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Preliminary Final Report

Document date:  Thu 24 Oct 2002
Published:  Thu 24 Oct 2002 14:18:54
Document No:  196680
Document part:  K
Market Flag:  Y
Classification:  Preliminary Final Report , Periodic Reports - Other , Dividend Record Date , Dividend Pay Date , Dividend Rate


HOMEX - Melbourne                                                     


Bob Edgar

Managing customer relationships and developing financial services
solutions and strategies for large businesses (turnover greater than
$100 million) and specialised industry segments including property
lending in Australasia and corporates in Asia

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

Net interest income                251         240          5%
Other external operating           
 income(1)                         329         285         15%

Net inter business unit fees         -           1       -100%

Operating income                  580          526         10%
External operating expenses      (123)        (117)         5%
Net inter business unit expenses  (12)         (15)       -20%
Operating expenses               (135)        (132)         2%
Profit before debt provision      445          394         13%
Provision for doubtful debts      (92)         (89)         3%
Profit before income tax          353          305         16%
Income tax expense and outside   
 equity interests                (110)        (100)        10%
Net profit attributable to 
 members of the Company           243          205         19%

Operating expenses to
 operating income                23.1%        24.9         -7%
Net specific provisions          52           67          -22%
Net non-accrual loans            97          260          -63%
Total employees                 783          773            1%

(1) Includes commercial bill income


Profit before tax grew by 16%, driven mainly by strong growth in fee
income from a range of product offerings and advisory services.
Lending margins improved, leading to higher net interest income on
lower loan volumes.


* Average lending volumes were flat, yet operating income grew by 6%.
Net interest income growth was due to improved interest margins with
risk more fully factored into pricing.

* The growth in other income despite the flat loan volumes reflects
charges for providing our specialist expertise on complex lending
deals, including restructuring.

* Operating expenses were well contained relative to income growth,
evidenced by the further reduction in the cost to income ratio.

* Provision for doubtful debts, specific provisions and non-accrual
loans all decreased, reflecting improving credit quality in the half.
Approximately 72% of the portfolio is investment grade. Overall the
quality of the portfolio reflects our specialist industry expertise
and strong credit processes.


* The focus on cross sell and increased share of wallet has resulted
in a 26% growth in customer EVA from prior year. Over 60% of this
result is booked in other business units.

* Maintaining existing high levels of market share and customer
satisfaction - ranked No 1 amongst peers for both measures.

* Maintaining non performing loans at less than 1% of total book.


* Institutional Banking is responsible for managing relationships
with top end corporates with turnover greater than $100 million.

* 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. Institutional Banking expects its lending growth to be broadly
in line with system growth, however focus is primarily on fee driven

* The 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.

* Top three needs of customers in this segment are i) Industry
knowledge; ii) Creative ideas and solutions; and iii) High quality
service proposition.


* Continue growth and diversification of customer revenue mix.
* Maintain leading customer satisfaction ratings.
* Increase focus on fee revenue.
* Develop advanced portfolio management capabilities.
* Maintain a strong focus on risk, with performing loans to remain at
>99% of total book.


Carole Anderson

Provision of cash management, trade finance, international payments,
clearing and custodian services principally to institutional and
corporate customers in Australasia and overseas

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

Net interest income                192        195        -2%
Other external operating income    241        237         2%
Net inter business unit fees       (24)       (27)      -11%
Operating income                   409        405         1%
External operating expenses        (98)      (103)       -5%
Net inter business unit expenses   (87)       (90)       -3%
Operating expenses                (185)      (193)       -4%
Profit before debt provision       224        212         6%
Provision for doubtful debts        (9)       (10)      -10%
Profit before income tax           215        202         6%
Income tax expense and outside
 equity interests                  (65)       (67)       -3%
Net profit attributable to members
 of the Company                    150        135        11%

Operating expenses to operating
 income                           45.2%      47.7%       -5%
Net specific provisions            6           (1)       N/A
Net non-accrual loans              4            9        -56%
Total employees                  770          805        -4%


Profit before tax grew by 6% and with the benefit of the Australian
tax rate change, profit after tax was 11% higher. This was achieved
through increased deposits and increased utilisation of ANZ on-line
services. Costs decreased whilst significant investment was made in
strategies for future growth.


* Net interest income fell as consolidation among customers resulted
in lower balances held in international clearing accounts. The
September half also suffered the full impact of the first half
run-off in Latin American trade finance to reduce risk.

* The growth in cash management and structured trade transactions
coupled with higher foreign cash fees and international payments
contributed to a 4% increase in non-interest income.

* Overall, operating income remained steady in a tough global trading

* Operating expenses were held flat, notwithstanding increased
investment in our wholesale banking service initiative and the
custody system replacement. Ongoing restructuring, including our
trade processing platform, reduced staff levels whilst also
re-positioning our sales and product management teams.

* Provision for doubtful debts was slightly lower in line with
reduced risk profile and there was a net specific provision recovery
of $2 million.


* Rated "Best Stand Out Transaction Bank", across all (Cash 
Management & Trade) Product/Services.

* ANZ Custodian Services in Australia remains "top rated" by Global
Custodian magazine in its 2002 review of Agent Banks.


* Cash Management: Strong domestic growth continues to support the
business however this is partially offset by a slowdown in equity

* International Trade: Slower world recovery and the Australian
drought will slow trade growth, though mineral and energy commodity
exports are forecast to expand augmented by the continued growth of
trade in the Asian region.

* International Payments: After the downturn that followed the events
of September 11, demand is returning to international payments
particularly with sales of travellers cheques and foreign cash.

* Clearing: With the global settlement risk reduction initiative,
Continuous Linked Settlement, commencing live operations in
September, client expectations will shift towards real time cash
management and liquidity support and away from traditional
transaction processing services.

* Custodian Services: Transaction volumes have increased in line with
increased volatility on the Australian security exchange.


* Maintain strong competitive position:

- Leverage ANZ's strong trade finance capability to build an
international business around commodity trade flows.

- Establish independent International Money Centres within the ANZ
branch Network.

- Support the future needs of our custody business by implementing a
new core processing system.

* Create new businesses and enter new markets in partnership with our

- Wholesale Banking which will enable our corporate customers to
offer select banking services to their employees or end-customers.