Preliminary Final Report

Document date:  Thu 24 Oct 2002
Published:  Thu 24 Oct 2002 14:25:59
Document No:  196680
Document part:  L
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)

ANZ INVESTMENT BANK
Grahame Miller

ANZ Investment Bank provides a customer focussed integrated service,
utilising specialist capabilities, innovative products and customised
client solutions. Comprises Global Foreign Exchange, Global Capital
Markets, Global Structured Finance and Corporate Financing & Advisory

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

Net interest income                   262        209      25%
Other external operating income       538        548      -2%
Net inter business unit fees          (4)         (8)    -50%
Operating income                      796        749       6%
External operating expenses         (335)       (331)      1%
Net inter business unit expenses     (27)        (23)     17%
Operating expenses                  (362)       (354)      2%
Profit before debt provision         434         395      10%
Provision for doubtful debts         (68)        (64)      6%
Profit before income tax             366          331     11%
Income tax expense and outside 
 equity interests                    (55)         (43)    28%
Net profit attributable to 
members of the Company                311         288      8%
Net loans & advances including
 acceptances                       12,323       13,645   -10%
Other external assets              13,346       16,206   -18%
External assets                    25,669       29,851   -14%
Deposits and other borrowings      11,219       13,904   -19%
Other external liabilities          9,435       12,208   -23%
External liabilities               20,654       26,112   -21%
Net interest average margin          1.46%       1.19%    23%
Return on assets                     1.13%       1.02%    12%
Return on risk weighted assets       1.32%       1.19%    11%
Operating expenses to 
 operating income                    45.5%        47.3%   -4%
Operating expenses to average assets 1.33%         1.25%   6%
Net specific provisions                396            95  large
Net specific provision as a % 
of average net advances              2.73%         0.65%  large
Net non-accrual loans                 348           209     67%
Net non-accrual loans as a % of
 net advances                        2.51%         1.32%    90%
Total employees                     1,034         1,068     -3%

GLOBAL FOREIGN EXCHANGE
Chris Cooper

Provision of foreign exchange and commodity trading and sales related
services to corporate and institutional clients globally

                                      FULL      FULL     MOVT
                                      YEAR      YEAR     YEAR
                                      SEP 02    SEP 01   V. SEP 01
                                      $M        $M       %
2002 RESULTS

The weak global economy, relatively stable exchange rates and
tightened credit conditions all impacted on the business,
particularly during the first half. Ongoing rationalisation reduced
costs by 4%, partly offsetting the reduction in income from trading
activities.


Net interest income                    28        (2)        n/a
Other external operating income       217        266       -18%
Net inter business unit fees            1        (2)        n/a
Operating income 1                    246        262         -6%
External operating expenses           (57)       (57)      -Net
inter business unit expenses          (64)       (69)        -7%
Operating expenses                   (121)      (126)        -4%
Profit before debt provision          125        136         -8%
Provision for doubtful debts           (3)        (6)       -50%
Profit before income tax              122         130        -6%
Income tax expense and outside 
equity interests                      (38)        (43)      -12%
Net profit attributable to 
members of the Company                 84          87        -3%
Operating expenses to 
operating income                     49.2%         48.1%      2%
Net specific provisions                (1)         57        n/a
Net non-accrual loans                   77         77         - 
Total employees                        211        219        -4%

1 Global Foreign Exchange derives and manages its revenue from the
mark-to-market of its trading portfolios less holding costs. For
disclosure purposes, the business is required to separately identify
net interest income, notwithstanding that performance is best
assessed on a total revenue basis.

FEATURES OF THE SECOND HALF

* Customer activity increased in the second half, as did the level of
volatility in Australasian and G4 currency markets, albeit
sporadically. Trading volumes were increased as a result of marketing
efforts directed at non-bank financial institutions. Our commodities
business showed an increasing contribution, with expansion of the
product range.

* There was also growing evidence of success in our e-business
strategy reflected in increased reliance on this delivery channel by
corporates.

* Operational restructuring resulted in a reduction in expenses,
enabling further investment to be made in our commodities business
and other initiatives, with total costs held to a marginal increase
(2%).

ACHIEVEMENTS

* Maintained position as premier Australian FX bank globally and 
domestically.

* Rated No 9 in the world and No 5 in Asia/Pacific by clients (FX 
Week Poll).

* Rated No 1 FX Bank in Australia and New Zealand (Asiamoney Poll).

* FX Online transactions now represent 40% of all customer 
transactions (2001  25%). 

BUSINESS ENVIRONMENT AND OUTLOOK

* Volumes continue to increase, however margin compression in the 
spot market continues due to the increasing use of eCommerce.

* Equity and fixed interest portfolio investment flows are growing, 
with investors seeking further international
diversification of holdings.  

* Retail foreign exchange is increasingly a growth sector. 

* Historical relationships and access to credit are highly valued by
customers, especially for complex products.

OBJECTIVES

* Defend and grow our global franchise in core currencies (AUD, NZD
and G4) across 32 countries.

* Focus on deeper penetration of global asset managers, and the small
business/middle corporate sectors.

* Further diversify revenues through developing the commodities
business.

GLOBAL CAPITAL MARKETS
David Hornery

Provision of origination, underwriting, structuring, risk management,
advice and sale of credit and derivative products globally


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

Net interest income                      66      74       -11%
Other external operating income         104      84        24%
Net inter business unit fees             12      10        20%
Operating income 1                      182      168        8%
External operating expenses             (45)     (40)      13%
Net inter business unit expenses        (43)     (45)      -4%
Operating expenses                      (88)     (85)       4%
Profit before debt provision             94       83       13%
Provision for doubtful debts             (2)      (3)     -33%
Profit before income tax                 92       80       15%
Income tax expense and 
outside equity interests                (28)     (27)       4%
Net profit attributable to 
members of the Company                   64       53       21%
Operating expenses to
 operating income                      48.4%      50.6%    -4%
Net specific provisions                   3        1       large
Total employees                         189        177       7%

1 Global Capital Markets derives and manages its revenue from the
mark-to-market of its trading portfolios less holding costs and
receipt of fee income. For disclosure purposes, the business is
required to separately identify net interest income, notwithstanding
that performance is best assessed on a total revenue basis.

2002 RESULTS

Profit before tax grew strongly by 15% and with the benefit of the
Australian tax rate change, profit after tax was 21% higher. This
result was due to good revenue growth across the product range,
despite a slowing economic cycle and volatile credit markets. Expense
growth was low despite significant investment in new product
development, international distribution and infrastructure
replacement.

FEATURES OF THE SECOND HALF

* In the September half, volatility, particularly in credit markets,
caused cancellation or deferment of a range of key deals. This was
offset by a number of high value structured derivative transactions
and good market penetration across the broad product range.

* GCM On-Line, our internet based trading platform was released and
is gradually being rolled out across the full client base.

* The decision was taken to withdraw as an issuer from the equity
warrant markets.

* During the year, major work on netting exposures was completed and
during the first half of 03 we will implement our collateral
management system, further enhancing our strong credit position,
where in excess of 95% of our credit exposure is ranked investment
grade.

ACHIEVEMENTS

* Maintained top tier ranking or market leadership in each of the 
business segments.

* Rated No 1 in Interest Rate Derivatives and Credit Derivatives in 
Australia and New Zealand (Asiamoney Poll).

* Rated No 1 in Syndicated and club loans including refinancing, for 
Australia and New Zealand (Basis Point).

* Launched GCM Online providing faster and interactive response to
customer orders, 24 hour service, Straight Through Processing to
clients and reduced transaction costs.

* ANZ has a leading market position in several key Credit and
Structured Credit Markets. This position will be strengthened with
further investment in systems and intellectual property investment in
the coming year.

BUSINESS ENVIRONMENT AND OUTLOOK

* The markets for high volume/scale driven product continue to
experience margin compression. 

* Historical relationships, access to credit, and product/solution
tailoring are key "selection criteria" for customers, especially for
complex products.

* Demand for specialist skills in new product development continues 
to intensify. 

OBJECTIVES

* Grow core business at 10%-15% per annum compound, consolidating a 
top 3 position.

* Focus on select, high growth, high intellectual property 
businesses, in which we have already built a strong pipeline.

GLOBAL STRUCTURED FINANCE
Gordon Branston

Provision of arranging, underwriting and advisory services, financial
engineering solutions and the funding of large structured debt
transactions internationally
                                      FULL      FULL     MOVT
                                      YEAR      YEAR     YEAR
                                      SEP 02    SEP 01   V. SEP 01
                                      $M        $M       %

Net interest income                    118       133       -11%
Other external operating income        147       122        20%
Net inter business unit fees             3        (3)       n/a
Operating income                       268        252        6%
External operating expenses            (59)       (56)       5%
Net inter business unit expenses       (55)       (53)       4%
Operating expenses                    (114)      (109)       5%
Profit before debt provision           154        143        8%
Provision for doubtful debts           (51)       (43)      19%
Profit before income tax               103        100        3%
Income tax expense and outside 
equity interests                       (19)       (24)      -21%
Net profit attributable 
to members of the Company               84         76        11%
Operating expenses to operating income  42.5%     43.3%      -2%
Net specific provisions                  356        8       large
Net non-accrual loans                    246       107      large
Total employees                          185       194        -5%

2002 RESULT

Profit after tax measured using ELP was 11% higher driven by strong
fee income. However, significant net specific provisions of $356
million, or a loss rate of 3.9%, cast a shadow over the result. Net
specific provisions of $356 million related mainly to Enron $136
million in the March half year and Marconi $143 million in the
September half year. Remaining provisions related to a small number
of customer exposures in the Media & Telecom and Power sectors. The
strong growth in fee income was partly offset by the maturity of high
yielding assets in the 2001 year, and an $8 million increase in
provision for doubtful debts. Costs increased by 5% with the
investment in specialist staff.

FEATURES OF THE SECOND HALF

Profit after tax increased by $2 million over the March half year.
After adjusting for exchange rate movements, this represents an
underlying 15% increase in profit after tax in a difficult market
environment. Revenue has increased 16% (23% excluding exchange rate
impact) over the March half. Strong fee income has maintained profit
levels and offset a contracting balance sheet. The tax charge for the
second half reflects a return to more sustainable levels. This first
half benefited from utilisation of available tax deductions in
offshore jurisdictions.

Expenses reduced 7% (3% excluding the exchange rate impact) with a
decrease in underlying staff costs. Net non-accruals decreased $131
million since March, due largely to provisioning against the Marconi
exposure.

ACHIEVEMENTS

* Rated No 1 Asia Pacific Project Finance Bank of the year (Project
Finance International and Global Finance magazines) and Top 10 Global
Loan Arranger (Dealogic Projectware, Thomson Financial).

* Awarded Deal of the Year accolades for Power, Oil & Gas and Water 
transactions.
 
* Launched Renewable Energy strategy in Europe and USA.

* Extended risk mitigation to transfer risk in our international 
Project Finance portfolio.

* Achieved a strong performance in project and structured finance and
in industrial transportation producing significant growth in
non-lending fees despite subdued markets.

BUSINESS ENVIRONMENT AND OUTLOOK

* The GSF business focuses on the following key segments, Power,
Infrastructure, Mining & Minerals, Oil & Gas and Media &
Telecommunications. Power projects represent around 44% of all
projects globally, and GSF has a strong position in this market
segment.

* With the loss experience in 2002, the credit portfolio is to be
progressively rebalanced to reduce the level of corporate credit
facilities provided to overseas companies (the principal source of
the specific provisions) and retain the focus on project finance.

* The power sector in the UK and US has shown some strain, which is
subduing project activity, although growth is expected in the
Renewable Energy sector.

* Oil & Gas and Liquefied Natural Gas sectors remain strong,
providing significant opportunities.

OBJECTIVES

Minimise portfolio concentrations, and diversify further by geography
and sector. Continue to build industry and product specialisation,
and exploit the intellectual capital of the business. Increase the
contribution from fee based structuring and advisory activities.

MORE TO FOLLOW