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Revised Chairman`s Address to Shareholders

Document date:  Wed 26 Feb 2003
Published:  Wed 26 Feb 2003 18:52:00
Document No:  201282
Document part:  A
Market Flag:  N
Classification:  Chairman's Address to Shareholders

AUSTRALIA AND NEW ZEALAND BANKING GROUP       2003-02-26  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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Ladies and Gentlemen, good morning.

Let me say how pleased we are to be in New Zealand and holding our
Shareholders meeting in Wellington today. It is a pleasure visiting
the Capital.

ANZ, through its predecessor, the Union Bank of Australia, was the
first bank in New Zealand, opening in 1840. Our first manager, John
Smith rowed ashore with the bank safe from the ship "Glenbervie" to
Petone, where he established our first branch.

Today ANZ is one of the major banks in NZ. We are major providers of
home mortgage finance with a 15% share of the market. We hold
approximately 14.5% of the total assets held by registered banks in
New Zealand and are supported by a network of over 140 branches. Our
customers include some of the countries largest and most successful
companies, 7,000 small to medium businesses as well as nearly one
million individuals.

Both ANZ and its employees are working hard to make a difference in
the New Zealand community. Our people are involved in many local
community programs. For example, ANZ staff through membership of the
ANZ Staff Foundation, contributed to 50 local community organisations
last year. The funds of the Foundation are from 850 ANZ staff members
making weekly donations and ANZ matching them dollar for dollar.

The provision of volunteer leave for our people has seen ANZ staff
volunteering in a number of ways. Packing food parcels for the city
mission, helping in animal shelters, cleaning beaches and waterways,
running working bees for local hospices, to name a few.

The Bank is a major supporter of The Young Enterprise Scheme helping
New Zealand school children develop financial and business skills. We
also contribute to the Intensive Care Appeal, and are continuing our
work with asthma education in partnership with the Asthma and
Respiratory Foundation.

In addition to meeting with our New Zealand based shareholders, we
are taking the opportunity to review our operations here, meet with
customers and staff, as well as have discussions with political and
business leaders.

I would like to say how pleased we were to hear the announcement
earlier this week, from the Government's of New Zealand and
Australia, that they expect to introduce legislation in May to help
relieve the double taxation on dividends, in relation to Australian
and New Zealand companies that operate in both countries. For ANZ,
this will enable our New Zealand shareholders to gain some imputation
credits with the dividends they receive. However, I must caution that
the proposed reforms, while very welcome, are only a partial
solution. As currently proposed, the reforms may result in only a
partial reduction, in tax payable by New Zealand shareholders on
dividends from ANZ.

We will review these changes once more detail becomes available and
advise shareholders of the impact and our proposed approach as soon
as practicable.

Double taxation has been an issue for many years, and it is pleasing
to see progress being made. We would encourage both governments to
build on this progress, in the period ahead.

Today I will comment briefly on three themes:

- the corporate governance of the bank,
- financial performance, and
- the prospects for the Australian and New Zealand economies.

GOVERNANCE

The first theme I wish to discuss today is governance.

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.

As a consequence of these events, there is a strong emphasis on
increasing corporate governance and disclosure standards. 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 these.

For some years now ANZ has been a leader in the level of transparency
and disclosure to investors, not only in Australia and New Zealand,
but also from a global standpoint.

For example:

- the reporting of our interim and annual results some three and a
half weeks after balance date is particularly timely.

- 2002 was the second year we have provided the profit and loss for
each of our 17 specialist businesses. For the first time, we also
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.

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.

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

PERFORMANCE

The second theme I wish to discuss is "performance".

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 $2.322 billion.

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 $2.168 billion. Our return on equity was 21.6%.

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.

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 more than 90% 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 some of the
key initiatives from the last financial year.

- In May last year, we established a joint venture in funds
management and life insurance with ING - formerly known as Armstrong
Jones in New Zealand. 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 improves 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.

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.

John McFarlane and Greg Camm will elaborate in more detail on our
Strategy for the Group, and our New Zealand business in their
respective presentations shortly.

ECONOMIC PROSPECTS

The final theme I wish to touch on is the economic prospects for
Australia and New Zealand.

The world economy has had to absorb a number of significant shocks
during the past two years - the collapse of the 'dot-com' bubble, and
a substantial decline in share market valuations more generally; the
terrorist attacks of September 11 2001 and their aftermath; the loss
of confidence in corporate governance practices, particularly in the
United States; and now the growing risk of a military confrontation
in the Middle East.

All of these have taken a severe toll of investor, business and
household confidence.

Appropriately, economic policies around the world have sought to
overcome these blows by imparting substantial stimulus. However, such
measures have only a limited impact in the face of the current
uncertainty and nervousness, and even given 'best-case' outcomes in
the Middle East, we are unlikely to see a return to strong global
growth before 2004.

Australia's economy has continued to withstand the succession of
global shocks remarkably well. However the country is experiencing
one of its worst droughts in the past 100 years, and that is now
having a noticeable impact on economic activity, particularly outside
Australia's major urban centres.

There are also signs that the strong housing cycle of the past two
years is peaking. This is likely to be offset to some extent by an
upturn in business investment. Overall, we expect growth in the
Australian economy to slow from around 4% in 2002, to around 3% this
year.

New Zealand's economy has performed strongly over the past year, with
growth through 2002 likely to have exceeded 4%. Not only is this
better than Australia, but New Zealand has also been able to sustain
an unemployment rate of less than 6%, something Australia has not
managed for more than 20 years.

As in Australia, a combination of generally good economic management,
avoiding the 'irrational exuberance' experienced in some other
stockmarkets, a strong housing sector and, until recently, an
undervalued currency have helped New Zealand shrug off much of the
global gloom.

This strong economic performance has both contributed to, and
benefited from, a significant pick-up in immigration, which is a
healthy development from both a social and an economic perspective.

We are also seeing an encouraging lift in business investment. The
sharp rise in the value of the New Zealand dollar over the past
twelve months, not only against the US dollar but other currencies,
including the Australian dollar, will inevitably have some dampening
effect on New Zealand's economy in 2003. However we still expect
growth to average around 3% in the year ahead.

While economic conditions in both Australia and New Zealand are
expected to moderate this year, they are still likely to be stronger
than many OECD peers, and this should create the environment for a
continuation of good performance from ANZ.

I would like to close by touching on ANZ's recent trading
performance, and in particular, highlight some of the comments we
made in a shareholder update provided to the market late last week.

In essence, ANZ confirmed a stable earnings outlook for the year in
line with market consensus for growth of around 8%, notwithstanding a
one-off charge in the credit card issuing business in the first half.

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

Asset and liability growth has been strong across personal and
corporate businesses. Expenses were controlled, and credit quality
continues to improve. We expect specific provisions for 2003 to be
below 2002.

While ANZ expects full-year 2003 bottom-line after tax profit growth
of 8%, the cards issue is likely to mean the first half will be
weaker than the second. We were also pleased to announce last Friday,
that we had settled an outstanding tax dispute with the Australian
Taxation Office relating to equity product transactions. The
settlement involves payment of $262 million to the Australian
Taxation Office, which will be met from ANZ's existing tax
provisions. The settlement will not impact ANZ's 2003 financial
results.

In summary, we are operating in a tougher environment, but despite
the problem in our credit card issuing business, recent overall
momentum has been good, expenses are being managed well,
international credit issues appear containable, and subject to any
unforseen difficulties in the economies in which we operate, we are
confident of another satisfactory performance in the period ahead.

I would now like to hand over to John McFarlane, ANZ's CEO, who will
provide a more detailed overview of the Group's strategy.

I trust this mornings presentations have given you a better
understanding of both the overall Group and ANZ New Zealand's
performance and plans for the future.

I would now like to open the floor for any questions or comments on
any of the matters relating to our business, but before doing so,
could I remind you that this is a shareholder meeting and it is not
appropriate to raise individual customer issues.

For any of you that may have customer related queries, we will have
ANZ staff available after the meeting to assist you.

Thank you