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Chairman`s & CEO`s Addresses to S/hldrs-Financial Highlights

Document date:  Fri 13 Dec 2002
Published:  Fri 13 Dec 2002 13:57:08
Document No:  199182
Document part:  B
Market Flag:  Y
Classification:  Chairman's Address to Shareholders

AUSTRALIA AND NEW ZEALAND BANKING GROUP       2002-12-13  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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CHAIRMAN'S SPEECH

DELIVERING SUSTAINABLE GROWTH

Ladies and gentlemen, good morning. My name is Charles Goode. As your
Chairman, it is my pleasure to welcome you to the 34th Annual General
Meeting of ANZ. I want to also welcome shareholders joining us via
anz.com

Let me say how pleased we are to be holding our Annual General
Meeting in Perth. We have had a continuous presence in Western
Australia for 124 years. Today we have 72 branches, 12 agencies and
over 1,000 dedicated staff across the State. Our customers include
some of the State's largest and most successful companies, 3,000
small to medium businesses as well as some 300,000 individuals.

The Bank and its staff are working hard to try to make a difference
in the Western Australian community. Our staff are involved in many
local community programs. For example ANZ staff have helped to raise
the funds for, and will help build, a skate park for young people in
Narrogin. They volunteer for causes like Meals on Wheels, Relay for
Life and Jeans for Genes Day and they actively support organizations
working at a local community level like Anglicare's 'Streets Alive'
program. The Bank is a major supporter of Foodbank W.A., a community
organisation providing food to those in need.

In sport, we are a long-standing and a very proud sponsor of the West
Coast Eagles. We are also long standing sponsors of the Western
Australian Institute of Sport and the Sports Star of the Year Awards.

Turning to today's meeting:

As a quorum is present I now formally declare this Annual General
Meeting of shareholders open. You should have all received a copy of
the notice of meeting and if there is no objection, I propose to take
it as read.

Extra copies of the Notice and the Annual Report are available, if
anyone would like them. The minutes of the 2001 Annual General
Meeting are also available.

At our meeting today the Chief Executive John McFarlane and I will
report to you on how ANZ has performed during the year and I will
give you our sense of the outlook for the year ahead. I will then
open the floor for questions or comments on any of the matters
related to our business. I would remind you that this is a meeting of
shareholders, it is not appropriate to raise individual customer
issues. A number of our senior staff are present today and you can
discuss those sorts of matters with them after the meeting.

This morning I want to discuss four key matters with you.

Five years ago ANZ began down a path that was aimed at changing the
bank and clearly differentiating it from our major competitors. The
foundation of lower risk and improved performance we have been trying
to achieve over these last five years is based on good governance and
accountability, including transparency. So I want to discuss our
approach to governance and accountability and then move on to our
performance this year, and together with John McFarlane, talk about
our strategy and finally give you a view on the year ahead.

Governance

The first issue I wish to discuss today is governance.

It has been a challenging year in financial markets. Around the world
investor confidence has been shaken by the collapse of a number of
high profile, formerly investment grade companies and concerns about
the integrity of some aspects of the financial market. We were not
immune from these events, especially in our activities in the United
States and the United Kingdom. As a consequence of these events there
is a strong emphasis on increasing corporate governance and
disclosure standards.

While I believe the ANZ's approach to corporate governance is
important to you as shareholders of the bank, I believe it is equally
important to you as customers and members of the broader community
because of the role the bank plays in the economies of Australia, New
Zealand and the Pacific.

At a practical level corporate governance comes down to three key
steps. The first is that a Board is made up of ethical, competent and
experienced directors. The second is that a Board undertakes active
monitoring of the company's activities and the third is that it
ensures integrity prevails within the company.

To be effective there needs to be an environment, which encourages
well-informed, challenging and constructive discussion. It means a
commitment to transparent reporting, timely and accurate disclosures
and management accountability. We believe that being a leader in
governance and transparency combined with delivering on our promises
will give us a strong advantage particularly in times like this.

For some years now ANZ has been a leader in the level of transparency
and our disclosure to investors. A number of significant awards have
recognised our efforts on improving transparency including the award
for "Best Communication of Shareholder Value" for the last two years
at the annual Australian Investor Relations Awards.

Let me give you a few examples of how we are working to improve
disclosure:

- We reported our annual results on the 24th of October, three and a
half weeks after our 30 September balance date. From a governance
perspective, getting information out in a timely manner is a critical
part of transparency.

- 2002 was the second year we have provided the profit and loss for
each of our specialist businesses. This year for the first time we
reported the profits of the banks internal treasury operation. I am
not aware of any other bank in the world doing this.

- We also regularly report on a range of non-financial, but
none-the-less critical indicators of success.

For example in this year's annual report we show how our customers
and staff rated their satisfaction with us in each of our major
businesses. We have also included a survey asking how you rate the
annual report and we will publish the results next year. While a high
level of transparency is important for good governance it is critical
in developing a performance culture and clear management
accountability. As you might expect, we also encourage openness and
transparency internally at ANZ. We encourage it within work teams and
between management and the Board.

While we have made good progress on governance we know we have to
continue to raise the bar. So this year your Board reviewed all of
our governance procedures.

Some of the key changes include:

- A new committee structure with four main Board committees  the
Audit Committee; the Risk Management Committee; the Nominations and
Corporate Governance Committee; and the Compensation Committee.

- Each of the four main committees is made up of independent
directors and each has its own committee chairman.

- We have introduced a new policy covering ANZ's relationship with
its auditor.

The policy, limits and controls the provision of services by ANZ's
auditor by ensuring that engagements undertaken by the external
auditor do not compromise its audit responsibilities.

- ANZ's Head of Internal Audit now reports directly to the Chairman
of the Audit Committee.

- We have enhanced the protection of our staff who raise issues about
internal procedures under our Serious Complaints Process.

- You may have noticed that there is also enhanced disclosure and
discussion of critical accounting policies, and disclosure of
offbalance sheet vehicles in the Financial Report.

These steps will help ensure governance at ANZ continues to be of the
highest standard.

Performance

Let me now discuss the second matter, Performance and Accountability.

Accountability is not simply about management and staff being
accountable, although we do believe strongly in that. It is about ANZ
being accountable to its shareholders, its staff, its customers and
the broader community.

I will discuss progress on each of these dimensions. There is no
doubt 2002 was a strong year for ANZ. The financial results are one
measure of our progress. We lifted after tax profit by 24% to a
record 2 point 322 billion dollars. The result was impacted by three
significant transactions:

- The sale of our investment management business, to the joint
venture we formed with ING, realised $170 million after tax.

- The settlement of the long running dispute with the National
Housing Bank of India resulted in the recovery of $159 million after
tax.

- And on the other side of the ledger we took a special charge to
strengthen our general provision for doubtful debts of $175 million
after tax.

Excluding these significant items, profit after tax increased by
15.9% to 2 point 168 billion dollars.

The earnings per share grew by 16.7% and we have paid a record
dividend for the year of 85 cents per share fully franked. Our return
on equity was 21.6 per cent.

An important measure of productivity is the cost to income ratio. Our
cost to income ratio was 46% ranking us in the top five of the 100
largest banks in the world in terms of this dimension of efficiency.

Over the past seven years, the majority of the benefit of our cost
reductions have been passed on to ANZ customers. This has been mainly
in the form of reduced interest rate margins.

Our Tier One capital ratio was strong at 7.9%. This is important in a
challenging economic environment. Our strong capital base makes us
more resilient and gives us the flexibility to take advantage of
opportunities that often present themselves in times like this.

Today we paid the final dividend of 46 cents a share into the bank
accounts of those shareholders electing direct credit. Shareholders
will receive the cheques, dividend reinvestment plan, bonus option
notices and the ANZ shareholder privilege package from today.

Shareholder return is a combination of dividends and movements in the
share price. You will be pleased to know that if you invested $1,000
in ANZ shares five years ago and you had reinvested the dividends,
that $1,000 would have increased to around $2,200 today.

Any organisation that wants to be successful has to align the
interests of staff with shareholders. So, I am pleased to be able to
report to you that as of today, more than 90 per cent of our 22,000
employees own shares in ANZ.

The Bank's good financial performance is a result of purposeful
management actions over a number of years. Let me mention several
initiatives from the last financial year.

In October last year we introduced our Customer Charter. This charter
goes beyond the industry code of banking practice. It makes specific
promises about the level of service we will provide to our customers.
These promises are about some of the most important issues for our
retail customers.

They include branch queues and how long they have to wait on the
phone. On some of these issues we said we would compensate customers
if we did not meet our promises. We also said that our external
auditors would review our performance against the promises we made.
Last month we published the results of the first audit of our
performance against the charter. In essence it showed we have made a
good start but we still have a lot to do.

In May we appointed a Customer Advocate, Mr. Bill Robinson, to
oversee how we deal with customer issues and complaints. Mr. Robinson
has legal training and extensive legal management experience in
senior State and Federal positions, including negotiation and
resolution of disputes and litigation.

We introduced new products for our customers such as lower cost
accounts with simpler fees, and no fee transaction banking for
customers over 60.

At the community level we introduced an innovative program with the
Brotherhood of St Laurence to develop Australia's first matched
savings program. This program has one simple objective: to help
families on the poverty line break out of the cycle by helping them
build savings for education.

Our staff are increasingly active at a local level in the community 
both through the work of the ANZ Community Fund and by contributing
their own time as volunteers.

In September this year Fortune Magazine recognised the changes at ANZ
by selecting the bank as one of 40 stocks to invest in for
retirement. ANZ was the only Australian company and one of only five
non-US companies on that list.

Over the last five years our objective has remained the same.

We want to achieve stable, sustainable growth by building growth
businesses with real competitive advantage and by continually working
at lowering risk across the bank.

Possible tax assessments

In the annual report we refer to ongoing disputes with the
Commissioner of Taxation. We have legal advice to support our
position but some of the matters are moving closer to the issue of
assessments. We believe our tax provisions are adequate. Of course we
will advise shareholders of our position in more detail on receipt of
any material assessments.

It has been our experience that the Australian Tax Office issues
assessments that are a multiple of the amount of profits involved.

We find this practice an unfortunate aspect of commercial life in
Australia that would benefit from reform.

Performance of Specialist Businesses

Let me talk about the performance of each of our major businesses:

Although there were some outstanding performances from several of our
businesses, growth came from across the portfolio. All but 3 of our
17 businesses recorded higher profits. The result reflects the
strength in the diversity of our businesses, and the benefits that
flow from our specialisation strategy.

Net loans and advances grew 7% reflecting strong growth in our
consumer businesses and our decision to limit balance sheet growth in
our corporate businesses.

Small to Medium Business, Wealth Management and Consumer Finance all
performed strongly.

On the Corporate side, performances were solid across most businesses
with Institutional Banking and Global Capital Markets delivering good
profit growth.

Internationally our businesses made strong gains. We expanded our
Pacific operations and they performed well. A strong contribution
from the Panin Bank investment in Indonesia helped the turnaround in
our East Asian operations.

In mentioning Indonesia I wish to say on behalf of all ANZ staff and
shareholders how shocked we were by what happened in Bali on October
the 12th. Our thoughts and prayers are with all the families so sadly
affected by this senseless act of terrorism. I am aware that many
families in Western Australia were particularly affected.

Returning to the year under review, major initiatives included:

- Creating a joint venture in funds management and life insurance
with ING. ING is one of the world's largest investment, banking and
insurance groups.

- The joint venture fits with the Bank's specialization strategy and
takes advantage of the respective strengths of ANZ and ING. It
strengthens our ability to serve customers in funds management and
life insurance in Australia and New Zealand.

- We also strengthened our position in the Pacific with the
acquisition of the Bank of Hawaii's Papua New Guinea, Vanuatu and
Fijian operations. We also acquired 75% of the Bank of Kiribati.

Strategy

I would now like to turn to my third theme: strategy.

This year's performance reinforces the benefits of our distinctive
strategy built around specialized businesses and our increasing
reputation for implementing that strategy.

It reflects the changes we have made in recent years to reduce risk,
to achieve world leading productivity, to build a balanced and
sustainable business mix and to evolve a high performance culture.

By reconceiving the bank as a portfolio of specialist businesses we
can now see opportunities for long term growth within many of those
businesses that weren't apparent under the old model. So while our
overall strategy for the future remains the same, we will be
investing in some of our specialist businesses to create new and
stronger platforms for growth.

Our challenge then, is to grow our existing businesses, take
advantage of the opportunities and invest for growth while
maintaining good financial performance and keeping risk low. At the
same time we need to continue to improve our performance with
customers, staff and the community.

To achieve this we need to establish stronger relative positions in
our core businesses in Australia and New Zealand, and in selective
overseas markets.

We are currently well positioned in our Corporate, Institutional and
Investment Banking businesses, and in Credit Cards and Asset Finance.
Looking ahead we need to develop similar relative strengths in
Personal Banking, Mortgages, Small to Medium Business, and in Wealth
Management.

Internationally we will continue to seek opportunities to expand our
franchise in the Pacific. In Asia we will position ourselves for
longer term growth by considering opportunities to establish modest,
lower risk growth options, principally in consumer banking.

Growing our businesses like this means balancing our level of
expenses relative to the growth and investing for the future, while
maintaining earnings.

Outlook

Over the last five years, Australian banks have experienced one of
the best periods in their history, with strong growth in profits and
in shareholder value. During that period ANZ achieved earnings growth
of 13% per annum, significantly exceeding our 10 per cent target.

Looking forward to the next three years, we believe the opportunities
for ANZ remain good, but the more subdued global situation and
consumer outlook are unlikely to create the environment to allow the
past five years performance to be repeated.

The global economic situation is likely to remain weak, exacerbated
by increased security concerns, but for us we expect international
credit losses to be at lower levels than last year. The Australian
and New Zealand economies, are likely to be more robust than other
developed economies although we see a softening in current high
levels of consumer credit growth, together with a modest upswing in
credit costs from their current cyclical lows.

For credit cards, higher loyalty program costs and, from 2004,
substantially lower interchange fees will subdue returns. An expected
slowing in the rate of growth in mortgages should partly be off-set
by the strength of ANZ's position in the third party mortgage market.
The outlook for the wealth management sector is not as strong as in
recent years.

However, business investment is expected to rebound from its current
low level, and ANZ is likely to benefit from a higher than industry
weighting in Corporate and Institutional banking. We also intend to
maintain our commitment to productivity improvement, risk reduction
and capital management.

We are likely to consider revising upwards our dividend payout ratio.

Now let me turn to the year ahead. We said at our results
announcement in October that our internal forecasts were below our
target. Our first two months were weak, falling short of target. We
have taken action to improve performance over the remaining months of
the year. Given this our 10% earnings per share target is now more
stretching.

To sum up, the relatively favourable conditions offered by our
domestic environment, together with the foundation we have
established gives us confidence that ANZ will continue to prosper and
create value for all stakeholders in the coming years.

That completes my address.