fee income was offset by lower interest recoveries on
impaired assets and lower interest margins on deposits in the first
half, due to falling interest rates. Profit was boosted by a lower
provision for doubtful debts, reflecting the improving quality of the
loan book.

FEATURES OF THE SECOND HALF

* Continued uncertainty in the business community was apparent in
lower average lending volumes and higher levels of deposits as
companies built up cash. In this environment operating income was
marginally lower, with a small increase in fee income offset by
slightly lower net interest income. Net interest was also adversely
impacted by lower interest recoveries on impaired assets compared to
prior periods.

* The increase in fee income on a reduced volume of loans reflects an
emphasis on providing a greater range of services. In addition, loan
approval fees and volumes picked up in the last quarter, potentially
showing early signs of increasing business activity.

* Provision for doubtful debts, specific provisions and non-accrual
loans all decreased, reflecting sound credit quality. Approximately
50% of the portfolio is investment grade.

ACHIEVEMENTS

* We have realised benefits from our "Wall Street to Main Street"
initiative where we have received enthusiastic customer response.
This has been a key component in the growth of total customer
returns, with customer EVA increasing 34% on prior year. 50% of this
result is reported in the product businesses.

* Amongst the 4 "Majors" we were rated No 1 in overall satisfaction
by Corporate Businesses customers.

* Focus on cross sell has continued with a number of initiatives
undertaken to further the value we are delivering to the customer.

* Despite a challenging risk environment, we have achieved our
objective of maintaining performing loans at 99% of book.

BUSINESS ENVIRONMENT AND OUTLOOK

* Corporate Banking is responsible for managing relationships with
customers who have turnover between $10 million and $100 million. ANZ
has a strong position in this market segment, with 26% of lead
relationships, and approximately 3,500 customers.

* economics@anz is forecasting business lending growth of 8.1% in the
year to September 2003, up from an estimated 2.1% in the current
year. While we expect an improvement in lending growth it is too
early to be confident that this level will be achieved.

* This higher level of lending growth is expected to be driven by
increased business investment. Evidence to date suggests that
business investment has recovered in the past quarter, however this
was funded primarily from cash reserves.

* The top three needs of customers in this segment are i) Provision
of lending on reasonable terms; ii) Creating a partner and trusted
advisor relationship; and iii) Delivering smart products and
customised solutions.

OBJECTIVES

* The key objective for Corporate Banking is the ongoing
implementation of a "Wall St to Main St" strategy, which involves
supplying Corporate Banking customers with more sophisticated
investment banking style products customised to individual need.

* Maintain leading position in market share and customer
satisfaction.

* Maintain a strong focus on risk, with performing loans to remain at
>99% of total book.


MORE TO FOLLOW