CHAIRMAN’S REPORT
A message from David Gonski AC
I am pleased to enclose with this Shareholder Update the advice of your 2018 Interim
Dividend payment of 80 cents per share fully franked.
We posted a solid result with statutory profit for the six months ending 31 March 2018 up
14% to $3.32 billion, compared with the first half of 2017. Cash Profit on a continuing basis- providing a better comparison of our ongoing businesses - was up 4% to $3.49 billion.

The payout ratio of our interim dividend is broadly
in-line with our preferred payout range of 60-65% of cash
profit, while also maintaining a tier-one capital position
above the Australian Prudential Regulation Authority’s‘unquestionably strong’ benchmark well ahead of the2020 implementation.

Our retail markets in Australia and New Zealandcontinued to perform well with both lending and deposits
in our targeted segments growing strongly. In Australia
we launched a new mobile banking app that is currently
the top rated app in the Australian Apple store andattracting over 15,000 new users each day.

I’m pleased with the progress we have made in building
a simpler, better capitalised, better balanced bank despite
the continued headwinds impacting the sector.

In New Zealand the introduction of home loan coaches
helped grow our home lending by 5%, while we
maintained market leadership across our key products.

As we promised, we have continued to simplify ourbusiness. During the half we announced the sale ofboth our Australian Pensions and Investments and Life
Insurance businesses to IOOF and Zurich respectively. We
also completed the sale of our minority stake in Shanghai
Rural Commercial Bank and announced the sale of ourshare in the Philippines based Metrobank Card Corporation
joint venture.

The difficult trading conditions impacting institutionalbanking globally persisted during the half and we continue
to rebalance our portfolio by focusing on customers thatvalue our differentiated international network. This will see
returns in institutional banking continue to improve.

A particular highlight was completing the complex
separation of six retail and wealth businesses in Asia ontime and under budget. The successful transfer of theseassets allows us to further increase our focus on ourinstitutional business in Asia, where we remain a top-four
corporate bank.
The progress of our transformation combined with ourpeer leading capital position meant we were also able toreturn surplus capital to shareholders with the purchase of
more than 40 million shares on-market during the half.
We continued our disciplined approach in the way wemanage costs and allocate shareholders’ funds withexpenses down for the fourth consecutive half. Returnon Equity of our continuing business increased 32 basis
points to 11.9%, while earnings-per-share grew 4%
versus a year ago.

The credit environment remains benign with our total
provision charge of $408 million, down from $720 million
the previous year. This has been driven by both positive
macro-economic factors impacting the sector as well as
the strategic changes made to improve the compositionof our loan portfolio.
Looking ahead, we expect the difficult trading conditions tocontinue into the foreseeable future and this reinforces ourstrategy to simplify our business remains appropriate forthe times. Moreover I’m confident we have an executive
team in place, led by our Chief Executive Officer Shayne
Elliott, with the necessary experience to manage ourbusiness into the future.
Finally, the Royal Commission into the Banking,Superannuation and Financial Services Industry is rightly
having a significant impact on the sector. We have engaged
with the Commission in an open and constructive manner
and we will continue to support its work as well as making
the meaningful changes the community, our customers
and our shareholders expect. It is in all of our interests.

DAVID GONSKI ACCHAIRMAN

2018 HALF YEAR HIGHLIGHTS
flat$3,493 million

80 cents1H17

1H17

CASH PROFIT(Continuing operations)$3,355 million

4.0%

119.4 cents

DIVIDEND PER SHARE

CASH EARNINGS PER ORDINARY SHARE(Continuing operations)

80 cents

1H17

114.8 centsNote:
All financials are on a Cash Profit Continuing Operations basis with growth rates compared to First Half 2017 unless otherwise stated. Cash Profit
Continuing Operations excludes non-core items from Statutory Profit and excludes the financial results of the Wealth Australia businesses being divested
and associated Group reclassification and consolidation impacts.

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