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Confirms earnings outlook despite weakness in cards

Document date:  Fri 21 Feb 2003
Published:  Fri 21 Feb 2003 08:40:54
Document No:  201129
Document part:  A
Market Flag:  Y
Classification:  Periodic Reports - Other

AUSTRALIA AND NEW ZEALAND BANKING GROUP       2003-02-21  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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MEDIA RELEASE

ANZ CONFIRMS EARNINGS OUTLOOK DESPITE WEAKNESS IN CARDS

ANZ today issued a shareholder update confirming a stable earnings
outlook for the year in line with market consensus for growth of
around 8%, notwithstanding a one-off charge in its credit card
issuing business in the first half. This announcement coincides with
public shareholder meetings in Auckland today and Wellington next
week.

ANZ confirmed trading improved in December and January following
previously announced weaker performance in October and November. ANZ
will also take a one-off $27 million charge after tax in its credit
card issuing business arising from the prior under-accrual of loyalty
points liabilities together with a non-recurring gain in Asia of $16
million after tax.

Asset and liability growth has been strong across personal and
corporate businesses. Expenses were controlled, and despite recent
speculation, credit quality continues to improve with ANZ expecting
specific provisions for 2003 to be below 2002 and within Economic
Loss Provisioning.

While ANZ expects full-year 2003 bottom-line after tax profit growth
of 8% in line with market consensus, the cards issue is likely to
mean the first half will be weaker than the second.

ANZ is also confident it will resolve satisfactorily its major
outstanding tax dispute with the Australian Taxation Office relating
to dividend product transactions.

ANZ Chief Executive Officer Mr John McFarlane said: "We are operating
in a tougher environment and the current market consensus on our 2003
earnings growth is a realistic challenge.

"Despite the problem in our credit card issuing business, recent
overall momentum has been good, expenses are being managed well, and
international credit issues appear containable," he said.

BUSINESS SEGMENT UPDATE

CONSUMER FINANCE. Underlying business conditions for the Consumer
Finance business remain solid, supported by strong asset growth in
the December quarter reflecting a buoyant Christmas sales period.
Momentum in credit card merchant acquiring continues, with market
share up to 24% of reported credit card transactions.

However, in a review of its credit card business following the
Reserve Bank of Australia's announced reforms, shortcomings have been
identified in the methodology used to accrue loyalty points for some
co-branded cards. Since 1999, points for the Qantas ANZ Business One
Card and bonus points for international expenditure on the Qantas ANZ
Card have been under-accrued. The associated one-off charge will
reduce Consumer Finance's after tax profit by a one-off charge of $27
million in the first half of 2003. As a result, ANZ has made
management changes in the cards issuing area and increased financial
controls within the business.

MORTGAGES. Mortgage outstandings were up 6.5% in the first four
months. While ANZ-distributed product has held up well, the majority
of improvement came from third parties who accounted for more than a
third of all new mortgages by value. Third-party share of the overall
market has been steadily increasing and ANZ's third-party
distribution model and product offering continues to gain a solid
share of this growth.

PERSONAL BANKING. Deposit growth and mortgage sales have been solid.
This has been eroded to some extent by margin pressure, reduced fees
on transaction accounts and increased costs associated with branch
refurbishment.

ING JOINT VENTURE. The performance of the ING Australia Joint Venture
has been flat compared to the second half of 2002. In a difficult
environment for the funds management industry, it was encouraging
that ASSIRT reported ING Australia had the largest net inflows in the
industry for the December quarter.

GLOBAL INSTITUTIONAL AND INVESTMENT BANK. Fee and loan volume growth
have been relatively strong in Australia and New Zealand but Global
Structured Finance has been subdued reflecting ANZ's strategy to
contain non-core international corporate lending. Revenues from
trading activities have been stable.

CORPORATE AND SMALL-MEDIUM BUSINESS. Asset and deposit growth
underpin a strong performance, with positive trends in domestic
business investment.

NEW ZEALAND. Performance has been relatively flat in New Zealand
Dollar terms however ANZ has benefited from the appreciation of the
New Zealand Dollar against the Australian Dollar.

ASSET FINANCE. Strong business conditions, good liability growth and
a more focused business model have generated positive earnings
performance.

ASIA-PACIFIC. Performance has been strong, enhanced by the one-off
gain relating to PT Panin Bank.

Domestic consumer and corporate credit quality remain sound. We
continue to be cautious regarding parts of the offshore investment
banking portfolio, including the US energy sector. While there have
been some developments, we do not believe these to be sufficient to
affect our previously stated view of potential losses, and continue
to believe these to be containable. Accordingly, ANZ continues to
expect specific provisions from its international investment banking
businesses to have peaked and for specific provisions in 2003 to be
lower than 2002. In general, the overall quality of ANZ's loan
portfolio continues to improve and there is scope for the underlying
Economic Loss Provision charge to modestly reduce as a percentage of
net lending assets.

ANZ's Adjusted Common Equity Ratio (ACE/RWA) is at the top end of its
target capital adequacy range and, with asset growth and the
possibility of a higher dividend payout ratio, is likely to remain
around current levels in the near term.

ANZ will report its Interim Results for the six months ended 31 March
2003 on 24 April 2003.

For media enquiries, contact:

Paul Edwards
HEAD OF MEDIA RELATIONS
Tel: 0409-655 550
Email: edwardp12@anz.com

For analyst enquiries, contact:

Philip Gentry
HEAD OF INVESTOR RELATIONS
Tel: 03-9273 4185 or 0411-125 474
Email: gentryp@anz.com

Stephen Higgins
SENIOR MANAGER INVESTOR RELATIONS
Tel: 03-9273 4282 or 0417-379170
Email: higgins@anz.com