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Preliminary Final Report

Document date:  Thu 24 Oct 2002
Published:  Thu 24 Oct 2002 14:02:20
Document No:  196680
Document part:  O
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)

GEOGRAPHIC SEGMENT PERFORMANCE
INCLUDES SIGNIFICANT TRANSACTIONS

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

NET PROFIT ATTRIBUTABLE TO MEMBERS OF THE COMPANY
Australia                                   1,708    1,444      18%
New Zealand                                   330      278      19%
Overseas Markets                              284      148      92%
                                            2,322    1,870      24%

EXTERNAL ASSETS
Australia                                 135,050  133,057       1%
New Zealand                                23,799   22,337       7%
Overseas Markets                           24,256   30,099     -19%
                                          183,105  185,493      -1%

RISK WEIGHTED ASSETS
Australia                                 104,537   98,236       6%
New Zealand                                15,867   15,147       5%
Overseas Markets                           20,986   25,746     -18%
                                          141,390  139,129       2%

GEOGRAPHIC SEGMENT - AUSTRALIA

NET PROFIT ATTRIBUTABLE TO MEMBERS OF THE COMPANY
Net interest income                         3,007    2,867       5%
Fee income                                  1,522    1,374      11%
Other operating income                        631      547      15%
Operating income                            5,160    4,788       8%
Operating expenses                         (2,058)  (2,243)     -8%
Profit before debt provision                3,102    2,545      22%
Provision for doubtful debts                 (711)    (385)     85%
Income tax expense                           (683)    (716)     -5%
Net profit attributable to members
 of the Company                             1,708    1,444      18%
Net interest average margin                  2.91%    2.96%     -2%
Return on risk weighted assets               1.71%    1.50%     14%
Operating expenses to operating income       39.7%    46.7%    -15%
Operating expenses to average assets         1.57%    1.77%    -11%
Net specific provision                        332      474     -30%
Net specific provision as a % of
 average net advances                        0.30%    0.45%    -33%
Net non-accrual loans                         315      492     -36%
Net non-accrual loans as a % of
 net advances                                0.27%    0.46%    -41%
Total employees                            15,879   16,152     -2%
Lending growth                                8.6%     3.1%    large
External assets                           135,050  133,057      1%
Risk weighted assets                      104,537   98,236      6%

2002 RESULTS

Net profit increased by 18% to $1,708 million (10% increase excluding
the Australian component of the significant transactions). The
benefit of the tax rate reduction to 30% was offset by a prudent
central provision for doubtful debts in the uncertain global economic
environment. 2001 also included a small net gain on the sale of
investments and various investment writedowns. Excluding these
impacts, net profit increased by 8%, reflecting solid growth across
most businesses.

FEATURES OF THE SECOND HALF

Excluding significant transactions, the central provision for
doubtful debts and the impact of the INGA joint venture, Australia
net profit increased by 5%, reflecting:

* Higher net interest income mainly due to deposit volume and margin
growth in Personal Banking and good growth from lending in Small to
Medium Business. Strong growth in Mortgages volume was offset by
lower margins due to the increasing interest rate environment.

* Growth in fee income, particularly from lending transactions within
Institutional Banking. Higher card transaction volumes were offset by
the migration of personal customers to the new low cost Access
Advantage and Select accounts.

* A small increase in operating expenses, with salary increases
offset by seasonally lower Mortgages marketing spend.

GEOGRAPHIC SEGMENT - NEW ZEALAND
MURRAY HORN

NET PROFIT ATTRIBUTABLE TO MEMBERS OF THE COMPANY
Net interest income                           580      520     12%
Fee income                                    287      291     -1%
Other operating income                        119       79     51%
Operating income                              986      890     11%
Operating expenses                           (476)    (450)     6%
Profit before debt provision                  510      440     16%
Provision for doubtful debts %                (54)     (45)    20%
Income tax expense                           (126)    (117)     8%
Net profit attributable to members 
 of the Company                               330      278     19%
Net interest average margin                  2.82%    2.63%     7%
Return on risk weighted assets               2.19%    1.95%    12%
Operating expenses to operating income       47.4%    49.7%    -5%
Operating expenses to average assets         2.07%    2.02%     2%
Net specific provision                         31       42    -26%
Net specific provision as a % of average
 net advances                                0.17%    0.24%   -29%
Net non-accrual loans                          17       48    -65%
Net non-accrual loans as a % of net advances 0.09%    0.27%   -66%
Total employees                             3,698    3,683      -
Lending growth (including FX impact)          4.2%    11.0%   -62%
Lending growth (excluding FX impact)         -0.4%     5.7%    n/a
External assets                             23,799  22,337      7%
Risk weighted assets                        15,867  15,147      5%

2002 RESULTS

New Zealand contributed $330 million to the Group result in 2002, an
increase of 19% on last year. Excluding the exceptional gain from the
sale of the funds management business to the INGA joint venture ($32
million), and adjusting for translation gains arising from a
strengthening New Zealand dollar, growth in the 2002 year was 3%.

FEATURES OF THE SECOND HALF

After a difficult first half for lending and transaction volumes,
solid profit growth was achieved in the second half, with a stronger
net interest income performance across the businesses. Excluding the
gain on sale from the funds management business, second half profit
growth was 6%.

* Increased net interest income, reflecting deposit volume and margin
improvements, particularly in Personal Banking, Small to Medium
Business, and Asset Finance. This was partly offset by lower lending
volumes and margins in Mortgages.

* Increased other operating income as a result of the $30 million
gain from the sale of the funds management business to the INGA joint
venture, and increased income from structured financing activities.

* Increased operating expenses reflecting investment in the new sales
and service platform and other infrastructure.

* Continued sound credit quality, with the specific provision charge
and non-accrual loans at low levels.

* Lower effective tax rate as a result of the non taxable gain on the
sale of the funds management business.

GEOGRAPHIC SEGMENT - OVERSEAS MARKETS
                                           
NET PROFIT ATTRIBUTABLE TO MEMBERS OF THE COMPANY
Net interest income                            431     446     -3%
Fee income                                     262     227     15%
Other operating income                         149      55     large
Operating income                               842     728     16%
Operating expenses                            (371)   (399)    -7%
Profit before debt provision                   471     329     43%
Provision for doubtful debts                   (95)   (101)    -6%
Income tax expense                             (89)    (78)    14%
Outside equity interests                        (3)     (2)    50%
Net profit attributable to members
 of the Company                                284     148     92%
Net interest average margin                   1.42%   1.31%     9%
Return on risk weighted assets                1.28%   0.63%    large
Operating expenses to operating income        43.7%   54.7%    -20%
Operating expenses to average assets          1.47%   1.54%    -4%
Net specific provision                         364       4     large
Net specific provision as a % of
 average net advances                         2.57%   0.03%    large
Net non-accrual loans                          296     230     29%
Net non-accrual loans as a % of net advances  2.19%   1.44%    52%
Total employees                              2,904   2,666      9%
Lending growth (including FX impact)         -15.4%   15.2%    n/a
Lending growth (excluding FX impact)          -8.8%   -2.8%    large
External assets                             24,256  30,099     -19%
Risk weighted assets                        20,986  25,746     -18%

2002 RESULTS

Net profit increased by 92% to $284 million in 2002. The prior year
results were adversely impacted by losses from discontinued
businesses and the writedown of the investment in Panin. Excluding
the net loss of $68 million from these items, profit grew by 31%, due
mainly to a $26 million increase in equity accounted income from
Panin, acquisitions and growth in fee income from Pacific, Americas
and Asia particularly in structured finance. Net specific provisions
were far above expectations, due to large single name losses on
formerly investment grade loans, mainly Enron and Marconi.

FEATURES OF THE SECOND HALF

Net profit increased by 12% to $150 million in the second half. The
main influences on this result were:

* Higher interest income recovered from non-accrual loans. Overall,
lending growth remained subdued in global markets.

* Increased fee income from structured finance in Americas.

* Higher other income, reflecting an increase of $5 million in equity
accounting income from Panin and higher income on structured deals in
Americas and UK. Foreign exchange earnings also increased, assisted
by volatility in the PNG exchange rate.

* Operating expenses were held to a slight increase. 

Net specific provisions increased further from the high level in the
first half, due principally to losses on Marconi.


OVERSEAS MARKETS - ASIA
JOHN WINDERS
                                           
NET PROFIT ATTRIBUTABLE TO MEMBERS OF THE COMPANY
NET interest income                            131     141     -7%
Fee income                                      61      52     17%
Other operating income                          69     (24)    n/a
Operating income                               261     169     54%
Operating expenses                            (114)   (126)   -10%
Profit before debt provision                   147      43    large
Provision for doubtful debts                   (22)    (24)    -8%
Income tax expense                             (21)    (22)    -5%
Outside equity interests                        (3)     (2)    50%
Net profit attributable to members                            
 of the Company                                101      (5)    n/a
Operating expenses to operating income        43.3%   74.0%    -41%
Net specific provision                           1     (11)    n/a
Net non-accrual loans                           32      80     -60%
Total employees                                617     601       3%

The Asia business now has a much lower risk profile and is focussed
on core group product capabilities including trade finance, foreign
exchange, structured finance, personal banking and cards, servicing
the needs of our high quality customer base with significant network
linkages to Australia and New Zealand.

Asia has had minimal new lending losses for the past two years which
reflects a program of ongoing risk reduction and a refocus towards
core group capabilities in both the corporate and personal banking
areas.

2002 RESULTS

2001 results were adversely impacted by losses from discontinued
business (Boom.com and the joint venture with OCBC Bank), together
with the writedown of the investment in Panin. Excluding the net loss
of $68 million from these items, profit before tax grew by 44%, due
mainly to increased equity accounted contribution from our investment
in Panin.

FEATURES OF THE SECOND HALF

Profit after tax for the half year to September 2002 increased by 24%
to $56 million. The results were impacted by:

* Improvement of $5 million in equity accounted contribution from our
investment in Panin.

* Reductions in fee income resulting from weak business conditions
regionally and globally.

* Ongoing focus on cost control as evidenced by the continued
lowering of operating expenses.


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