Australia and New Zealand Banking Group Limited

1997 Annual ReportWho we areContents

ANZ is Australia and New Zealand’sinternational bank.

ANZ at a Glance ................................................... 2

In our home markets of Australia and New Zealand, we area major financial institution providing the full range ofbanking and other financial services. We seek todifferentiate ourselves from our competitors by the qualityof our customer service, our professionalism, and ourinternational capability.

Chief Executive Officer’s Review...................... 5

Overseas, we have a significant presence in countries from
the Middle East through South and East Asia to the Pacific–
the region of greatest geographic and economic relevanceto Australia and New Zealand. These businesses arecomplemented by wholesale and investment banking
operations in the world’s major financial centres.

Our values

Chairman’s Report ................................................ 4

ANZ 2000 ................................................................ 6
Going Global ......................................................... 7
Review of Results ................................................ 9
Eight Year Summary........................................... 13
Personal Banking ............................................... 14
Corporate & Investment Banking .................... 16
Funds Management & Private Banking ......... 18
Risk Management .............................................. 19Group Executive ................................................. 22
Board of Directors.............................................. 24

We have a strong customer focus and build relationships
based on integrity, superior service and mutual benefit.

Corporate Governance ...................................... 26

We strive for profit and sound growth.

Business Environment....................................... 30

We work as a team to serve the best interests of theGroup.

Events of 1997...................................................... 31

Community Involvement.................................... 29

Financial Highlights in Key Currencies ......... 32

We are relentless in pursuit of business innovation andimprovement.

1997 Financial Statements ................................ 33

We value and respect people and make decisions about
people based on merit.

ANZ’s Worldwide Representation ................ 118

We base recognition and reward on performance.

Shareholder Information ....... Inside back coverPhone Directory ................................................ 120

We value open and honest communication.
We are responsible, trustworthy and law-abiding in all
we do.

Key Dates
Books close for Final Dividend .......... 12 December 1997
Annual General Meeting ........................ 21 January 1998
Payment of Final Dividend ...................... 21 January 1998
Announcement of Interim Results ............. 27 May 1998*
Books close for Interim Dividend .............. 12 June 1998*
Payment of Interim Dividend ......................... 6 July 1998*
Announcement of Final Results ....... 18 November 1998**tentative dates only

Australia and New Zealand Banking Group Limited
ACN 005 357 522
Unless otherwise stated, all amounts are expressed in Australian dollars

ANZ Internet Home Page: www.anz.com

1997 Achievements

Earnings* andDividends# per Share

¢
90

78.4

Underlying profit growth of 17%,well spread across Australia andinternational operations

60
48

30

0

-30

Annual dividend increased 14%
to 48 cents, fully franked

-60

91

92

93

Earnings*

94

95

96

97

Dividends#*before abnormal items#excludes preference shares

Asset growth of 8%
Sharemarket
Accumulation Index

Conservative provisioning
350
300

Significant restructuring

306
Oct97

250
200

Named Australian “Bank of the Year”

203

150
100

New branch in Beijing and branch
in Jerusalem re-opened

50
Sep91 Sep92 Sep93 Sep94 Sep95 Sep96 Sep97

ANZ

All Ords

Our Commitment for the Future
ANZ 2000
Build a truly unique financial company
Make dealing with ANZ an enjoyable customer experience
Create an environment where people excel
Deliver superior growth and financial performance
Transform the way we do business
Australia and New Zealand Banking Group Limited – 1997 Annual Report1

ANZ at a GlanceGroup Profile

Australia

ANZ, with assets of A$138 billion, is amongst the world’s
top 100 banks and operates in 43 countries. The Grouporiginated in the United Kingdom in 1835 when the Bank ofAustralasia was established by Royal Charter.

ANZ is one of the “big four” Australian domestic banks
providing a full range of retail and corporate financial
services.

ANZ is Australia and New Zealand’s international bank. In
its home markets of Australia and New Zealand, ANZ is amajor financial institution providing the full range of banking
and other financial services.

Within this spectrum, ANZ’s relative strengths are inbusiness banking, cards and international banking services.

Overseas, we have a significant presence in countries from
the Middle East through South and East Asia to the Pacific–
the region of greatest geographic and economic relevanceto Australia and New Zealand. These businesses arecomplemented by wholesale and investment banking
operations in the world’s major financial centres.

Through wholly owned subsidiaries, ANZ offers
complementary financial services-investment and insurance
services through ANZ Funds Management; personal andcorporate stockbroking services through ANZ Stockbroking
and ANZ Securities Limited; and specialised leasing, motor
vehicle and property finance services through Esanda
Finance Corporation Limited, the largest finance company
in Australia. Town & Country provides retail banking services
in Western Australia.

Underlying profit after tax in 1997 of $1,308m
An increase of 17%

Underlying profit after tax in 1997 of $764m
An increase of 16%

Personal Banking“Bank of the Year” award
Branches - 868, down 202
EFTPOS devices - 25,167, up 7,852
Telephone banking - 875,000 registrations
Lending transformation - 60% of mortgage
applications processed within 24 hours
Strong growth in cards - to 24% market share
Interactive internet site launched
Trial of Smart Cards
PC Banking development
p14

Corporate & Investment Banking

Strong business lending growth
Focus on risk adjusted profitability
Esanda completes major transformation- staff numbers down 30%,- record new business writings exceeding $5 billion“Best Foreign Exchange Dealer” award
ANZ Investment Bank leads largest Australianprivatisation deal - Loy Yang A
p16

Funds Management & Private Banking

Strong growth$10 billion in funds under management
Strategic alliance with Frank Russell company
Peter Jonson appointed Managing Director of
ANZ Funds Management

p18

2New ZealandInternational

ANZ is the oldest (1840) and the third largest bank in the
country.

ANZ has a network of specialist banking operations,principally trading as ANZ and ANZ Grindlays (purchased in1984), providing trade finance and commercial banking
services in 41 countries outside Australia and New Zealand,
mainly throughout Greater Asia (pages 118 & 119 list ANZ’sworldwide representation). In the emerging markets of South
Asia and the Middle East, ANZ Grindlays has provided highquality retail banking services since 1846.

ANZ provides a complete range of products and services
to the retail and business markets, and is known as New
Zealand’s international bank. PostBank was purchased in
1989.
The finance subsidiary (UDC Finance Limited) is New Zealand’s
largest finance company specialising in leasing and motor
vehicle finance.
ANZ Securities (NZ) Limited provides wholesale broking
services while ANZ Funds Management provides investment
management services.

Underlying profit after tax in 1997 of $165m
An increase of 20%

This network is complemented by an active presence inmajor global financial centres.
ANZ provides on-the-ground banking services to support theinternational activity of ANZ’s customers worldwide.

Underlying profit after tax in 1997 of $379m
An increase of 18%

Branches - 198, down 61

Jerusalem branch re-opened

EFTPOS devices - 13,423, up 1,909

Oman operations restructured

Mobile sales force expanded

Insurance launched in Vanuatu and PNG

Trial of supermarket and hyperstore branches

ATMs introduced in Fiji and PNG

Strong mortgage lending growthCredit cards expanded in India

Internet site launched

Credit cards launched in Pakistan and
Bangladesh

Trial of “Branch of the Future”
Planning for move to new technology platform
David Airey appointed Managing Director of
ANZ New ZealandCommercial Banking System trial in Vanuatu
completed

New Zealand’s international bank

Beijing branch licence approved

Specialist property lending group establishedIndian Arbitration result announced - successful,appeal pending

Offices opened in regional centres; Nelson andWest Auckland
UDC - strong growth in operating leases
UDC & Esanda to integrate

ANZ Investment Bank executes major financing
deals
Strong business growth in South Asia,
Middle East and Asia PacificExpand asset based finance into Asia andMiddle East

Strong growth, 17%“Number 1” Emerging Market Debt FundOver $3 Billion in funds under management

Grindlays Private Bank expanded

Ranked “Number 1” on investment performance

Global Private Banking integrated

Bonus Bonds re-launched

Australia and New Zealand Banking Group Limited – 1997 Annual Report3Chairman’s Report
land Banking Group

Australia and New Zea
A.C.N. 005 357 522

Limited3000, Australia
Street, Melbourne, Vic
Level 32, 100 Queenarne, Vic 3001, Australi
G.P.O Box 537E, Melbou

Charles Goode
Chairmaning profit
a 17% increase in underly
s
wa
re
the
97
19
In
ll.
rm we
itional transfer
ANZ continues to perfos prior to making an add
wa
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Th
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ou
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which was well spread acr
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and abnormal restructurin
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re consistentreflects our desire to be mo
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The decision to increasearge is necessar y toabnormal restructuring ch
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and conservative inobal Program.
costs under the ANZ Gl
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allow us to achiev
franked. We said
to 48 cents per share, fully
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The annual dividend
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As a result dividends are
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spanning 34 and 41 years
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unsel to the Board over his
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Charles Goode
Chair man4

Chief Executive Officer’s Review
ANZ is in good shape. We are well positioned to takeadvantage of the opportunities available to us and to meet
our challenges head on. We have recently launched“ANZ 2000” (page 6), to ensure that we meet our customers’
expectations into the 21st century, and deliver superior
performance for our shareholders.
Review of 1997
ANZ’s performance in 1997 underlines thefinancial strength of the Group. We are a‘AA’ bank, with assets of $138 billion,
shareholders’ funds of $6.9 billion and acomfortable Tier 1 capital ratio of 6.6%. Assetquality remains excellent and we are also
carrying conservative provisions.
During 1997 underlying profit increased
by 17%. Despite aggressive competition
domestically, underlying profit in Australia
grew by 16%, and in the rest of the world by
19%. Asset growth, increased fee income,and buoyant market-related earnings, alloffset lower interest margins. Core cost
increases were contained at 2%, as a result ofa reduction in staff numbers in Australia and
New Zealand mainly in retail banking andEsanda. A charge of $417 million before tax
has been made this year, to cover current
and future redundancy and related
restructuring costs, including those arisingfrom the ANZ Global program. Most of
this has been treated as an abnormal item.
Assets quality remains sound. Nonaccrual loans were reduced by 29% to$872 million, and specific provision charges
fell by 26% to $86 million. Nevertheless,the directors decided to increase the generalprovision by $201 million, significantly
higher than the Reserve Bank of Australia’s
guideline of 0.5% of growth in risk-weighted
assets. This recognises that loan losses would
normally be higher than current levels acrossthe economic cycle. The total charge is basedon the annual average debt charge impliedin our portfolio risk management models, andis not linked to any need to provide against
specific regions, industries or individual
borrowers.
A discussion of the financial performancein 1997 is contained on pages 9 to 12, which
I recommend to shareholders, with fulldetails contained in the second half of thisReport.
Outlook
The Government has announced its
acceptance of the majority of the key
recommendations from The Report of the
Financial System Inquiry which was releasedin March 1997. Legislation to facilitate thepackage of reforms is now being formulated.
There will be further change in the financial
services industry arising from this legislationand continued technological advance.
Domestic economic conditions inAustralia and New Zealand appear to be
improving, but competition in the financeindustry will remain intense.

John McFarlane
Chief Executive Officer

The recent unsettling events in financial
markets in Asia will undoubtedly dampen
growth prospects in the region in the nearterm. We have reviewed our exposures in
the region and are satisfied there are no
immediate concerns. We remain convincedof the long term growth prospects for theregion, and are cautiously looking foropportunities to expand our operations.

Australia and New Zealand Banking Group Limited – 1997 Annual Report5ANZ 2000
We have developed a clear vision for ANZ
going forward which we call ANZ 2000.

UniqueBuild a truly unique financial company
ANZ is already unique. We are strong inour domestic markets and in the world’s
emerging markets. We are recognised as“Australia and New Zealand’s internationalbank”. Recently we expanded our funds
management and investment banking
activities. This foundation gives us theopportunity to create a truly uniqueinternational financial services company
through organic growth and by acquisition.

Customers

Make dealing with ANZ an enjoyable
customer experience
On those rare occasions where we experience
moments of memorable customer service
dedication, how many of them have been inbanking? This is the challenge facing all banks,
particularly in Australia. We aim to meetthis challenge. We are currently reorganising
our branches into financial retail outlets. We
are building our Private Banking, Priority
Banking and Business Banking capabilities,
to provide higher levels of service for ourbest customers. We are also investing in newmarketing and customer service training for
all of our front-line staff which will belaunched early next year. We know we havesome way to go, but we aim to make a realdifference in this area.

PeoplePerformance

Create an environment where
people excel
ANZ has talented people everywhere we
operate. Our challenge is to create theenvironment and the opportunity for themto enjoy their work and to reach theirpotential. This is made more difficult when
we are reducing costs. We are restricting
external recruitment to ensure our people
have the opportunity to move from areas ofrestructuring into growth segments. One
exception is that we will increase substantiallyour recruitment of graduates. We are also
launching a programme to identify people
with high potential, and to channel them tothe best opportunities. Our incentive
programs have been changed to reward thoseTransform
6

who do deliver. We intend also to achieve a
better balance of women and men in senior
management.
Deliver superior growth andfinancial performance
In our mature markets we are facing
relatively low levels of growth, and certain
emerging markets are experiencing economic
uncertainty. At the same time, competition
is reducing margins. This more difficult
revenue environment places greater priority
on cost management. Our current relatively
high cost-income ratio gives us scope to
improve productivity substantially, and toenable us to achieve superior earnings growth.
The overall risk of our business needs to becontrolled to ensure an acceptable level of
earnings volatility. Whilst we are comfortablewith the balance today, we will manage thegrowth of higher risk segments to within
the overall growth rate of the group.
Our overall aim is to deliver superior
earnings growth and maintain a high returnon equity for shareholders. Our new
performance management process which
was launched this month will focus ongoing
attention to achieving these objectives.
Transform the way we do businessBanking in the 21st century will be different.
To prepare ourselves, we need to radically
restructure the way we do business today, toinvest in new technologies to manage ourbusiness and to reach our customers.
Recently we announced our reorganisation
around global business lines. Under “ANZ
Global”, we are developing three major
technology platforms to improve customer
service and to lower product costs. Our“Branch of the Future” program is changing
the face of branch banking; we are investingin telephone, direct and internet banking andcard technologies. We also announced ourstrategic alliance with Frank Russell – aworld leader in funds management. Theseand other new ventures will ensure that for
ANZ, the best is yet to come.

Going Global
ANZ, with representation in 43 countries, is the mostinternational of the Australasian banks. We have a long traditionin Australia, New Zealand, the Pacific Islands and, throughGrindlays, in South Asia and the Middle East. Our presence in
East Asia, while more recent, has been expanded significantly
over recent years. We are now radically altering our management
approach to focus on global lines of business to improve efficiency
and build a better platform for growth.

Global Rationale
With the rapid development of information technology
and the globalisation of financial markets, banking ischanging. To capture the efficiency opportunities ofour scale and establish a better platform for growth, wehave radically altered our management approach. From
October 1997 all businesses moved to global management
and reporting. Previously they operated according togeographic areas with independent country management.
ANZ is by no means unique in facing these issues. Other
leading multinational companies, both within the financesector and outside it, have made or are making similarchanges.
The objective of moving to global business lines is
to improve efficiency and build a better platform tosupport growth. This will achieve economies of scaleand scope, minimise duplication of effort, develop andleverage the capabilities of our people and build common
values and culture throughout the organisation.
Inventing things once and applying them many times is
the goal.
We are pleased with the success of our investmentbanking and capital markets activities which werecombined last year to form the first global business unit.
By managing activities on a functional rather thangeographic basis, ANZ Investment Bank has been able
to develop real expertise across geographic boundaries
and mobilise quickly to respond to changing client andmarket needs.

Managing Director John
Sunderland, closest to TV
screens (in Melbourne),
uses video conference
facilities to meet regularly
with General Manager
United Kingdom, Dr Holger
van Paucker and Gordon
Branson, Head of
Structured and Project
Finance (in London), andGeneral Manager Americas,
Roy Marsden (in New York).

Australia and New Zealand Banking Group Limited – 1997 Annual Report

7The ANZ Global Program
With the assistance of specialists from theinternational finance consultancy, KPMG
Barents, teams of ANZ staff have beenworking to re-design processes across almost
all of of ANZ’s activities.
To ensure line management ownershipof the changes, ANZ’s management structure
has been changed to reflect line of businessfocus. There are now the principal businessactivities of Personal Banking, Corporate &Investment Banking and Funds Management& Private Banking, and a single Operations
and Technology support unit, whereas
previously these functions were all part ofcountry management.

M AN A G E M E N T
ANZ Global Organisation
Chief Executive Officer
Finance & Risk

Human ResourcesGroup Office

Corporate &Investment
Banking

Personal
Banking

Operations&
Technology

Funds
Management

PrivateBankingGlobal Management
Australia
Corporate & Investment
Banking
Personal Banking

Funds Management

Private Banking

Operations & Technology

8

New Zealand

India...

There are some 38 individual programs
within ANZ Global covering all aspects of
the Group’s activities. Fundamental to theoverall program is increasing the consistencyof approach across the Group and theconsolidation of technology and support
platforms.
We will be moving to a single banking
technology platform in Australia and
New Zealand (Hogan), a single global cards
system, and a single system supportingbanking outside Australia and New Zealand(the Commercial Banking System or CBS).
New Zealand will move to the new platform
during 1998, and Australia, which alreadyoperates on Hogan based systems, in 1999/
2000. There will be significant efficiency
savings through achieving scale operations
and having fewer systems. Also, bystandardising products and processes acrosscountries, development and training costs
will be reduced.
Customer service will also be enhancedby having consistent product and processes
across all of ANZ’s operations. Central tothis is the project called “Branch of the
Future”, which is designed to improve
efficiency and facilitate the development ofa sales culture throughout the branch network.
Branch layouts are being redesigned to be
more “people friendly” for customers andstaff. Sales and enquiry areas are being
grouped together near the entrance, withseparate private areas for detailed discussions
with customers and the telling functions
located towards the rear. The trial of the
new model, which includes expanded useof modular furniture, is underway in Australia
and New Zealand and will be implemented
simultaneously in both countries. Applicationof the same model outside our domestic
markets will follow.
Implementation of ANZ Global will
involve significant restructuring. A provision
for these costs was taken in the 1997 financial
year.

Review of 1997 Results
Summary
Operating Profit*
$M
1200

1171

1000
800
600
400
200
0

Australia and New Zealand Banking Group Limited recorded a 17%
increase in underlying profit after tax to $1,308 million for the year
ended 30 September 1997. This was prior to an additional transfer tothe general provision of $137 million giving an operating profit after
tax and before abnormal items of $1,171 million. Abnormal items
were $147 million (after tax) leading to an operating profit after tax andabnormal items of $1,024 million. Dividends for the year were increasedby 14% to 48 cents per share, fully franked.
Despite aggressive competition, underlying profit in Australia grewby 16%, and in the rest of the world by 19%. Asset growth, increased fee
income, and buoyant market-related earnings, all offset lower interest
margins.

-200
-400
-600
91

92

93

94

95

96

97

*before abnormal items

Underlying Profit*
$M
800

764

700
600
500
400

379

300
200

165

100

Core cost increases were contained to 2%, as a result of a reduction
in staff numbers in Australia and New Zealand, mainly in retail banking
and Esanda. A charge of $417 million before tax has been made thisyear, to cover existing and committed redundancy and related
restructuring costs, mainly arising from the ANZ Global program. Mostof this has been treated as an abnormal item.
Non-accrual loans were reduced by 29% to $872 million, and specificprovision charges fell by 26% to $86 million. Nevertheless, the directors
decided to increase the general provision by $201 million, significantly
higher than the Reserve Bank of Australia’s guideline of 0.5% of growthin risk-weighted assets. This is in recognition that loan losses across the
economic cycle would normally be higher than current levels. The
total charge is based on the annual average debt charge implied in our
portfolio risk management models, and is not linked to any need toprovide against specific regions, industries or individual borrowers.

0
Australia

1995

New Zealand International

1996

1997

*Operating profit after tax before additionaltransfer to general provision of $137 million
and abnormal items

Change in Profit
$M
1600

320

-139
31

1400

Higher
Costs

Distribution of Gross Income
415

1200
1,116

-319

Growth in
Non-Interest
Income

1000

-27

-89

Lower General
1,308
Specific Provision
Increased
Provision (RBA)
Tax

-137

Abnormals

1,171

-212

Additional
GeneralProvision

65

1,024

Restructuring NHB

Interest

800

Lower Balance
Margins Sheet
Growth600

Net Interest
Income400
Interest Payments to
Depositors &Bondholders 51%

Tax 5%
Dividends toShareholders 6%

200

Personnel Costs 16%
Other 15%
Provision for Doubtful
Debts 2%

Reinvested(depreciation &retained earnings)
5%

0
1996
ProfitUnderlying
ProfitAfter Tax

1997 Profit
After
Abnormals

1997 Profit
BeforeAbnormals

Australia and New Zealand Banking Group Limited – 1997 Annual Report9Review of 1997 Results
IncomeNet interest income grew by 3% as asset growth offset reduced margins
in the domestic markets.
Competitive pressures in Australia and New Zealand led to the 19
point decline in gross interest spread. Lower levels of non-accrual loans
and lower interest rates reduced the related funding costs. However,the lower interest rates also reduced the earning rate on non-interest
bearing items, resulting in a 32 point reduction in overall margins.
The reduction in margins was more than offset by strong growth ininterest earning assets in International markets, particularly South Asia,
Asia Pacific and the Middle East, the Investment Bank and business
lending in Australia.
Non-interest income increased by 15%. Strong growth in our Cards
business together with higher transaction and corporate advisory fees
lifted fee income.

Operating Income
$M
6000

2415

5000
4000
3413

3000
2000
1000
0
91

92

93

94

95

96

97

Net Interest Income
Non-Interest Income

Foreign exchange continues to be a stable core business. Good
trading performances in buoyant global markets led to the significant
increase in trading, fee and other income. The Group’s earnings frominvestment banking capital markets activities is sensitive to asset prices
in the global financial markets. Profits before tax from these activities
were $208 million in 1997 (1996: $100 million).

Operating Expenses

Strong growth in operating lease income and the profit on the saleof the Omani operation also lifted other income.

Operating Expenses
Core costs increased by only 2% (this excludes restructuring costs andDirect Income Related Costs which directly reflect the level of businessactivity in our Cards and Operating Lease businesses). Staff numbers inAustralia and New Zealand declined as a result of branch closures andincreased automation and centralisation of processes particularly in retailbanking and Esanda, but there were higher overtime and temporary
staff costs relating to these major change programs. Personnel costs grewby 8% as a result of increased salaries offsetting low staff numbers, higher
performance related bonuses in our investment banking activities andhigher overtime and temporary staff costs. The recruitment of relatively
highly paid professional staff in the Investment Bank and the impactof high salary inflation in South Asia and Middle East also contributed
to the increase in personnel expenses.
Premises costs fell due to branch closures in Australia and New
Zealand while computer expenses were steady.
Other expenses fell reflecting a favourable non-lending loss
experience both in Australia and overseas following the resolution ofcertain Indian scam related issues.
Expansion of our Cards and operating lease businesses drove thegrowth in direct income-related costs.

Personnel 51%

Premises 10%

Other 19%

IncomeRelated 9%

Restructure
Computer 9%2%**A further $327m restructuring costs
were abnormal

Operating Expenses
as % of Net Income
%
80
75
70
65
64.9

60
55

10

50
91

92

93

94

95

96

97

Asset Quality

Net Non-Accrual Loans toShareholders’ Equity
%

80
70
60
50
40
30
20
10

6.1

0
91

92

93

94

95

96

97

Gross non-accrual loans were reduced by $353 million to $872 million
through asset realisations and reduced new non-accrual loans. Net nonaccrual loans fell to $428 million and represent 6% of shareholders’equity at September 1997, down from 11% in 1996.
The specific provision charge fell by 26% to $86 million, reflecting
continued good credit conditions and experience. New and increased
provisions were slightly down while releases and recoveries were alsofavourable to last year. The Group remains well provided with thecoverage ratio (specific provisions to gross non-accrual loans) now above
50%.
The general provision charge was $201 million, including an
additional transfer of $137 million. The latter was in recognition thatloan losses would normally be higher than current levels across the
economic cycle. The total charge is based on the annual average provision
implied in our portfolio risk management models and is not linked to
any need to provide against specific regions, industries or individual
borrowers. The general provision now stands at 0.9% of risk-weighted
assets, well in excess of the Reserve Bank of Australia guideline of 0.5%.

Income tax
The pre-abnormal tax expense increased by $89 million reflecting thehigher earnings and an increase in the effective tax rate to 32.9%(1996: 30.3%) owing to the impact of the increased general provision
charge more than offsetting the increased level of rebateable dividends.
Specific Provisions for
Doubtful Debts$M
1800

Abnormal Items
The Arbitrators of the long running dispute with the National Housing
Bank of India (“NHB”) handed down their award in the Group’s favour
on 29 March 1997. The NHB has repaid the deposit together withinterest at 18% p.a. in accordance with the decision. Given its size, the$145 million interest receipt (before tax) is disclosed as an abnormal
item. Subsequently, NHB filed documents with the relevant Court tochallenge the award. ANZ is confident that the award will stand.

1600
1400
1200
1000
800
600
400
200

86

0
91

92

93

94

95

96

97

Cost reduction is a major priority for the Group. We are proceedingwith the implementation of ANZ Global. The change programs resulted
in a $417 million before tax restructuring charge. This amount covers
both completed restructuring programs and those ANZ Global projects
in train to which the Group is demonstrably committed. Of this charge,$327 million is abnormal.

Australia and New Zealand Banking Group Limited – 1997 Annual Report11Review of 1997 Results
Dividends
Dividends for the year have been increased by 14% to 48 cents per
share, fully franked (from 42 cents in 1996). We foreshadowed last yearthat there would be some limit on our franking capacity going forward
as the proportion of Group profits earned offshore increases. This,
together with the dividend increase and the costs associated with therestructuring underway to position ANZ for the future, impact on our
franking capacity. As a result we do not expect dividends in 1998 to be
fully franked.

Earnings* andDividends# per Share

¢
90

78.4

60
48

30

0

-30

Balance Sheet & Capital Adequacy
Total assets grew by 8% to $138 billion. Good lending growth wasachieved, particularly in business lending in Australia, the Investment
Bank and international markets (South Asia, Asia Pacific and the Middle
East).

-60

91

92

93

94

95

96

97

Dividends#

Earnings**before abnormal items#excludes preference shares

Funding for asset growth came from the wholesale market, as well
as from increased retail and corporate deposits.
Total shareholders’ equity increased to $7 billion and capital resources
increased to $10 billion, after the redemption of some subordinateddebt.
The Reserve Bank of Australia’s guideline ratio of qualifying capitalto risk-weighted assets is a minimum of 8.0%, of which Tier 1 capitalmust be at least 4.0%. The Group’s capital adequacy ratio is 9.8%, witha Tier 1 ratio of 6.6%, down 0.1% from September 1996. Retained
earnings and dividend reinvestment supported the 14% growth in riskweighted assets achieved over the year. The Group seeks to maintainthe Tier 1 ratio in the range of 6.5% to 7.0%.

Group Assets
$B
140

138

120
106

100
80
60
40
20
0
91

92

93

94

95

96

97

Total Assets
Risk-Weighted Assets

Capital Adequacy
%
12
10

9.8

*8
6.6

6
*4
2
0
91

12

92
Tier 1*RBA minima

93

94

95

96

97

Eight Year Summary
1997

1996

1995

1994

1993

1992

1991

1990

$M

$M

$M

$M

$M

$M

$M

$M

Net interest income
Other operating income
Operating expenses

3,413
2,415
(3,783)

3,317
2,096
(3,644)

3,081
1,975
(3,334)

2,800
1,969
(3,183)

2,543
1,875
(3,124)

2,438
2,109
(3,329)

2,602
2,067
(3,153)

2,475
1,765
(2,848)Operating profit before tax, debt
provisions and abnormal items
Provisions for doubtful debts - specific- general

2,045
(86)
(201)

1,769
(117)
(37)

1,722
(63)
(111)

1,586
(368)
(13)

1,294
(629)
(5)

1,218
(1,600)
(337)

1,516
(1,037)
(16)

1,392
(788)
(5)

Operating profit(loss) before abnormal items
Income tax (expense)benefit
Outside equity interests

1,758
(579)
(8)

1,615
(490)
(9)

1,548
(505)
(10)

1,205
(395)
(7)

660
(193)
(7)

(719)
146
(5)

463
(193)
(4)

599
(186)
(1)

Operating profit(loss) after tax
before abnormal items
Net abnormal (loss)profit

1,171
(147)

1,116
-

1,033
19

803
19

460
(213)

(578)
(1)

266
1

412
(191)

Operating profit(loss) after income
tax and outside equity interests

1,024

1,116

1,052

822

247

(579)

267

221

138,241 127,604 112,587 103,874 103,045 101,138

98,21299,300

Profit and loss

Balance Sheet
AssetsNet assets

6,993

6,336

5,747

5,504

5,133

4,591

5,018

4,323

Ratios (after abnormal items)
Return on average shareholders’ equity
Return on average assets
Capital adequacy - total

14.8%
0.7%
9.8%

18.3%
0.9%
10.5%

17.9%
0.9%
10.9%

15.6%
0.8%
11.3%

5.0%
0.2%
10.8%

-11.4%
-0.6%
9.0%

5.8%
0.3%
9.9%

5.4%
0.2%
8.6%

Share information (per fully paid share)
Dividend - declared rate
Franked portion
Earnings before abnormal items - basic
Earnings after abnormal items - basic
Net tangible assets

48.0¢
100%
78.4¢
68.6¢
$4.59

42.0¢
79%
76.3¢
76.3¢
$4.24

33.0¢
18%
68.5¢
69.9¢
$3.94

25.0¢
54.5¢
55.9¢
$3.58

20.0¢
30.8¢
13.5¢
$3.43

20.0¢
50%
-60.1¢-60.2¢
$3.40

20.0¢
100%
26.7¢
26.9¢
$4.31

38.0¢
100%
45.0¢
24.2¢
$4.45

Share price on ordinary shares - high- low

$11.58
$7.10

$7.28
$5.41

$5.75
$3.55

$5.68
$3.78

$4.40
$2.53

$4.88
$2.87

$4.20
$2.92

$6.38
$3.95

Number of fully paid ordinary shareson issue (millions)

1,508.6 1,478.1 1,446.0 1,353.6 1,308.2 1,054.5 1,019.3

971.1

Dividend reinvestment plan
Share price - interim- finalOther information
Points of representation
Number of employees (full-time equivalents)
Number of shareholders

$3.42
$4.46

$4.35
$2.72

1,473
1,744
1,881
2,026
2,136
2,302
2,367
35,926 39,721 39,240 39,642 40,277 43,977 46,261
132,450 121,847 114,829 121,070 115,000 112,036 101,188

2,431
48,182
92,606

$9.77
-

$5.59
$7.60

$4.40
$6.27

$3.78
$3.73

$3.42
$4.44

$3.58
$2.51

Australia and New Zealand Banking Group Limited – 1997 Annual Report13Personal Banking
ANZ, one of the big full service banks in Australia and
New Zealand, is the dominant retail bank in several PacificIslands, and ANZ Grindlays is one of the leading foreign
retail banks in the emerging markets of South Asia.
Retail Banking
In Australia and New Zealand ANZ has some3 million and 1 million customers respectively.
During 1997 ANZ was awarded Australian‘Bank of the Year’ by Personal Investment
Magazine.
During the year there was a strong
growth in telephone banking in both markets.
The National Teleservicing Centre in
Melbourne is now handling the majority of
telephone calls from metropolitan customers
nationwide. Approximately 60% of these calls
are now being handled automatically throughtelephone banking which provides 24 hour,
7 days a week service. In New Zealand it is
the bill payment feature of ‘Phone Direct’that is growing fastest.
The centralisation of credit assessments
into the National Finance Centre has
reduced both approval times for customers
and costs. There has also been a complete reengineering of the sales and credit processes
for the small business customer to makegreater use of automated procedures and

ANZ Phone Banking
provides customers
with flexible access to
ANZ services 24 hours
a day.

focus effort more closely on the higher risk
elements of the business. This system will
be implemented in New Zealand in 1998.
The development of new delivery
channels is epitomised in ‘ANZ Direct’.
Launched in 1996, ‘ANZ Direct’ provides,
without the use of branches, very
competitively priced home and car loans, adeposit product and a range of insurance andinvestment products. It is accessing a newmarket niche with up to 100% larger
mortgages.
These developments, the expansion of
the ATM and EFTPOS networks over recent
years, and the new pricing regime fortransaction accounts introduced in Australia
in January 1997, have led to a significant
reduction in branch withdrawals (30% in
Australia in 1997 and 50% in New Zealandsince 1995). With the number of customers
visiting our branches to conduct transactions
falling steadily there is no longer the needfor as many branches. 20% of branches wereclosed last year in both countries. The trialof smaller in-store branches in supermarkets(and ‘hyperstores’ in New Zealand) reflect
the changing role of branches away fromtransactions and toward sales and information.
At the same time as making thesechanges we have taken initiatives to growthe business including launching a businessmortgage product, taking the opportunityof the official interest rate reduction in late
May to gain price leadership in the mortgage
market in Australia and launching a ‘no fees’
campaign in New Zealand.
Also to enhance our position in thepremium market, private banking has beenlaunched across Australia to provide premium

14

service to high net worth customers. Priority
banking will provide enhanced service levels
to the next tier of customers.
Mortgage and small business lending inAustralia, while slow in the first half of 1997,
have picked up considerably later in the year,
stabilising our market share. In New Zealand,strong growth in mortgage lending has
continued with ANZ maintaining its 17.5%
market share.
The global management of personalbanking services will enable greater
coordination and joint development of retailbanking services. “Branch of the Future”
involves the total redesign of branch
procedures and layouts to drive efficiencies
and free-up staff to focus on sales. It iscurrently being trialed in both New Zealandand Australia. The full roll-out of theconcept to all branches is expected to takeplace during 1998. We will also be transferring
the New Zealand core operating system to
Hogan, on which the Australian system isbased.
PC Banking is into the final stages ofdevelopment and will enable a secureinternet-based PC banking service forindividuals. This will enable customers to
use PCs to look up their account balances,transfer funds and pay bills.
ANZ also provides retail banking in the
Pacific Islands, including Papua New Guinea,
Fiji and Samoa,where we are a major
provider of retail banking products such as
cards, transaction accounts and homemortgages.
The rollout of the new banking platform
across the network in the next few years will
standardise products, improve efficiency andfacilitate improved customer service.
Cards
ANZ holds a strong market position in thecards market in Australia and New Zealand.
In Australia the co-branded Telstra andQantas/Telstra credit cards were very wellreceived by customers. As a result, despite

ANZ Grindlays offers
retail banking services
in the United ArabEmirates.

strong competition, ANZ’s market share has
increased from 18% two years ago, to 24%
today. Around 80% of customers taking thesecards had no previous relationship with ANZ,
providing an excellent opportunity to crosssell other ANZ products.
Outside Australia and New Zealand,
ANZ has card activities in 15 countries, allof which are now part of one business unit.
In the near term we plan to replace thecurrent multiple systems with one new
system to support all activity.
During the year new cards and merchantacquiring facilities were launched in a
number of countries including Pakistan,
Bangladesh, and Nepal, supported by systems
and infrastructure in Melbourne. Use of thissame system also allowed the expansion ofcards in India, with a doubling of cards on
issue to over 150,000. These are markets ofenormous growth potential. In 1998 we will
be growing these businesses and expanding
into new countries.
The development of Smart Card
technology is well advanced. ANZ, together
with the other major banks, has taken ashareholding in Mondex International. With
experience in both the Visa Cash and
MasterCard Cash trials, ANZ is well positioned
for a market launch of the Mondex Electronic
Purse in 1998.

Australia and New Zealand Banking Group Limited – 1997 Annual Report

15

Corporate & Investment Banking
The provision of banking services to the business and corporate
markets has been at the centre of the ANZ franchise in Australia and
New Zealand for 150 years, with cross border internationalbanking the basis of our international network. The restructuringof our investment banking activities (financial markets, structured
and project finance on to a global basis) the first business unit to doso, has proven to be highly effective is the forerunner for change inother business units.
Business Banking
About 30% of all Australian and
New Zealand corporates have a relationshipwith ANZ and the bank provides about$30 billion in lending to this business
community. Growth of around 10% wasachieved during 1997. The quality of thelending portfolio was improved through theshedding of high risk business and net nonaccruals now amount to less than 0.5% ofcorporate banking lending assets. A
management information system thatprovides risk adjusted customer profitability
data to front line managers in Australia is a
key driver of customer strategies, designed
to develop medium term shareholder value.

Paul Henderson,
Relationship Sales
Consultant with Esanda,
spends the majority ofhis days on the roadvisiting customers.

16

Business Banking has conducted a major
process improvement exercise focused on
stripping out non-essential functions,simplifying technology infrastructure,streamlining credit processes and defining
service standards by customer size andindustry. This is allowing RelationshipManagers to spend more time on developing
new account relationships and also to extend
and deepen relationships with existingcustomers. This process was assisted by theestablishment of an expanded number ofBusiness Centres, where Business Banking
is co-located with International, Leasing,
Treasury, Electronic Banking and Funds
Management specialists, as well as Retailservices, in geographic areas of significant
business activity.

In order to meet the particular needsof customers, Business Banking has been
segmented into Corporate and Middle
Market, along with separate specialist
industry lending teams, such as Commercial
Property Development. This has been
received in the market as a distinctive andprofessional financial service offering.
Process improvement is also being
assisted by the rapid acceptance of electronicbanking service by business customers, withwell over half of target customers now using
the ANZ service. The provision ofinternational banking services is also greatly
enhanced by electronic delivery. International
Services itself underwent a major
tranformation during the year to centralise
and automate back office processing – tofree up managers’ time to help existing andnew customers with their export and importfinance and other international transactions.
Asset Based FinanceEsanda is Australia’s largest asset financier
providing $9.5 billion of asset lending tosome 290,000 customers nationwide.
Esanda also, through issuing debentures,
raised $5.3 billion medium term funding for
the Group.
During 1997, Esanda underwent a majortransformation program to streamline andautomate its processes while maintaining
service levels to its customers. This greatly
improved efficiency and involved a 24%
reduction in staffing levels.

Notwithstanding the impact on thebusiness during the implementation of thesechanges, new business writings exceeded $5
billion for the first time – an improvementof 6.8% on 1996. Plans are well advanced
to make the same process changes in UDC
Finance, the largest asset financier in
New Zealand. UDC Finance’s strength andexperience in operating lease business will
be utilised to further develop the Australian
operations.

Investment Banking
ANZ Investment Bank was formed early in1996 recognising the increasingly global
nature of our largest corporate andinstitutional clients’ service and productneeds. By managing activities on a functionalrather than geographic basis, ANZ
Investment Bank is able to develop realexpertise across geographic boundaries andto respond quickly to changing client andmarket needs.

Combined, Esanda and UDC Financeare one of the Asia Pacific region’s largest
asset finance businesses. The expertise inthese companies will be used as thefoundation for the expansion of the Group’s
asset finance business into overseas markets,particularly Asia, South Asia and the Pacific.

There have been a number of notableachievements during the year which havedemonstrated the strength of the integrated
approach and the quality of ANZ’s franchiseamong major corporations and institutions
in Australia and Greater Asia.

International Commercial Banking
ANZ has a commercial banking presencein the region from the Middle East throughSouth and East Asia to the Pacific. This is
the region of greatest economic relevance toAustralia and New Zealand. The commercial
banking activities in these countries focus
on providing international trade andinvestment services to companies from
Australia and New Zealand, elsewhere in theinternational network, and local corporates.
The rollout of the new technology
platform (the Commercial Banking System)
continues. During the year it was successfully
implemented in United Arab Emirates,
Qatar and Bahrain. The Commercial Banking
System, when fully implemented will
provide the Bank with an International Core
Processing System to replace the existing
variety of systems and processes currently
in place.
The international network differentiates
ANZ from the competition. This provides
leadership in trade finance which is acompetitive advantage in the business market
and uniquely positions ANZ as Australia and
New Zealand’s international bank.

ANZ Investment Bank secured major
structured finance deals including the $4.7
billion privatisation of the LoyYang A power
station and coal mine. We led the US$300
million sovereign Eurobond issue for theIslamic Republic of Pakistan. We have also
won a number of project finance advisory
and arrangement roles from the Cable andWireless telecom project in Vietnam to the
Mangalore independent power project andHaldia petrochemicals project in India. ANZ
Investment Bank also acted as advisor,
underwrote an equity issue and provided
long term funding for Village Roadshow’s
expansion in Europe and their acquisitionof Austereo.
The quality of ANZ Investment Bank’s
operations has also been recognised in thereceipt of a number of industry awards andrankings. These included a clean sweep of
the Australian Business Review Weekly’s
foreign exchange service awards including
Best Overall Service. Project FinanceInternational magazine, in citing the Top 10
Project Finance Deals in Asia, included
three deals in which ANZ Investment Bank
had a lead arranger status, the only bank to
be represented in such a way.

ANZ Investment Bank
secured major
structured finance deals
including theprivatisation of the
Loy Yang A power
station and coal mine.

Australia and New Zealand Banking Group Limited – 1997 Annual Report17

Funds Management & Private Banking
The Group manages $18 billion of investment funds forcustomers around the world. Funds Management is one of
the fastest growing sectors of the finance industry. The focus
is on providing retail investment and insurance services.

Australia and New ZealandIn our two principal domestic markets ofAustralia and New Zealand we have in excess
of $10 billion and $3 billion of funds undermanagement respectively. ANZ Funds
Management provides retail funds management
and insurance products through specialist
investment advisers working with the branch
network. Products include balanced andspecialist investment funds, cash management
accounts, insurance products, administration
and advice services. In New Zealand there
are also “Bonus Bonds”.
In October 1997, ANZ Funds
Management announced a strategic alliancewith Frank Russell company, one of theworld’s leading asset consulting andinvestment management firms.

Ross Chessari,
General Manager Estate
Planning & Management
for ANZ Funds
Management, provides
advice to customer.

Under this alliance, customers will beoffered access to world-class investments
through the launch of a unique, personalised
investment program. ANZ Funds
Management will be able to focus on what
it does best – providing quality financial
planning services – while Russell will focus
on managing the investments and selecting
the appropriate fund managers.
Russell uses multi-style, multi-manager
investment approval which has an impressive
record of investment performance.
To enhance our position in the premium
market, private banking has been launchedacross Australia to provide premium service tohigh net worth customers.

18

The New Zealand operation has
recorded a very strong growth in funds undermanagement (17%) on the back of outstanding
investment performance. Both retail andwholesale funds increased significantly over
the year. In New Zealand, ANZ Funds
Management was ‘Best International Equities
Manager’, and second for balanced funds,
while also achieving the best investment
performance with the balanced investment
fund. Bonus Bonds – a capital guaranteed
product where in lieu of interest, holders
participate in weekly and monthly cash prize
draws – has been relaunched and invested
funds have grown to AUD$1.5 billion.
International
Overseas, our funds management activities
draw on our presence in the emerging
economies. We have a very successful
emerging market investment operation basedin London. The success of our six managed
emerging markets funds has won us a leading
reputation in managing emerging market
debt investment funds. Micropal has rated
the ANZ flagship fund, EMLIP, the No. 1
emerging market debt fund over three years,
and in 1997 Lipper Analytical Services – theleading fund analysts in the USA – rated
ANZ Global Emerging Market Debt Fundas the best performing fund over a 12 month
period.
Grindlays Private Bank provides fullprivate banking and asset management services
to high net worth individuals primarily from
Asia and the Middle East through offices in
London, Geneva, the Channel Islands andSingapore.

Risk Management
Good risk management is good banking. The identificationand monitoring of risk is an essential part of the Bank’s
operations. Our objective is to make risk management a
prime core competency of the organisation by continuous
improvement of our systems and procedures to ensure risks
are accurately identified and assessed.
ANZ manages risk through an approval anddelegation of limits structure that starts with
the Board of Directors and is administeredby an independent department.
The Risk Management Committee of
the Board approves and oversees theframework of risk standards, policies andprocesses for credit, market and operating
risks. Delegations pass through Executive
Committees to individual customer
controllers and risk managers. Regular
reports and compliance checks are presented
back through the Risk Management
Committee to the Board.
The Risk Management Department is
the independent group which has
responsibility for ensuring the cohesion andeffectiveness of the Group’s risk management
framework. It oversees the activities of allareas involving risk policy and monitoring.
The work of the department is subject toindependent review and audit by both theinternal and external auditors to ensure

Sources of Risk

Illustrative

Credit Risk
Customers unable to meet contractual obligations

compliance with policies, procedures andindustry/government regulations.
Credit Risk
Credit risk is the potential financial loss
resulting from the failure of customers tohonour fully the terms of a loan or contract.
Credit risk represents some 50% of Grouprisk exposures.
The Board establishes the framework ofdelegated authority limits for the approvalof credit risk transactions. The largest
transactions are approved by the Risk
Management Committee.
That Committee also receives regular
reports on asset quality issues, including
portfolio composition, large customer
exposures, and developments in credit
management policy and processes.
The Credit Approvals Committee,
involving senior executive management,
makes decisions on transactions, portfolio
strategy, policy and processes. Specialist credit
and business areas have been established forthe larger portfolios (e.g. real estate andagriculture), whilst a specialist group handles
the effective management of problem loans.
At operational levels the loan approval
process requires independent specialist credit
officers to be involved in all major lending
decisions, in conjunction with customer
relationship managers. A sophisticatedcustomer credit risk grading system is
supported by objective risk measurement
tools which aids in the assessment of default
risk.

Market Risk
Potential loss due to fluctuations in interest or exchange
rate markets

Operating & Other Risk
Australia and New Zealand Banking Group Limited – 1997 Annual Report

19

Risk Management Framework
Board
Board Risk Management Committee

Group Risk Management
Department

Global Funds
Management Committee

Trading
Risks

Credit Approvals
Committee

Balance
Sheet Risks

Market Risk Management
Market risk is the potential risk to earnings
resulting from changes in interest rates,
currencies, equities and commodity prices.
ANZ’s approach starts with independence
and segregation of operations, risk
measurement and control.
The activities are guided by separate setsof policies approved by the Risk Management
Committee of the Board. At the executive
level, the Global Funds Management
Committee is the most senior market andbalance sheet management risk forum andis responsible for maintenance of the Board
approved control framework. Its membership
includes the Chief Executive Officer and it
is chaired by the Executive Director.
The Market Risk Management Unit,
as part of the Group Risk Management
Department, has responsibility for coordination of policy and compliance formarket risk and related credit and operating
risks. This includes the co-ordination of the
independent control of all market risk related
activities within the specific business units.
ANZ increasingly is integrating its approachto the management of credit and market risk
and the monitoring of operating risk fromtrading activities.
Trading Risk Management
Market risk activities include trading,
distribution and underwriting, dealing in awide range of financial products. Principal
portfolios consist of capital markets securities,

20

Credit Portfolio & Policy
Committee

CreditRisks

Operating Risks
Executive Committee

OperatingRisksforeign exchange and money market products,
derivatives, equities and commodities. ANZ’s
principal trading activities are well diversified,and now managed on a global product basis.
The key principles for control of market
risk are “Value at Risk” measurement
supplemented with volume and risk
concentration limits. The “Value at Risk”
limit framework is designed in three levels
with an aggregate global market risk limit,
global product limits and individual tradingbook limits. These are supported by daily
mark to market profit accounting and adviceof loss procedures.
Supporting the risk management
framework, particularly for the Bank’s major
trading and geographically isolated business
units, are Professional Standards Reviews.
Market specialists conduct reviews of the
trading activities to ensure high standards ofprofessional conduct throughout all officesof the Group world-wide.
Balance Sheet Risk Management
The balance sheet risk management processembraces the management of balance sheet
interest rate risk, liquidity and foreign
currency capital exposures. These risks aremanaged by a specialist Global Balance SheetManagement unit and are monitored by the
Global Funds Management Committee.
Balance sheet interest rate risk management
involves minimising fluctuations in net
interest income that may occur over time asa result of changes in market interest rates.

A leading edge modelling system wasinstalled in 1997 and is used to simulate theimpact on earnings and market value of alarge number of market scenarios and balance
sheet structures. This enables management
to quantify the risks and formulate strategies
to manage current and future risk profiles.
The liquidity management processensures that funds are available at all times tomeet maturing obligations as they fall due.
ANZ policy establishes daily liquidity
management practices as well as scenario based guidelines to monitor future liquidity
flows under normal operating conditions andto cater for a worst case scenario arising froman unfounded, name-specific rumour.
Structural foreign exchange exposures
are managed with the objective of ensuringthat the ANZ capital ratio is not adversely
impacted by changes in the value of theGroup’s foreign currency capital as a resultof movements in exchange rates.
Operating Risk
Operating Risk embraces those risks arisingfrom day to day operational activities which
may result in direct or indirect loss.
Operating Risk may arise, for example, fromfailure to comply with internal policies, laws
and regulations, from fraud and forgery orfrom breakdown in the availability, integrity
and confidentiality of services, systems andinformation. Some operating risks are
insurable and appropriate cover is taken. The
majority are not insurable.
The objective of Operating Risk
management is to ensure that risks are
known, assessed and managed in a structured
environment. ANZ does not expect toeliminate all risks, but to minimise exposure
based on a sound risk/reward analysis in thecontext of an international financial
institution.

reviewing and approving key practices andapproving deviations from policy.
The Operating Risk methodology isbased on the risk management standards
issued by the Australian and New ZealandStandards bodies.
In addition to addressing today’s risks,such as the Year 2000 issue and disasterrecovery, there is also a forward looking
responsibility, to ensure that risks associatedwith new business initiatives, delivery
channels and technology are being properly
addressed. ANZ also trains staff in operatingrisk management.
Year 2000
ANZ, along with all other users of computer
systems, faces the issue of the potential
disruption to business that may eventuate withthe date change from 1999 to 2000.
ANZ has a well established process for
dealing with this threat. A project team, withdedicated staff assisted by external consultants,
has been established to provide management
and control across all Year 2000 compliancerelated work world-wide. All ANZ systems
have been analysed and work is underway
to develop, test and implement the necessarychanges. Full systems testing for internal
applications is scheduled to be completed
by December 1998, and in conjunction withother organisations, full cross industry
integration testing will take place during
1999.
The potential risk to the Group fromvendors and customers not being adequately
prepared to manage this issue is also receiving
detailed attention.

Reporting to the Board’s Risk
Management Committee, the Operating Risk
Executive Committee is responsible for the
Operating Risk policy, methodology,
Australia and New Zealand Banking Group Limited – 1997 Annual Report21

Group Executive
John McFarlanePeter Hawkins

John Ries

JOHN McFARLANE
Chief Executive Officer
John McFarlane joined ANZ in October 1997
as Chief Executive Officer. He was previously
Executive Director of Standard Charteredplc and prior to that he spent 18 years with
Citibank where he held a number of
positions in corporate banking, treasury,
investment banking, stockbroking, strategy,
human resources and training.

JOHN RIES
Executive Director
John Ries joined ANZ in 1961 and has held
senior management positions within thecorporate banking and international banking
divisions. In June 1988 he was appointed
as Managing Director, ANZ Grindlays Bank,
London. He returned to Melbourne inAugust 1990 to take up the position of Chief
General Manager International Banking. In
August 1992, John was appointed to the
ANZ Board as Executive Director withresponsibility for Australia. He currently has
responsibility for the Group’s Corporate andInvestment banking activities.

John Sunderland

Peter MarriottPeter McMahon

Peter Jonson

PETER HAWKINS
Global Head of Personal
Banking

JOHN SUNDERLANDManaging Director,
ANZ Investment Bank

Peter Hawkins joined ANZ in December
1971 and has had experience in most
aspects of banking including treasury,
corporate banking, retail banking, strategy
and international banking. He wasappointed to his present position in
November 1997 after two and a half years
as Chief General Manager Australian Retail
Division and before that he was Managing
Director ANZ Banking Group (New Zealand)
Limited. Prior to that he was General
Manager Asia Pacific.

John Sunderland joined ANZ in November
1996 to head the Group’s global investmentbanking activities. He has responsibility forthe various business activities undertaken
by ANZ to support its large corporate andinstitutional customers around the globe.
Prior to joining ANZ John held seniorinvestment banking positions with BZW in
London, New York and Hong Kong.

PETER MARRIOTT
Chief Financial Officer andCompany Secretary
Peter Marriott joined ANZ in February 1993
as General Manager, Group Accounting andwas promoted to Group General Manager
Credit/Risk Management in July 1995. He
was appointed to his present position as
Chief Financial Officer and Company
Secretary in July 1997. Prior to joining ANZ,Peter was a partner in KPMG’s Melbourne
office.

PETER JONSONManaging Director,
ANZ Funds Management
Dr Peter Jonson was appointed to ANZ’sGroup Executive in the position of Managing
Director ANZ Funds Management in March
1997. Prior to joining ANZ he was GroupManaging Director of Norwich Australia.
He has also held senior positions withJames Capel Australia Limited and theReserve Bank of Australia.

PETER McMAHONManaging Director, Esanda
Finance Corporation LimitedPeter McMahon joined ANZ in July 1992
as General Manager Special Projects. In
December 1992 he was appointed General
Manager of the Asset Management Groupand then Group General Manager Credit.
Prior to joining ANZ he was Managing
Director of Costain Australia. He wasappointed to his current position ofManaging Director Esanda FinanceCorporation Limited in July 1995.

22

Bob Edgar

David AireyCharles Carbonaro

John Winders

Grahame Miller

BOB EDGARManaging Director,
Business Banking

GRAHAME MILLERManaging Director,
International Network

Dr Bob Edgar joined ANZ in December 1984
as Senior Economist and in 1986 he wasappointed Chief Economist. Since then heheld a number of executive positions before
he was appointed to his present position in
Business Banking in March 1995. Before
joining ANZ Bob held senior positions with
the Australian Bankers’ Association and theReserve Bank of Australia in Sydney.

Grahame Miller joined ANZ in 1968. He
has held a number of senior positions
including General Manager Financial
Markets, General Manager Global Treasury,
Chief Manager/General Manager Hogan for
Retail, Senior Manager Group Strategic
Planning and Assistant Vice President Los
Angeles. He was appointed to his current
position as Managing Director, International
Network in July 1997.

CHARLES CARBONAROManaging Director,
Global Cards DivisionCharles Carbonaro joined ANZ in January1987 as a senior consultant in the Electronic
Network Services Division. He wasappointed General Manager-Cards in 1989
and was promoted to Chief General
Manager - Australian Operations andPayments Division in 1992. He wasappointed to his current position in Global
Cards Division in December 1996. Before
joining ANZ Charles was Chief General
Manager at Resi-Statewide Building
Society (now Bank of Melbourne).

DAVID AIREYManaging Director, ANZ Banking
Group (New Zealand) Ltd
David Airey was appointed Managing
Director, ANZ Banking Group (New Zealand)
Limited in March 1997. Prior to thisappointment he was Chief Executive Officerof the Bank of Melbourne from February
1993 to February 1997 and from January
1990 to December 1992 he was Managing
Director of The Rural Bank based in
Wellington.

JOHN WINDERSGroup General Manager,
ANZ Global
John Winders joined ANZ in 1969 andworked across a wide range of business andsupport areas and spent a number of years
with ANZ overseas before leaving in 1985.
He returned to ANZ in early 1994 and was
appointed to the position of General
Manager International Services. He
currently heads the ANZ Global program in
addition to his International Services role.

DAVE RICHARDSONGroup General Manager,
Information Technology
Dave Richardson joined ANZ as General
Manager Information Technology inAustralia in March 1993. He was appointedGroup General Manager, Corporate
Development in 1996. This position was
responsible for Strategic Planning,
Economics, Public Affairs and Technology.
He was appointed to his current role ashead of global information technology in1997. Dave Richardson has over 20 years
experience in Information Technology andhas held a variety of senior positions inColes Myer, Ansett Australia and overseas.

Andrew Ward

Dave Richardson

Murray Horn

Peter Wilson

ANDREW WARD
Head of Operations and Payments
Mr Andrew Ward joined ANZ in February
1971. He has held a number of senior
management positions including Administration Executive - Corporate Banking
Australia, Zone Chief Manager - Melbourne
North and West Zone, Assistant General
Manager - Asset Management Group,
General Manager Operations and Payment
Services - ANZ Banking Group (New
Zealand) Ltd, Acting Managing Director of
ANZ Banking Group (New Zealand) Limited.
He is responsible for the Group’s Operations
and Payments functions globally.

PETER WILSONGroup General Manager,
Human Resources andManagement Services
Peter Wilson joined ANZ in October 1990
as Group General Manager, Strategic
Planning and Economics. From 1992-95 he
was General Manager, Asia Pacific,
responsible for the Bank’s operations inNorth Asia, South East Asia, Sri Lanka,
Papua New Guinea and the Pacific Islands.
Peter took up his current role as Group
General Manager, Human Resources andManagement Services in January 1996.

Elmer Funke Kupper

MURRAY HORN
Group General Manager,
Strategic Planning
Dr Murray Horn was appointed to the position of General Manager Strategic Planningin September 1997. His responsibilities
include overseeing the development of strategic planning as the Group strengthens its
global lines of business. Prior to joining
ANZ he had a distinguished career with the
New Zealand Treasury, where he had been
Secretary of the Treasury since 1993.

ELMER FUNKE KUPPER
Group General Manager,
Risk Management
Elmer Funke Kupper joined ANZ in 1995 asGeneral Manager, Portfolio Management
within Group Credit/Risk Management.
Prior to joining the Group he worked as aconsultant for McKinsey & Company andlater Mitchell Madison Group. In March
1997 he became team leader, Support andBusiness Management and Organisation
Design for ANZ Global and has recently
been appointed to the role of Group General
Manager, Risk Management.

Elizabeth Proust
Elizabeth Proust will join ANZ in January 1998 as Headof Group Human Resources. Until recently Ms Proust
was Secretary of the Victorian Department of Premierand Cabinet. Previously she had held the positions of
Chief Executive Officer of the City of Melbourne,
Secretary of the Victorian Attorney-General’s
Department and Deputy Director General of the
Department of Industry, Technology and Resources.

Australia and New Zealand Banking Group Limited – 1997 Annual Report23

Board of Directors
MR C B GOODE (left)
B Com (Hons) (Melb), MBA (Columbia University, New York), FCPA, FSIA
ChairmanCompany Director.
Director since July 1991, appointed Chairman August 1995.
Director of CSR Limited, Pacific Dunlop Ltd, Queensland Investment Corporation,
Woodside Petroleum Ltd, Mercury Asset Management Ltd and other companies.
Lives in Melbourne. Age 59.

Mr J McFARLANE OBE
MA, MBA, MSI, FHKIB, FRSA
Chief Executive Officer. Appointed Group Managing Director and Chief Executive
Officer in October 1997. Former Group Executive Director, Standard Chartered plc(1993-1997), Head of Citibank, United Kingdom (1990-1993), Managing Director,
Citicorp Investment Bank Ltd (1987-1990).
Lives in Melbourne. Age 50.

(left to right)

DR B W SCOTT AO
B Ec, MBA, DBA
Company Director.
Director since August 1985. Chairman of Management Frontiers Pty Ltd, W.D. Scott
International Development Consultants Pty Ltd, Television Makers Pty Ltd and The
Foundation for Development Co-operation Ltd. Director of Air Liquide Australia Ltd
and the James N. Kirby Foundation Ltd. Australian member of the Board of Governorsof the Asian Institute of Management and Chairman of the Australia-Korea
Foundation. Former Chairman of the Australian Government’s Trade Development
Council (1984-1990). Former Federal President, Institute of Directors in Australia(1982-1986)
Lives in Sydney. Age 62.

MR J K ELLIS
MA (Oxon) FAIMM FTS
Chairman, The Broken Hill Proprietary Co Ltd.
Director since October 1995. Chairman of Sandvik Australia Pty Ltd and Chairman of
the International Copper Association Ltd. Patron of the Australian-Korea BusinessCouncil. Board Member of the Museum of Contemporary Art.
Lives in Melbourne. Age 60.

MR R B VAUGHAN AO (seated)
Company Director.
Director since January 1988. Chairman of MIM Holdings Limited and Queensland
Sugar Corporation Limited. Deputy Chairman of Commercial Union Assurance Limited
and Transgrid. Chairman of the Federal Government’s Trade Policy Advisory Council,
APEC Committee and Sugar Industry Review Working Party, and Vice-President of
the Australia Japan Business Co-operation Committee. President and Chairman of
the Research Institute for Asia and the Pacific. Former Chairman and Chief Executiveof Dalgety Farmers Limited and former Chairman of ICI Australia Limited.
Lives in Sydney. Age 69.

MR C J HARPER
CA (Scots)
Company Director.
Director since October 1976. Chairman of CSL Ltd. Former General Manager andChief Executive of the merchant bank Australian United Corporation Ltd (1968-1976)
and since then a professional non-executive director. Inaugural National Vice
President of The Australian Institute of Company Directors.
Lives in Melbourne. Age 66.

24

(left to right)

DR R S DEANE
PhD, B Com (Hons), FCA, FCIS, FNZIM
Chief Executive and Managing Director, Telecom New Zealand Limited.
Director since September 1994. Director of Fletcher Challenge Limited, IHC
Mortgages Ltd, The Centre for Independent Studies Ltd and Institute of Policy Studies,
Victoria University, Wellington. Formerly Chief Executive, Electricity Corporation of
New Zealand Ltd, Chairman State Services Commission, Alternate Executive Director,
International Monetary Fund and Deputy Governor, Reserve Bank of New Zealand.
Lives in Wellington, New Zealand. Age 56.

MR J F RIESB Bus, FCPA, FAIB
Executive Director.
Executive Director since August 1992. Thirty-seven years experience in banking
with the Group including Managing Director, ANZ Grindlays Bank plc, London (19881990) and Chief General Manager, International Banking (1990- 1992).
Lives in Melbourne. Age 53.

MS M A JACKSON
MBA, B Econ, FCA
Company Director.
Director since March 1994. Chairman of Transport Accident Commission (Victoria).
Director of The Broken Hill Proprietary Co Ltd, Pacific Dunlop Ltd, Qantas Airways
Ltd and other companies. Fund Committee Member of The Walter and Eliza Hall
Institute of Medical Research and Trustee of The Brain Imaging Research Foundation.
Lives in Melbourne. Age 44.

MR J C DAHLSEN
LLB, MBA (Melb)
Solicitor and Company Director.
Director since May 1985. Consultant to and former Partner of the legal firm Corrs
Chambers Westgarth. Chairman of Woolworths Ltd and Melbourne Business School
Ltd, Director of Southern Cross Broadcasting (Australia) Ltd, Mining Project Investors
Pty Ltd, The Smith Family, GS Private Equity Pty Limited and J. C. Dahlsen Pty Ltd
Group. Former Chairman of The Herald and Weekly Times Ltd and Deputy Chairman
Myer Emporium Ltd.
Lives in Melbourne. Age 62.

Retired Directors
Three Directors retired during
the year.
Mr Charles Goode in
farewelling them said,“We thank these gentlemen for
their enormous contribution to
the Bank and wish them all thebest in their retirement”.

Sir Ronald Trotter

Mr D P Mercer

Mr A T L Maitland

Director

Chief Executive Officer &Executive Director

Executive Director

1988-1997

1992-1997

1992-1997

Australia and New Zealand Banking Group Limited – 1997 Annual Report25Corporate GovernanceGood governance is essential for ANZ to carry out its
business activities and meet the objectives of its shareholders,
employees, customers and regulators around the world.

Role of the Board of Directors
The Board of Directors is responsible toshareholders for the corporate governanceof ANZ. The Board
charts the direction of the Group by
participating in the setting of objectives
and strategy formulation and establishingpolicy guidelines
monitors management’s running of thebusiness to ensure implementation is inaccordance with the agreed framework.
Effective risk management is central to goodbanking. The Board and the Risk Management
Committee approve and oversee theframework of risk standards, policies andprocesses. A detailed explanation of the Bank’s
Risk Management procedure is containedon pages 19 to 21 of this Report.
The Board, and particularly, Audit &Compliance Committee, liaises with theexternal auditors on accounting policies andpractices and compliance issues.
Composition of Board
To achieve its objectives, a well structured
Board is necessary. Details of directors, their
qualifications and experience are set out on
pages 24 and 25.
The Board Nominations Committee
identifies and nominates suitable candidates
for consideration by the full Board.
Although flexible, criteria include theindividual’s background, experience, andskills. Geographical considerations andavailability to commit sufficient time to theBoard’s program are also considered.

26

To ensure the benefit of independentviews, the Articles of Association of theCompany state that there must be a majority
of non-executive directors on the Board andthat the role of Chairman cannot be heldby an executive director, ensuring that theroles of Chairman and Chief Executive
Officer are separate. Committees of theBoard are chaired by non-executive directors
and the Audit & Compliance Committee
comprises only non-executive directors.
All non-executive directors are regarded
as independent, having no substantial
supplier customer relationship and no priorexecutive role in the Group. The Board has
established a code of conduct in the eventof a conflict of interest.
The Board currently has eight nonexecutive directors and two executive
directors.
Both non-executive and executive
directors (other than the Managing Director)
are subject to re-appointment by shareholders
on a rolling three year basis and must retire
upon attaining the age of 70. Executive
directors retire as directors on thetermination of their employment with theGroup. Their status after that date is a matterfor the Board at the time.
In the interests of ensuring smooth
succession and a reasonable range andturnover of skills, non-executive directors
appointed since 1993 have agreed that they
will not, in normal circumstances, serve as a
Director beyond 15 years.

Board Activities
The Board meets ten times a year.
Committee meetings are held at regularintervals. Details of attendance are shown
below.
The Board receives regular reports on
performance and outlook, and reviews
activities and strategies of the Bank and eachdivision.
Directors participate in a programme ofvisits to operations and create opportunities
to meet and discuss current issues withmanagement and staff. The Board held its
February 1997 meeting in India whichallowed Directors to visit local banking
operations, meet staff and customers andgovernment representatives in India and also
in neighbouring countries in which the
Bank operates.
Whilst there is no restriction on thenumber of external Board or charitablecommittee appointments a director may
have, they are required to seek Board
approval before accepting appointment.

To assist in the exercise of their
responsibilities, directors are entitled to seek
independent professional advice. With the
Chairman’s prior approval the advice can beobtained at the Bank’s expense and is to bemade available to the whole Board.
Directors are required to hold at least
2,000 shares in the Company. Details of theirholdings are shown on page 115. They mustrefrain from dealing in the Company’s sharesfor their personal benefit except in three fourweek periods; following the announcementof half year and full year results, and theAnnual General Meeting, and in each case
the Chairman of the Board must be
informed prior to any trading. The same
restrictions are also imposed upon senior
management and those staff in departmentswith access to market sensitive information,with the notification being required to theChief Executive Officer.
The Articles of Association provide anindemnity to directors and employees forcosts and liabilities incurred in the executionof duty. The External Auditor is notindemnified.
continued overleaf...

Attendance of Board and Committee meetings for the period 1/10/96–30/9/97

A

B

Risk
ManagementAB

C B Goode

10

10

11

J C Dahlsen

10

10

1

R S Deane

10

10

11

11

J K Ellis

10

10

11

11

C J Harper

10

10

11

M A Jackson

10

9

11

Board

8

Audit &
Compliance
A
B

A

B

5

4

3

3

5

5

Personnel

Executive App.
& Remuneration
A
B

7

7

7

6

7

7

7

7

11

7

6

8

7

7

7

6

3

3

A T L Maitland2

7

7

D P Mercer3

10

10

J F Ries

10

10

B W Scott

10

10

5

5

7

7

Sir Ronald Trotter1,4

10

9

5

4

7

5

R B Vaughan

10

10

5

5

7

7

11

3

3

3

3

A

B

Board
Nominations
A
B

3

3

4

4

3

3
4

4

4

4

Donations

11

Column A–Indicates number of meetings held during the period the Director was a Member of the Board and/or Committee.
Column B–Indicates number of meetings attended during the period the Director was a Member of the Board and/or Committee.
The Executive Committee met three times during the year.
The Chairman is an ex officio member of all Board committees.
1Resident of New Zealand 2Mr Maitland retired 30/6/97 3Mr Mercer retired 30/9/97 4Sir Ronald Trotter retired 9/10/97

Australia and New Zealand Banking Group Limited – 1997 Annual Report27Committee Structure
The Board’s function is to address issues intheir broadest context. It is through theBoard’s committee structure that specificareas of detail are examined. There are six
board committees, each with a defined
Charter. These committees are charged with
providing quality and independent advice tothe Board as a whole. Details of the role ofeach committee is shown opposite.
Membership of the committees andattendance at committee meetings during
the year is set out on page 27.
Directors have also participated inmeetings of Committees of the Board (4meetings during 1997) to sign accounts, todeclare dividends and make allotments under
the Company’s various dividend reinvestment
and employee share schemes.
The Board has the power to nominate
Directors to form an Executive Committeeof the Board at any time and delegate tothat Committee general executive authority
to deal with any matter relating to thecompany’s affairs in circumstances where it
is not possible to call a full Board meeting.
Subsidiary Boards Non-executive Directors
ANZ has a number of subsidiary companies,
some of which have non-executive directors.
The major subsidiaries in this regard are:
ANZ Grindlays Bank Limited
M A Jackson, B W Scott AO
ANZ Banking Group (New Zealand)
LimitedJ G Todd, F H Wilde
Companies within ANZ Funds
Management GroupD P McDonald, C M William,
L J Willett AO.
B W Scott and R B Vaughan, directors on
the ANZ Board, are members of the boardsof the main Australian Staff Superannuation
and Pension companies.

The Audit & Compliance Committee(Chairman - J C Dahlsen)
Reviews the Group’s accounting policies and practices;financial statements; due diligence processes in relation
to capital raisings; and compliance with the Group’s
statutory responsibilities including those relating toConsumer Credit Legislation, Trade Practices Act andprivacy issues. Monitors compliance with approved
policies and controls; liaises with internal and external
auditors. Approves audit plans and the audit fee of theexternal auditor.

The Risk Management Committee(Chairman - C J Harper)
Supervises all aspects of risk management. This includes
approving and overseeing the setting of delegation
policies, standards and reporting mechanisms for credit
risk, trading risk, balance sheet risk and operating risk.
Monitors the risks being assumed by the Group to ensure
standards are being met. A full description of the Group’s
Risk Management procedures is contained on pages 19
to 21 of this report.

Personnel Committee(Chairman - Dr B W Scott)

Reviews and advises on executive remuneration
policies. Has the responsibility of developing andmonitoring the new senior executive remuneration
scheme, which more closely aligns management
remuneration to the generation of shareholder value.

The Executive Appointment &Remuneration Committee(Chairman - C B Goode)Approves appointments and individual remuneration
packages for the senior officers of the Group. The
Committee obtains independent advice on theappropriateness of remuneration packages.

The Board Nominations Committee(Chairman - C B Goode)
Reviews the composition of the Board to ensure that it
has the appropriate mix of expertise and experience.
Recommends appointments to the Board where it isconsidered that the Board would benefit from the serviceof a new director with particular skills.

The Donations Committee(Chairman - C B Goode)
Advises on donations policy and considers requests forcorporate contributions.
Committee members shown on page 27.

28

Community Involvement
Our responsibility to shareholders, customers and staff extends
to playing an active role in the communities in which we
operate. This involvement covers many areas of community
life from local sports activities and multicultural festivals tocommunity welfare and the arts.
During 1997, ANZ has contributed to a wide
range of initiatives in community welfare,medical research, education and culturalactivities.
Fostering the talents of young people isan important contribution to the community’s
future. ANZ has built on its long runningcommitment to the arts by supporting young
artistic talent through the ANZ Visual Arts
Fellowship and the ANZ Music Fellowship.
Food BankIn Victoria and New South Wales we haveprovided support to Food Bank, a charity
which works with welfare agencies to giveassistance to more than 40,000 people inneed each week through the provision ofmeals and food hampers. Our support
included providing finance for a new vehicle
to assist in delivering food.
Our focus in this area has also extended
to supporting The Salvation Army’s Family
Support Services Network in Victoria which
involves the distribution of food to people
in need in rural areas.
India’s 50th Anniversary of Independence
ANZ has had a presence in India since 1854
and ANZ Grindlays has played an active partin supporting India’s cultural heritage. In
August 1997, India celebrated the 50th
anniversary of its independence.

India’s leading musicians, dancers and theatre
artists performed in the Festival, in celebrationof India’s history and independence.
ANZ has also supported the establishmentof a Chair in South Asian Economics at theAustralian National University in Canberra.
The Chair is dedicated to India’s latePrime Minister, Rajiv Gandi and recognises
the growing economic links between
Australia and India.
ANZ Foundation
During 1997, ANZ further encouraged
staff involvement in the community throughthe ANZ Foundation. Formerly known as
the ANZ Staff Foundation, the ANZFoundation was relaunched in November
1996 to support the Australian community
through staff donations and involvement.
The Bank provides financial support to
the Foundation, and in 1997 over $90,000
of grants were made to charities such as theAustralian Sport and Recreation Association
for Persons with an Intellectual Disability(AUSRAPID), Youth Insearch and the
Down Syndrome Assocation of Victoria.
The ANZ Foundation aims to fundprojects which offer opportunities for staff
to become involved by giving their time.

Pictured with the new
Food Bank truck arePeter Bearsley, ANZ’s
General Manager
Charitable Trusts, andGlenn Ellam, General
Manager Food Bank
Victoria.

Background Li Cunxin, Private Client
Adviser with ANZ
Stockbroking and one of
the six principal maledancers with theAustralian Ballet.

As part of the celebrations, ANZ
Grindlays was involved in sponsoring the
National Centre for Performing Arts’ festivalof dance and drama in Mumbai. Some ofAustralia and New Zealand Banking Group Limited – 1997 Annual Report29Business Environment
Financial System Inquiry
In March 1997 the final report of theAustralian Financial System Inquiry waspresented to the Federal Treasurer. Rapid
technological change and globalisation of thefinancial services industry since thederegulation of the first half of the 1980s
prompted the Inquiry. The Reportconcluded that improvement in efficiency,
choice and quality within the financial sector
has occurred since the deregulation of the
1980s and recommended a package of 115
regulatory reforms to secure further
improvements.
In early September, the Treasurer
announced the Government’s acceptance ofthe majority of the Report’s recommendations.
Implementation of the reform package tosharpen competition and ensure Australia has
a world class regulatory structure able toaccommodate the significant change that lies
ahead, is scheduled to begin in 1998.
Key reforms are:establishment of a new regulatory
framework.
• The Reserve Bank of Australia (RBA)
will retain responsibility for the stabilityof the financial system with a new
Payments System Board within the
RBA, will be responsible for payments
system regulation.
• A new regulatory body, the Australian
Prudential Regulation Authority, will
have prudential oversight of all deposit
taking institutions, life and generalinsurance offices and superannuation
funds.
• A single agency, the Corporations andFinancial Services Commission, will be
responsible for the corporations law,market integrity and consumer
protection roles of the Australian
Securities Commission, the Insurance
and Superannuation Commission and
the Australian Payments System
Council.

30

Liberalisation of access to the payments
system.
While participation has until now been
limited to banks and a small number of‘special service providers’ offering
clearing services to building societies andcredit unions, new guidelines for accessto payments clearing and settlement tobe developed by the Payments System
Board will allow access to non-banks.
Increased flexibility in corporate
structures.
Banks will be permitted to restructure
their operations under a more flexible
non-operating holding company
structure; mutual organisations will bepermitted to hold a banking licence; andthe principle of separating financial
activities from non-financial activities
within the one corporate group is to berelaxed, subject to prudential and otherconditions being met.
Political Donations
ANZ supports a vigorous multi-party
democracy as the best guarantee of a marketoriented economy with strong private andcommercial rights and freedoms.
Accordingly, from time to time, we provide
some level of support for the major parties
in our home markets.
In Australia we provide details to theAustralian Electoral Commission which are
published on an annual basis.
In the year to 30 September 1997 inAustralia, we donated $125,000 to the Liberal
Party, $25,000 to the National Party and$20,000 to the Australian Labor Party.
In New Zealand, we donated NZ$10,000
to the National Party, NZ$5,000 to the Labour
Party and NZ$5,000 to the Association ofConsumers and TaxPayers.

Events of 1997
OCTOBERInteractive Internet Web site launched
Omani operations restructured

NOVEMBER
1996 profit of $1,116M“ANZ Money Saver Home Loan”
introducedHome loan interest rates reduced

DECEMBER
Business index rate and businessreference rate reduced
Credit card interest rates reduced

JANUARY
Mr David Aireyappointed
Managing Director,
ANZ New Zealand
Launch of ANZ
Phone Banking

FEBRUARY
Dr Peter Jonson
appointed Managing Director, ANZ Funds
Management$1 billion committed to small businesssectorHome loan rates reduced

MARCH

MAY
Half Year profit of $646M
Chief Executive Officer, Mr Don Mercer,
retirement announced
Home loan interest rates reduced
CBS rolled out in United Arab Emirates

JUNE
ANZ Health Insurance launched
ANZ No. 1 in foreignexchange
CBS rolled out in Qatar
ANZ wins Gold at
Annual Report Awards
ANZ New ZealandFunds Management
wins industry awards

JULY
ANZ “Bank of the Year”
Emerging markets debt
fund launchedHome loan andbusiness interest rates
reducedCBS rolled out in Bahrain

AUGUST
Supermarket banking launched on theGold Coast
Credit card interest rates reduced

Indian arbitration ruling
ANZ Direct home loans introduced

APRIL
Jerusalem branch re-opened
Financial System Inquiry Report
Approval granted to proceed with Beijing
branch licence

SEPTEMBER
Mr John McFarlane appointed Chief
Executive Officer
Home loan rates reduced
ANZ Beijing branch opened

Supermarket
branch at
Tweed Heads,
New South Wales.

Charles Goode, Dai Ziang Long, Governor of the People’s Bank of China,
and John Howard, Prime Minister of Australia, cut the ribbon to markthe granting of ANZ’s branch banking licence in Beijing.

Australia and New Zealand Banking Group Limited – 1997 Annual Report31Financial Highlights in Key Currencies
1997

1997

1997

1997

Millions
Profit and loss
Net income
Operating expenses
Profit before tax and doubtful debts
Provisions for doubtful debts - specific- general
Profit before tax and abnormal items
Income tax expense
Outside equity interests
Profit before abnormal items
Abnormal loss

AUD

USD1

GBP1

NZD1

5,828
(3,783)
2,045
(86)
(201)
1,758
(579)
(8)
1,171
(147)

4,475
(2,905)
1,570
(66)
(154)
1,350
(445)
(6)
899
(113)

2,736
(1,776)
960
(40)
(94)
826
(272)
(4)
550
(69)

6,522
(4,234)
2,288
(96)
(225)
1,967
(648)
(9)
1,310
(165)

Profit after tax and abnormal items

1,024

786

481

1,145

Profit after tax by geographic segment
Australia
New Zealand
UK & Europe
Asia PacificSouth Asia2
AmericasMiddle East3
Profit after tax and before abnormal items
Abnormal items
Profit after tax and abnormal items

627
165
112
95
82
36
54
1,171
(147)
1,024

481
127
86
73
63
28
41
899
(113)
786

295
77
53
45
38
17
25
550
(69)
481

702
185
125
106
92
40
60
1,310
(165)
1,145

138,241
131,248
6,993

99,492
94,4595,033

61,72458,602
3,122

155,826
147,943
7,883

68.6¢
48.0¢
$4.59

52.7¢
36.9¢
$3.30

32.2p
22.5p
£2.05

76.8¢
53.7¢
$5.17

Balance Sheet
AssetsLiabilities
Shareholders’ equity 4
Ratios
Earnings per share - after abnormal items (basic)
Dividends per share - declared rate
Net tangible assets per share
1

USD, GBP and NZD amounts - profit and loss converted at average rates for financial year ended 30 September 1997 and balance sheet items
at closing rates at 30 September 1997
2
Includes Bangladesh, India and Nepal
3
Includes Bahrain, Greece, Israel, Jordan, Oman, Pakistan, Qatar and United Arab Emirates
4
Includes outside equity interests

32

1997
Financial
Statements
Australia and New Zealand Banking Group Limited – 1997 Annual Report33

33

Table of Contents

Page

Page

Alphabetical index ......................................... 35

33 Notes to the statements of cash flows ................... 78
34 Controlled entities ............................................... 80
35 Associates ............................................................. 81
36 Commitments ...................................................... 82
37 Derivative financial instruments ........................... 82
38 Contingent liabilities andcredit related commitments .................................. 88
39 Superannuation commitments .............................. 90
40 Fiduciary activities ............................................... 91
41 Exchange rates ..................................................... 91
42 Employee share purchase andshare option schemes ........................................... 92
43 Related party disclosures ...................................... 94
44 Remuneration of directors ................................... 97
45 Remuneration of executives ................................ 98
46 US GAAP reconciliation...................................... 99
47 Events since the end of the financial year ........... 102

Directors’ report ........................................... 36
Profit and loss accounts ................................. 40
Balance sheets .............................................. 41
Statements of changes inshareholders’ equity ...................................... 42
Statements of cash flows ................................ 44
Notes to the financial statements
1 Accounting policies ............................................. 45
2 Income ................................................................ 48
3 Expenses .............................................................. 48
4 Remuneration of auditors .................................... 50
5 Abnormal items ................................................... 50
6 Income tax expense ............................................. 51
7 Dividends ............................................................ 51
8 Earnings per share ................................................ 53
9 Liquid assets ......................................................... 54
10 Due from other financial institutions .................... 54
11 Trading securities ................................................. 55
12 Investment securities ............................................ 56
13 Net loans and advances ........................................ 58
14 Impaired assets ..................................................... 60
15 Provisions for doubtful debts ................................ 62
16 Customers’ liabilities for acceptances..................... 63
17 Regulatory deposits ............................................. 63
18 Shares in controlled entities and associates ............ 64
19 Other assets.......................................................... 65
20 Premises and equipment ...................................... 66
21 Due to other financial institutions ........................ 66
22 Deposits and other borrowings ............................. 67
23 Income tax liability .............................................. 68
24 Creditors and other liabilities ............................... 68
25 Provisions ............................................................ 68
26 Bonds and notes ................................................... 69
27 Loan capital ......................................................... 70
28 Outside equity interests ........................................ 71
29 Average balance sheet .......................................... 71
30 Interest sensitivity gap .......................................... 73
31 Net fair value of financial instruments .................. 74
32 Segment analysis .................................................. 76

34

Directors’ statement .................................... 103
Auditors’ report .......................................... 104
Financial information
1 Capital adequacy ................................................ 105
2 Interest spreads and net interest
average margins ................................................ 106
3 Cross border outstandings .................................. 107
4 Certificates of deposit and term
deposit maturities ............................................... 107
5 Volume and rate analysis .................................... 108
6 Concentrations of credit risk .............................. 110
7 Doubtful debts - industry analysis ....................... 112
8 Short term borrowings ....................................... 113
Shareholder information
1 Major shareholders ............................................. 114
2 Substantial ordinary shareholders ........................ 114
3 Average size of shareholdings ............................. 114
4 Distribution of shareholdings ............................. 114
5 Voting rights of shareholders .............................. 115
6 Holders of non-marketable parcels ..................... 115
7 Employee shareholder information ..................... 115
8 Directors’ shareholding interests ......................... 115
Glossary ..................................................... 116

Alphabetical Index

Page

Page

Abnormal items ......................................................... 50
Accounting policies ................................................... 45
Associates .................................................................. 81
Auditors’ report ....................................................... 104
Average balance sheet ................................................ 71
Average size of shareholdings ................................... 114
Balance sheets ........................................................... 41
Bonds and notes ........................................................ 69
Capital adequacy ..................................................... 105
Certificates of deposit and term deposit maturities ... 107
Commitments ........................................................... 82
Concentrations of credit risk ................................... 110
Contingent liabilities andcredit related commitments ....................................... 88
Controlled entities ..................................................... 80
Creditors and other liabilities ..................................... 68
Cross border outstandings ........................................ 107
Customers’ liabilities for acceptances .......................... 63
Deposits and other borrowings .................................. 67
Derivative financial instruments ................................. 82
Directors’ report ........................................................ 36
Directors’ shareholding interests ............................... 115
Directors’ statement ................................................. 103
Distribution of shareholdings ................................... 114
Dividends .................................................................. 51
Doubtful debts - industry analysis ............................ 112
Due from other financial institutions ......................... 54
Due to other financial institutions .............................. 66
Earnings per share ..................................................... 53
Employee share purchase and shareoption schemes .......................................................... 92
Employee shareholder information .......................... 115
Events since the end of the financial year ................. 102
Exchange rates .......................................................... 91
Expenses ................................................................... 48
Fiduciary activities ..................................................... 91
Glossary .................................................................. 116

Holders of non-marketable parcels ........................... 115
Impaired assets ........................................................... 60
Income ..................................................................... 48
Income tax expense ................................................... 51
Income tax liability.................................................... 68
Interest sensitivity gap ................................................ 73
Interest spreads and net interest average margins ....... 106
Investment securities ................................................. 56
Liquid assets .............................................................. 54
Loan capital ............................................................... 70
Major shareholders .................................................. 114
Net fair value of financial instruments ........................ 74
Net loans and advances .............................................. 58
Notes to the financial statements ............................... 45
Notes to the statements of cash flows ......................... 78
Other assets ............................................................... 65
Outside equity interests ............................................. 71
Premises and equipment ............................................ 66
Profit and loss accounts .............................................. 40
Provisions .................................................................. 68
Provisions for doubtful debts ..................................... 62
Regulatory deposits ................................................... 63
Related party disclosures ........................................... 94
Remuneration of auditors ......................................... 50
Remuneration of directors ........................................ 97
Remuneration of executives ...................................... 98
Segment analysis ........................................................ 76
Shares in controlled entities and associates .................. 64
Short term borrowings ............................................ 113
Statements of cash flows ............................................ 44
Statements of changes in shareholders’ equity ............. 42
Substantial ordinary shareholders ............................. 114
Superannuation commitments ................................... 90
Trading securities ...................................................... 55
US GAAP reconciliation ........................................... 99
Volume and rate analysis .......................................... 108
Voting rights of shareholders.................................... 115

Australia and New Zealand Banking Group Limited – 1997 Annual Report35

Directors’ Report

The directors present their report together with theaccounts of the parent entity (the Company) and theconsolidated accounts of the Economic entity (theGroup) for the year ended 30 September 1997.
The information is provided in conformity with the
Corporations Law.

Activities
The principal activities of the Group during the year
were general banking, mortgage and instalment lending,life insurance, leasing, hire purchase and general finance,international and investment banking, investment andportfolio management and advisory services, nominee
and custodian services, stockbroking and executor andtrustee services.
There has been no significant change in the natureof the principal activities of the Group during the

Review of Operations
A review of the operations of the Group during thefinancial year and the results of those operations arecontained in the Chairman’s Report, the Chief
Executive Officer’s Review, the Review of 1997
Results and the financial statements.
State of Affairs
In the directors’ opinion, there have been no significant
changes in the state of affairs of the Group during thefinancial year, other than:Net loans and advances increased by 11% from$75,901 million to $84,148 million, primarily fromgrowth in International markets, particularly South Asia,
Asia Pacific and the Middle East, and business lending inAustralia.
Deposits and other borrowings increased by 12%
from $79,709 million to $89,152 million.

financial year.
At 30 September 1997, the Group had 1,473 pointsof representation.

The charge for provisions for doubtful debts
increased by 86% to $287 million. New and increased
specific provisions were $280 million and releases andResultConsolidated operating profit after income tax andabnormal items attributable to members of theCompany was $1,024 million. Further details arecontained in the Chief Executive Officer’s Review and
the Review of 1997 Results on page 5 and pages 9 to
12 respectively of the 1997 Annual Report.

recoveries totalled $194 million. The charge for the

Dividends
The directors propose payment of a final dividend of
26 cents per ordinary fully paid share, fully franked at
36%, to be formally declared on 15 December 1997 andto be paid on 21 January 1998. The proposed payment
amounts to $392 million.

or individual borrowers. Gross non-accrual loans fell to

Since the end of the previous financial year, the1997. The NHB has repaid the deposit together withfollowing fully franked dividends on fully paid ordinaryinterest at 18% in accordance with the decision. Givenshares have been paid:

its size, the $65 million interest receipt (after tax) is

general provision increased from $37 million in 1996 to$201 million for 1997. This included an additional$137 million transfer. This transfer was based on theannual average provision implied in the Group's
portfolio risk management models and is not linked to
any need to provide against specific regions, industries$872 million, or 1% of net loans and advances, from
$1,225 million at 30 September 1996.
The Arbitrators of the long running dispute with
the National Housing Bank of India (“NHB”) handed
down their award in the Group's favour on 29 March

disclosed as an abnormal item. Subsequently, NHB
Cents per
share

Type

Final
Interim

24
22

Amount before
bonus option
$m

355
329

Date ofpayment

15 January 1997
7 July 1997

The final dividend paid on 15 January 1997 wasdetailed in the directors’ report dated 29 November
1996. Neither the interim dividend paid on 7 July 1997
nor the current proposed dividend have been
mentioned in previous directors’ reports.

36

filed documents with the relevant Court to challenge
the award. The Group is confident that the award will
stand.
Restructuring costs of $417 million before tax havebeen charged of which $327 million are shown as anabnormal item.

Directors’ Report

While the above matters are those considered to besignificant changes, reviews of matters affecting theitems) for the relevant one of the financial years ending

Review, the Review of 1997 Results and the financial

30 September 1996, 1997 or 1998 are at least 50% overthe equivalent figure for the 1993 financial year. 95,000
options were exercised and 95,000 shares issued since
the end of the financial year, in accordance with thestatements.

Rules of the Scheme.

Group’s state of affairs are also contained in the
Chairman’s Report, the Chief Executive Officer’s

Events since the End of the Financial YearNo matter or circumstance has arisen between
30 September 1997 and the date of this report that has
significantly affected or may significantly affect theoperations of the Group, the results of those operationsor the state of affairs of the Group in subsequent years.
Future Developments
Details of likely developments in the operations of theGroup in subsequent financial years are contained in the
Chairman’s Report and the Chief Executive Officer’s
Review on pages 4 and 5 respectively of the 1997
Annual Report.
In the opinion of the directors, disclosure of any
further information would be likely to result in
unreasonable prejudice to the Group.

Rounding of Amounts
The Company is a company of the kind referred to in
the Australian Securities Commission class order
97/1005, dated on 9 July 1997 pursuant to section
313(6) of the Corporations Law. As a result, amounts inthis report and the accompanying financial statements
have been rounded to the nearest million dollars except
where otherwise indicated.
Shareholdings
The directors’ interests, beneficial and non-beneficial, inthe shares of the Company are detailed on page 115 of
the Shareholder Information section of the 1997 Annual
Report.
The directors are not aware of any single beneficial
interest of five per cent or more in the share capital of
the Company.

Share Options
ANZ Group Share Option Scheme
At the date of this report, there are 5,435,000
unexercised options over ordinary shares of $1 each atan exercise price of $5.34 per share. The options heldby current employees cannot be exercised earlier than
three years from the date of issue or later than
30 January 1999 and may only be exercised if the basic
earnings per share of the Company (before abnormal

In addition there are 1,400,837 unexercised options
issued over ordinary shares of $1 each at an exercise
price of $8.76 per share. The options held by current
employees cannot be exercised earlier than three years
or later than five years from the date of issue. 2,254
options were exercised by former employees and 2,254
shares issued since the end of the financial year, in
accordance with the Rules of the Scheme.
The Company is of the kind referred to in classorder 97/1011 issued by the Australian Securities
Commission on 9 July 1997 under which the directors
are relieved from the need to disclose the names of
employees and relevant details in respect of options
granted to those employees under the scheme. The
directors have availed themselves of the relief granted
under this class order.
The names of all persons who currently holdoptions granted under the schemes are entered in theregister kept by the Company pursuant to section 216C
of the Corporations Law and the register may beinspected free of charge.
No person entitled to exercise any option has orhad, by virtue of the option, a right to participate in any
share issue of any other body corporate.
Further details on the ANZ Group Share Option
Scheme are contained in note 42 to the financial
statements and form part of this report.

Directors’ Share and Option Purchase Scheme
At the date of this report, there are 50,000 unexercised
options over ordinary shares of $1 each at an exercise
price of $3.44 per share with an expiry date of 1 March
1998 or 90 days after cessation of a director’s term ofoffice, whichever is the earlier. No partly paid shares or
options were issued under this Scheme since the end of
the financial year.
Further details on the Directors’ Share and Option
Purchase Scheme are contained in note 42 to thefinancial statements and form part of this report. Detailsof directors’ shareholdings interests are set out on page
115 of the Shareholder Information section of the 1997
Annual Report.
Australia and New Zealand Banking Group Limited – 1997 Annual Report37Directors’ Report

Directors, their Qualifications and Experience
The Board includes eight non-executive directors who
have a diversity of business and community experienceand two directors with executive responsibilities who
have extensive banking experience. The names,
qualifications and experience of the directors who are in
office at the date of this report are contained on pages
24 and 25 of the 1997 Annual Report.

seeking the approval of shareholders for the issue ofSpecial responsibilities and attendance at meetings,

legal fees have been paid or are payable to Corrs

cannot be issued;(e) retirement benefits paid to Sir Ronald Trotter
pursuant to an agreement of the type referred to in
Article 79(b), following his retirement on 9 October
1997; and(f) benefits that may be deemed to have arisen because

are shown on pages 27 and 28 of the 1997 Annual

Chamber Westgarth of which J C Dahlsen is a

Report.

consultant.

Directors’ Benefits
No director has, during or since the end of the financial
year, received or become entitled to receive a benefit(other than a benefit included in the aggregate amountof emoluments received, or due and receivable, bydirectors shown in the Company’s financial statements
for the financial year or the fixed salary of a full-time
employee of the Company, or an entity controlled by
the Company, or a body corporate that was related to
the Company at a relevant time) because of a contractthat the director, or a firm of which the director is amember, or an entity in which the director has asubstantial financial interest, has made with theCompany or an entity that the Company controlled, ora body corporate that was related to the Company,
when the contract was made or when the director
received, or became entitled to receive the benefit, withthe exception of the following:(a) subscription by a director and certain former
directors for options to take up unissued shares underthe ANZ Group Share Option Scheme, pursuant toapproval by shareholders at the January 1997 Annual
General Meeting;(b) variable benefits payable under the Senior Executive
Remuneration Scheme to which J F Ries became
entitled after the end of the financial year;(c) benefits which may have arisen from an agreementwith a former executive director, A T L Maitland,
relating to consulting services;(d) an employment agreement between the Company
and J McFarlane providing, inter alia, for a variable
component of remuneration and for the Company

38

options, and alternative arrangements if such options

Further details are set out in note 43 to the financial
statements dealing with Related Party Disclosures.

Directors’ and Officers’ Indemnity
Article 143 provides that to the extent permitted by the
Corporations Law “every director, secretary or
employee of the Company shall be entitled to beindemnified by the Company against all costs, charges,
losses, expenses and liabilities incurred by him in theexecution and discharge of his duties or in relation
thereto”. The Corporations Law prohibits a company
from indemnifying directors, secretaries, executive
officers and auditors for liabilities except for a liability toa party, other than the Company or a related body
corporate, where the liability arises out of conduct
involving good faith, and for costs and expenses
incurred in defending proceedings in which the officer
or auditor is successful. An indemnity for officers or
employees who are not directors, secretaries or
executive officers, is not expressly restricted by the
Corporations Law.
In addition to its obligations under Article 143, it is
the policy of the Company to:(a) indemnify, in the same terms as Article 143,
directors, secretaries and executive officers of relatedbodies corporate; and(b) indemnify other employees of related bodies
corporate for all liability incurred,
where they are acting in good faith in furtherance of theobjectives of the Company and its related bodies
corporate.

Directors’ Report

The directors, the secretaries of the Company,
being P R Marriott, R T Jones and J E Clark, and aformer secretary D T Craig, and executive officers of
the Company have the benefit of the indemnity in
Article 143.
During the financial year, and again since the endof the financial year, the Company has paid apremium for an insurance policy for the benefit of thedirectors, secretaries as named above and executive
officers of the Company, and directors, secretaries andexecutive officers of related bodies corporate of theCompany. In accordance with common commercial
practice, the insurance policy prohibits disclosure of
the nature of the liability insured against and theamount of the premium.
Except for the above, during the financial year
and since the end of it, no person has been
indemnified nor has the Company or a related body
corporate of the Company made an agreement forindemnifying any person who is or has been an officer
or auditor of the Company or of a related body
corporate.

Signed in accordance with a resolution of the directors.

Charles GoodeJohn McFarlane

Chairman

Chief Executive Officer

28 November 1997

Australia and New Zealand Banking Group Limited – 1997 Annual Report39Australia and New Zealand Banking Group Limited and Controlled Entities
Profit and Loss Accounts for the year ended 30 September 1997

Note

1997
$M

Consolidated
1996
$M

1995
$M

Interest income
Interest expense

2
3

9,431
(6,018)9,286(5,969)8,310(5,229)6,045(3,981)

5,974(4,037)

Net interest income
Other operating income

2

3,413
2,415

3,317
2,096

3,081
1,975

2,064
1,971

1,937
1,994

Operating income
Operating expenses

3

5,828
(3,783)

5,413(3,644)

5,056(3,334)

4,035(2,805)

3,931(2,574)

Operating profit before
debt provisions and abnormal items
Provisions for doubtful debts

3

2,045
(287)

1,769
(154)

1,722
(174)

1,230
(221)

1,357
(110)

Operating profit before abnormal items
Abnormal loss

5

1,758
(182)

1,615
-

1,548
-

1,009
(214)

1,247
-

1,576

1,615

1,548

795

1,247

Operating profit before tax
Income tax (expense) benefit
Operating profit
Abnormal loss

6
5

(579)
35

(490)
-

(505)
19

(225)
77

(224)
-

Income tax expense

6

(544)

(490)

(486)

(148)

(224)

Operating profit after income tax
Outside equity interests

1,032
(8)

1,125
(9)

1,062
(10)

647
-

1,023
-

Operating profit after income tax
attributable to members of the Company

1,024

1,116

1,052

647

1,023

Retained profits at start of year

1,583

1,106

585

781

317

Total available for appropriation
Transfers (to) from reserves
Dividends provided for or paid
Ordinary shares
Preference shares

2,607
(82)

2,222
(55)

1,637
(27)

1,428
-

1,340
15

(695)
-

(584)
-

(424)
(80)

(695)
-

(574)
-

1,830

1,583

1,106

733

781

78.4
68.6

76.3
76.3

68.5
69.9

n/a
n/a

n/a
n/a

78.2
68.4

76.1
76.1

68.4
69.7

n/a
n/a

n/a
n/a

7

Retained profits at end of year
Earnings per share (cents)
Basic
Before abnormal items
After abnormal items
Diluted
Before abnormal items
After abnormal items

8

The notes appearing on pages 45 to 102 form an integral part of these financial statements
n/a Not applicable40

The Company
1997
1996
$M
$M

Australia and New Zealand Banking Group Limited and Controlled Entities
Balance Sheets as at 30 September 1997

Note

AssetsLiquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Customers’ liabilities for acceptances
Due from controlled entities
Regulatory deposits
Shares in controlled entities and associates
Other assets
Premises and equipment

9
10
11
12
13
16

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

6,298
11,5887,266
3,139
84,14814,040
1,206
7
8,490
2,059

6,901
11,3527,334
2,570
75,901
14,013
1,163
10
6,340
2,020

3,940
7,594
5,148
1,416
53,345
13,585
7,952
638
5,117
6,437
459

4,784
8,258
6,157
910
48,086
13,307
6,251
612
4,769
4,196
480

138,241

127,604

105,631

97,81010,87489,152
14,040
778
9,807
1,218
1,990
3,389

12,68279,70914,013
575
7,471
954
2,264
3,600

9,330
56,84813,585
4,921
314
7,532
1,011
1,990
3,159

11,36350,443
13,307
4,310
301
5,551
785
2,264
3,196

131,248

121,268

98,69091,520Net assets

6,993

6,336

6,941

6,290

Shareholders’ equity
Issued and paid-up capital
Reserves
Retained profits

1,509
3,604
1,830

1,478
3,229
1,583

1,509
4,699
733

1,478
4,031
781

6,943
50

6,290
46

6,941
-

6,290
-

6,993

6,336

6,941

6,290

17
18
19
20

Total assets
Liabilities
Due to other financial institutions
Deposits and other borrowings
Liability for acceptances
Due to controlled entities
Income tax liability
Creditors and other liabilities
Provisions
Bonds and notes
Loan capital

21
22

23
24
25
26
27

Total liabilities

Share capital and reserves attributable tomembers of the Company
Outside equity interests

28

Total shareholders’ equity and outside
equity interests
Commitments
Derivative financial instruments
Contingent liabilities and credit related
commitments

36
37
38

The notes appearing on pages 45 to 102 form an integral part of these financial statements

Australia and New Zealand Banking Group Limited – 1997 Annual Report41Australia and New Zealand Banking Group Limited and Controlled Entities
Statements of Changes in Shareholders’ Equity for the year ended 30 September 1997

1997
$M

Consolidated
1996
$M

1995
$M

Authorised capital
2,100,000,000 shares of $1 each
1,000,000,000 preference shares of $0.01 each

2,100
10

2,100
10

2,100
10

2,100
10

2,100
10

Total authorised capital

2,110

2,110

2,110

2,110

2,110

1,478
-

1,446
-

1,360
(6)

1,478
-

1,446
-

22
4
3
2
#
#

23
3
6
#
#

129
(100)
47
2
11
3
#

22
4
3
2
#
#

23
3
6
#
#

Total issued and paid-up capital

1,509

1,478

1,446

1,509

1,478

Share premium reserve
Balance at start of year
Premium on issue of shares
Conversion of preference shares
Share buy-back

2,637
189
-

2,516
121
-

2,905
621
(594)
(416)

2,637
189
-

2,516
121
-

Total share premium reserve

2,826

2,637

2,516

2,826

2,637

Asset revaluation reserve
Balance at start of year
Revaluation of investments in controlled entities
Transfer to retained profits

-

-

-

1,152
441
-

1,143
24
(15)

Total asset revaluation reserve

-

-

-

1,593

1,152

(183)

(88)

(87)

187

223

104

(95)

(1)

38

(36)

Total foreign currency translation reserve

(79)

(183)

(88)

225

187

General reserve
Balance at start of year
Transfers from retained profits

626
82

571
55

544
27

55
-

55
-

Total general reserve

708

626

571

55

55

Capital reserve

149

149

149

-

-

Total reserves

3,604

3,229

3,148

4,699

4,031

Issued and paid-up capital
Balance at start of year
Conversion of preference shares
Ordinary shares
Shares issued on conversion of preference shares
Share buy-backDividend reinvestment plan1
Employee share purchase scheme2
Bonus share option plan3
Group share option scheme4
Senior officers’ share purchase scheme5
Directors’ share and option purchase scheme6

Foreign currency translation reserve
Balance at start of year
Currency translation adjustments,
net of hedges after tax

42

The Company
1997
1996
$M
$M

Australia and New Zealand Banking Group Limited and Controlled Entities
Statements of Changes in Shareholders’ Equity for the year ended 30 September 1997

1997
$M

Consolidated
1996
$M

1995
$M

The Company
1997
1996
$M
$M

1,583

1,106

585

781

317

1,024

1,116

1,052

647

1,023

2,607
(82)

2,222
(55)

1,637
(27)

1,428
-

1,340
15

(695)
-

(584)
-

(424)
(80)

(695)
-

(574)
-

Retained profits at end of year

1,830

1,583

1,106

733

781

Total shareholders’ equity attributable tomembers of the Company

6,943

6,290

5,700

6,941

6,290

1997

The Company
1996

Note

Retained profits
Balance at start of year
Operating profit after income tax
attributable to members of the Company
Total available for appropriation
Transfers (to) from reserves
Dividends provided for or paid
Ordinary shares
Preference shares

7

Number of issued shares

1995

Ordinary shares of $1 each fully paid
Ordinary shares of $1 each paid to 10 cents per share

1,508,550,854
274,500

1,478,089,641 1,446,047,877
687,500
929,500

Total number of issued shares

1,508,825,354

1,478,777,141 1,446,977,377

The notes appearing on pages 45 to 102 form an integral part of the financial statements# Amounts less than $500,000
1Dividend reinvestment plan issues were
10,661,444 ordinary shares at $7.60 per share
10,132,948 ordinary shares at $9.77 per share
2
Employee Share Purchase Scheme issues were
4,135,275 ordinary shares at $6.43 per share
3
Bonus option plan issues were1,617,564 ordinary shares at $7.60 per share
1,401,371 ordinary shares at $9.77 per share
4Group share option scheme issues were2,040,000 ordinary shares at $5.34 per share
9,611 ordinary shares at $8.76 per share
5
Senior officers’ share purchase scheme
issue proceeds from conversion of partly paid to fully paid
3,000 ordinary shares at $3.42 per share
30,000 ordinary shares at $3.75 per share
3,000 ordinary shares at $4.55 per share
12,000 ordinary shares at $4.60 per share
3,000 ordinary shares at $4.68 per share
15,000 ordinary shares at $5.20 per share
10,000 ordinary shares at $5.26 per share
10,000 ordinary shares at $5.36 per share
10,000 ordinary shares at $5.42 per share
5,000 ordinary shares at $5.46 per share
10,000 ordinary shares at $5.56 per share
2,000 ordinary shares at $5.60 per share
10,000 ordinary shares at $5.62 per share6

Directors’ share and option purchase scheme
issue of shares
50,000 ordinary shares at $3.44 per share (on exercise of options)issue proceeds from conversion of partly paid to fully paid
140,000 ordinary shares at $3.75 per share
100,000 ordinary shares at $4.76 per share
50,000 ordinary shares at $5.46 per share
Total uncalled capital at 30 September 1997 was $1.3 million, comprising
capital of $0.3 million and share premium of $1 million

Australia and New Zealand Banking Group Limited – 1997 Annual Report43Australia and New Zealand Banking Group Limited and Controlled Entities
Statements of Cash Flows for the year ended 30 September 1997

Note

1997
$M

Consolidated
1996
$M

1995
$M

Inflows/(Outflows)

Cash flows from operating activities
Interest received
Dividends received
Fees and other income received
Interest paid
Personnel expenses paid
Premises expenses paid
Other operating expenses paid
Income taxes paid
Net decrease (increase) in trading securities
Net cash provided by operating activities
Cash flows from investing activities
Net decrease (increase)
Due from other financial institutions
Regulatory deposits
Loans and advances
Shares in controlled entities and associates
Investment securities
Purchases
Proceeds from sale or maturity
Controlled entities and branches
Purchased (net of cash acquired)Proceeds from sale (net of cash disposed)
Premises and equipment
Purchases
Proceeds from sale
Other
Net cash used in investing activities

33(a)Inflows/(Outflows)

9,364
327
1,970
(5,995)(2,155)(315)(1,041)
(426)
304

9,458
111
1,946
(6,136)(1,850)(351)(1,134)(353)(1,595)

7,945
4
1,918
(4,864)(1,618)(362)(1,118)(153)(1,222)

5,922
581
1,387
(3,867)(1,347)
(296)
(975)
(198)
1,212

6,061
516
1,490
(4,101)(1,309)
(333)
(755)
(79)
(1,339)

2,033

96

530

2,419

151

1,840
(14)
(7,447)
-

(171)
(28)
(8,269)-(1,801)(291)(7,487)
(6)

1,869
(26)
(4,570)
92

(562)
(61)
(6,769)480(3,140)2,803(2,166)2,381(6,949)8,573(1,060)
647

(718)
609

(11)
41

13
14

(81)
14

-

(198)
-

(457)
110
982

(412)
104
(954)

(361)
69
(44)

(110)
10
392

(202)
5
(1,832)(5,293)(9,488)(8,364)(2,756)(9,248)33(c)Cash flows from financing activities
Net (decrease) increase
Due to other financial institutions
Deposits and other borrowings
Due from/to controlled entities
Creditors and other liabilities
Bonds and notes
Issue proceeds
Redemptions
Loan capital
Issue proceeds
Redemptions
Decrease in outside equity interests
Dividends paid
Share capital issues
Share buy-back(2,787)
7,861
425

2,094
10,109
879

520
6,080
(186)

(3,142)
5,330(1,090)
296

2,395
7,959
929
653

973
(1,434)

1,427
(655)

655
(578)

973
(1,434)

1,427
(655)

323
(851)
(3)
(478)
39
-

634
(110)
(8)
(354)
18
-

165
(8)
(241)
19
(516)

323
(642)
(478)
39
-

634
(343)
18
-

Net cash provided by financing activities

4,068

14,034

5,910

175

13,017

Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities

2,033(5,293)
4,068

96(9,488)14,034530(8,364)
5,910

2,419
(2,756)175

151(9,248)13,017

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Foreign currency translation on opening balances

808
11,246
402

4,642
7,079
(475)

(1,924)
9,092
(89)

(162)
6,804
351

3,920
3,238
(354)

33(b) 12,456

11,246

7,079

6,993

6,804

Cash and cash equivalents at end of year

The notes appearing on pages 45 to 102 form an integral part of these financial statements

44

The Company
1997
1996
$M
$M

Notes to the Financial Statements

1: Accounting Policies(iv) Goodwill(i) Bases of preparation
This general purpose financial report complies withthe accounts provisions of the Banking Act,applicable Australian Accounting Standards, theaccounts provisions of the Corporations Law andUrgent Issues Group Consensus Views. The
accounting policies are consistent with those of theprevious year except for the change disclosed innote (ii).
Disclosures required by the United States
Securities and Exchange Commission in respect offoreign registrants have also been included in thisreport.
The financial report has been prepared inaccordance with the historical cost convention as
modified by the revaluation of certain properties,
trading instruments and shares in controlled entities.
The latter are revalued annually based on the net
tangible assets of the entity.
The Company is a company of the kindreferred to in the Australian Securities Commission
class order 97/1005, dated 9 July 1997.
Consequently, amounts in the financial report havebeen rounded to the nearest million dollars except
where otherwise indicated.
All amounts are expressed in Australian dollars,
unless otherwise stated. Where necessary, amounts
shown for the previous year have been reclassified
to facilitate comparison.

Goodwill, representing the excess of the purchaseconsideration over the fair value of the identifiable
net assets of a controlled entity at the date ofgaining control, is recognised as an asset andamortised on a straight line basis over the period
during which the benefits are expected to arise, notexceeding 20 years.
The unamortised balance of goodwill and theperiod of amortisation are reviewed annually.
Where the balance exceeds the value of expected
future benefits, the difference is charged to the
profit and loss account.

(ii) Change in accounting policy(vi) Net loans and advances

Effective 1 October 1996, the Group adopted theequity method of accounting for associates. Sharesin associates are stated in the consolidated balance
sheet at cost plus the Group's share of postacquisition net assets. The Group's share of resultsof associates is included in the profit and loss
account.
ASC Class Order 97/798 dated 5 June 1997
permitted the adoption of equity accounting.
As a result of the change in accounting policy,
the carrying value of associates has increased by$2 million, and $2 million of profit after tax has
been recognised.

Net loans and advances include direct financeprovided to customers such as bank overdrafts,
credit cards, term loans, lease finance, hire purchasefinance and commercial bills.
Overdrafts, credit cards and term loans arecarried at principal balances outstanding. Intereston amounts outstanding is accounted for on an
accruals basis.
Finance leases and hire purchase contracts areaccounted for using the finance method whereby
income is taken to account progressively over thelife of the lease or the contract in proportion to theoutstanding investment balance.
Investments in leveraged leases are recorded at
an amount equal to the investment participation,and income is taken to account on an actuarial basis
over the term of each lease.
Customer financing through redeemablepreference shares is included within net loans andadvances. Dividends received on redeemablepreference shares are taken to the profit and loss
account as part of interest income.

(iii) Consolidation
The financial statements consolidate the financial
statements of Australia and New Zealand Banking
Group Limited (the Company) and its controlled
entities.
Where controlled entities and associates havebeen sold or acquired during the year, theiroperating results have been included to the date ofdisposal or from the date of acquisition.

(v) Foreign currency
Revenues and expenses of overseas branches andcontrolled entities are translated at averageexchange rates for the year, while assets andliabilities are translated at the mid-point rates of
exchange ruling at balance date.
Net translation differences arising from thetranslation of overseas branches and controlled
entities considered to be self-sustaining operations
are included in the foreign currency translation
reserve, after allowing for those positions hedged byforeign exchange contracts and related currency
borrowings.
Assets and liabilities denominated in foreign
currencies are translated into Australian dollars at
the rates of exchange ruling at balance date.

Australia and New Zealand Banking Group Limited – 1997 Annual Report45Notes to the Financial Statements

All loans are subject to regular scrutiny andgraded according to the level of credit risk. Loansare classified as either productive or non-accrual.
The Group has adopted the Reserve Bank ofAustralia Impaired Assets Guidelines in assessing
non-accrual loans. Non-accrual loans include loans
where the accrual of interest and fees has ceased due
to doubt as to full recovery, and loans that havebeen restructured with an effective yield below theGroup’s average cost of funds at the date ofrestructuring. A specific provision is raised to cover
the expected loss, where full recovery of principal is
doubtful.
Restructured loans are loans with an effective
yield above the Group’s cost of funds and below
the yield applicable to a customer of equal credit
standing.
Cash receipts on non-accrual loans are, in theabsence of a contrary agreement with the customer,
applied as income or fees in priority to being
applied as a reduction in principal, except where
the cash receipt relates to proceeds from the sale ofsecurity.

Premiums and discounts are capitalised andamortised from the date of purchase to maturity.
Interest and dividend income is accrued.
Changes in market values of securities are nottaken into account unless there is considered to be apermanent diminution in value.

(vii) Bad and doubtful debts

Derivative financial instruments (derivatives) arecontracts whose value is derived from one or more
underlying financial instruments or indices. They
include swaps, forward rate agreements, futures,
options and combinations of these instruments.
Trading derivatives comprising derivatives
entered into for customer-related or proprietary
reasons or for hedging the trading portfolio, aremeasured at fair value and all gains and losses aretaken to the profit and loss account.
Fair value losses arising from trading derivatives
are not offset against fair value gains unless a legal
right of set-off exists.
Derivatives designated, and effective, as hedgesof underlying non-trading exposures are accounted
for on the same basis as the underlying exposures.
Gains and losses resulting from the terminationof a derivative that was designated as a hedge of
non-trading exposures are deferred and amortisedover the remaining period of the original term
covered by the terminated instrument where theunderlying exposure still exists. Where theunderlying exposure no longer exists, the gains andlosses are recognised in the profit and loss account.
Gains and losses on derivatives related tohedging exposures arising from anticipatedtransactions are deferred and recognised in thefinancial statements when the anticipatedtransaction occurs. These gains and losses aredeferred only to the extent that there is an offsetting
unrecognised (unrealised) gain or loss on the
exposures being hedged. Deferred gains and losses
are amortised over the expected term of the hedged
exposure.

Specific provisions are maintained to coveridentified doubtful debts.
General provisions are maintained for losses
which, although not specifically identified, are
known from experience to be inherent in any asset
portfolio. The level of the general provision isdetermined having regard to economic conditions,the level of on and off-balance sheet assets andother general risk factors.
All known bad debts are written off in the year
in which they are identified.
Provisions for doubtful debts are deducted fromloans and advances in the balance sheet.
(viii) Acceptances
Commercial bills accepted but not held in portfolio
are accounted for and disclosed as a liability with acorresponding contra asset.
The Group’s own acceptances discounted areheld as part of either the trading securities portfolioor the loan portfolio, depending on whether, at thetime of such discount, the intention was to hold theacceptances for resale or until maturity.
(ix) Trading securities
Securities held for trading purposes are recorded atmarket value. Unrealised gains and losses onrevaluation are taken to the profit and loss account.
(x) Investment securities
Investment securities are those which the Grouppurchased with the positive intent and ability tohold until maturity. Such securities are recorded atcost or at cost adjusted for amortisation ofpremiums or discounts.

46(xi) Repurchase agreements
Securities sold under repurchase agreements are
retained in the financial statements and acounterparty liability is disclosed under theclassifications of Due to other financial institutions
or Deposits and other borrowings. The difference
between the sale price and the repurchase price isamortised over the life of the repurchase agreement
and charged to interest expense in the profit andloss account.
Securities purchased under agreements to resell
are recorded as Liquid assets, Net loans andadvances, or Due from other financial institutions,depending on the term of the agreement and thecounterparty.
(xii) Derivative financial instruments

Notes to the Financial Statements(xiii) Premises and equipment(xv) Life insurance businessPremises and equipment (including computerequipment) are carried at cost less depreciation oramortisation, or at valuation. Any surplus onrevaluation of a class of assets is credited directly tothe asset revaluation reserve. Where a deficit
arises, this is debited to the asset revaluation reserveto the extent of any previous revaluation surplus
for that class, and the excess debited to the profit
and loss account. Potential capital gains tax arisingfrom revaluations is not taken into account as theGroup has no current intention to dispose of thesubject properties.
Profit or loss on the disposal of premises andequipment is determined as the difference between
the carrying amount of the assets at the time ofdisposal and the proceeds of disposal, and isincluded in the results of the Group in the year of
disposal.
Assets other than freehold land are depreciatedat rates based upon their expected useful lives to
the Group, using the straight line method.
Leasehold improvements are amortised on astraight line basis over the remaining period ofeach lease.
The carrying values of all non-current assets
have been assessed and are not in excess of theirrecoverable amounts. In assessing recoverable
amounts, the relevant cash flows have not been
discounted to their present value.

The Group conducts life insurance businessthrough ANZ Life Assurance Company Limited(ANZ Life). The Group’s financial statements
include its interest in the actuarially assessed surplus
of ANZ Life’s statutory funds for the year, after
allowing for increases in policyholder reserves
determined under the margin on services
methodology. The net result for the year of$82 million (1996: $55 million) has been includedin the profit and loss account and then transferredto the general reserve, until available for
distribution under the requirements and restrictionsof the Life Insurance Act 1995 and statutory
accounting practices.
The Group’s interest in the accumulated
retained earnings of the life insurance statutory
funds of $436 million (1996: $354 million),
together with the net assets of the shareholders’funds of ANZ Life, are included within the balance
sheet of the Group.
Due to the provisions of the Life Insurance Act
1995, the assets of the life insurance statutory funds
attributable to policyholders of ANZ Life do notform part of the assets to which the Group is
entitled and are therefore not consolidated.

(xiv) Income tax
The Group adopts the liability method of tax effectaccounting whereby income tax expense iscalculated based on accounting profit adjusted forpermanent differences. Permanent differences are
items of revenue and expense which arerecognised in the profit and loss account but are
not part of taxable income. General provisions for
doubtful debts are treated as permanent differences
as the provisions do not relate to specific accounts
for which a tax deduction would be available in
the event of a loss.
Future tax benefits and deferred tax liabilities
relating to timing differences and tax losses arecarried forward at tax rates applicable to future
periods. Future tax benefits relating to tax losses
are only carried forward where realisation of thebenefit is considered virtually certain.
Provision for Australian income tax is madewhere the earnings of overseas controlled entities
are subjected to Australian tax under theattribution rules for the taxation of foreign sourced
income. Otherwise, no provision is made foroverseas withholding tax or Australian income tax
which may arise on repatriation of earnings fromoverseas controlled entities, where it is expected
these earnings will be retained by those entities tofinance their ongoing business.

(xvi) Employee entitlements
The amounts expected to be paid in respect of
employees’ entitlements to annual leave are accrued
at current salary rates including on-costs. Liability
for long service leave is accrued in respect of all
applicable employees at the present value of future
amounts expected to be paid.
(xvii) Superannuation commitments
Contributions, which are determined on an
actuarial basis, to superannuation schemes arecharged to personnel expenses in the profit and loss
account.
Any aggregate deficiencies arising from theactuarial valuations of the Group’s defined benefit
schemes have been provided for in the financial
statements.
The assets and liabilities of the schemes havenot been consolidated as the Company does nothave direct or indirect control of the schemes.
(xviii) Leasing
Leases entered into by the Group as lessee are
predominantly operating leases, and the operatinglease payments are included in the profit and loss
account in equal instalments over the lease term.
Assets relating to operating leases entered intoby the Group as lessor are included within Premises
and equipment with rental income anddepreciation separately classified in income andexpense.

Australia and New Zealand Banking Group Limited – 1997 Annual Report47

Notes to the Financial Statements

1997
$M

Consolidated
1996
$M

1995
$M

The Company
1997
1996
$M
$M

Interest income
From other financial institutions
On regulatory deposits
On trading and investment securities
On loans and advances
Dividends from redeemable preference share finance
Other

753
13
835
7,284
8
538

766
25
754
7,320
9
412

661
43
698
6,502
2
404

535
6
501
4,286
374

525
14
480
4,381
216

From controlled entities

9,431
-

9,286
-

8,310
-

5,702
343

5,616
358

Total interest income

9,431

9,286

8,310

6,045

5,974

570
964

550
854

537
801

458
644

440
571

From controlled entities

1,534
-

1,404
-

1,338
-

1,102
284

1,011
269

Total fee income

1,534

1,404

1,338

1,386

1,280

245
192
35
146
94

231
113
36
116
55

226
96
33
89
52

153
142
27
-

140
80
28
-

10
5
154

6
7
10
118

13
14
4
110

263

6
3
457

881

692

637

585

714

2,415

2,096

1,975

1,971

1,994

145

-

-

-

-

11,991

11,382

10,285

8,016

7,968

2: Income

Other operating income(i) Fee income
Lending
Other including commissions(ii) Other income
Foreign exchange earnings
Profit on trading instruments
Rental income
Operating lease income
Life insurance fund surplus
Development ventures
IncomeDiminution in value
Profit on sale of premises and equipment
Other1
Total other income
Total other operating income
Abnormal items (refer note 5)
Total income
1

Includes dividend income of $327 million (1996: $111 million) for the Group and $581 million (1996: $516 million) for theCompany. The Company's dividends include dividends received from controlled entities of $276 million (1996: $405 million)

3: Expenses

48

Interest expense
To other financial institutions
On deposits
On borrowing corporations’ debt
On commercial paper
On bonds and notes
On loan capital
Other

804
3,838
512
275
25
364
200

862
3,826
520
247
134
245
135

809
3,271
490
179
114
254
112

648
2,464
102
25
322
170

694
2,498
109
134
210
107

To controlled entities

6,018
-

5,969
-

5,229
-

3,731
250

3,752
285

Total interest expense

6,018

5,969

5,229

3,981

4,037

Notes to the Financial Statements

1997
$M

Consolidated
1996
$M

1995
$M

The Company
1997
1996
$M
$M

280
(145)

292
(129)

293
(178)

161
(89)

201
(87)

Recoveries of amounts previously written off

135
(49)

163
(46)

115
(52)

72
(31)

114
(26)

Specific provision

86

117

63

41

88

General provision

201

37

111

180

22

Total provisions for doubtful debts

287

154

174

221

110

1,453
114

1,387
105

1,270
93

1,084
86

1,031
10

76
46
19
241

73
53
29
158

64
48
19
116

73
40
14
184

70
48
27
122

1,949

1,805

1,610

1,481

1,308

189
31
16
126

204
31
13
137

207
31
16
147

145
6
8
91

144
4
7
92

To controlled entities

362
-

385
-

401
-

250
60

247
87

Total premises expenses

362

385

401

310

334

98
232
2
27
49
3
7
627

97
231
55
8
49
3
24
635

86
224
79
8
49
5
5
588

63
152
1
23
31
2
2
488

64
150
44
3
31
2
15
430

Total other expenses

1,045

1,102

1,044

762

739

Total core operating expenses

3,356

3,292

3,055

2,553

2,381

49
197
91

61
172
62

67
150
49

25
158
-

22
141
-

337

295

266

183

163

90

57

13

69

30

Total operating expenses

3,783

3,644

3,334

2,805

2,574

Total expenses

10,088

9,767

8,737

7,007

6,721

3: Expenses (continued)
Provisions for doubtful debts (refer note 15)
New and increased provisions
Provision releases

Operating expenses(i) Personnel
Salaries and wages
Pension fundEmployee taxes
PayrollFringe benefits tax
Provision for employee entitlements
Other
Total personnel expenses(ii) Premises
Rent
Depreciation of buildings and integrals
Amortisation of leasehold improvements
Other(iii) Other
Computer costs
Depreciation
Other
Non-lending losses, frauds and forgeries
Remuneration of auditors (refer note 4)
Depreciation of furniture and equipment
Depreciation of motor vehicles
Loss on disposal of premises and equipment
Other(iv) Direct income-related expenditure
Brokerage and commissions
Interchange and card costs
Operating lease depreciation
Total direct income-related expenditure(v) Restructuring1

1

In addition, restructuring costs of $327 million have been treated as abnormal for the Group (Company: $214 million) in the 1997
financial year. Refer note 5Australia and New Zealand Banking Group Limited – 1997 Annual Report49Notes to the Financial Statements

1997
$'000

Consolidated
1996
$'000

1995
$'000

The Company
1997
1996
$'000
$'000

3,771
11

3,652
8

3,833
84

1,637
-

1,553
-

3,782

3,660

3,917

1,637

1,553

2,008
90
120
20,657
59

2,143
1,037
74
658
42

2,123
1,201
200
785
101

847
48
65
20,565
25

997
402
18
57
5

22,934

3,954

4,410

21,5501,479

26,716

7,614

8,327

23,187

3,032

4: Remuneration of Auditors
Amounts received and due and receivable
Auditing the accounts
By KPMGBy other Group auditors

Other services
By KPMG
Audit related services1
Taxation
Accounting
Consulting2
By other Group auditors

Total remuneration of auditors
1

Audit related services are services other than those relating to the audit or review of the statutory financial statements of the Group.
These services include prudential supervision reviews for central banks, prospectus reviews, trust audits and other audits required for
local statutory purposes
2
Includes fees of $20,326,000 in 1997 paid to KPMG Barents (a wholly owned entity of the USA practice of KPMG) for
consultancy work in connection with the ANZ Global Project

By virtue of an Australian Securities Commission class order dated 29 June 1992, the auditors of Australia and
New Zealand Banking Group Limited and its related bodies corporate, KPMG, have been exempted fromcompliance with the requirements of Section 324(2) of the Corporations Law. The class order exemption
applies in that partners and associates of KPMG not engaged on the audit of Australia and New Zealand
Banking Group Limited and its related bodies corporate may be indebted to the Company, provided that suchindebtedness arose upon ordinary commercial terms and conditions.

1997
$M

Consolidated
1996
$M

145

-

-

-

-

145

-

-

-

-

Loss before tax
Restructuring costs

327

-

-

214

-

Total abnormal loss before tax

(182)

-

-

(214)

-

(80)
115

-

-

77

-

-

-

19

-

-

35

-

19

77

-

(147)

-

19

(137)

-

1995
$M

The Company
1997
1996
$M
$M

5: Abnormal Items
Profit before tax
Interest on National Housing Bank deposit

Income tax (expense) benefit applicable toInterest on National Housing Bank deposit
Restructuring costs
Restatement of net deferred tax balances to reflect theincrease in the Australian corporate tax rate
Total abnormal tax benefit
Total abnormal (loss) profit after tax

50Notes to the Financial Statements

1997
$M

Consolidated
1996
$M

1995
$M

The Company
1997
1996
$M
$M

1,758

1,615

1,548

1,009

1,247

6: Income Tax Expense
Reconciliation of the prima facie income tax payable
on operating profit and abnormal items with the income
tax expense charged in the profit and loss accountOperating profit before income tax andbefore abnormal items
Prima facie income tax at 36% (1996: 36%, 1995: 33%)
Tax effect of permanent differences
Overseas tax rate differential
Other non-assessable income
Rebateable and non-assessable dividends
Non-allowable depreciation and amortisation
General provision for doubtful debts
Other

632

581

511

363

449

14
(25)
(117)
3
72
10

1
(27)
(41)
4
13
(19)

18
(34)
(4)
3
37
(10)

7
(6)
(205)
3
64
10

6
(24)
(184)
3
8
(15)

Income tax over provided in prior years

589
(10)

512
(22)

521
(16)

236
(11)

243
(19)

Total income tax expense on operating profit
before abnormal items

579

490

505

225

224

Abnormal loss before tax

(182)

-

-

(214)

-

Prima facie income tax at 36% (1996: 36%, 1995: 33%)
Tax effect of permanent differences
Overseas tax rate differential
Restatement of net deferred tax balances (refer note 5)

(65)

-

-

(77)

-

30
-

-

(19)

-

-

Total income tax benefit on abnormal items

(35)

-

(19)

(77)

-

Total income tax expense

544

490

486

148

224

1997
$M

Consolidated
1996
$M

1995
$M

The Company
1997
1996
$M
$M

Ordinary dividends
Interim dividend
Proposed final dividend
Bonus option plan adjustment (see over)

329
392
(26)

264
355
(35)

208
260
(44)

329
392
(26)

254
355
(35)

Dividends on ordinary shares

695

584

424

695

574

Preference dividends (13.25% per annum, unfranked)
Dividend paid in January
Dividend paid in July

-

-

40
40

-

-

Dividends on preference shares

-

-

80

-

-

695

584

504

695

574

7: Dividends

Total dividends

A final dividend of 26 cents fully franked is proposed to be paid on each fully paid ordinary share (1996: final
dividend of 24 cents per fully paid share, fully franked; 1995: final dividend of 18 cents per fully paid share,
franked to 6 cents at 36%). Non-resident shareholders will be exempt from dividend withholding tax on thefull dividend.
The 1997 interim dividend of 22 cents was fully franked (1996: interim dividend of 18 cents was franked to
9 cents; 1995: unfranked interim dividend of 15 cents per fully paid ordinary share).

Australia and New Zealand Banking Group Limited – 1997 Annual Report51Notes to the Financial Statements

7: Dividends (continued)
Dividend Franking Account
The amount of franking credits available for the subsequent financial year is nil, after adjusting for franking
credits that will arise from the payment of tax on Australian profits for the 1997 financial year, less franking
credits which will be utilised in franking the proposed final dividend and franking credits that may be
prevented from being distributed in the subsequent year.
Restrictions which Limit the Payment of Dividends
There are presently no significant restrictions on the payment of dividends from controlled entities to theCompany. Various capital adequacy, liquidity, statutory reserve and other prudential requirements must be
observed by certain controlled entities and the impact on these requirements caused by the payment of cash
dividends is monitored. In practice however, there are significant tax considerations associated with thereceipt of dividends from controlled entities by a company. Payment of dividends from domestic controlled
entities constitutes assessable income to a recipient Australian company. The recipient company is generally
entitled to a rebate of tax otherwise payable on the assessable dividend. Should the recipient company's total
assessable income be less than the dividend income, or it be in a tax loss position, the rebate will reduce or be
eliminated. The Group therefore acts to preserve the availability of rebates by avoiding the payment ofdividends by domestic controlled entities in this situation.
Payments of dividends from overseas controlled entities may attract withholding taxes which have notbeen provided for in these financial statements.
There are presently no restrictions on payment of dividends by the Company other than(i) the share premium reserve is not available for distribution other than in the form of bonus issues (share
dividends); and(ii) reductions of shareholders' equity through payment of cash dividends is monitored having regard to
the regulatory requirements to maintain a specified capital adequacy ratio. In particular, the Reserve
Bank of Australia has advised Australian banks that a bank under its supervision must consult with it
before declaring a dividend if the bank has incurred a loss, or proposes to pay dividends which exceed thelevel of profits earned.

Bonus option plan
Dividends paid during the year have been reduced by way of certain shareholders participating in the bonus
option plan and forgoing all or part of their right to dividends in return for the receipt of bonus shares.

Final dividend 1996
Interim dividend 1997

52

Declared
dividend$M

Bonus options
exercised$M

Amount
paid
$M

355
329

12
14

343
315

684

26

658

Notes to the Financial Statements

1997
$M

Consolidated
1996
$M

1995
$M

Before abnormal items
Basic
Operating profit after income tax
attributable to shareholders of the Company
Abnormal items after tax

1,024
147

1,116
-

1,052
(19)

Operating profit after income tax before abnormal items
Preference share dividend

1,171
-

1,116
-

1,033
(80)

Total adjusted earnings

1,171

1,116

953

1,492.9

1,462.3

1,390.3

78.4

76.3

68.5

1,171
-

1,116
-

1,033
(80)

2

2

1

1,173

1,118

954

Weighted average number of ordinary shares (millions)
Add: potential dilution of options to ordinary shares

1,492.9
7.2

1,462.3
7.6

1,390.3
5.0

Total adjusted number of shares

1,500.1

1,469.9

1,395.3

Diluted earnings per share (cents)

78.2

76.1

68.4

After abnormal items
Basic
Operating profit after income tax
attributable to shareholders of the Company
Preference share dividend

1,024
-

1,116
-

1,052
(80)

Total adjusted earnings

1,024

1,116

972

1,492.9

1,462.3

1,390.3

Basic earnings per share (cents)

68.6

76.3

69.9

DilutedOperating profit after income tax
attributable to shareholders of the Company
Preference share dividend
Add: notional interest earned on capital raised fromexercise of options

1,024
-

1,116
-

1,052
(80)

2

2

1

Total adjusted earnings

1,026

1,118

973

Weighted average number of ordinary shares (millions)
Add: potential dilution of options to ordinary shares

1,492.9
7.2

1,462.3
7.6

1,390.3
5.0

Total adjusted number of shares

1,500.1

1,469.9

1,395.3

68.4

76.1

69.7

8: Earnings per Share

Weighted average number of ordinary shares (millions)
Basic earnings per share (cents)
DilutedOperating profit after income tax before abnormal items
Preference share dividend
Add: notional interest earned on capital raised fromexercise of options
Total adjusted earnings

Weighted average number of ordinary shares (millions)

Diluted earnings per share (cents)

Australia and New Zealand Banking Group Limited – 1997 Annual Report53Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

9: Liquid Assets
Australia
Coins, notes and cash at bankers
Money at call
Other banks’ certificates of deposit
Securities purchased under agreement toresell less than 90 days
Bills receivable and remittances in transit

508
189
8

1,351
25
7

410
133
-

1,334
-

142
41

130
3

142
41

130
2

888

1,516

726

1,466

342
622
2,785

216
687
3,321

50
85
1,992

23
145
2,695

823
838

900
261

749
338

445
10

5,410

5,385

3,214

3,318

Total liquid assets

6,298

6,901

3,940

4,784

Maturity analysis based on original term
to maturity at 30 September
Less than 90 days
More than 90 days

3,857
2,441

4,285
2,616

1,829
2,111

2,456
2,328

Total liquid assets

6,298

6,901

3,940

4,784

Australia
Overseas

1,480
10,108

1,607
9,745

1,480
6,114

1,507
6,751

Total due from other financial institutions

11,588

11,352

7,594

8,258

Maturity analysis based on remaining term
to maturity at 30 September
Overdraft
Less than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years

2,154
7,495
1,786
82
71

{ 6,961

1

1,597
4,377
1,520
48
52

{ 4,348

Total due from other financial institutions

11,588Overseas
Coins, notes and cash at bankers
Money at call
Other banks’ certificates of deposit
Securities purchased under agreement toresell less than 90 days
Bills receivable and remittances in transit

10: Due from Other Financial Institutions

1

54

{

4,3911

11,352

7,594

1

{

3,9101
8,258

Maturity analysis at 30 September 1996 was based on original terms to maturity of less than 90 days and greater than 90 days

Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

11: Trading Securities
Trading securities are allocated between Australia andOverseas based on the domicile of the issuer
Listed - Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments

75
20
622

1,496
10
91

75
20
350

1,496
10
-

717

1,597

445

1,506

397
912

272
265

331

236

1,309

537

331

236

Total listed

2,026

2,134

776

1,742

Unlisted - Australia
Treasury notes and bills
Other government securities
ANZ accepted bills
Other securities and equity investments

1,567
1,846
320

103
1,577
1,317
269

1,567
1,665
299

103
1,577
1,249
199

3,733

3,266

3,531

3,128

770
335
402

1,564
64
306

465
223
153

1,177
64
46

1,507

1,934

841

1,287

Total unlisted

5,240

5,200

4,372

4,415

Total trading securities

7,266

7,334

5,148

6,157

Listed - Overseas
Indian government securities
Other securities and equity investments

Unlisted - Overseas
Treasury notes and bills
Other government securities
Other securities and equity investments

Australia and New Zealand Banking Group Limited – 1997 Annual Report55

Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

12: Investment Securities
Investment securities are allocated between Australia andOverseas based on the domicile of the issuer
Listed - Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments

58
462

4
46
297

58
451

4
46
286

520

347

509

336

404
99
431

304
147
316

84
259

10
83
187

934

767

343

280

1,454

1,114

852

616

Unlisted - Australia
Other securities and equity investments

448

139

412

134

Unlisted - Overseas
New Zealand government securities
Indian government securities
Other government securities
Other securities and equity investments

476
2
646
113

540
32
576
169

151
1

9
146
5

1,237

1,317

152

160

Total unlisted

1,685

1,456

564

294

Total investment securities

3,139

2,570

1,416

910

58
462

4
46
297

58
451

4
46
286

520

347

509

336

424
100
431

300
149
316

84
259

10
83
187

955

765

343

280

1,475

1,112

852

616

Unlisted - Australia
Other securities and equity investments

448

140

412

134

Unlisted - Overseas
New Zealand government securities
Indian government securities
Other government securities
Other securities and equity investments

475
2
635
114

537
32
575
171

151
1

9
145
6

1,226

1,315

152

160

Total market value of unlisted investment securities

1,674

1,455

564

294

Total market value of investment securities

3,149

2,567

1,416

910

Listed - Overseas
Indian government securities
Other government securities
Other securities and equity investments
Total listed

Market value information
Listed - Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments

Listed - Overseas
Indian government securities
Other government securities
Other securities and equity investments

Total market value of listed investment securities

56

Notes to the Financial Statements

12: Investment Securities (continued)
Investment Securities by Maturities and Yields
Based on remaining term tomaturity at 30 September 1997
BetweenLess than 3 months and3 months
12 months
At book value

Between
1 year and5 years

Between
5 years and
10 years

After No maturity
10 years
specified

Total

Market
Value

$M

$M

$M

$M

$M

$M

$M

$M

-

90

304

-

-

-

394

394

44

18

11

-

-

-

73

73

309

145

11

-

-

36

501

501

353

253

326

-

-

36

968

968

35

441

-

-

-

-

476

475

17
19
484

14
54
53

274
144

53
25

7
6
1

-

38
406
707

37
426
699

114

172

218

28

3

9

544

544

669

734

636

106

17

9

2,171 2,181

Total book value

1,022

987

962

106

17

45

3,139

Total market value

1,012

988

977

108

17

47

n/a 3,149

Less than
1 year

Between
1 year and5 years

Between
5 years and
10 years

After
10 years

Australia
Commonwealth securities
Local and semigovernment securities
Other securities andequity investments

Overseas
New Zealandgovernment securities
US treasury andgovernment securities
Indian government securities
Other government securities
Other securities andequity investmentsn/aWeighted average yields1
Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments

%

%

%

%

5.88
7.04
5.62

5.25
5.93
5.76

-

-

Overseas
New Zealand government securities
US treasury and government securities
Indian government securities
Other government securities
Other securities and equity investments

7.53
5.19
11.67
11.98
7.31

11.74
9.11
9.86

12.68
8.36
11.65

6.99
12.15
16.58
16.02

1

Based on effective yields for fixed interest and discounted securities and dividend yield for equity investments at 30 September 1997

Australia and New Zealand Banking Group Limited – 1997 Annual Report57Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

13: Net Loans and Advances
Loans and advances are classified between Australia andOverseas based on the domicile of the lending point
Australia
Overdrafts
Credit card outstandings
Term loans - owner-occupied housing
Term loans - other
Lease finance (refer below)
Hire purchase
Commercial bills
Redeemable preference share finance
Other

2,877
1,430
15,862
26,880
3,272
5,958
16
20
377

3,358
1,156
15,001
23,026
3,282
5,803
21
20
422

2,877
1,430
15,862
24,556
700
370

3,352
1,156
15,001
20,583657
412

56,692

52,08945,795

41,161

3,070
266
7,539
17,689
74
383
786
44
376

2,699
231
6,878
15,590
68
458
568
9
329

702
3
224
7,399
32
184
54

587
2
187
6,868
22
189
-

30,227

26,830

8,598

7,855

Total gross loans and advances

86,91978,91954,39349,016

Provisions for doubtful debts (refer note 15)
Income yet to mature(1,371)(1,400)(1,218)(1,800)(1,027)
(21)

(884)
(46)

(2,771)(3,018)(1,048)(930)

Total net loans and advances

84,14875,901

53,34548,086

Lease finance consists of gross lease receivables
Current
Non-current

627
2,719

885
2,465

252
480

187
492

3,346

3,350

732

679

Overseas
Overdrafts
Credit card outstandings
Term loans - housing
Term loans - non-housing
Lease finance (refer below)
Hire purchase
Commercial bills
Redeemable preference share finance
Other

58

Notes to the Financial Statements

13: Net Loans and Advances (continued)
Maturity Distribution and Concentrations of Credit Risk

Based on remaining term
to maturity at 30 September 1997

Overdraft$M

BetweenLess than 3 months and3 months
12 months$M$M

Between
1 year and5 years$M

After
5 years
$M

Total
$M

Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal 1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other

341
217
97
102
1
538
361
192
117
718
211

647
136
176
434
331
566
1,729
127
1,551
1,593
1,094

619
208
188
123
320
297
491
208
1,468
403
404

761
636
682
3,283
29
2,588
824
2,995
600
1,689
921
1,208

348
291
249
55
38
33
221
653
89
21,270
740
481

2,716
1,488
1,392
3,997
68
3,272
2,446
6,229
1,216
26,095
4,375
3,398

Overseas
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal 1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other

99
74
8
118
54
349
935
29
10
139
384

734
119
68
1,701
198
19
1,612
480
359
304
550
836

596
62
306
818
192
12
1,580
409
119
1,528
619
498

589
85
158
328
125
29
1,260
656
325
4,509
492
771

421
6
15
224
87
13
371
372
68
3,061
51
293

2,439
346
555
3,189
656
73
5,172
2,852
900
9,412
1,851
2,782

Gross loans and advances

5,094

15,364

11,46825,54329,45086,919Specific provisions for doubtful debts
Income yet to mature

(453)
-

(72)

(139)

(1,168)

(21)

(453)
(1,400)

(453)

(72)

(139)

(1,168)(21)(1,853)

4,641

15,292

11,32924,37529,42985,066

(918)

(918)

Loans and advances net of
specific provisions and income
yet to mature
General provision
Net loans and advances

4,641

15,292

11,32924,37528,511

84,148Interest rate sensitivity
Fixed interest rates3
Variable interest rates

196
4,898

8,150
7,214

7,636
3,832

17,9697,574

10,122
19,32844,07342,846

5,094

15,364

11,46825,54329,45086,9191
2

3

Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such properties and must
be secured by property
Housing loans and other loans that are capped for an initial period are treated as fixed interest rate loans and their maturities based on the principal
repayments due over the term of the loan

Australia and New Zealand Banking Group Limited – 1997 Annual Report59Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

14: Impaired Assets
Summary of impaired assets
Non-accrual loans
Restructured loans
Other real estate owned
Unproductive facilities

60

872
13
75

1,225
33
82

545
4
21

835
25
22

Gross impaired assets
Specific provisions
Non-accrual loans
Unproductive facilities

960

1,340

570

882

(444)
(9)

(501)
(8)

(295)
(9)

(338)
(7)

Net impaired assets

507

831

266

537

Non-accrual loans
Non-accrual loans
Specific provisions

872
(444)

1,225
(501)

545
(295)

835
(338)

Total net non-accrual loans

428

724

250

497

Restructured loans
For these loans interest and fees are recognised asincome on an accruals basis

13

33

4

25

Other real estate owned
In the event of customer default, any loan security is held
as mortgagee in possession and therefore the Group
does not hold any other real estate owned assets

-

-

-

-

Unproductive facilities
Unproductive facilities
Specific provisions

75
(9)

82
(8)

21
(9)

22
(7)

Net unproductive facilities

66

74

12

15

Accruing loans past due 90 days or more
These amounts, comprising loans less than $100,000 or fully
secured, are not classified as impaired assets andtherefore are not included within the above summary

243

212

180

174

Notes to the Financial Statements

14: Impaired Assets (continued)
Further analysis of non-accrual loans at 30 September 1997 and interest and/or other income received during
the year under Reserve Bank of Australia guidelines is as follows
Consolidated
Specific
provision$M

Interest and/or
other income
received
$M

89
35
39

-

13
2
1

64
29

-

12
1

163

-

16

93

-

13

404
59
113

270
20
105

17
1
3

290
30

228
18

17
2

576

395

21

320

246

19

132
1

49
#

11
#
#

132
-

49
-

11
-

133

49

11

132

49

11

872

444

48

545

295

43

Non-accrual loans
Without provisions
Australia
New ZealandInternational markets

With provisions and no, or partial
performance1
Australia
New ZealandInternational markets

With provisions and full performance
Australia
New ZealandInternational markets

The Company

Grossbalanceoutstanding
$M

Gross
Interest and/or
balanceSpecific other income
outstanding provision
received
$M
$M
$M

1

Total non-accrual loans# Amounts less than $500,000
1
A loan’s performance is assessed against its contractual repayment schedule

Interest and other income forgone on impaired assets
The following table shows the estimated amount of interest and other income that would have been recorded
had interest and other income on non-accrual loans been accrued to income (or, in the case of restructuredloans, had interest and other income been accrued at the original contract rate), and the amount of interest
and other income received with respect to such loans.
Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

Gross interest and other income receivable on
non-accrual loans and restructured loans
Australia
New ZealandInternational markets

96
10
15

149
13
19

74
2

128
4

Total gross interest and other income receivable on
non-accrual loans and restructured loans

121

181

76

132

Interest and other income received
Australia
New ZealandInternational markets

42
3
5

69
4
8

41
2

69
3

Total interest and other income received

50

81

43

72

Net interest and other income forgone
Australia
New ZealandInternational markets

54
7
10

80
9
11

33
-

59
1

Total net interest and other income forgone

71

100

33

60

Australia and New Zealand Banking Group Limited – 1997 Annual Report61Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

15: Provisions for Doubtful Debts
Specific provision
Balance at start of year
Adjustment for exchange rate fluctuations
Bad debts written off
Transfer from profit and loss account (refer note 3)
Acquired

509
8
(199)
135
-

702
(10)
(346)
163
-

345
#
(113)
72
-

454
(3)
(239)
114
19

Total specific provision

453

509

304

345

General provision
Balance at start of year
Adjustment for exchange rate fluctuations
Charge to profit and loss account (refer note 3)
Acquired

709
8
201
-

678
(6)
37
-

539
4
180
-

504
(1)
22
14

Total general provision

918

709

723

539

1,371

1,218

1,027

884

%
0.4
0.9

%
0.5
0.8

%
0.4
1.1

%
0.5
0.8

0.4
0.9

0.5
0.8

0.4
0.8

0.5
0.7

Bad debts written off as a % of total advances2

0.2

0.4

0.2

0.4

Specific provision charge as a % of total advances2

0.1

0.1

0.1

0.1

Total provisions for doubtful debts
RatiosProvisions1 as a % of total advances2
Specific
GeneralProvisions as a % of risk weighted assets
Specific
General# Amounts less than $500,000
1
Excludes provisions for unproductive facilities2
See definition on page 11662

Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

16: Customers’ Liabilities for Acceptances
Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Manufacturing
Personal 1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other

Overseas
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Manufacturing
Personal 1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other

Total customers’ liabilities for acceptances

757
279
1,937
791
3
2,403
204
104
4,093
1,730
984

556
228
1,629
1,054
8
2,155
343
111
4,079
1,904
890

757
279
1,937
791
3
2,403
204
104
4,093
1,730
984

556
228
1,629
1,054
8
2,155
343
111
4,079
1,904
890

13,285

12,957

13,285

12,957

11
45
14
202
301
7
55
108
12

24
94
1
218
311
28
45
6
168
161

12
187
19
38
39
5

5
51
163
42
13
33
43

755

1,056

300

350

14,04014,013

13,585

13,3071

Personal includes non-business acceptances to individuals through overdrafts, personal loans, credit cards and fully drawn advances

2

Real estate mortgage includes residential and commercial property exposure. Acceptances within this category are for the purchase of such properties andmust be secured by property

17: Regulatory Deposits
Reserve Bank of Australia
Overseas central banks

572
634

551
612

572
66

551
61

Total regulatory deposits

1,206

1,163

638

612

Australia and New Zealand Banking Group Limited – 1997 Annual Report63Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

18: Shares in Controlled Entities and Associates
Refer notes 34 and 35 for details of controlled entities and associates.
Controlled entities
At directors’ valuation 1996
At directors’ valuation 1997

5,116

4,768
-

Total shares in controlled entities

5,116

4,768

Associates
Total shares in associates1

7

10

1

1

Total shares in controlled entities and associates

7

10

5,117

4,769

Date
acquiredInterest
acquired%Consideration$M

Net tangible
assets on
acquisition$M

Goodwill$M

3 Dec 1996
23 Jun 1997
12 Feb 1997

50
100
100

5
4

1
#
4

4
#
-

1 Dec 1996
31 Aug 1997

100
20

#
2

#
#

#
2

11

5

6

#

#

-

Profiton disposal$M

Net tangible
assets on
disposal
$M

-

-

-

-

Acquisitions of controlled entities

Year ended 30 September 1997
Fleetlink Leasing Pty Ltd2Greyloch Investments Limited
La Serigne Limited
Repair Authorisation Centre(RAC) Pty Limited
Truck Leasing Limited3

Year ended 30 September 1996
Autofleet Pty Ltd4

1 Jul 1996

50

Disposals of controlled entities
The entire interest in these entities was disposed of during the year

Year ended 30 September 1997
Valiant Heart Limited
Year ended 30 September 1996
Esanda Limited
Pukeko Holdings Limited
Pukeko Investments Limited
Pukeko Securities Limited5# Amounts less than $500,000
1
The Group has adopted equity accounting for the year ended 30 September 1997 (refer note 1(ii))
2
During 1997, the remaining 50% interest in Fleetlink Leasing Pty Ltd was acquired by Esanda Finance Corporation Limited,bringing the total interest to 100%3
During 1997, the remaining 20% interest in Truck Leasing Limited was acquired by UDC Finance Limited, bringing the totalinterest to 100%4During 1996, the remaining 50% interest in Autofleet Pty Ltd was acquired by Esanda Finance Corporation Limited, bringing thetotal interest to 100%
5Formerly ANZ Securities (New Zealand) Limited

64

Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

19: Other Assets
Property held for resale
Cost of acquisition
Development expenses capitalised
Interest, rates and taxes capitalised

67
65
3

70
68
3

1
-

5
14
-

Provision for diminution in value

135
(11)

141
(16)

1
-

19
(12)

124

125

1

7

Accrued interest/prepaid discounts
Accrued commission
Prepaid expenses
Future income tax benefits (refer below)
Treasury instruments revaluations
Security settlements
National Housing Bank deposit (refer note 38)
Life insurance reserves (refer note 1[xv])
Other

1,004
57
89
516
5,232
304
436
728

836
39
48
491
3,070
525
179
354
673

736
35
15
360
4,659
300
331

575
32
23
344
2,692
386
137

Total other assets

8,490

6,340

6,437

4,196

136
11
90
39

148
3
26
80
54

99
1
68
34

107
3
68
43

16
1
21
3
97
102

12
8
22
11
19
4
104

16
1
1
6
58
76

12
4
4
11
24
4
64

516

491

360

344

Future income tax benefits comprises
Provision for doubtful debts
Interest
Tax losses
Provision for employee entitlements
Provision for non-lending losses, frauds and forgeries
Provision for leased premises surplus tocurrent requirements
Provision for diminution in development ventures
Development venture income
Treasury instruments
Leveraged leasing
Provision for restructuring costs
Other

Certain potential future income tax benefits within the Group have not been recognised as assets because
recovery cannot be regarded as virtually certain. These potential benefits arise from tax losses and timing
differences (benefits could amount to $19 million, 1996: $5 million) and from realised capital losses (benefits
could amount to $141 million, 1996: $133 million).
These benefits will only be obtained if(i) the relevant entities derive future assessable income of a nature and amount sufficient to enable thebenefit of the taxation deductions to be realised;(ii) the relevant entities continue to comply with the conditions for deductibility imposed by law; and(iii) there are no changes in taxation legislation adversely affecting the benefit of the taxation deductions.

Australia and New Zealand Banking Group Limited – 1997 Annual Report65Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

20: Premises and Equipment
Freehold and leasehold land and buildings
At directors’ valuation 1996
At costProvision for depreciation

Leasehold improvements
At costProvision for amortisation

Furniture and equipment
At costProvision for depreciation

Computer equipment
At costProvision for depreciation

Motor vehicle operating lease assets
At costProvision for depreciation

Capital works in progress
At costTotal premises and equipment

942
26
(28)

944
26
(20)

91
1
(2)

83
1
(1)

940

950

90

83

146
(83)

121
(71)

82
(47)

61
(35)

63

50

35

26

845
(467)

811
(429)

394
(219)

374
(210)

378

382

175

164

734
(491)

668
(423)

459
(308)

416
(260)

243

245

151

156

555
(141)

430
(97)

-

-

414

333

-

-

21

60

8

51

2,059

2,020

459

480

Valuations of premises are assessed annually by officers of the Group. All premises over a specific value arealso subject to external valuation at least once every three years by independent valuers. Valuations are basedon the estimated open market value and assume that the premises concerned continue to be used in their
existing manner by the Group.
An officers’ valuation undertaken during the financial year indicated that the estimated market value ofpremises exceeded the book value by $81 million. The excess has not been booked in the financial
statements.

21: Due to Other Financial Institutions
Australia
Overseas

910
9,964

717
11,965

910
8,420

717
10,646

Total due to other financial institutions

10,874

12,682

9,330

11,363Maturity analysis based on remaining
term to maturity at 30 September
At callLess than 3 months
Between 3 months and 12 months
Between 1 year and 5 years

1,041
8,031
1,786
16

8931
7,9171
3,8721
-

878
6,714
1,722
16

7451
6,99813,6201-

Total due to other financial institutions

10,874

12,682

9,330

1

66

{

{

11,363Maturity analysis at 30 September 1996 was based on original term to maturity and comprised at call, less than 90 days and greater than 90 days

Notes to the Financial Statements

Consolidated
1997
1996

The Company
1997
1996

$M

$M

$M

$M

927
17,256
21,175
2,865
3,023
5,350
196

1,135
17,366
17,612
2,751
2,341
5,286
394
20

927
17,21921,175
2,865
1,942
196

1,135
17,313
17,612
2,751
1,394
394
20

50,792

46,90544,324

40,6195,934
18,741
6,994
2,909
1,808
1,158
722
94

4,218
16,880
5,837
2,459
946
1,199
1,171
94

4,025
6,461
869
363
716
90

2,203
5,583
547
257
1,142
92

38,36032,804

12,524

9,824

Total deposits and other borrowings

89,15279,70956,84850,443Maturity analysis based on remaining term
to maturity at 30 September 1
At callLess than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years

33,262
38,911
12,049
4,335
595

n/a
n/a
n/a
n/a
n/a

25,02525,122
5,743
958
-

n/a
n/a
n/a
n/a
n/a

Total deposits and other borrowings

89,152n/a

56,848n/a

22: Deposits and Other Borrowings
Deposits and other borrowings are classified between Australia
and Overseas based on the location of the deposit taking point
Australia
Certificates of deposit
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Borrowing corporations’ debt
Securities sold under agreement to repurchase
Other unsecured borrowings

Overseas
Certificates of deposit
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Borrowing corporations’ debt
Securities sold under agreement to repurchase
Other secured borrowings

1

Disclosure of comparative information not required in first year of adoption of Australian Accounting Standard AASB 1032
“Specific Disclosures by Financial Institutions”

Australia and New Zealand Banking Group Limited – 1997 Annual Report67Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

23: Income Tax Liability
Australia
Provision for income tax
Provision for deferred income tax (refer below)

93
415

116
384

3
176

95
154

508

500

179

249

116
154

14
61

107
28

25
27

270

75

135

52

Total income tax liability

778

575

314

301

Provision for deferred income tax comprises
Lease finance
Depreciation
Investment income
Treasury instruments
Other

201
38
6
23
301

204
33
8
200

29
9
2
23
141

33
8
1
139

569

445

204

181

228
700
1,828
92
700

306
748
1,648
93
170
436

224
501
1,828
80
207

228
497
1,648
88
170
183

3,548

3,401

2,840

2,814

456
752
4,285
182
308
276

164
647
2,249
134
594
282

90
452
3,640
80
255
175

13
312
1,890
49
376
97

6,259

4,070

4,692

2,737

9,807

7,471

7,532

5,551

262
392
130
44
275
115

272
355
171
32
124

197
392
96
31
160
135

211
355
120
21
78

1,218

954

1,011

785

Overseas
Provision for income tax
Provision for deferred income tax (refer below)

24: Creditors and Other Liabilities
Australia
Creditors
Accrued interest and unearned discounts
Treasury instruments revaluations
Accrued charges
Security settlements
Other liabilities

Overseas
Creditors
Accrued interest and unearned discounts
Treasury instruments revaluations
Accrued charges
Security settlements
Other liabilities

Total creditors and other liabilities

25: Provisions
Employee entitlements
Dividends (refer note 7)
Non-lending losses, frauds and forgeries
Leased premises surplus to current requirements
Restructuring costs
Other
Total provisions

68

Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

26: Bonds and Notes
USD medium term notes
GBP medium term notes
AUD medium term notes
JPY medium term notes
GBP 78m floating rate notes due 1997
USD 250m floating rate notes due 1998
USD 300m floating rate note due 1998

1,016
22
176
184
175
417

834
89
235
257
154
316
379

1,016
22
176
184
175
417

834
89
235
257
154
316
379

Total bonds and notes

1,990

2,264

1,990

2,264

Bonds and notes by currency
USD United States dollars
GBP Great British pounds
JPY Japanese yen
AUD Australian dollars

1,433
197
184
176

1,529
243
257
235

1,433
197
184
176

1,529
243
257
235

1,990

2,264

1,990

2,264

449
974
539
28

{ 831

{ 831

1,371 1
62 1

449
974
539
28

1,990

2,264

1,990

2,264

Bonds and notes by maturity
Maturity analysis based on remaining
term to maturity at 30 September
Less than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years

1

1

1

1,3711
62 1

Maturity analysis at 30 September 1996 was based on remaining term to maturity of less than 1 year, between 1 and 5 years andafter 5 years

Australia and New Zealand Banking Group Limited – 1997 Annual Report69Notes to the Financial Statements

Interest
Rate%

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

27: Loan Capital
Perpetual subordinated notes
USD 300m
floating rate notes
USD 258.7m fixed rate notes
USD 120m
floating rate notes
USD 30m
floating rate notes

417
359
-

379
327
152
38

417
359
-

379
327
-

776

896

776

706

38
48
115
42
56
65
55
58
134
278
348
174
695
17
6
347
7
20
110

40
49
114
38
88
253
57
65
55
177
88
58
119
253
316
157
632
16
5
6
18
100

38
48
115
42
65
55
58
134
278
348
695
17
6
347
7
20
110

40
49
114
38
88
253
65
55
177
88
58
119
253
316
632
16
5
6
18
100

2,613

2,704

2,383

2,490

Total loan capital

3,389

3,600

3,159

3,196

Loan capital by currency
USD United States dollars
AUD Australian dollars
GBP Great British pounds
JPY
Japanese yen
LUX Luxembourg francs

2,807
226
190
128
38

3,032
227
176
125
40

2,633
226
134
128
38

2,685
227
119
125
40

3,389

3,600

3,159

3,196

38
573
2,002
776

1,025
1,679
896

38
517
1,828
776

968
1,522
706

3,389

3,600

3,159

3,196

Subordinated notes
LUX 1,000m fixed notes due 1998
AUD 48.8m
fixed notes due 1999
JPY
10,000m fixed notes due 19992
USD 30m
floating rate notes due 1999
USD 70m
floating rate notes due 1999
USD 200m
floating rate notes due 1999
GBP 22.7m
fixed notes due 2000
AUD 65m
floating rate notes due 2000
AUD 55.3m
floating rate notes due 20004
USD 140m
floating rate notes due 2000
USD 70m
floating rate notes due 2000
AUD 58.2m
floating rate notes due 20015
GBP 60m
fixed notes due 2001
USD 200m
floating rate notes due 2002
USD 250m
fixed rate notes due 2004
USD 125m
floating rate notes due 2005
USD 500m
fixed notes due 2006
USD 12.5m
floating rate notes due 2007
JPY
482m
floating rate notes due 2007
USD 250m
floating rate notes due 20076
JPY
568.8m floating rate notes due 2008
USD 14.3m
floating rate notes due 2008
USD 79m
floating rate notes due 20087

LIBOR1 + 0.15
9.125
LIBOR + 0.80
LIBOR + 0.80

9.375
7.720
7.430, 5.800
LIBOR + 0.46
LIBOR + 0.46
LIBOR + 0.50
7.050
BB3 + 0.40
BB + 0.40
LIBOR + 0.50
LIBOR + 0.625
BB + 0.40
12.625
LIBOR + 0.70
6.25
LIBOR + 0.45
7.55
LIBOR + 0.50
LIBOR + 0.50
LIBOR + 0.25
LIBOR + 0.55
LIBOR + 0.50
LIBOR + 1.03

Loan capital by maturity
Maturity analysis based on remaining
term to maturity at 30 September
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years
Perpetual

1

LIBOR is an average of rates offered on loans to leading banks inthe London inter-bank market
2
Two equal tranches of notes were issued with different interest rates3
BB is the stated average of Bank Bill rates

4

Prior to March 1995 the interest rate was 12.5% p.a.
Prior to July 1996 the interest rate was 12.5% p.a.
6
After February 2002 the interest rate is LIBOR+ 0.75%
7After January 2002 the interest rate is LIBOR+ 0.53%

5Loan capital is subordinated in right of payment to the claims of depositors and all other creditors of the Company and its controlled
entities which have issued the notes, and constitutes tier 2 capital as defined by the Reserve Bank of Australia for capital adequacy
purposes70

Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

28: Outside Equity Interests
Issued and paid-up capital
Reserves
Retained profits

22
16
12

22
14
10

Total outside equity interests

50

46

29: Average Balance Sheet and Related Interest
Averages used in the following table are predominantly daily averages. Interest income figures are presented
on a tax-equivalent basis. Non-accrual loans are included under the interest earning asset category“Loans, advances and bills discounted”.
1996

1997
Averagebalance$M

Interest earning assets
Due from other financial institutions
Australia
480
New Zealand359
International markets
10,380Regulatory deposits with
Reserve Bank of Australia
556
Investments in public securities
Australia
4,770
New Zealand
1,603International markets
5,094
Loans, advances andbills discounted
Australia
52,827
New Zealand
14,089International markets
14,578Other assets
Australia
1,655
New Zealand
831
International markets
5,920
113,142
Non-interest earning assets
Acceptances
Australia
New ZealandInternational markets
Premises and equipment
Other assets
Provisions for doubtful debts
Australia
New ZealandInternational markets

Average
Interest
rate$M%

Averagebalance$M

1995

Average
Interest
rate$M%

Averagebalance$M

Interest$M

Average
rate
%

32
21
700

6.7
5.8
6.7

630
346
10,209

41
27
699

6.5
7.8
6.8

390
339
8,940

25
28
607

6.4
8.3
6.8

5

0.9

535

13

2.4

491

30

6.1

301
107
427

6.3
6.7
8.4

4,897
1,090
2,973

380
88
289

7.8
8.1
9.7

4,464
1,116
3,195

332
81
290

7.4
7.3
9.1

4,657
1,384
1,258

8.8
9.8
8.6

48,39912,619
11,770

4,939
1,315
1,084

10.2
10.4
9.2

44,783
11,134
10,313

4,471
1,143
922

10.0
10.3
8.9

105
80
361

6.3
9.6
6.1

618
760
4,825

53
77
293

8.6
10.1
6.1

861
800
4,086

61
70
278

7.1
8.8
6.8

9,438

8.3

99,671

9,298

9.3

90,912

8,338

9.2

13,248
244
556
1,975
9,740

12,581
597
462
2,027
6,842

11,521
672
586
1,982
7,714

(917)
(118)
(217)

(1,002)
(118)
(238)

(1,163)(96)(300)

24,511

21,151

20,916

Total assets

137,653

120,822

111,828

Total assets
Australia
New ZealandInternational markets

77,604
18,39541,65470,917
16,212
33,69366,095
14,92430,809137,653

120,822

111,828

43.6%

41.3%

40.9%

% of total assets attributable
to overseas activities

Australia and New Zealand Banking Group Limited – 1997 Annual Report71Notes to the Financial Statements

29: Average Balance Sheet and Related Interest (continued)
1996

1997

Interest bearing liabilities
Time deposits
Australia
New ZealandInternational markets
Savings deposits
Australia
New ZealandInternational markets
Other demand deposits
Australia
New ZealandInternational markets
Due to other financial institutions
Australia
New ZealandInternational markets
Commercial paper
Australia
International markets
Borrowing corporations’ debt
Australia
New ZealandInternational markets
Loan capital, bonds and notes
Australia
New ZealandInternational markets
Other liabilities1
Australia
New ZealandInternational markets

Average
Interest
rate$M%

Averagebalance$M

Average
Interest
rate$M%

Averagebalance$M

Interest$M

Averagerate%

18,4958,304
15,904

1,097
658
1,015

5.9
7.9
6.4

18,542
7,313
11,722

1,340
622
785

7.2
8.5
6.7

17,605
6,175
9,885

1,251
491
644

7.1
8.0
6.5

8,216
2,462
1,266

222
96
69

2.7
3.9
5.5

7,530
2,183
1,142

264
83
57

3.5
3.8
5.0

7,408
1,959
1,158

239
52
55

3.2
2.7
4.7

11,237
1,789
1,009

518
122
41

4.6
6.8
4.1

8,683
1,534
810

520
121
35

6.0
7.9
4.3

7,207
1,395
628

408
103
30

5.7
7.4
4.8

300
843
11,549

15
73
716

5.0
8.7
6.2

397
732
11,501

27
72
763

6.8
9.8
6.6

213
863
10,902

15
69
722

7.0
8.0
6.6

3,081
1,731

181
94

5.9
5.4

2,469
1,087

186
61

7.5
5.6

1,601
1,173

110
68

6.9
5.8

5,326
1,237
-

409
103
-

7.7
8.3
-

5,081
1,167
-

420
99
-

8.3
8.5
-

4,915
1,137
2

402
87
-

8.2
7.7
-

4,998
530
653

313
35
41

6.3
6.6
6.3

4,246
186
621

322
19
37

7.6
10.2
6.0

4,060
120
605

314
17
38

7.7
14.2
6.3

425
199
2,010

49
33
118

n/a
n/a
n/a

676
698

76
7
53

n/a
n/a
n/a

727
406

78
9
27

n/a
n/a
n/a

101,564

6,018

5.9

88,3205,969

6.8

80,1445,229

6.5

Non-interest bearing liabilities
Deposits
Australia
2,817
New Zealand
1,288International markets
1,529
Acceptances
Australia
13,248
New Zealand
244International markets
556
Other liabilities
9,444

2,736
1,139
1,249

3,340
1,075
1,139

12,581
597
462
7,586

11,521
672
586
7,420

29,126

26,35025,753

Total liabilities

130,690

114,670

105,897

Total liabilities
Australia
New ZealandInternational markets

72,063
17,54841,07966,67915,352
32,63962,193
14,022
29,682

130,690

114,670

105,897

6,963

6,152

5,931

Total liabilities andshareholders’ equity

137,653

120,822

111,828% of total liabilities attributable
to overseas activities

44.9%

41.9%

41.3%

Shareholders’ equity

1

72

1995

Averagebalance$M

Includes foreign exchange swap costs

Notes to the Financial Statements

30: Interest Sensitivity Gap
The following table represents the interest rate sensitivity as at 30 September 1997 of the Group’s assets,
liabilities and off-balance sheet instruments repricing (that is, when interest rates applicable to each asset or
liability can be changed) in the periods shown.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of thecorresponding liability funding. These mismatches are managed within policy guidelines for gap positions.
Major changes in gap positions can be made to adjust the profile as market outlooks change.

Less than
3 months$M

Between
3 months and6 months$M

Between
6 months and
12 months$M

Between
1 year and5 years$M

After
5 years$M

Notbearing
interest
$M

Total
$M

Liquid assets and due fromother financial institutions
14,085
Trading and investment securities 6,533
Net loans and advances
53,015
Other assets
2,674

1,402
1,073
7,602
148

1,071
587
8,285
2

361
1,172
14,726
16

14
539
1,019
2

953
501
(499)
22,96017,886
10,405
84,14825,802

Total assets

76,307

10,225

9,945

16,275

1,574

23,915 138,241

34,611
26,207

3,409
523

3,368
212

1,454
1,223

15
5

5,774

42,85733,944

13,151
1,953
2,991

4,023
55
688

2,962
9
-

2,196
16
298

1,402

893
23,810-23,22525,843
5,379

78,913

8,698

6,551

5,187

1,422

30,477 131,248

-

-

-

-

-

6,993

6,993

3,382

(1,447)275(1,035) (1,175)

-

-

776
776

80
856

3,669
4,525

10,053 (1,023) (13,555)
14,578 13,555--

Certificates of deposit
and term deposits
Other deposits
Other borrowings and due toother financial institutions
Other liabilities
Bond, notes and loan capital
Total liabilities
Shareholders’ equity andoutside equity interests
Off-balance sheet items affecting
interest rate sensitivity
Interest sensitivity gap- net- cumulative

Australia and New Zealand Banking Group Limited – 1997 Annual Report73Notes to the Financial Statements

31: Net Fair Value of Financial Instruments
Australian Accounting Standard AASB 1033: Presentation and Disclosure of Financial Instruments(AASB 1033) requires disclosure of the net fair value of on and off-balance sheet financial instruments. The
disclosures exclude all non-financial instruments, such as income taxes and regulatory deposits, and specified
financial instruments, such as interests in controlled entities. Accordingly, the aggregate net fair value
amounts do not represent the underlying value of the Group.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s-length transaction. Net fair value is the fair value adjusted fortransaction costs.
Quoted market prices, where available, are adjusted for material transaction costs and used as the measureof net fair value. In cases where quoted market values are not available, net fair values are based on present
value estimates or other valuation techniques. For the majority of short term financial instruments, defined as
those which reprice or mature in 90 days or less, with no significant change in credit risk, the net fair value
was assumed to equate to the carrying amount in the Group’s balance sheet.
The fair values are based on relevant information available as at 30 September 1997. While judgement isused in obtaining the net fair value of financial instruments, there are inherent weaknesses in any estimation
technique. Many of the estimates involve uncertainties and matters of significant judgement, and changes inunderlying assumptions could significantly affect these estimates. Furthermore, market prices or rates of
discount are not available for many of the financial instruments valued and surrogates have been used which
may not reflect the price that would apply in an actual sale.
The net fair value amounts have not been updated for the purposes of these financial statements since
30 September 1997, and therefore the net fair value of the financial instruments subsequent to 30 September 1997
may be different from the amounts reported.
Financial Assets
Liquid assets
Due from other financial institutions
Trading securities
Investment securities and shares in associates
Loans and advances
Customers’ liabilities for acceptances
Other financial assets

Net fair value
1997
1996
$M
$M

6,298
11,5887,266
3,156
85,537
14,0407,665

6,906
11,356
7,334
2,577
76,95814,006
5,731

Carrying value
1997
1996
$M
$M

6,298
11,5887,266
3,146
84,14814,0407,761

6,901
11,3537,334
2,580
75,901
14,013
5,609

Liquid assets and Due from other financial institutions
The carrying values of these financial instruments are considered to approximate their net fair values as they
are short term in nature or are receivable on demand.
Trading securities
Trading securities are carried at market value. Market value is generally based on quoted market prices,broker or dealer price quotations, or prices for securities with similar credit risk, maturity and yieldcharacteristics.
Investment securities and shares in associates
Net fair value is based on quoted market prices or broker or dealer price quotations. If this information is notavailable, net fair value has been estimated using quoted market prices for securities with similar credit,
maturity and yield characteristics, or by reference to the net tangible asset backing of the investee.
Loans, advances and customers’ liabilities for acceptances
The carrying value of loans, advances and acceptances is net of specific and general provisions for doubtful
debts and income yet to mature. The estimated net fair value of loans, advances and acceptances is based on
the discounted amount of estimated future cash flows and accordingly has not been adjusted for either specificor general provisions for doubtful debts.
Estimated contractual cash flows for performing loans are discounted at estimated current market rates todetermine fair value. For loans with doubt as to collection, expected cash flows (inclusive of the value of
security) are discounted using a rate which includes a premium for the uncertainty of the flows.
The difference between estimated net fair values of loans, advances and acceptances and carrying value
reflects changes in interest rates and the credit worthiness of borrowers since loan origination. The excess ofnet fair value of loans and advances over the carrying value is primarily a result of offsetting the generalprovision for doubtful debts against the carrying value and the effect of declining interest rates.
Finance lease receivables, with a carrying value of $2,694 million (1996: $2,880 million) and a net fairvalue of $2,722 million (1996: $2,864 million), are included in loans and advances.

74

Notes to the Financial Statements

31: Net Fair Value of Financial Instruments (continued)
Other financial assets
Included in this category are accrued interest, fees receivable and derivative financial instruments. The
carrying values of accrued interest and fees receivable are considered to approximate their net fair values as
they are short term in nature or are receivable on demand.
The fair values of derivative financial instruments such as interest rate swaps and currency swaps were
calculated using discounted cash flow models based on current market yields for similar types of instruments
and the maturity of each instrument. Foreign exchange contracts and interest rate option contracts werevalued using market prices and option valuation models as appropriate.
Properties held for resale, future income tax benefits and prepaid expenses are not considered financial
assets.
Financial Liabilities
Due to other financial institutions
Deposits and other borrowings
Liability for acceptances
Bonds and notes
Loan capital
Other financial liabilities

Net fair value
1997
1996
$M
$M

10,872
89,277
14,040
1,984
3,413
9,457

12,69779,72414,006
2,277
3,586
7,160

Carrying value
1997
1996
$M
$M

10,87489,152
14,040
1,990
3,389
9,471

12,68279,70914,013
2,264
3,600
7,115

Due to other financial institutions
The carrying value of amounts due from other financial institutions is considered to approximate the net fairvalue.
Deposits and other borrowings
The net fair value of a deposit liability without a specified maturity or at call is deemed by AASB 1033 to be
the amount payable on demand at the reporting date. The fair value is not adjusted for any value expected to
be derived from retaining the deposit for a future period of time.
For interest bearing fixed maturity deposits and other borrowings and acceptances without quoted market
prices, market borrowing rates of interest for debt with a similar maturity are used to discount contractual
cash flows.
The net fair value of interest bearing deposits and other liabilities reflects declining interest rates during
the year ended 30 September 1997.
Bonds and notes and loan capital
The aggregate net fair value of bonds and notes and loan capital at 30 September 1997 was calculated basedon quoted market prices. For those debt issues where quoted market prices were not available, a discounted
cash flow model using a yield curve appropriate for the remaining term to maturity of the instrument wasused.
Other financial liabilities
This category includes accrued interest and fees payable for which the carrying amount is considered toapproximate the fair value. Also included are derivative financial instruments, where fair value is determinedon the basis described under “other financial assets”.
Income tax liabilities, other provisions and accrued charges are not considered financial instruments.
Commitments and contingencies
As outlined in note 38, the Group has various credit-related commitments. Based upon the level of fees
currently charged for granting such commitments, taking into account maturity and interest rates, together
with any changes in the creditworthiness of counterparties since origination of the commitments, theirestimated replacement or net fair value is not material.
Transaction costs
The fair value of financial instruments required to be disclosed under US accounting standard, Statement of
Financial Accounting Standards No. 107 “Disclosures about Fair Value of Financial Instruments” (SFAS 107)
is calculated without regard to estimated transaction costs. Such transaction costs are not material, andaccordingly the fair values shown above would not differ materially from fair values calculated in accordancewith SFAS 107.

Australia and New Zealand Banking Group Limited – 1997 Annual Report75Notes to the Financial Statements

32: Segment Analysis
The following analysis shows income, operating profit, total assets and risk weighted assets based on
geographical locations and income, operating profit and total assets by industry segments.

1997

Geographical

Consolidated
1996
$M
%

1995
$M

%

58
16
9
7
4
3
3

6,145
1,657
861
680
339
317
286

60
16
8
7
3
3
3

11,382100

10,285

100

51
13
9
8
9
4
6

886
203
155
147
81
64
79

55
13
9
9
5
4
5

903
204
116
124
57
60
84

58
13
8
8
4
4
5

1,758

100

1,615

100

1,548

100

(240)
(61)
(13)
(1)
136
(1)
(2)

-

-

-

-

-

(182)

-

-

-

-

-

1,576

-

1,615

-

1,548

-

627
165
112
95
82
36
54

54
14
9
8
7
3
5

657
138
106
99
36
38
42

59
12
10
9
3
3
4

612
146
83
79
27
39
47

59
14
8
8
3
4
4

1,171

100

1,116

100

1,033

100

(155)
(41)
(9)
59
(1)

-

-

-

19
-

-

(147)

-

-

-

19

-

1,024

-

1,116

-

1,052

-

$M

%

6,534
2,020
1,191
865
657
364
360

55
17
10
7
5
3
3

6,623
1,886
1,000
826
435
325
287

11,991

100

892
233
160
141
166
63
103

1

IncomeAustralia
New Zealand
UK and Europe
Asia PacificSouth Asia
AmericasMiddle East
Operating profit before income tax
Australia
New Zealand
UK and Europe
Asia PacificSouth Asia
AmericasMiddle East
Abnormal items
Australia
New Zealand
UK and Europe
Asia PacificSouth Asia
America
Middle East

Operating profit after income tax
Australia
New Zealand
UK and Europe
Asia PacificSouth Asia
AmericasMiddle East
Abnormal items
Australia
New Zealand
UK and Europe
South Asia
Middle East76

Notes to the Financial Statements

Consolidated
1996

1997

1995

$M

%

$M

%

$M

%

80,321
18,831
16,886
9,844
3,959
4,611
3,789

58
14
12
7
3
3
3

75,11017,46315,008
9,163
3,333
4,723
2,804

59
13
12
7
3
4
2

67,594
15,31012,001
7,874
3,306
3,666
2,836

60
13
11
7
3
3
3

138,241100

127,604

100

112,587

100

66,687
14,332
8,471
6,489
2,897
4,505
2,766

63
14
8
6
3
4
2

59,681
13,492
6,220
5,358
2,244
4,527
1,995

64
14
7
6
2
5
2

53,531
11,748
5,238
4,766
2,213
3,535
2,045

65
14
6
6
3
4
2

106,147

100

93,517

100

83,076

100

9,797
708
1,293
193

82
6
11
1

9,496
480
1,253
153

84
4
11
1

8,955
n/a
1,154
176

87
n/a
11
2

11,991

100

11,382100

10,285

100

1,272
208
203
75

72
12
12
4

1,257
100
201
57

78
6
12
4

1,217
n/a
234
97

79
n/a
15
6

1,758
(182)

100
-

1,615
-

100
-

1,548
-

100
-

1,576

-

1,615

-

1,548

-

832
144
130
65

71
12
11
6

860
72
133
51

77
6
12
5

793
n/a
158
82

77
n/a
15
8

1,171
(147)

100
-

1,116
-

100
-

1,033
19

100
-

1,024

-

1,116

-

1,052

-

120,319
6,353
11,258
311

87
5
8
-

112,169
4,549
10,639
247

88
4
8
-

102,120
n/a
9,997
470

91
n/a
9
-

138,241100

127,604

100

112,587

100

32: Segment Analysis (continued)
Total assets
Australia
New Zealand
UK and Europe
Asia PacificSouth Asia
AmericasMiddle East

Risk weighted assets
Australia
New Zealand
UK and Europe
Asia PacificSouth Asia
AmericasMiddle East

Industry
Income1
General banking
Investment banking capital markets
FinanceInsurance and funds management

Operating profit before income tax
General banking
Investment banking capital markets
FinanceInsurance and funds management
Abnormal items

Operating profit after income tax
General banking
Investment banking capital markets
FinanceInsurance and funds management
Abnormal items

Total assets
General banking
Investment banking capital markets
FinanceInsurance and funds management

1

Includes abnormal items
n/a Not applicable
Australia and New Zealand Banking Group Limited – 1997 Annual Report77Notes to the Financial Statements

1997
$M

Consolidated
1996
$M

1995
$M

The Company
1997
1996
$M
$M

33: Notes to the Statements of Cash Flowsa) Reconciliation of operating profit after income
tax to net cash provided by operating activities
Inflows(Outflows)

Operating profit after income tax

Inflows(Outflows)

1,024

1,116

1,052

647

1,023

287
288
560
(362)
2
29
(10)
(2)

154
255
189
(194)
14
(7)
2
-

174
236
201
(190)
1
2
-

221
110
386
(207)
1
10
(1)

110
108
81
(49)
12
(8)
-

304
(127)
(18)
162

(1,595)230
8
137(1,222)
(282)
6
333

1,212
(126)
(3)
28

(1,339)
101
8
145

(85)

(58)

(83)

3

(14)

23
47

(167)
62

364
(2)

114
23

(64)
44

(89)

(50)

1
(61)

1

(7)

Total adjustments

1,009(1,020)

(522)

1,772

(872)

Net cash provided by operating activities

2,033

96

530

2,419

151

3,857
8,599

4,285
6,961

2,824
4,255

1,829
5,164

2,456
4,348

12,456

11,246

7,079

6,993

6,804

Adjustments to reconcile operating profit after
income tax to net cash provided by operating activities
Provisions for doubtful debts
Depreciation and amortisation
Provisions for employee entitlements and other
Payments from provisions
Loss on sale of premises and equipment
Provision for surplus lease space(Profit) loss on sale of controlled entities and associates
Profit on sale of investment securities
Net decrease (increase)
Trading securities
Interest receivable
Accrued income
Net debit tax balances
Amortisation of discounts/premiums included
in interest income
Net increase (decrease)
Interest payable
Accrued expenses
Amortisation of discounts/premiums included
in interest expense
Otherb) Reconciliation of cash and cash equivalents
Cash and cash equivalents include liquid assets andamounts due from other financial institutions withoriginal term to maturity of less than 90 days.
Cash and cash equivalents at the end of the financial
year as shown in the statements of cash flows arereconciled to the related items in the balance sheets
as follows
Liquid assets - less than 90 days
Due from other financial institutions - less than 90 days

78

Notes to the Financial Statements

1997
$M

Consolidated
1996
$M

1995
$M

The Company
1997
1996
$M
$M

33: Notes to the Statements of Cash Flows (continued)c) Acquisitions and disposals
Details of aggregate assets and liabilities of controlled
entities and branches acquired, and disposed of, by
the Group are as follows
Fair value of net assets acquired
Liquid assets
Due from other financial institutions
Net loans and advances
Other assets
Premises and equipment
Due to other financial institutions
Creditors and other liabilities
Deposits and other borrowings
Due to controlled entities
Income tax liability
Provisions

2
2
4
(3)
-

13
2
1
(1)
(5)
(10)

81
-

-

10
1,672
42
83
4
(39)
(16)
(1,596)(7)(9)-

Fair value of net assets acquired
Goodwill on acquisition

5
6

-

81
-

-

144
64

Consideration paid
Cash acquired

11
-

(13)

81
-

-

208
(10)

Cash consideration paid (received)

11

(13)

81

-

198

4
35
72
20
1
(2)
(13)
(104)
1

-

-

-

-

Fair value of net assets disposed
Net profit on disposal

14
10

-

-

-

-

Consideration received/receivable
Deferred settlements

24
17

14

14

-

-

Cash consideration received

41

14

14

-

-

180
3

135
6

192
11

180
3

135
6

Available

1997
UnusedAvailable

1996
Unused

$M

$M

$M

$M

100
2,719

100
2,057

100
1,955

100
1,854

1,065

452

457

449

3,884

2,609

2,512

2,403

Fair value of net assets disposed
Liquid assets
Due from other financial institutions
Net loans and advances
Other assets
Premises and equipment
Due to other financial institutions
Creditors and other liabilities
Deposits and other borrowings
Provisionsd) Non-cash financing and investing activities
Share capital issues
Dividend reinvestment plan
Bonus option plane) Financing arrangements
Financing arrangements which are available
under normal financial arrangements
Credit standby arrangements
Commercial bills acceptance discount lines
Standby lines
Other financing arrangements
Overdrafts and other financing arrangements
Total finance available

Australia and New Zealand Banking Group Limited – 1997 Annual Report79Notesto tothetheFinancial
Statements
Notes
Financial
Statements

Incorporated
inBook value
1997
1996
$M
$M

Contribution to
the consolidated
result1997 1996$M$M
Nature of Business

34: Controlled Entities
All controlled entities are 100% owned unless otherwise noted.
The material controlled entities of the Group are
Australia and New Zealand Banking Group Limited
A.F.T. Investors Services Limited
ANZ Adelaide Group Limited 3
ANZ Bank (Guernsey) Limited *ANZ Capital Hedging Limited
ANZ (Delaware) Inc.*ANZ Executors & Trustee Company Limited
ANZ Finance (Far East) Limited
ANZ Funds Pty Ltd
ANZ Grindlays International Limited *ANZ Asia Pacific Holdings Ltd *ANZ Bank (Vanuatu) Limited *La Serigne Limited *ANZ International Private Limited *ANZCOVER Insurance Pte Ltd *ANZ Holdings (New Zealand) Limited *ANZ Banking Group (New Zealand) Limited *Bage Investments Limited *Endeavour Investments (NZ) Limited *Greyloch Investments Limited *UDC Group Holdings Limited *UDC Finance Limited *Mutual Leasing Limited *Truck Leasing Limited *UDC Leasing Limited *National Mutual Permanent Building Society*
ANZ Singapore Limited *4Bank of Western Samoa *LFD Limited
GNPL Limited
RFDL Limited
Minerva Holdings Limited *ANZ Grindlays Export Finance Limited *Town & Country Land Holdings Limited
ANZ Lenders Mortgage Insurance Pty Limited
Town & Country Housing Trust
ANZ General Insurance Pty Limited
ANZ Grindlays Jersey Holdings Limited *ANZ Grindlays Bank (Jersey) Limited *ANZ Grindlays Holdings Limited
ANZ Grindlays Bank Limited
Grindlays Bahrain Bank B.S.C. 5
Grindlays Modaraba Management (Private) Limited
Nepal Grindlays Bank Limited *A.N.Z. Holdings Limited
ANZ Investment Holdings Limited
530 Collins Street Property Trust
A.N.Z. Investments Limited
ANZ Life Assurance Company Limited
ANZ Managed Investments Limited
A.N.Z. Properties (Australia) Limited
ANZ Securities (Holdings) Limited
ANZ Securities (Corporate) Limited
ANZ Securities Limited
Australia and New Zealand Banking Group(PNG) Limited *Bellinz Pty Ltd

80

80

371

Australia
6
Australia
52
Guernsey
33
Australia
7
USA
Australia
54
Australia
22
Australia
3,765
Hong Kong#
Hong Kong
78
Vanuatu#
Vanuatu
4
Singapore
715
Singapore75
New Zealand 202
New Zealand 356
New Zealand 222
New Zealand 847
New Zealand 106
New Zealand66
New Zealand
54
New Zealand
16
New Zealand
4
New Zealand
16
New Zealand
12
Singapore
12
Samoa
18
Australia
204
Australia
11
Australia
1
England82
England49
Australia
115
Australia
9Australia
43
Australia
3
Jersey164
Jersey58
Australia
1,101
Australia
204
Bahrain
16
Pakistan#
Nepal
12Australia
128
Australia
54
Australia
397
Australia
17
Australia
436
Australia
85
Australia
21
Australia
33
Australia
1
Australia
6
Papua New
Guinea33
Australia
25

80

6
63
27
52
41
22
3,327
#
71
#
715
75
203
355
221
843
66
54
16
2
16
12
11
18
204
11
1
82
43
115
9
46
3
130
51
841
204
14
#
10
128
44
397
16
354
70
21
47
1
6
27
-

557

#
#
(11)
3
3
3
(6)
8
13
9
#
#
2
21
(3) #
1
1
3
3
1
(2)
9
15
(11) (12)
59
60
12
13
47
47
1
18
22
(3)
5
(1) #
2
2
#
#
6
6
3
3
21
23
#
(6)
8
5
#
1
2
2
(1)
5
2
#
#
#
#
15
17
1
204
94
2
2
3
3
#
#
1
#
7
18
1
#
82
55
15
11
#
(1)
1
(1)
(12) #
3
6
17
#

13
-

Banking
Holding Company
Property Owner
Banking
Capital Hedging
Finance
Trustee/Nominee
Property Owner
Holding Company
Holding Company
Holding Company
Banking
Property Owner
Holding Company
Insurance
Holding Company
Banking
Investment
Holding Company
Finance
Holding Company
Finance
Lease Finance
Leasing
Lease Finance
Building Society
Merchant Banking
Banking
FinanceNon-operative
Finance
Holding Company
Export Finance
Property Development
Mortgage Insurance
Property Investment
General Insurance
Holding Company
Banking
Holding Company
Banking
Banking
Fund Management
Banking
Property owner
Investment
Investment Activities
Investment
Life Assurance
Investment Services
Property Owner
Holding Company
Corporate Advisory
Administration
Banking
Investment

Notes
Notes toto thethe Financial
Financial Statements
Statements

Incorporated
inBook value
1997
1996
$M
$M

Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Indonesia

865
75
9
119
#
#
5
445
57
132
40

Contribution to
the consolidated
result1997 1996$M$M
Nature of Business

34: Controlled Entities (continued)
Esanda Finance Corporation Limited
Finance Corporation of Australia Limited
Mercantile Credits Limited
Alliance Holdings Limited
6
Fleet Partners Pty Limited
Repair Authorisation Centre (RAC) Pty Limited
Fleetlink Leasing Pty Limited
NMRB Limited
ANZ Capel Court Limited
NMRSB Limited
PT ANZ Panin Bank *

937
75
9
119
#
1
420
57
132
41

86
(2)
(1)
2
#
21
#
8

95
3
(2)
1
2
5
#
8

Contributions of above entities to the Group result after
income tax and abnormal items
Adjustment for controlled entities sold/liquidated
Adjustments on consolidation
Contribution of non-material controlled entities
Equity accounting profit (notes 1(ii) and 35)

997 1,128####
25 (12)2-

Consolidated operating profit after income tax

1,024 1,116

*
#
1

2

3

4
5

6
7

General FinanceReal Estate Finance
General FinanceHolding Company
Fleet Management
Fleet MaintenanceLease FinanceHolding Company
Investment Banking
Holding Company
Banking

Audited by overseas KPMG firms
Amounts less than $500,000
The above controlled entities are 100% owned with the exception of Australia and New Zealand Banking Group (PNG) Limited(93%), Grindlays Bahrain Bank B.S.C. (40%), Nepal Grindlays Bank Limited (50%), PT ANZ Panin Bank (85%) and
Town & Country Housing Trust (93%)
Outside equity interests hold ordinary shares or units in the controlled entities listed above as follows:
Australia and New Zealand Banking Group (PNG) Limited - 371,507 PGK1 shares (7%)
Grindlays Bahrain Bank B.S.C. - 3,600,000 BHD1 shares (60%)
Nepal Grindlays Bank Limited - 750,000 NPR 100 shares (50%)
PT ANZ Panin Bank - 7,500 IDR1m shares (15%)
Town & Country Housing Trust - 2,435,931 $1 units (7%)
ANZ Adelaide Group Limited owns 100% of the issued ordinary shares of Penplaza Investments Pty Limited but does not control that company as
it does not have substantially all the risks and benefits incidental to ownership or control
Subsequent to 30 September 1997, Bank of Western Samoa was renamed ANZ Bank (Samoa) Limited
ANZ Grindlays Bank Limited controls Grindlays Bahrain Bank B.S.C. due to the existence of an agreement whereby ANZ Grindlays Bank
Limited provides management and other technical services giving the capacity to dominate decision making
Formerly Autofleet Pty Limited
The following controlled entities were audited by firms other than KPMG
Clive Street Nominees Private Limited
Grindlays Modaraba Management (Private) Limited
Grindlays Bahrain Bank B.S.C.
Grindlays Services of Pakistan (Private) Limited
Grindlays International (Cayman Islands) Limited

Book value
1997
1996
$M
$M

Balance
dateContribution to
the consolidated
result
1997
$M

6

4

31 Jan2

Other associates
Associates disposed of or reclassified ascontrolled entities during the current year 2

1

-

-

-

6

-

Total shares in associates

7

10

2

Incorporated
inInterest%

Malaysia

26.5

Principal
activity

Merchant Bank

81

35: Associates
Significant associates of the Group are
Sime Merchant Bankers Berhad1

12Formerly Asian International Merchant Bankers Berhad. The investment is held by ANZ Grindlays Bank Limited
The investment held by UDC Finance Limited in Amalgamated Finance Limited was disposed of during the year

81Australia and New Zealand Banking Group Limited – 1997 Annual Report81Notes to the Financial Statements

Consolidated
1997
1996
$M
$M

The Company
1997
1996
$M
$M

36: Commitments
Capital expenditure
Contracts for outstanding capital expenditure
Not later than 1 year

56

43

27

9

Total capital expenditure commitments

56

43

27

9

Lease rentals
Future rentals in respect of leases
Land and buildings
Not later than 1 year
Later than 1 year but not later than 2 years
Later than 2 years but not later than 5 years
Later than 5 years

139
130
219
444

143
131
251
475

110
106
168
398

114
107
204
472

932

1,000

782

897

5
3
3

4
3
1

1
1
-

1

11

8

2

1

Total lease rental commitments

943

1,008

784

898

Total commitments

999

1,051

811

907

Furniture and equipment
Not later than 1 year
Later than 1 year but not later than 2 years
Later than 2 years but not later than 5 years

37: Derivative Financial Instruments
Derivatives
Derivative instruments are contracts whose value is derived from one or more underlying financial
instruments or indices. They include swaps, forward rate agreements, futures, options and combinations ofthese instruments. The use of derivatives and their sale to customers as risk management products is an
integral part of the Group’s trading activities. Derivatives are also used to manage the Group’s own exposure
to fluctuations in exchange and interest rates as part of its asset and liability management activities.
Derivatives are subject to the same types of credit and market risk as other financial instruments, and theGroup manages these risks in a consistent manner.
The principal exchange rate contracts used by the Group are forward foreign exchange contracts, currency
swaps and currency options. Forward foreign exchange contracts are agreements to buy or sell a specified
quantity of foreign currency on a specified future date at an agreed rate. A currency swap generally involves
the exchange, or notional exchange, of equivalent amounts of two currencies and a commitment to exchangeinterest periodically until the principal amounts are re-exchanged on a future date. Currency options provide
the buyer with the right, but not the obligation, either to purchase or sell a fixed amount of a currency at a
specified rate on or before a future date. As compensation for assuming the option risk, the option writer
generally receives a premium at the start of the option period.
The principal interest rate contracts used by the Group are forward rate agreements, interest rate futures,interest rate swaps and options. Forward rate agreements are contracts for the payment of the difference
between a specified interest rate and a reference rate on a notional deposit at a future settlement date. There is
no exchange of principal. An interest rate future is an exchange traded contract for the delivery of astandardised amount of a fixed income security or time deposit at a future date. Interest rate swap transactions
generally involve the exchange of fixed and floating interest payment obligations without the exchange of theunderlying principal amounts.
Derivative transactions generate income for the Group from buy-sell spreads and from trading positions
taken by the Group. Income from these transactions is taken to net interest income, foreign exchange earnings
or profit on trading instruments. Income or expense on derivatives entered into for balance sheet hedging
purposes is accrued and recorded as an adjustment to the interest income or expense of the related hedged
item.

82

Notes to the Financial Statements

37: Derivative Financial Instruments (continued)
Credit risk
The credit risk of derivative financial instruments arises from the potential for a counterparty to default on its
contractual obligation. Credit risk arises when market movements are such that the derivative has a positive
value to the Group. It is the cost of replacing the contract in the event of counterparty default. The Grouplimits its credit risk within a conservative framework by dealing with creditworthy counterparties, setting credit
limits on exposures to counterparties, and obtaining collateral where appropriate.
The following table provides an overview of the Group’s exchange rate and interest rate derivatives. It
includes all trading and non trading contracts. Notional principal amounts measure the amount of theunderlying physical or financial commodity and represent the volume of outstanding transactions. They are nota measure of the risk associated with a derivative.
The gross replacement cost is the cost of replacing those financial instruments with a positive market value
to the Group. It represents the potential credit loss had all counterparties defaulted on the reporting date andany collateral become worthless. There is no allowance for netting arrangements.
The credit equivalent amount is calculated in accordance with the Reserve Bank of Australia’s Capital
Adequacy guidelines. It combines the aggregate gross replacement cost with an allowance for the potential
increase in value over the remaining term of the transaction should market conditions change.

Consolidated

Foreign exchange contracts
Spot and forward contracts
Swap agreements
Options purchased
Options sold1
Interest rate contracts
Forward rate agreements
Swap agreements
Futures contracts2
Options purchased
Options sold1
Other contracts

1
2

Notional
principal
amount1997

Grossreplacement
cost
1997

Creditequivalentamount1997

Notional
principal
amount1996

Grossreplacement
cost
1996

Creditequivalentamount
1996

$M

$M

$M

$M

$M

$M

202,885
10,81011,537
11,033

3,547
321
182
n/a

5,404
678
325
n/a

159,243
5,872
5,637
5,385

1,487
127
47
n/a

2,916
355
111
n/a

236,265

4,050

6,407

176,137

1,661

3,382

66,719193,092
125,942
13,54820,899
944

37
2,030
n/a
27
n/a
3

122
2,465
n/a
38
n/a
13

95,994148,495
87,864
4,001
3,632
248

65
1,256
n/a
8
n/a
3

137
1,567
n/a
15
n/a
4

421,144

2,097

2,638

340,234

1,332

1,723

657,409

6,147

9,045

516,371

2,993

5,105

Options sold have no credit exposure, as they represent obligations rather than assets
Replacement costs have not been included as there is minimal credit risk associated with exchange traded futures where the clearing
house is the counterparty

Australia and New Zealand Banking Group Limited – 1997 Annual Report83Notes to the Financial Statements

37: Derivative Financial Instruments (continued)
The maturity structure of derivative activity is a primary component of potential credit exposure. The tablebelow shows the remaining maturity profile by class of derivatives based on notional principal amounts.
Remaining life

Consolidated

At 30 September 1997

Foreign exchange contracts
Spot and forward contracts
Swap agreements
Options purchased
Options soldInterest rate contracts
Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options sold
Other contracts
Total

Less than
1 year1 to 5 years

Greater than
5 years

Total

$M

$M

$M

$M

200,173
4,575
11,195
10,492

2,680
4,757
342
541

32
1,478
-

202,885
10,81011,537
11,033

226,435

8,320

1,510

236,265

49,731
105,900
97,043
9,613
14,413918

16,98875,44027,479
2,034
2,202
26

11,752
1,420
1,901
4,284
-

66,719193,092
125,942
13,54820,899944

277,618

124,169

19,357421,144504,053

132,489

20,867

657,409

157,429
1,645
5,454
5,239

1,800
3,921
183
146

14
306
-

159,243
5,872
5,637
5,385

169,767

6,050

320

176,137

81,57386,09664,403
2,576
2,269
228

14,421
58,51822,926
1,293
1,230
19

3,881
535
132
133
1

95,994148,495
87,864
4,001
3,632
248

237,145

98,407

4,682

340,234

406,912

104,457

5,002

516,371

At 30 September 1996

Foreign exchange contracts
Spot and forward contracts
Swap agreements
Options purchased
Options soldInterest rate contracts
Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options sold
Other contracts
Total

84

Notes to the Financial Statements

37: Derivative Financial Instruments (continued)
Concentrations of credit risk exist for groups of counterparties when they have similar economic
characteristics. Major concentrations of credit risk arise by location and type of customer.
The following table shows the concentrations of credit risk, by class of counterparty and by geographic
location, measured by credit equivalent amount. In excess of 78% of the Group’s exposures are withcounterparties which are either Australian banks or banks based in other OECD countries.
Consolidated

Credit equivalent
1997
1996
$M
$M

Class of Counterparty

Commonwealth and OECD governments
Australian and OECD banks
Corporations, non-OECD banks and others

55
7,062
1,928

60
4,200
845

9,045

5,105

Credit equivalent
1997
1996
$M

$M

4,007
601
4,437

1,959
486
2,660

9,045

5,105

Geographic location

Australia
New ZealandInternational markets

Market risk
The market risk of derivatives arises from the potential for changes in value due to movements in interest andforeign exchange rates.
The Group calculates value at risk based on historical models of movements in interest rates and exchange
rates, and using a 97.5% confidence level that the adverse movements will not exceed the value at risk. Ifvalue at risk is estimated to be $1 million, then based on historical analysis over 500 working days there isapproximately one chance in 40 of seeing an adverse movement in excess of $1 million within the current
trading day, on the basis of the opening position. Reflecting the nature of its trading activities, the Group
monitors its value at risk by reference to close-to-close (overnight) risk levels.
Below are the Group’s aggregate value at risk figures covering both physical and derivatives trading
positions for its principal treasury trading centres. The increase in value at risk is due to the inclusion of theGroup's Capital Markets activities within the value at risk regime. Previously, the risks associated with these
activities were managed as credit risks within the Group's credit systems and controls.
As at
30 Sep 97

Maximum
1997

Average
1997

As at
30 Sep 96

Maximum
1996

Average
1996

Consolidated

$M

$M

$M

$M

$M

$M

Value at risk at 97.5% confidence
Foreign exchangeInterest rate

4
19

4
23

3
18

2
10

5
13

2
6

Australia and New Zealand Banking Group Limited – 1997 Annual Report85Notes to the Financial Statements

37: Derivative Financial Instruments (continued)
The next table shows the fair values of the Group’s derivatives by product type, disaggregated into grossunrealised gains and gross unrealised losses. The fair value of a derivative represents the aggregate net present
value of the cash inflows and outflows required to extinguish the rights and obligations arising from thederivative in an orderly market as at the reporting date. Fair value does not indicate future gains or losses, butrather the unrealised gains and losses from marking to market all derivatives at a particular point in time.

Consolidated

Foreign exchange contracts
Spot and forward contracts
Gross unrealised gains
Gross unrealised losses
Swap agreements
Gross unrealised gains
Gross unrealised losses
Options purchased
Options soldInterest rate contracts
Forward rate agreements
Gross unrealised gains
Gross unrealised losses
Swap agreements
Gross unrealised gains
Gross unrealised losses
Futures contracts
Gross unrealised gains
Gross unrealised losses
Options purchased
Options sold
Other contracts
Gross unrealised gains
Gross unrealised losses

Total

Fair value
as at
30 Sep 1997

Averagefair value
1997

Fair value
as at
30 Sep 1996

Averagefair value
1996

$M

$M

$M

$M

3,579
(3,503)2,301(2,450)1,510(1,778)

1,515(1,736)

321
(274)
182
(138)

198
(273)
102
(31)

127
(343)
47
(73)

88
(325)
66
(104)

167

(153)

(510)

(496)

37
(46)

48
(48)

65
(71)

5
(23)

2,030
(2,741)

1,558(2,111)

1,256(1,579)1,174(1,385)

8
(9)
37
(30)

28
(46)
25
(10)

6
(26)
8
-

12
(30)
7
(7)

3
(11)

(1)

3
-

2
-

(722)

(557)

(338)

(245)

(555)

(710)

(848)

(741)

The fair values of derivatives vary over time depending on movements in interest and exchange rates and the
trading or hedging strategies used. The negative fair value as at 30 September 1997 does not represent the
profitability from such transactions. It arises from contracts that have generated net positive cash flows (onwhich interest is being earned) since their inception but which are expected to generate negative cash flows
over their remaining term.

86

Notes to the Financial Statements

37: Derivative Financial Instruments (continued)
In addition to customer and trading activities, the Group uses, inter alia, derivatives to manage the risk
associated with its balance sheet. The principal objectives of asset and liability management are to hedge themarket value of the Group’s capital and to manage and control the sensitivity of the Group’s income while
maintaining acceptable levels of interest rate and liquidity risk. The Group also uses a variety of foreignexchange derivatives to hedge against adverse movements in the value of foreign currency denominated assets
and liabilities.
The table below shows the notional principal amount, gross replacement cost and fair value of derivatives
held by the Group, split between those entered into for customer-related and trading purposes, and thoseentered into for balance sheet hedging purposes.
Notional
principal
amount1997

Grossreplacement
cost
1997

Fair
value
1997

Notional
principal
amount1996

Grossreplacement
cost
1996

Fair
value
1996

$M

$M

$M

$M

$M

$M

Foreign exchange contracts
Customer-related and trading purposes 220,761
Balance sheet hedging purposes
15,504

3,864
186

214
(47)

165,861
10,276

1,587
74

(323)
(187)

236,265

4,050

167

176,137

1,661

(510)

Interest rate contracts
Customer-related and trading purposes 400,942
Balance sheet hedging purposes
20,202

1,801
296

(790)
68

317,122
23,112

1,102
230

(396)
58

421,144

2,097

(722)

340,234

1,332

(338)

657,409

6,147

(555)

516,371

2,993

(848)

Consolidated

Total

Detailed below are the net deferred realised and unrealised gains and losses arising from hedging contracts
used to manage interest rate exposure or used to hedge anticipated transactions. These gains and losses aredeferred only to the extent that there is an offsetting unrecognised gain or loss on the exposure being hedged.
Deferred gains or losses are generally amortised over the expected term of the hedged exposure.

Balance sheet
hedging
contracts
at 30 Sep 1997

Balance sheet
hedging
contracts
at 30 Sep 1996

Consolidated$M$M

Expected recognition in income
Within one year
One to two years
Two to five years
Greater than five years

39
(24)
45
22

19
(16)
39
(20)

82

22

Australia and New Zealand Banking Group Limited – 1997 Annual Report87Notes to the Financial Statements

38: Contingent Liabilities and Credit Related Commitments
Credit related commitments
The credit risk of the following facilities may be less than the contract amount, but as it cannot be accurately
determined, the credit risk has been taken to be the contract amount.
Consolidated
1997
1996
Contract
Contract
amountamount$M$M

Undrawn facilities
Underwriting facilities
Securities lending

The Company
1997
1996
Contract
Contract
amountamount$M$M

Controlled Entities
1997
1996
Contract
Contract
amountamount$M$M

38,614679-

30,014361
590

27,555408-

21,59282590

11,059
271
-

8,422
279
-

39,29330,96527,963

22,264

11,3308,701

Contingent liabilities
The Group guarantees the performance of customers by issuing standby letters of credit and guarantees tothird parties. The risk involved is essentially the same as the credit risk involved in extending loan facilities tocustomers, therefore these transactions are subjected to the same credit origination, portfolio maintenance andcollateral requirements for customers applying for loans. As the facilities may expire without being drawn
upon, the notional amounts do not necessarily reflect future cash requirements.
The credit risk of these facilities may be less than the contract amount, but as it cannot be accurately
determined, the credit risk has been taken to be the contract amount.
Consolidated
1997
1996
Contract
Contract
amountamount$M$M

The Company
1997
1996
Contract
Contract
amountamount$M$M

Controlled Entities
1997
1996
Contract
Contract
amountamount$M$M

Guarantees
Standby letters of credit
Bill endorsements
Documentary letters of credit
Performance related contingents
Other

2,776
917
18
1,927
7,761
1,069

2,149
355
29
1,349
6,614
828

2,250
867
10
1,123
6,368
797

1,431
319
25
608
5,328
631

526
50
8
804
1,393
272

718
36
4
741
1,286
197

Total contingent liabilities

14,468

11,324

11,415

8,342

3,053

2,982

The details and estimated maximum amount of contingent liabilities classified according to the party fromwhom the contingent liability could arise are set out below.
The Company
In accordance with the clearing arrangements set out in the Australian Payments Clearing Association Limited(APCA) Regulations for the Australian Paper Clearing System, the Bulk Electronic Clearing System and theHigh Value Clearing System, the Company has a commitment to provide liquidity support to these clearing
streams in the event of a failure to settle by a member institution; for the latter clearing stream, the obligationarises only in limited circumstances.
Controlled entities(i) The Group will indemnify each customer of controlled entities engaged in nominee activities against loss
suffered by reason of such entities failing to perform any obligation undertaken by them to a customer.
(ii) Pursuant to class order 95/1530 dated 10 November 1995, relief was granted during the year to anumber of wholly owned controlled entities from the Corporations Law requirements for preparation,
audit, and publication of financial statements. The entities to which relief was granted are
A.F.T. Investors Services Limited
ANZ Investment Holdings Limited
A.N.Z. Holdings Limited
A.N.Z. Nominees Limited
A.N.Z. Properties (Australia) Limited
Australian Fixed Trusts Limited
ANZ Adelaide Group Limited
E.S.&A. Holdings Limited
ANZ Capital Hedging Limited
E.S.&A. Properties (Australia) Limited
ANZ Finance (Far East) Limited
NMRB Limited
ANZ Funds Pty LtdNMRSB Limited
ANZ Grindlays Holdings Limited
It is the condition of the class order that the Company and each of the above controlled entities enter
into a Deed of Cross Guarantee.

88Notes to the Financial Statements

38: Contingent Liabilities and Credit Related Commitments (continued)
A Deed of Cross Guarantee under the class order was lodged and approved by the Australian Securities
Commission. The effect of the Deed is that the Company guarantees to each creditor payment in full ofany debt in the event of winding up any of the controlled entities under certain provisions of the
Corporations Law. The Company will only be liable in the event that after six months any creditor has
not been paid in full. The controlled entities have also given similar guarantees in the event that theCompany is wound up. At 30 September 1997 the controlled entities which are parties to the Deed had
external aggregate assets of $2,393 million (1996: $2,721 million); external aggregate liabilities of $473
million (1996: $747 million); and their operating (loss) profit after tax and abnormal items for the year
was $(9) million (1996: $418 million). A Deed of Revocation was executed during the year for thefollowing companies which were party to the Deed of Cross Guarantee. These companies are small
proprietary companies which are not required by the Corporations Law to prepare accounts.
Ecomel Pty Limited
Elgeba Pty Limited
NMRB Insurance (Agents) Pty Limited
Dinias Pty Limited
Weelya Pty Limited
A.F.T. Property Management Pty Limited
A.F.T. Property Services Pty Limited
Analed Pty Limited
ANZ Business Licensing Pty Limited

ANZ Leasing (ACT) Pty Limited
ANZ Leasing (NSW) Pty Limited
ANZ Leasing (NT) Pty Limited
ANZ Leasing (VIC) Pty Limited
ANZ Leasing Pty Limited
ANZ Payment Services Pty Limited
Eriel Pty Limited
FCA Finance Pty Limited(iii) Pursuant to class order 95/1530 dated 10 November 1995, relief was granted during the year to Capel
Court Management Limited, a wholly owned controlled entity, from the Corporations Law requirementsfor preparation, audit and publication of accounts. It is the condition of the class order that ANZ Capel
Court Limited and its controlled entity enter into a Deed of Cross Guarantee.
A Deed of Cross Guarantee under the class orders was lodged and approved by the Australian
Securities Commission. The effect of the Deed is that ANZ Capel Court Limited guarantees to eachcreditor payment in full of any debt in the event of winding up its controlled entity under certain
provisions of the Corporations Law. ANZ Capel Court Limited will only be liable in the event that after
six months any creditor has not been paid in full. The controlled entity has also given a similar guarantee
in the event that ANZ Capel Court Limited is wound up. At 30 September 1997 ANZ Capel Court
Limited and its controlled entity which is party to the Deed had external aggregate assets of $348 million(1996: $358 million); external aggregate liabilities of $151 million (1996: $163 million); and theiroperating profit after tax and abnormal items for the year was $21 million (1996: $6 million). A Deed of
Revocation was executed during the year for Capel Court International Investments Pty Limited which
was a party to the Deed of Cross Guarantee. This company is a small proprietary company which is not
required by the Corporations Law to prepare accounts.
(iv) The Company has guaranteed payment on maturity of the principal and accrued interest of commercial
paper notes issued by ANZ (Delaware) Inc. of $1,822 million (1996: $956 million).
(v) The Company is party to an underpinning agreement with ANZ Grindlays Bank Limited whereby theCompany undertakes to assume risk in relation to credit facilities extended by ANZ Grindlays Bank
Limited to certain individual customers which exceed 25% of ANZ Grindlays Bank Limited’s capitalbase.
(vi) The Company is party to an underpinning agreement with ANZ Banking Group (New Zealand) Ltd
whereby the Company undertakes to assume risk in relation to credit facilities extended by ANZ
Banking Group (New Zealand) Ltd to individual customers which exceed 35% of ANZ Banking Group(New Zealand) Ltd's capital base.
(vii)The Company has guaranteed, on a subordinated basis, the issue of $174 million Subordinated Floating
Rate Notes issued by ANZ Banking Group (New Zealand) Ltd.

Australia and New Zealand Banking Group Limited – 1997 Annual Report89Notes to the Financial Statements

38: Contingent Liabilities and Credit Related Commitments (continued)
GeneralThere are outstanding court proceedings, claims and possible claims against the Group, the aggregate amountof which cannot readily be quantified. Where considered appropriate, legal advice has been obtained and, inthe light of such advice, provisions as deemed necessary have been made.
India - National Housing Bank
In 1992 the branch of ANZ Grindlays Bank Limited in India (the Bank) received a claim, aggregating
approximately Indian Rupees 5.06 billion ($194 million) from the National Housing Bank (NHB) in thatcountry. The claim arose out of certain cheques drawn by NHB in favour of the Bank, the proceeds ofwhich were credited into the account of one of the customers of the Bank.
On 29 March 1997, pursuant to an Arbitration Agreement entered into on 4 November 1992, theArbitrators made an award on this dispute in favour of the Bank. NHB has paid to the Bank the principal andinterest due under the award. Subsequently, NHB filed documents with the relevant Court to challenge theaward. ANZ is confident that the award will stand.
India - Foreign Exchange Regulation Act
In 1991 certain amounts were transferred from non-convertible Indian Rupee accounts to convertible Rupee
accounts maintained with the Bank in India. In making these transactions it would appear that the provisionsof the Foreign Exchange Regulation Act 1973 were inadvertently not complied with. The Bank, on its own
initiative, brought these transactions to the attention of the Reserve Bank of India.
The Indian authorities have served preliminary notices on the Bank and certain of its officers in India
which could lead to proceedings and possible penalties. The Group’s lawyers in India have prepared responses
to these notices, and the Group considers that the outcome will have no material adverse effect on thefinancial statements.

39: Superannuation Commitments
A number of pension/superannuation schemes have been established by the Group worldwide. The Group is
obliged to contribute to the schemes as a consequence of legislation and provisions of trust deeds. Legal
enforceability is dependent on the terms of the legislation and trust deeds. The major schemes with assets inexcess of $25 million are
Country

SchemeScheme type

Australia

ANZGROUP (Australia)
Staff Pension Scheme1

DefinedBenefit Scheme

Australia

ANZ Australian Staff
Superannuation Scheme2

DefinedContribution Scheme
ContributoryorSection A

New ZealandEnglandANZGROUP (New Zealand)
Staff Superannuation Scheme1, 2

ANZ UK Staff Pension
Scheme1

DefinedBenefit SchemeorDefinedContribution Scheme
DefinedBenefit Scheme

Contribution levels
Employee
EmployernilBalance of cost

2.5% minBalance of cost3

optional

7% of salary

5.5%

Balance of cost

2.5% minBalance of cost4

nil

Balance of cost

Balance of cost: the Group's contribution is assessed by the actuary after taking account of members’ contributions and the value of theschemes’ assets
1
These schemes provide for pension benefits
2
These schemes provide for lump sum benefits
3
As recommended by the actuary, not to exceed 7.25% of members’ superannuation salaries for the financial year ended
30 September 19984
7.5% of superannuation salaries

90Notes to the Financial Statements

39: Superannuation Commitments (continued)
The details of major defined benefit schemes with assets in excess of $25 million are as follows

Employer ’s
contribution$M

Accruedbenefits$M

Net market value of
assets held by scheme$M(Deficiency)excess ofnet market valueof assets overaccrued benefits$M

ANZGROUP (Australia)
Staff Pension Scheme1

4

59

46

(13)

59

ANZ UK Staff Pension Scheme1

-

558

715

157

522

Vestedbenefits$M

1997
SchemeVestedbenefits$M

Employer ’s
contribution$M

Accruedbenefits$M

Net market value of
assets held by scheme$M(Deficiency)excess ofnet market valueof assets overaccrued benefits$M

ANZGROUP (Australia)
Staff Pension Scheme2

5

64

44

(20)

64

ANZ UK Staff Pension Scheme3

-

459

584

125

429

1996
Scheme1

Amounts were measured at 31 December 1996
Amounts were measured at 30 September 1996
3
Amounts were measured at 31 December 1995
2

40: Fiduciary Activities
The Group conducts investment management and other fiduciary activities as trustee or manager forinvestment funds and trusts, including superannuation and approved deposit funds, equity trusts, property
trusts and deceased estates. These funds have not been consolidated as the Company does not have direct orindirect control of the funds.
Where the Company or its controlled entities incur liabilities in respect of these operations as trustee, aright of indemnity exists against the assets of the applicable funds or trusts. As these assets are sufficient tocover the liabilities and it is therefore not probable that the Company or its controlled entities will be
required to settle the liabilities, the liabilities are not included in the financial statements.
The aggregate amounts of funds concerned are as follows

Funds managed
Trusteeships

1997

1996

$M

$M

13,478
4,411

11,312
2,142

17,88913,454

41: Exchange Rates
The exchange rates used in the translation of the results and the assets and liabilities of major overseas
branches and controlled entities are
Closing

Average

Closing

1996
Average

1995
Closing
Average

0.44650.7197
1.1272

0.46940.76791.11910.5062
0.7914
1.1314

0.49630.76851.13400.47640.75201.1498

1997

Great British pound
United States dollar
New Zealand dollar

0.46590.74061.1407Australia and New Zealand Banking Group Limited – 1997 Annual Report91Notes to the Financial Statements

42: Employee Share Purchase and Share Option Schemes
The Company has four share purchase and share option schemes available for employees and directors of theGroup: the ANZ Group Employee Share Purchase Scheme; the ANZ Group Senior Officers’ Share Purchase
Scheme; the ANZ Group Share Option Scheme; and the Directors’ Share and Option Purchase Scheme.
Shareholders of the Company have approved the Rules of each of the schemes. Fully paid ordinary sharesissued under these schemes rank equally with other existing fully paid ordinary shares, except for fully paid
ordinary shares issued on conversion from partly paid shares which are not entitled to the first dividend paid.
Partly paid ordinary shares, paid to 10 cents, issued under the ANZ Group Senior Officers’ Share Purchase
Scheme and the Directors’ Share and Option Purchase Scheme are not entitled to dividends payable by theCompany, but are entitled to one vote for every ten partly paid shares. They are also entitled to participate inrights and bonus issues.
Each option granted under the ANZ Group Share Option Scheme and the Directors’ Share and Option
Purchase Scheme entitles a holder to purchase one ordinary share subject to any attached terms andconditions.
An offer to employees and non-executive directors cannot be made under any of the schemes if an issue
pursuant to that offer will result in the aggregate of shares issued, and those liable to be issued pursuant toexercisable options granted under any of the schemes, and bonus shares issued in respect of shares issued
under these schemes, exceeding 7% of the issued capital of the Company.
During the financial year, loans at concessional interest rates were available for financing shares purchased
under the ANZ Group Employee Share Purchase Scheme. Shares issued under these schemes are free ofbrokerage and stamp duty costs.
The market price of one ordinary share at 30 September 1997 was $11.28.
Amounts received from employee share purchase and share option schemes are accounted for as follows− the par value of fully paid shares and amounts received on partly paid shares are recognised as issued andpaid-up capital;− the difference between par value and issue price is credited to the share premium reserve; and− amounts received for options are credited to the general reserve.
Amounts received from employee share purchase and share option schemes during the financial year,
excluding calls on partly paid shares issued in prior financial years, were recognised as follows
The Company

Issued and paid-up capital
Share premium reserve
General reserve

1997
$

1996
$

6,175,275
31,382,725(7,469)3,200,483
12,679,869-

ANZ Group Employee Share Purchase Scheme
All employees, excluding part-time service employees, who have had continuous service for one year with
the Company or any of its controlled entities are eligible to participate in this scheme. Each eligible
employee’s entitlement depends on the employment level of the employee, and the maximum entitlement is
5,000 ordinary shares.
During the financial year, 4,135,275 fully paid ordinary shares were issued at a 20% discount to themarket price at 28 February 1997 to 2,777 eligible employees for a total consideration of $26,589,818.
32,780 employees were eligible to participate in this offer. The total market value of the shares at issue date,
which was 25 March 1997, was $33,785,198. At 30 September 1997, 43,798,610 ordinary shares had been
issued since the commencement of this scheme.
ANZ Group Senior Officers’ Share Purchase Scheme
Senior officers eligible to participate in this scheme may be offered fully paid or partly paid ordinary shares.
During the financial year, no ordinary shares were issued under the scheme.
At 30 September 1997, 11,035,400 fully paid ordinary shares and 7,805,000 partly paid ordinary shares
had been issued since the commencement of this scheme. The partly paid ordinary shares were paid to
10 cents on application and the balance payable either at the request of the employee or upon cessation of
employment, except in the event of death, retirement or illness, in which case, the balance is payable threemonths after the event.

92

Notes to the Financial Statements

42: Employee Share Purchase and Share Option Schemes (continued)
ANZ Group Share Option Scheme
Executive directors and executive officers may be invited to purchase options at one cent each under thisscheme. These options do not entitle the holder to participate in a share issue of any other body corporate
apart from the Company.
1,412,850 options were issued during the financial year. 60,148 options granted under the scheme
lapsed during the financial year.
At 30 September 1997, 6,933,091 options were outstanding under this scheme. Options which may be
exercised no later than 30 January 1999 may only be exercised if the basic earnings per share of the Group(before abnormal items) for one of the financial years ending 30 September 1996, 1997 or 1998 is at least
50% over the equivalent figure for the 1993 financial year.
Options issued during the financial year were issued pursuant to the Senior Executive Remuneration
Scheme which requires that part of an executive's remuneration relative to performance against target must
be taken in the form of options. These options cannot be exercised until the expiration of three years after
the date of issue or after the expiration of five years after the date of issue.
No. of options outstandingat 30 September 1997

1

Exercise price

300,000$5.34

1,110,000$5.34

4,120,000$5.34

366,753$8.76

36,338$8.76

100,000$8.76

900,000$8.76

Exercisable period1

Not exercisable before
31 Jan 1997, or later than 30 Jan 1999
1
Not exercisable before
22 Dec 1997, or later than 30 Jan 1999
1Not exercisable before
23 Mar 1998, or later than 30 Jan 1999
Not exercisable before
31 Jan 2000, or later than 30 Jan 2002
Not exercisable before
14 Feb 2000, or later than 13 Feb 2002
Not exercisable before
24 Mar 2000, or later than 23 Mar 2002
Not exercisable before
2 Jun 2000, or later than 1 Jun 2002

subject to performance condition

These options will expire immediately on termination of employment, except in the event of retirement,
death or where agreed by the directors of the Company, in which case, the directors may allow the options
to be exercised. 2,049,611 options were exercised by former employees during the financial year with theconsent of the directors where required. In the event of a takeover offer or takeover announcement, thedirectors of the Company may allow the options to be exercised within thirty days from the date of
notification.
If there is a bonus issue prior to the expiry or exercise of the options, option holders are entitled to thoseshares as if the options have been exercised prior to that issue. Those shares will be allotted to the option
holder when the options are exercised.
Directors’ Share and Option Purchase Scheme
This Scheme was approved by shareholders in January 1988. During the financial year, no director was
eligible to subscribe for shares under the scheme and no shares were issued and no options were offered.
There will be no further issues of shares or options under this Scheme and following the expiration of theremaining options on issue on 1 March 1998 or earlier exercise, the Scheme will be discontinued.
Under the Scheme each non-executive director was entitled to subscribe for up to 50,000 partly paid
ordinary shares at market price, paid to 10 cents, with the balance payable any time at the request of thedirector or upon ceasing to be a director, except in the event of retirement, death or illness, in which case thebalance is payable 90 days after such date.
Each director was, subject to the Board’s approval, eligible to subscribe for an equivalent number of
options at one cent each under this scheme. Options granted under this scheme were exercisable within five
years after issuance or within 90 days after ceasing to be a director, if earlier. The exercise price of an option
is based on the market price of an ordinary share when the option is granted, less one cent, which is payable
on issue of the option.
During the financial year 290,000 partly paid shares were paid up and 50,000 options were exercised.

Australia and New Zealand Banking Group Limited – 1997 Annual Report93Notes to the Financial Statements

42: Employee Share Purchase and Share Option Scheme (continued)
At 30 September 1997, 950,000 partly paid shares, paid to 10 cents and 1,100,000 options had been issued
since the commencement of this scheme.
No. of options outstandingat 30 September 1997

50,000Exercise Price

Expiry date

$3.44

1 March 1998

43: Related Party Disclosures
The directors during the year wereC B Goode (Chairman)
Dr R S Deane
J K Ellis
J C Dahlsen
C J Harper
M A Jackson

A T L Maitland (retired 30 June 1997)
D P Mercer (retired 30 September 1997)
J F Ries
Dr B W Scott
Sir R R Trotter (retired 9 October 1997)
R B Vaughan

Australian banks, parent entities of Australian banks and controlled entities of Australian banks have been
exempted, subject to certain conditions, by an Australian Securities Commission class order,
97/1016 dated 9 July 1997, from making disclosures of loans made, guaranteed or secured by a bank torelated parties (other than specified categories of directors) and financial instrument transactions (other thanshares and share options) of a bank where a director of the relevant entity is not a party to the transaction
and where the loan or financial instrument transaction is lawfully made and occurs in the course of ordinarybanking business either at arm’s length or with the approval of a general meeting of the relevant entity andits ultimate chief entity (if any).
The class order does not apply to a loan or financial instrument transaction of which any director of therelevant entity should reasonably be aware that, if not disclosed, would have the potential to adversely affectthe decisions made by users of the financial statements about the allocation of scarce resources.
A condition of the class order is that for each financial year to which it applies, the Company must
provide evidence to the Commission that the Company has systems of internal controls and procedures
which(i) in the case of any material financial instrument transaction, ensure that; and(ii) in any other case, are designed to provide a reasonable degree of assurance that,any financial instrument transaction of a bank which may be required to be disclosed in the Company’s
financial statements and which is not entered into regularly, is drawn to the attention of the directors.
(a) Transactions with directors and director-related entities
Shares and Share Options
Aggregate number of shares and share options issued to directors of the Company and their director-related
entities by the Company were as follows
The Company
1997
1996
No.
No.

Fully paid ordinary shares in the Company
Partly paid ordinary shares in the Company
Options issued under the ANZ Group Share Option Scheme

886,050
40,944

224,229
50,000-Certain executive directors have acquired fully paid ordinary shares under the ANZ Group Senior Officers’
Share Purchase Scheme on conditions no more favourable than those offered to other employees. All otherfully paid ordinary shares were acquired on terms and conditions no more favourable than those offered toother shareholders.
Certain non-executive directors paid up partly paid ordinary shares issued to them in prior years under
the Directors’ Share and Option Purchase Scheme, approved by shareholders in January 1988. No partly
paid ordinary shares or options have been issued to directors under this scheme during the financial year.
The reduction in the number of partly paid shares held by directors of the Company and their directorrelated entities during the financial year was 290,000 (1996: 100,000).

94

Notes to the Financial Statements

43: Related Party Disclosures (continued)
Aggregate number of shares and share options held directly, indirectly or beneficially by directors of theCompany and their director-related entities, as at balance date, were as follows

Fully paid ordinary shares in the Company
Partly paid ordinary shares, paid to 10 cents per share, in the Company
Share options over ordinary shares in the Company

1997
No.

1996
No.

1,039,536
380,234

872,544
290,000
1,200,000

Directors of the Company and their director-related entities received normal dividends on these shares, withthe exception of partly paid ordinary shares, paid to 10 cents per share, which qualify for dividends only
when fully paid.
Loans made to Directors
Loans made to non-executive directors of the Company and controlled entities are made in the course ofordinary business on normal commercial terms and conditions. Loans to executive directors of the Company
and controlled entities are made pursuant to the Executive Directors' Loan Scheme authorised byshareholders on 18 January 1982, on the same terms and conditions applicable to other employees within theGroup in accordance with established policy.
Under the Australian Securities Commission class order referred to above, disclosure is limited to theaggregate amount of loans made, guaranteed or secured by(i) the Company to its directors;(ii) any controlled entity to the directors of the Company;(iii) banking corporation controlled entities to their directors; and(iv) non-banking corporation controlled entities to directors of controlled entities and to parties related toany one of them or the directors of the Company.
The directors involved are
S Armstrong 1,2
I W A Brandon 1,2,3,4
D J Brunskill 1,3,4
A H Buhindi 3
G J Camm 3
K Chan 1,2
G M Collinson 2
P J Conway 1,4
J C Dahlsen 3
R M Evans 1,2

C J Harper 1,2,3
P F Horsfall 1,3,4
B J Joliffe 1,3,4
R G Jones 3
W J C Laird 1,2
A T L Maitland1,3
D W Manoa 1,4
D P Mercer 1,3,4
I F Peterkin 1,3
J F Ries 1,2,3,4

J L Roach 1,3
J G Todd 1,3,4
R R Trotter 1,4
A E Ward 1,3
D F Wicks 3

1

Repayments made during the year
Loans made during the year
3
Repayments made during the prior year
4
Loans made during the prior year2

The aggregate amount of such loans outstanding at 30 September was
Consolidated
1997
1996
$’000
$’000

Balance outstanding at 30 September
Total interest received

The Company
1997
1996
$’000
$’000

1,599
185

2,176
173

743
103

1,198
89

The aggregate amount of repayments received
from directors and their director-related
entities during the financial year was
Normal terms and conditions
Employee terms and conditions

413
657

1,012
1,689

102
565

305
1,460

The aggregate amount of loans made during
the financial year was
Normal terms and conditions
Employee terms and conditions

73
413

273
238

73
139

13
187

Australia and New Zealand Banking Group Limited – 1997 Annual Report95Notes to the Financial Statements

43: Related Party Disclosures (continued)
Other transactions of Directors and Director-Related Entities(i) Financial instrument transactions
Under the Australian Securities Commission class order referred to above, disclosure of financial instrumenttransactions regularly made by a bank is limited to disclosure of such transactions with a director of the entity
concerned. Financial instrument transactions which have occurred on arm’s length terms and conditions, andare deemed trivial or domestic in nature are required to be disclosed by general description.
Financial instrument transactions between the directors and the banks during the financial year were in
the nature of normal personal banking, investment and deposit transactions. These transactions occurred on
an arm’s length basis and on normal commercial terms and conditions no more favourable than those given
to other employees or customers.
(ii) Transactions other than financial instrument transactions of banks
All other transactions with directors and their director-related entities are conducted on arm’s length terms
and conditions, and are deemed trivial or domestic in nature. These transactions are in the nature of deposits,
debentures, or investment transactions conducted with non-bank controlled entities.
(b) Transactions with associated entities
During the course of the financial year the Company and the Group conducted transactions with associatedentities on normal commercial terms and conditions, other than a loan of nil (1996: $2,390,000) to Valuta
Group Pty Ltd at an interest rate of 5%. Transactions with associated entities on normal commercial terms
and conditions are detailed below.
Consolidated
1997
1996
$’000
$’000

Aggregate
Amounts receivable from associated entities
Interest revenue
Dividend revenue
Interest expense
Other revenue

96

336
171
790
13

2,290
630
2,581
105
186

The Company
1997
1996
$’000
$’000

300
77
27

300
24
-

Notes to the Financial Statements

44: Remuneration of Directors
Remuneration includes income from salaries, bonuses, other benefits (including non-cash benefits),
retirement benefits and superannuation contributions. The maximum total remuneration for non-executive
directors of the Company was set at the Annual General Meeting of 20 January 1995 at $0.85 million.
Total fees paid to non-executive directors by the Company for the year was $0.8 million(1996: $0.7 million).
The number of directors of the Company with total income in each of the following bands was
The Company
1997
1996

$60,001 to $70,000$70,001 to $80,000$80,001 to $90,000$160,001 to $170,000$170,001 to $180,000

1
5
2
1

4
4
1
-

The Company
1997
1996

$580,001 to $590,000$630,001 to $640,000$1,000,001 to $1,010,000$1,940,001 to $1,950,000$4,210,001 to $4,220,000

Total number of directors

1
11
12

2
1
-

12

12

1

A T L Maitland - comprises fixed remuneration ($355,274), 1995/96 bonus ($114,481), 1996/97 bonus ($330,178), annual
leave and long service leave payout ($353,839), retirement allowance under pre-existing arrangements ($319,797) and payment
under contract ($475,000)
2
D P Mercer - comprises fixed remuneration ($770,000), 1995/96 bonus ($187,782), 1996/97 bonus ($659,033), annual leaveand long service leave payout ($352,140), additional superannuation contribution and retirement allowance under pre-existingarrangements ($589,925) and payment relating to unexpired period of contract ($1,656,027)
Consolidated
1997
1996
$’000
$’000

Total income paid or payable todirectors of the Company and controlled
entities from the Company or related entity33

13,127

7,555

The Company
1997
1996
$’000
$’000

7,587

2,911

Including the total income of executive directors, excluding executive directors of wholly owned controlled entities who are executivesof the Company

Australia and New Zealand Banking Group Limited – 1997 Annual Report97Notes to the Financial Statements

45: Remuneration of Executives
Remuneration includes salaries, bonuses, other benefits (including non-cash benefits), and superannuation
contributions. The remuneration of executives who work wholly or mainly outside Australia are excluded
from this disclosure.
The number of executives with total remuneration exceeding $100,000 in each of the following bands was
Consolidated
1997
1996

$100,001 to $110,000$110,001 to $120,000$120,001 to $130,000$130,001 to $140,000$140,001 to $150,000$150,001 to $160,000$160,001 to $170,000$170,001 to $180,000$180,001 to $190,000$190,001 to $200,000$200,001 to $210,000$210,001 to $220,000$220,001 to $230,000$230,001 to $240,000$240,001 to $250,000$250,001 to $260,000$260,001 to $270,000$270,001 to $280,000$280,001 to $290,000$290,001 to $300,000$300,001 to $310,000$310,001 to $320,000$320,000 to $330,000$330,001 to $340,000$340,001 to $350,000

1
2
11
1
3
1
1
61
51
1
1
1
4
2
2
3
51
31
21
-

2
11
21
3
2
4
2
51
1
4
2
1
1
1
3
4
1
21
11
1

The
Company
1997
1996

11
1
1
1
1
1
1
2
2
1
11
-

1
1
1
1
2
1
1
1
1
1
3
1
21
1

Consolidated
1997
1996

$350,001 to $360,000$360,001 to $370,000$370,001 to $380,000$380,001 to $390,000$390,001 to $400,000$400,001 to $410,000$410,001 to $420,000$420,001 to $430,000$430,001 to $440,000$440,001 to $450,000$460,001 to $470,000$470,001 to $480,000$520,001 to $530,000$530,001 to $540,000$580,001 to $590,000$590,001 to $600,000$630,001 to $640,000$650,001 to $660,000$720,001 to $730,000$760,001 to $770,000$1,000,001 to $1,010,000$1,280,001 to $1,290,000$1,550,001 to $1,560,000$1,940,001 to $1,950,000$4,210,001 to $4,220,000

Total number of executives
Total remuneration received or due and receivable directly
or indirectly by executives of the Company and controlled entities ($’000)
1

1
31
1
11
1
1
2
1
21
2
31
1
1
31
1
1
12
13

1
21
31
1
1
1
2
1
2
2
-

72

63

-

1
1
1
1
-

1

The
Company
1997 1996

1
2
1
11
1
1
2
1
2
2
1
1
31
1
1
1
1
36

1
1
31
1
1
1
2
1
2
2
-

11
1
1
36

30,651 19,778 21,265 13,621

The executives whose remuneration is recorded in these bands include fixed term employees with contracts which recognise their
particular expertise and that they have been recruited by the Group for specialised activities. These bands also include employees inthe sharebroking industry whose income includes bonuses in accordance with the practice of that industry
2
A T L Maitland - comprises fixed remuneration ($355,274), 1995/96 bonus ($114,481), 1996/97 bonus ($330,178), annual
leave and long service leave payout ($353,839), retirement allowance under pre-existing arrangements ($319,797) and payment
under contract ($475,000)
3D P Mercer - comprises fixed remuneration ($770,000), 1995/96 bonus ($187,782), 1996/97 bonus ($659,033), annual leaveand long service leave payout ($352,140), additional superannuation contribution and retirement allowance under pre-existingarrangements ($589,925) and payment relating to unexpired period of contract ($1,656,027)

98

Notes to the Financial Statements

46: US GAAP Reconciliation
The consolidated financial statements of the Group are prepared in accordance with Generally Accepted
Accounting Principles applicable in Australia (“Australian GAAP”) which differ in some respects from
Generally Accepted Accounting Principles in the United States (“US GAAP”).
The following are reconciliations of the financial statements, applying US GAAP instead of Australian
GAAP.
1997

1996

1995

$M

$M

$M

1,024

1,116

1,052

(i)

3

1

2

(i)
(ii)
(ii)
(iii)
(vi)

17
(36)
10

4
(36)
(7)
4
5

2
(36)
(5)
5
2

1,018

1,087

1,022

(i)
(i)
(ii)
(ii)
(iv)
(vi)

6,943
(349)
36
807
(472)
392
44

6,290
(366)
33
807
(436)
355
34

5,700
(370)
32
807
(393)
260
30

(iii)

-

-

(4)

7,401

6,717

6,062

138,241 127,604
(349)
(366)
36
33
807
807
(472)
(436)
33
26

112,587
(370)
32
807
(393)
26

(392)

(388)

(350)

137,904

127,280

112,339

Note

Operating profit after income tax using
Australian GAAP1
Items having the effect of increasing (decreasing)reported income:Depreciation charged on the difference between revaluation
amount and historical cost of buildings
Difference in gain or loss on disposal of properties revalued
under historical cost
Amortisation of goodwill
Write-off of goodwill
Amortisation of sale-leaseback gain over lease term
Pension expense adjustment
Net income according to US GAAP
Shareholders’ equity according to Australian GAAP2
Elimination of gross asset revaluation reserves
Adjustment to provision for depreciation on buildings revalued
Restoration of previously deducted goodwill
Accumulated amortisation and write-off of goodwill
Provision for final dividend
Pension expense adjustment
Restoration of deferred gain on sale-leaseback transactions
less amortisation
Shareholders’ equity according to US GAAP
Total assets according to Australian GAAP
Elimination of gross asset revaluation reserves
Adjustment to provision for depreciation on buildings revalued
Restoration of previously deducted goodwill
Accumulated amortisation and write-off of goodwill
Prepaid pension adjustment
Reclassification of deferred tax assets against deferred
tax liabilities
Total assets according to US GAAP
1
2

(i)
(i)
(ii)
(ii)
(vi)
(v)

After abnormal items
Excluding outside equity interests

Australia and New Zealand Banking Group Limited – 1997 Annual Report99Notes to the Financial Statements

46: US GAAP Reconciliation (continued)(i)
Premises and equipment
Properties have been revalued by the Group at
various times, increasing the book value of theseassets (refer note 1(xiii)). Under Australian GAAP,
any increments on revaluation are credited directly
to the Asset Revaluation Reserve (“ARR”), anddecrements are debited to the ARR to the extent
of any previous revaluation increments.
Decrements in excess of any previous
revaluation increments are charged to the Profit
and Loss Account. The ARR forms part of
Shareholders’ equity.
Under US GAAP, revaluation of properties is
not permitted except for decrements which are
regarded as permanent.
Accordingly, under Australian GAAP,
depreciation charges are generally higher andprofits on disposal are lower than those required
under US GAAP. The depreciation charges,
together with the profits and losses on revalued
assets sold have been adjusted to historical cost in
the US GAAP reconciliation.
(ii) Goodwill
The Group changed its accounting policy inrespect of goodwill in the financial year ended
30 September 1993. Previously, goodwill on
acquisition was charged in full to the Group’s
Profit and Loss Account in the year of acquisition.
Under US GAAP, goodwill is capitalised andamortised over the period of time during which
the benefits are expected to arise, such period notexceeding 40 years generally or 25 years in respectof bank acquisitions.
Adjustments have been made in the US GAAP
reconciliation statement to writeback goodwill
written-off in full and to amortise such goodwill
over the period of the expected benefits.
Additionally, to the extent that periodic
reviews of the carrying amount of goodwill lead toa write-down of goodwill previously capitalised for
US purposes, this is adjusted in the US GAAP
reconciliation.
(iii) Sale-leaseback transactions
Under Australian GAAP for operating leases, gains
on disposal under sale-leaseback transactions can berecognised in the period of sale. Under US
GAAP, the gain is amortised over the remaining
lease term. This difference in treatment has beenadjusted in the US GAAP reconciliation.
(iv) Dividends
Under Australian GAAP, dividends are shown in
the Profit and Loss Account in the period to which
they relate rather than in the period when they are
declared as required by US GAAP. This differencein treatment has been adjusted in the US GAAP
shareholders’ equity reconciliation.

100

(v)
Income taxes
Under Australian GAAP, tax benefits relating tocarry forward tax losses must be “virtually certain”
of being realised before being booked.
Realisations of benefits relating to other timing
differences must be “beyond reasonable doubt”
before they may be booked. These tests are as
stringent as those applied under US GAAP andhence no write-down of future tax benefits isrequired.
Australian GAAP allows offsetting of future
income tax benefits and liabilities to the extent
they will reverse in the same period. US GAAP
requires an offset of these two items where reversal
will occur within twelve months and in the period
exceeding twelve months. This has been adjusted
in the US GAAP reconciliation.
(vi) Pension commitments
Under Australian GAAP, contributions in respectof defined benefit schemes are made at levels
necessary to ensure that these schemes aremaintained with sufficient assets to meet theiractuarially assessed liabilities. Any net deficiency
arising from the aggregation of assets and liabilitiesof the Group’s defined benefit schemes is provided
for in the Group’s financial statements (refer
note 39 in the Financial Statements). Under US
SFAS 87 “Employer’s Accounting for Pensions”,
pension expense is a function of an employee’s
service period, interest costs, actuarial return on theschemes’ assets, amortisation of unrecognised priorservice costs and unrecognised net gains or losses.
(vii) Post retirement benefits
Post retirement benefits other than pension
payments are not material and no adjustment isrequired in the US GAAP reconciliation.
(viii) Trading securities
US GAAP requires that in instances where trading
securities are not bought and held principally forthe purpose of selling them in the near term, theyshould be classified as available for sale andrecorded at market value with unrealised profits
and losses in respect of market value adjustments
recognised in Shareholders’ equity.
No adjustment is required to be made in the
US GAAP reconciliation as the effect ofreclassifying certain trading securities as available
for sale is not material.
(ix) Accounting for the impairment of loans
SFAS 114 “Accounting by Creditors for
Impairment of a Loan”, as amended by SFAS 118“Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures”,
requires the value of an impaired loan to bemeasured as the present value of future cash flows
discounted at the loan's effective interest rate, theloan's observable market price or the fair value ofthe collateral, if the loan is collateral dependent.

Notes to the Financial Statements

46: US GAAP Reconciliation (continued)
There is no requirement under Australian
GAAP to discount the expected future cash flows
attributable to impaired loans in assessing the levelof specific provision for doubtful debts.
No adjustment is required in the US GAAP
reconciliation as the estimated fair value of
impaired loans is not materially different from thecarrying value as at 30 September 1997.
(x)

Accounting for the impairment of long
lived assets and for long-lived assets to bedisposed of
SFAS 121 “Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to be
Disposed Of ”, requires that where an event or achange in circumstance indicates that the carrying
value of an asset that is expected to be held andused may not be recoverable, an impairment loss
should be recognised. The standard also requiresthat where there is a committed plan to dispose ofan asset, the asset should be reported at the lowerof the carrying value or fair value less selling costs.
SFAS 121 was adopted by the Group effective
for the year ending 30 September 1997. The
Group has assessed the carrying values of all noncurrent assets and determined that they are not inexcess of their recoverable amounts.

The issue of SFAS 127 “Deferral of theEffective Date of Certain Provisions of FASBStatement No. 125” has deferred the application ofcertain provisions of SFAS 125 until
1 January 1998.
The adoption of the provisions of SFAS 125
by the Group during the year ending
30 September 1997 did not result in a material
adjustment to the US GAAP reconciliation.
The adoption of certain provisions of
SFAS 125 applicable from 1 January 1998 is notexpected to have a material impact on the US
GAAP reconciliation.
(xiii) Statements of comprehensive income
and disclosures about segments
The Group has not adopted the disclosure
provisions of SFAS 130 “Reporting
Comprehensive Income” and SFAS 131“Disclosures about Segments of an Enterprise andRelated Information”, which are not effective until
financial years commencing on or after
15 December 1997. The adoption of thesestandards would not have resulted in a material
impact on the Group’s net income, total assets orshareholders’ equity.

(xi) Accounting for stock-compensation
plans
Under Australian GAAP, an expense is notrecognised for share options issued to employees orfor shares issued at a discount. SFAS 123“Accounting for Stock-Based Compensation”,
requires share options and shares issued to
employees to be recognised using either the fairvalue based method or the intrinsic value based
method as prescribed by APB No 25. No
adjustment is made for the impact of the intrinsic
value based method in the US GAAP
reconciliation as the impact is not material.
(xii) Accounting for transfers andservicing of financial assets andextinguishments of liabilities
The Group has adopted certain provisions of
SFAS 125 “Accounting for Transfers and Servicingof Financial Assets and Extinguishments ofLiabilities”. SFAS 125 prescribes the accounting
and reporting requirements for transfers of financial
assets and extinguishments of liabilities occurring
after 31 December 1996. Under certain
circumstances, the statement also requires atransferor of financial assets that are pledged ascollateral to reclassify those assets, and thetransferee to recognise those assets and their
obligation to return them.

Australia and New Zealand Banking Group Limited – 1997 Annual Report101Notes to the Financial Statements

46: US GAAP Reconciliation (continued)(xiv) Details of Pension Schemes and Pension Expense
Reconciliations of the funded status of major defined benefit schemes as at 30 September 1997 aresummarised below. Details of the funding of the schemes are set out in note 39.
Australian Scheme
accumulated
benefits exceed
assetsUK Scheme
assets exceed
accumulated
benefits$M$M

Accumulated benefit obligation - vested

59

544

Projected benefit obligation
Fair value of plan assets

59
47

596
748

(Deficiency)excess of assets over projected benefit obligation
Unrecognised net transition loss(gain)
Unrecognised net loss(gain)
Unrecognised prior service cost
Adjustment required to recognise minimum unfunded
projected benefit obligation

(12)
7
6
-

152
(46)
(103)
30

(13)

-

(Pension liability)prepaid pension cost

(12)

33

Australian
SchemeUK Scheme

9%
8%

7.5%
7.5%

5%
3%
8%

6%
6%
8.5%

The assumptions used in the actuarial calculations are as follows

Discount rate used in determining present values- active members- pensioners
Annual increase in future compensation levels- salary- pensions
Expected long-term rate of return on assets
The elements of the net periodic pension cost of the above schemes are as follows

1997
$M

Service cost
Interest cost
Actual return on schemes’ assets
Net amortisation and deferral
Net periodic pension cost
The Group also sponsors defined contribution schemes. The Group’s contributions to major defined
contribution schemes amounted to $75 million for the year.

47: Events Since the End of the Financial Year
There have been no significant events since 30 September 1997 to the date of this Report.

102

13
49
(95)
34
1

Directors’ Statement

In the opinion of the directors of Australia and New
Zealand Banking Group Limited, the accompanying
financial statements of the Company and theEconomic entity are properly drawn up inaccordance with the provisions of the Corporations
Law in the manner authorised for a prescribedcorporation being a bank and on this basis(i) the financial statements set out on pages 40 to
102 are drawn up so as to give a true and fairview of the results and cash flows for thefinancial year ended 30 September 1997, andthe state of affairs at 30 September 1997, of theCompany and the Economic entity;(ii) the consolidated accounts have been made out
in accordance with Divisions 4A and 4B of Part
3.6 of the Corporations Law; and(iii) at the date of this statement there are reasonablegrounds to believe that the Company will beable to pay its debts as and when they fall due.
The directors have elected to adopt early
AASB 1014: Set-off and Extinguishment of Debt,
AASB 1016: Accounting for Investments in
Associates, AASB 1032: Specific Disclosures by
Financial Institutions, and AASB 1033: Presentation
and Disclosure of Financial Instruments.

The financial statements have been prepared inaccordance with applicable Australian AccountingStandards and Urgent Issues Group Consensus
Views.
The Company and some of its wholly owned
controlled entities listed in note 38 executed a
Deed of Cross Guarantee enabling them to takeadvantage of the accounting and audit relief
offered by the class order 95/1530, dated
10 November 1995 issued by the Australian
Securities Commission.
The nature of the Deed of Cross Guarantee is toguarantee each creditor payment in full of any debt
in accordance with the terms of the Deed of Cross
Guarantee.
At the date of this statement, there are reasonablegrounds to believe that the Company and its
controlled entities to which the class order applies,
are able, as an Economic entity, to meet any
obligations or liabilities to which they are, or may
become, subject by virtue of the Deed of Cross
Guarantee.

Signed in accordance with a resolution of the directors

Charles Goode
ChairmanJohn McFarlane
Chief Executive Officer

28 November 1997

Australia and New Zealand Banking Group Limited – 1997 Annual Report103Auditors’ Report

To the Members of Australia and
New Zealand Banking Group Limited
Scope
We have audited the financial statements ofAustralia and New Zealand Banking Group
Limited for the financial year ended
30 September 1997, consisting of the profit andloss accounts, balance sheets, statements of changes
in shareholders’ equity, statements of cash flows,
accompanying notes and the directors’ statement
set out on pages 40 to 103. The financial
statements comprise the accounts of the Company
and the consolidated accounts of the Economic
entity being the Company and its controlled
entities. The Company’s directors are responsible
for the financial statements. We have conducted
an independent audit of these financial statements
in order to express an opinion on them to themembers of the Company.
Our audit has been conducted in accordancewith Australian Auditing Standards (which aresubstantially the same as auditing standards
generally accepted in the United States ofAmerica) to provide reasonable assurance whether
the financial statements are free of material
misstatement. Our procedures included
examination, on a test basis, of evidence
supporting the amounts and other disclosures in
the financial statements, and the evaluation of
accounting policies and significant accounting
estimates. These procedures have been
undertaken to form an opinion whether, in allmaterial respects, the financial statements arepresented fairly in accordance with accounting
standards and other mandatory professional
reporting requirements (Urgent Issues Group
Consensus Views) and statutory requirements inthe manner authorised for a prescribedcorporation being a banking corporation so as topresent a view which is consistent with ourunderstanding of the Company’s and theEconomic entity’s financial position, the results of
their operations and their cash flows.
The names of the controlled entities of which
we have not acted as auditors are set out innote 34. We have received sufficient informationand explanations concerning these controlled
entities to enable us to form an opinion on the
consolidated accounts.
The audit opinion expressed in this report has
been formed on the above basis.

KPMG
Chartered Accountants
Melbourne
28 November 1997

104

Audit Opinion
In our opinion, the financial statements ofAustralia and New Zealand Banking Group
Limited, and the financial statements of the
Economic entity, are properly drawn up:(a) so as to give a true and fair view of:(i) the state of affairs of the Economic entity
at 30 September 1997 and 1996 and theresults and cash flows of the Economic
entity for the financial years ended on
30 September 1997, 1996 and 1995;(ii) the state of affairs of the Company at
30 September 1997 and 1996 and of theresults and cash flows of the Company forthe financial years ended 30 September
1997 and 1996; and(iii) the other matters required by Divisions 4,
4A and 4B of Part 3.6 of the Corporations
Law to be dealt with in the financial
statements;(b) in accordance with the provisions of the
Corporations Law in the mannerauthorised for a prescribed corporation
being a banking corporation; and(c) in accordance with applicable Australian
Accounting Standards and other mandatory
professional reporting requirements.
Accounting principles generally accepted inAustralia vary in certain respects from accounting
principles generally accepted in the United Statesof America. An explanation of the majordifferences between the two sets of principles ispresented in note 46 to the financial statements.
The application of the United States principles
would have affected the determination of
consolidated net profit for each of the three years
in the period ended 30 September 1997 and thedetermination of the consolidated financial
position as of 30 September 1997, 1996 and 1995
to the extent summarised in note 46 to thefinancial statements.

P M Burroughs
PartnerP S NashPartnerFinancial Information

1: Capital Adequacy
The Reserve Bank of Australia (RBA) adopts a risk-based capital assessment framework for Australian banks
based on internationally accepted capital measurement standards. This risk-based approach requires eligible
capital to be divided by total risk weighted assets, with the resultant ratio being used as a measure of a bank’s
capital adequacy in relation to its credit risk.
Capital is divided into tier 1, or ‘core’ capital, and tier 2, or ‘supplementary’ capital. For capital
adequacy purposes, eligible tier 2 capital cannot exceed the level of tier 1 capital. Banks are required todeduct from total capital any strategic holdings of other banks' capital instruments and investments in entities
engaged in life insurance, funds management and securitisation activities. Under RBA guidelines, banks
must maintain a ratio of qualifying capital to risk weighted assets of at least 8 per cent.
Risk weightings are applied to balance sheet assets and to credit converted off-balance sheet exposures
to determine total risk weighted assets. Categories of risk weights are assigned based upon the nature of thecounterparty and the relative liquidity of the assets concerned.
1997
$M

1996
$M

Tier 1
Total shareholders’ equity and outside
equity interests
Unamortised goodwill
Net future income tax benefit

6,993
(21)
-

6,336
(17)
(46)

Tier 1 capital

6,972

6,273

776
918

896
709

Qualifying capital

1997
$M

1996
$M

1996
$M

1997
$M

Tier 2
Perpetual notes - subordinatedGeneral provision for doubtful debts

1,694

1,605

Subordinated notes1

2,336

2,418

Tier 2 capital

4,030

4,023

Investment in ANZ Life
Investments in funds management
and securitisation activities

(436)

(354)

Total qualifying capital
Balance sheet assets

AssetsLiquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Customers’ liabilities for acceptances
Regulatory deposits
Shares in associates
Other assets
Premises and equipment

Off-balance sheet exposures
Direct credit substitutes
Trade and performance related items
Commitments
Foreign exchange, interest rate andother market related transactions

(151)

(122)

10,415

9,820

Risk weighted assets

6,298
11,5887,266
3,139
84,14814,040
1,206
7
8,490
2,059

6,901
11,3527,334
2,570
75,901
14,013
1,163
10
6,340
2,020

1,878
2,387
4,191
769
66,182
13,563
189
7
1,464
2,059

1,715
2,403
2,681
630
59,142
12,948
178
10
1,538
2,020

138,241

127,604

92,68983,265

3,506
3,715
3,911

2,369
3,202
3,431

Contract/
notional amountCreditequivalent

4,779
9,689
39,293

3,360
7,964
30,965

4,779
4,266
4,574

3,360
3,577
4,085

657,409516,371

9,045

5,105

Total risk weighted assets andoff-balance sheet exposures

2,326

1,250

13,458

10,252

106,147

93,517

Capital adequacy ratios
Tier 1
Tier 2
Deductions

%
6.6
3.8
(0.6)

%
6.7
4.3
(0.5)

Total
1
Subordinated note issues are reduced each year by 20% of the original amount during the last five years to maturity

9.8

10.5

Australia and New Zealand Banking Group Limited – 1997 Annual Report105Financial Information

2: Interest Spreads and Net Interest Average Margins
1997
$M

1996
$M

1995
$M

2,296
472
652

2,271
484
574

2,102
494
513

3,420

3,329

3,109

60,28816,88235,97255,07914,81529,77750,98913,38926,534

113,142

99,671

90,912

%

%

%

8.46
9.43
7.63
8.34

9.85
10.17
7.94
9.33

9.65
9.87
7.90
9.17

Australia
Gross interest spread
Interest forgone on impaired assets2

3.16(0.09)

3.37(0.15)

3.46(0.25)Net interest spread
Interest attributable to net non-interest bearing items

3.07
0.74

3.22
0.90

3.21
0.91

Net interest average margin - Australia

3.81

4.12

4.12

New ZealandGross interest spread
Interest forgone on impaired assets2

2.18(0.04)

2.43(0.06)

2.77(0.01)Net interest spread
Interest attributable to net non-interest bearing items

2.14
0.66

2.37
0.90

2.76
0.93

Net interest average margin - New Zealand

2.80

3.27

3.69

International markets
Gross interest spread
Interest forgone on impaired assets2

1.53(0.03)

1.49(0.04)

1.48
0.02

Net interest spread
Interest attributable to net non-interest bearing items

1.50
0.32

1.45
0.48

1.50
0.43

Net interest average margin - International markets

1.82

1.93

1.93

Group
Gross interest spread
Interest forgone on impaired assets2

2.48(0.06)

2.67(0.10)

2.79(0.14)Net interest spread
Interest attributable to net non-interest bearing items

2.42
0.60

2.57
0.77

2.65
0.77

Net interest average margin - Group

3.02

3.34

3.42

Net interest income
Australia
New ZealandInternational markets

Average interest earning assets
Australia
New ZealandInternational markets

Gross earnings rate1
Australia
New ZealandInternational markets
Total GroupInterest spreads and net interest average margins may be analysed as follows

1
2

106

Average interest rate received on interest earning assets
Refer note 14 to the financial statements

Financial Information

3: Cross Border Outstandings
Cross border outstandings of the Group to countries which individually represented in excess of 0.75% of
the Group’s total assets are shown below. There were no cross border outstandings to any other country
exceeding 0.75% of total assets.
Cross border foreign outstandings are based on the country of domicile of the borrower or guarantor of
the ultimate risk and comprise loans (including accrued interest), placements with banks, acceptances andother monetary assets denominated in currencies other than the borrower’s local currency.

Governments
and other
official institutions$M

Banks andother financial
institutions
$M

Other
commercial
and industrial
$M

Total
$M

% of
Economic
entityassetsAt 30 September 1997
New Zealand
USA
Japan
United Kingdom
Singapore
Hong Kong
South Korea
India
FranceIndonesia

10
462
12
94
12
1
16
12
2

1,462
1,803
1,033
772
1,371
1,288
918
661
577
559

4,498
937
1,084
894
324
356
600
531
574
542

5,970
3,202
2,129
1,760
1,707
1,645
1,534
1,192
1,163
1,103

4.3
2.3
1.5
1.3
1.2
1.2
1.1
0.9
0.8
0.8

At 30 September 1996
New Zealand
USA
Japan
United Kingdom
Singapore
Hong Kong
France

13
922
84
97
26
1
92

788
683
1,675
1,367
1,180
904
1,019

3,998
881
623
786
336
537
73

4,799
2,486
2,382
2,250
1,542
1,442
1,184

3.8
2.0
1.9
1.8
1.2
1.1
0.9

4: Certificates of Deposit and Term Deposit Maturities
The following table shows the maturity profile of the Group’s certificates of deposit and term deposits inexcess of $100,000 issued at 30 September 1997

Australia
Certificates of deposit
Term deposits

Overseas
Certificates of deposit
Term deposits

Total

Less than
3 months$M

Between
3 months
and 6 months$M

Between
6 months
and 12 months
$M

After
1 year
$M

Total
$M

883
7,391

892

730

44
632

927
9,645

8,274

892

730

676

10,572

2,919
10,711

1,436
1,323

1,297
1,275

271
363

5,923
13,672

13,630

2,759

2,572

634

19,595

21,904

3,651

3,302

1,310

30,167Australia and New Zealand Banking Group Limited – 1997 Annual Report107Financial Information

5: Volume and Rate Analysis
The following table allocates changes in interest income and interest expense between changes in volume andchanges in rate for the past two years. Volume and rate variances have been calculated on the movement inaverage balances and the change in the interest rates on average interest earning assets and average interest
bearing liabilities. The variance caused by the change of both volume and rate has been allocated inproportion to the relationship of the absolute dollar amounts of each change to the total.

Total

Volume

$M

$M

$M

$M

$M

$M

(10)
1
12

1
(7)
(11)

(9)
(6)
1

16
1
87

(2)
5

16
(1)
92

-

(8)

(8)

2

(19)

(17)

(10)
36
182

(69)
(17)
(44)

(79)
19
138

33
(2)
(21)

15
9
20

48
7
(1)

427
147
246

(709)
(78)
(72)

(282)
69
174

367
155
133

101
17
29

468
172
162

69
7
67

(17)
(4)
1

52
3
68

(19)
(4)
47

11
11
(32)

(8)
7
15

1,174

(1,034)

140

795

165

960

VolumeInterest earning assets
Due from other financial institutions
Australia
New ZealandInternational markets
Regulatory deposits with
Reserve Bank of Australia
Investments in public securities
Australia
New ZealandInternational markets
Loans, advances and bills discounted
Australia
New ZealandInternational markets
Other assets
Australia
New ZealandInternational markets
Change in interest income

108

1996 over 1995
Change due toRate1997 over 1996
Change due to
Rate

Total

Financial Information

5: Volume and Rate Analysis (continued)
Volume$M

1996 over 1995
Change due to
Rate
$M

Total
$M

(243)
36
230

67
95
123

22
36
18

89
131
141

(64)
2
6

(42)
13
12

4
6
(1)

21
25
3

25
31
2

133
19
8

(135)
(18)
(2)

(2)
1
6

87
11
8

25
7
(3)

112
18
5

(6)
10
3

(6)
(9)
(50)

(12)
1
(47)

13
(11)
40

(1)
14
1

12
3
41

41
35

(46)
(2)

(5)
33

65
(5)

11
(2)

76
(7)

20
6
-

(31)
(2)
-

(11)
4
-

14
2
-

4
10
-

18
12
-

52
25
2

(61)
(9)
2

(9)
16
4

14
8
1

(6)
(6)
(2)

8
2
(1)

(29)
26
79

2
(14)

(27)
26
65

(6)
22

4
(2)
4

(2)
(2)
26

Change in interest expense

808

(759)

49

557

183

740

Change in net interest income

366

(275)

91

238

(18)

220

1997 over 1996
Change due to
Rate
$M

Total
$M

(3)
80
268

(240)
(44)
(38)

22
11
6

Volume$M

Interest bearing liabilities
Time deposits
Australia
New ZealandInternational markets
Savings deposits
Australia
New ZealandInternational markets
Other demand deposits
Australia
New ZealandInternational markets
Due to other financial institutions
Australia
New ZealandInternational markets
Commercial paper
Australia
New ZealandInternational markets
Borrowing corporations’ debt
Australia
New ZealandInternational markets
Loan capital, bonds and notes
Australia
New ZealandInternational markets
Other liabilities
Australia
New ZealandInternational markets

Australia and New Zealand Banking Group Limited – 1997 Annual Report109Financial Information

6: Concentrations of Credit Risk
Concentrations of credit risk exist if a number of counterparties are engaged in similar activities and have
similar economic characteristics that would cause their ability to meet contractual obligations to be similarly
affected by changes in economic or other conditions. Off-balance sheet transactions of the Group are
substantially with other banks.
1996

1997

Australia
Agriculture, forestry, fishingand mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate - construction
Real estate - mortgage3
Retail and wholesale trade
Other

Overseas
Agriculture, forestry, fishingand mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate - construction
Real estate - mortgage3
Retail and wholesale trade
Other

Total portfolio
1

1995

Loans andadvances 1$MSpecific
provision$M

Loans andadvances1$M

Specific
provision$M

Loans andadvances1$M

Specific
provision
$M

2,716
1,488
1,392
3,997
68
3,272
2,446
6,229
1,216
26,095
4,375
3,398

12
5
28
6
5
29
90
8
54
14
64

2,038
950
1,302
2,472
70
3,282
2,998
7,384
857
23,518
4,210
3,008

21
27
18
22
8
17
35
12
82
51
53

1,721
1,053
1,079
2,106
104
3,138
2,639
7,109
817
22,734
3,615
2,157

25
36
23
32
14
62
40
15
126
75
57

56,692

315

52,089346

48,272

505

2,439
346
555
3,189
656
73
5,172
2,852
900
9,412
1,851
2,782

4
6
4
53
12
8
2
15
34

1,471
439
393
4,493
377
68
3,722
3,115
753
8,034
1,711
2,254

4
6
3
23
3
55
15
16
8
28
2

1,309
501
319
2,066
320
51
3,973
3,221
602
7,488
1,554
1,618

11
9
7
26
3
54
11
16
10
27
23

30,227

138

26,830163

23,022

197

86,919453

78,919509

71,294702

Loans and advances exclude acceptances
Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
3
Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of suchproperties and must be secured by property
2

110Financial Information

6: Concentrations of Credit Risk (continued)
1994

Australia
Agriculture, forestry, fishingand mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate - construction
Real estate - mortgage3
Retail and wholesale trade
Other

Overseas
Agriculture, forestry, fishingand mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate - construction
Real estate - mortgage3
Retail and wholesale trade
Other

Total portfolio

1993

Loans andadvances1$M

Specific
provision$M

Loans andadvances1$M

Specific
provision
$M

1,884
851
827
2,359
345
3,179
1,752
6,379
704
21,674
3,362
1,451

42
48
88
36
21
65
69
14
221
107
96

1,802
759
894
1,638
205
3,212
1,948
6,252
774
19,676
3,497
2,042

98
91
34
44
32
93
78
45
712
132
22

44,767807

42,699

1,381

750
481
237
1,607
595
52
2,598
2,388
373
6,245
1,485
1,486

20
5
10
31
17
52
17
38
23
27
38

901
449
227
1,776
409
63
2,821
2,366
865
4,958
1,524
1,991

24
12
32
20
1
2
58
49
61
29
33
423

18,297278

18,350744

63,064

1,085

61,0492,125

Australia and New Zealand Banking Group Limited – 1997 Annual Report111Financial Information

7: Doubtful Debts - Industry Analysis
1997
$M

1996
$M

1995
$M

1994
$M

1993
$M

Balance at start of year
Adjustment for exchange rate fluctuations
Bad debts written off (refer (i) below)
Transfer from profit and loss account
Provisions acquired(disposed)
Tax (liability) realised on rescheduled debt
Recognition of provisions previously netted
against tax benefits
Other

1,218
16
(199)
336
-

1,380
(16)
(346)
200
-

1,652
(2)
(497)
226
-

2,690
(84)
(1,427)
469
3
-

3,338
56
(1,440)
718
(22)
(2)

-

-

1

1

35
7

Total provisions for doubtful debts

1,371

1,218

1,380

1,652

2,690

(5)
(3)
(11)
(8)
(5)
(10)
(55)
(6)
(26)
(11)
(4)

(11)
(17)
(19)
(8)
(12)
(49)
(46)
(6)
(77)
(33)
(23)

(19)
(11)
(29)
(11)
(45)
(41)
(47)
(6)
(102)
(50)
(55)

(75)
(52)
(95)
(34)
(#)
(26)
(79)
(42)
(36)
(382)
(127)
(21)

(55)
(75)
(22)
(49)
(53)
(46)
(91)
(22)
(576)
(93)
(18)

n/a
(55)

n/a
(45)

n/a
(81)

(321)
(137)

(82)
(258)

(199)

(346)

(497)

(1,427)(1,440)

4
1
1
2
2
4
9
7
2
7

3
1
2
3
3
2
9
1
9
2
2

1
1
3
2
3
1
10
3
4
3

4
1
3
4
4
1
11
1
5
6
3

1
2
1
5
5
#
8
#
7
2
1

n/a
10

n/a
9

n/a
21

12
33

30
9

49

46

52

88

71

Net write-offs

(150)

(300)

(445)

(1,339)(1,369)Ratio of net write-offs to averageloans and acceptances

0.1%

0.3%

0.6%

1.9%

1.9%

(i) Total write-offs by industry
Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other
Overseas
Rescheduled country debt
Other
Total write-offs(ii) Total recoveries by industry
Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other
Overseas
Rescheduled country debt
Other
Total recoveries# Amounts less than $500,000
n/a Not applicable
1
Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
2
Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such properties
and must be secured by property

112

Financial Information

8: Short Term Borrowings
The Group’s short term borrowings comprise commercial paper, as well as unsecured notes issued bysubsidiary borrowing corporations with an original term to maturity of less than one year. The Group hascommercial paper programmes in the United States, where it issues paper through ANZ (Delaware) Inc.,and in Europe and Asia, where the Group issues paper direct.

Balance at end of year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - otherUnsecured notes
Weighted average interest rate at end of year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - otherUnsecured notes
Maximum amount outstanding at any monthend during year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - otherUnsecured notes
Average amount outstanding during year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - otherUnsecured notes
Weighted average interest rate during year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - otherUnsecured notes

1997
$M

1996
$M

1995
$M

1,808
3,023
552

946
2,341
490

1,164
2,046
382

5.55%
5.39%
6.35%

5.58%
7.22%
6.93%

5.76%
5.71%
7.40%

2,094
3,395
564

1,841
3,021
506

1,860
2,396
419

1,731
3,081
427

1,087
2,469
478

1,173
1,601
379

5.41%
5.87%
6.64%

5.58%
7.53%
6.48%

5.80%
6.90%
7.40%

Australia and New Zealand Banking Group Limited – 1997 Annual Report113

Shareholder Information

1: Major Shareholders
Ordinary shares
At 31 October 1997 the twenty largest holders of ordinary shares held 817,497,668 ordinary shares, equal to54.1 per cent of the total issued ordinary capital.
Westpac Custodian Nominees Limited
Chase Manhattan Nominees Ltd
National Nominees Limited
ANZ Nominees Ltd
Australian Mutual Provident Society
Citicorp Nominees Pty Limited
Queensland Investment Corporation
MLC Limited
Pendal Nominees Pty Limited
SAS Trustee Corporation
Permanent Trustee Australia Limited
Perpetual Trustees Victoria Limited
Perpetual Trustees Company Limited
Mercantile Mutual Life Insurance Company Limited
HKBA Nominees Pty Limited
Commonwealth Custodial Services Limited
Permanent Trustee Company Limited
Perpetual Trustees Nominees Limited
The National Mutual Life Association of Australasia Limited
Commonwealth Superannuation Board of Trustees

Number of shares%

168,798,501
148,354,109
89,662,708
58,440,942
38,821,349
31,654,043
30,377,728
29,749,298
29,057,731
27,304,960
25,864,240
17,934,743
17,350,265
16,764,357
15,909,044
15,685,776
15,584,947
15,450,963
13,166,460
11,565,504

11.2
9.8
5.9
3.9
2.6
2.1
2.0
2.0
1.9
1.8
1.7
1.2
1.2
1.1
1.0
1.0
1.0
1.0
0.9
0.8

817,497,668

54.1

2: Substantial Ordinary Shareholders
At 31 October 1997, there were no entries in the Register of Substantial Shareholdings.
During the year to 31 October 1997 notices were received from The Capital Group Companies Inc
regarding shares held by that company. On 29 October 1997 they advised that they held 75,317,646 shares(being 4.99% of the ordinary voting shares). This holding is held by several of the companies listed in
Item 1 above.

3: Average Size of Shareholdings
At 31 October 1997 the average size of holding of ordinary shareholdings was 11,432 (1996: 12,119) shares.

4: Distribution of Shareholdings
Ordinary shares - fully paid
At 31 October 1997Range

1 to 1,000 shares
1,001 to 5,000 shares
5,001 to 10,000 shares
10,001 to 100,000 sharesOver 100,001 shares

114

Number ofholders% ofholders

Number ofshares’000% ofshares52,20759,618
11,903
7,698
552

39.6
45.2
9.0
5.8
0.4

25,397140,247
84,200167,045
1,091,933

1.7
9.3
5.6
11.0
72.4

131,978100.0

1,508,822

100.0

Shareholder Information

5: Voting Rights of Shareholders
Ordinary shares - fully paid
The Articles provide for(i) on show of hands 1 vote;(ii) on a poll 1 vote for each ordinary share held; and(iii) 1 vote for every 10, 10 cent paid shares issued pursuant to the Company’s Senior Officers’ Share
Purchase Scheme and the Directors’ Share and Option Purchase Scheme.

6: Holders of Non-Marketable Parcels
Ordinary shares
At 31 October 1997, shareholdings of less than a marketable parcel (1 to 99 shares) were 6,519(1996: 5,370), which is 4.9% of the total holdings of ordinary shares.

7: Employee Shareholder Information
At the January 1994 Annual General Meeting, shareholders approved a limit of 7% of the issued share capitalof the Company on the number of shares which may be issued under the Employee and Senior Officers’
Share Purchase Schemes and the unissued shares to which options may be granted under any incentive
schemes for employees and directors of the Group.
At 31 October 1997, participants in the Employee and Senior Officers’ Share Purchase Schemes held 1.6%
(1996: 1.8%) of the issued share capital. At 31 October 1997, 6,983,091 options to purchase ordinary shares
which have been granted under the Directors’ Share and Option Purchase and the ANZ Group Share
Option Schemes, had not been exercised.

8: Directors’ Shareholding InterestsC B GoodeJ C Dahlsen
Dr R S Deane
J K Ellis
C J Harper
M A Jackson
J McFarlane
J F Ries
Dr B W ScottR B Vaughan

A

B

C

D

267,075
83,40075,00052,47155,50071,1232,000
102,000
84,05388,51250,000-310,710-

12,000-881,134

50,000310,710

12,000

A Beneficially held - fully paid ordinary shares of $1.00 each
B Beneficially held - options issued pursuant to the Directors’ Share and Option Purchase Scheme to take up shares in the Company during
the period of 5 years after issue at market prices fixed as at the time of issue less one cent, which was paid on issue of the option
C Beneficially held - options issued pursuant to the ANZ Group Share Option Scheme to take up shares in the Company no earlier than
3 years or later than 5 years after issue at market prices fixed as at the time of issue less one cent, which was paid on issue of the option,
provided certain performance criteria are met
D Non-beneficially held - fully paid ordinary shares of $1.00 each

Australia and New Zealand Banking Group Limited – 1997 Annual Report115GlossaryCore Operating Expenses
Core operating expenses represents total operating expenses excluding direct income-related
expenditure and restructuring expenses.
Geographic segmentation
UK and Europe includes France, Germany, Guernsey, Jersey, Italy, Switzerland and United
Kingdom.
Asia Pacific includes Cook Islands, Fiji, Hong Kong, Indonesia, Japan, Korea, Malaysia,
Papua New Guinea, Philippines, Samoa, Singapore, Solomon Islands, Sri Lanka, Taiwan, Thailand,
The People’s Republic of China, Tonga, Vanuatu and Vietnam.
South Asia includes Bangladesh, India and Nepal.
Americas includes Argentina, Brazil, Chile, Mexico and United States of America.
Middle East includes Bahrain, Greece, Israel, Jordan, Oman, Pakistan, Qatar and United ArabEmirates.
Impaired assets
Impaired assets are loans or other credit facilities where there is reasonable doubt about thecollectability of interest, fees (past and future) or principal outstanding, or where concessional terms
have been provided because of the financial difficulties of the customer.
Net advances
Net advances include gross loans and advances, acceptances and ANZ accepted bills held as part of
trading securities less income yet to mature and specific provisions (for both as at and averagevolumes).
Net interest average margin
Net interest average margin is net interest income as a percentage of average interest earning assets.
Non-assessable interest income is grossed up to the equivalent before tax amount for the purposeof these calculations.
Net interest spread
Net interest spread is average interest rate received on interest earning assets less the averageinterest rate paid on interest bearing liabilities. Non-assessable interest income is grossed up to theequivalent before tax amount for the purpose of these calculations.
Net non-interest bearing items
Net non-interest bearing items, referred to in the analysis of interest spread and net interest averagemargin, includes shareholders’ equity, provisions for doubtful debts, and deposits not bearing
interest and other liabilities not bearing interest, offset by premises and equipment and other noninterest earning assets. Non-accrual loans are included within interest bearing loans, advances andbills discounted.
Operating expenses
Operating expenses exclude charges for doubtful debts and abnormal items.
Total advances
Total advances include gross loans and advances, acceptances and ANZ accepted bills held as partof trading securities less income yet to mature (for both as at and average volumes).
Unproductive facilities
Unproductive facilities comprise standby letters of credit, bill endorsements, documentary letters ofcredit and guarantees to third parties.

116

Australia and New Zealand Banking Group Limited – 1997 Annual Report117Worldwide Representation
Australia
Group Headquarters
Australia and New Zealand Banking
Group Limited,
100 Queen Street,
Melbourne,
Victoria 3000
GPO Box 537E,
Melbourne 3001
Telephone: (61-3) 9273 5555
Telex: AA 68210 (International)
AA 139920 (Domestic)

Esanda Finance Corporation Limited,
85 Spring Street,
Melbourne 3000
Telephone: (61-3) 9666 9100
Fax: (61-3) 9666 9626
Town & Country Bank(a division of Australia and New
Zealand Banking Group Limited)
297 Murray Street,
Perth W.A. 6000
Telephone: (61-8) 9267 3333
Fax: (61-8) 9267 3435

Principal State Offices

New South Wales
20 Martin Place,
Sydney 2000
GPO Box 495,
Sydney 2001
Telephone: (61-2) 9227 1911

Queensland
324 Queen Street,
Brisbane 4000
GPO Box 1051,
Brisbane 4001
Telephone: (61-7) 3228 3228

South Australia
13 Grenfell Street,
Adelaide 5000
GPO Box 1819,
Adelaide 5001
Telephone: (61-8) 8218 8122

Tasmania
ANZ Centre
2nd Floor,
22 Elizabeth Street,
Hobart 7000
GPO Box 504E,
Hobart 7001
Telephone: (61-03) 6221 2601

Western Australia
77 St. George’s Terrace,
Perth 6000
GPO Box L905, Perth 6001
Telephone: (61-8) 9323 8111

Headquarters
ANZ Banking Group(New Zealand) Limited,
215-229 Lambton Quay, Wellington
PO Box 1492, Wellington
Telephone: (64-4) 496 7000
Telex: NZ 3385
Fax: (64-4) 473 6919

Subsidiary Companies
ANZ Securities (NZ) Limited,
21st Floor, ASB Building,
135 Albert Street, Auckland
PO Box 6243,
Wellesley Street, Auckland
Telephone: (64-9) 356 3450
Freephone: 0800 800 611
Telex: 63372
Fax: (64-9) 309 9410
UDC Group Holdings Limited,113-119 The Terrace, Wellington
PO Box 1616, Wellington
Telephone: (64-4) 471 4500
Fax: (64-4) 471 4592

International
Headquarters

25 Petrie Plaza,
Canberra City 2601
GPO Box 371,
Canberra City 2601
Telephone: (61-2) 6276 4100

Australia and New Zealand Banking
Group Limited,
100 Queen Street
Melbourne
Victoria 3000
Australia
Tel: (61-3) 9273 5555
Fax: (61-3) 9273 4909

Northern Territory

ARGENTINA

Smith Street, 43 The Mall,
Darwin 0800
GPO Box 1, Darwin 0800
Telephone: (61-8) 89 823510

Australia and New Zealand Banking
Group Limited
Bouchard 547, 10th Floor
1106 Buenos Aires
Argentina
Tel: (54-1) 315 2330
Fax: (54-1) 313 3967

Australian Capital Territory

Subsidiary Companies
ANZ Funds Management,(ANZ Managed Investments
Limited/ANZ Life Assurance Company
Limited/ANZ Executors and Trustee
Company
Limited)68 Pitt Street, Sydney 2000
Telephone: (61-2) 9216 2345
Fax: (61-2) 9216 2350
ANZ Securities Limited,
10th Floor, 530 Collins Street,
Melbourne 3000
Telephone: (61-3) 9205 1400
Fax: (61-3) 9649 7023

118

New Zealand

BAHRAIN
Grindlays Bahrain Bank B.S.C. (c)P O Box 793
Manama Centre, Entrance No 3
Government Road
ManamaBahrain
Tel: (973) 225 999
Fax: (973) 224 482

ANZ Grindlays Bank Limited
Offshore Banking Unit
P O Box 5793
1st Floor, Manama Centre
Bahrain
Tel: (973) 224 210
Fax: (973) 224 478

BANGLADESHANZ Grindlays Bank Limited
P O Box 502
2 Dilkusha Commercial Area
Dhaka 1000
Bangladesh
Tel: (880-2) 955 0181
Fax: (880-2) 956 2329/956 2332

BRAZIL
Australia and New Zealand Banking
Group Limited
Av. Nilo Pecanha, 50 Grupo 810
20044 Rio de Janeiro - RJ
BrazilTel: (55-21) 240 2294
Fax: (55-21) 220 0840

CHILE
Australia and New Zealand Banking
Group Limited
Edificio Atlantis
Av. El Bosque Norte 0440, Of. 604
Las Condes
Santiago
Chile
Tel: (56-2) 203 5217
Fax: (56-2) 203 5226

GERMANY
Australia and New Zealand Banking
Group Limited
Mainzer Landstrasse 46
60325 Frankfurt am Main
Germany
Tel: (49-69) 710 0080
Fax: (49-69) 710 00821

GREECEANZ Grindlays Bank Limited
7 Merlin Street
P O Box 30391
Athens 10671
GreeceTel: (30-1) 362 4601/5
Fax: (30-1) 360 3811

GUERNSEYANZ Bank (Guernsey) Ltd
P O Box 153
Frances House, Sir William Place
St Peter Port
Guernsey
Channel Islands
Tel: (44-1481) 726 771
Fax: (44-1482) 727 851

HONG KONG
Australia and New Zealand Banking
Group Limited
27th Floor, One Exchange Square
8 Connaught Place Central
Hong Kong
Tel: (852) 2843 7111
Fax: (852) 2525 2475/2868 0089

CHINA

INDIA

Australia and New Zealand Banking
Group Limited
10th Floor, Novel Plaza
116-128 Nanjing Road WestShanghai 200003
Peoples Republic of China
Tel: (86-21) 6350 9599
Fax: (86-21) 6350 9590

ANZ Grindlays Bank Limited
90 Mahatma Gandhi RoadP O Box 725
Mumbai 400 001
India
Tel: (91-22) 267 0162/267 1495
Fax: (91-22) 261 9903

COOK ISLANDSPT ANZ Panin Bank
17th Floor, BNI Building
Jl Jend, Sudirman Kav. 1
Jakarta Pusat 10220
Indonesia
Tel: (62-21) 251 0530
Fax: (62-21) 251 0536

Australia and New Zealand Banking
Group Limited
1st Floor, Development Bank Building
P O Box 907
Avarua, Rarotonga
Cook Islands
Tel: (682) 21 750
Fax: (682) 21 760

FIJI
Australia and New Zealand Banking
Group Limited
ANZ House, 25 Victoria Parade
P O Box 179
Suva
Fiji
Tel: (679) 302 144
Fax: (679) 300 267

FRANCE
Australia and New Zealand Banking
Group Limited
6 rue de Berri
75008 Paris
FranceTel: (33-1) 40 75 05 37
Fax: (33-1) 40 75 05 46

INDONESIA

Australia and New Zealand Banking
Group Limited
Representative Office
17th Floor, BNI Building
Jl Jend, Sudirman Kav. 1
Jakarta Pusat 10220
Indonesia
Tel: (62-21) 570 1204
Fax: (62-21) 570 5138

IRAN
Australia and New Zealand Banking
Group Limited
3rd Floor, No 14, 4th Alley
Shahid Ahmad Ghasir(Ex Bucharest Avenue)
Tehran 15146
Iran
Tel: (98-21) 873 3554
Fax: (98-21) 873 3559

ISRAELNEPAL

SWITZERLAND

UNITED KINGDOM

Australia and New Zealand Banking
Group Limited
1 Salahadin Street
P O Box 19390
Jerusalem 91133
IsraelTel: (972-2) 626 3444
Fax: (972-2) 626 3311

Nepal Grindlays Bank Ltd
Grindlays Bhawan
P O Box 3990
Kathmandu
Nepal
Tel: (977-1) 247 304
Fax: (977-1) 247 314

ANZ Grindlays Bank LimitedCase Postale 1560
7 Quai du Mont Blanc
CH-1211 Geneva
Switzerland
Tel: (41-22) 906 0111
Fax: (41-22) 906 0122

PAKISTANTAIWANJAPANANZ Grindlays Bank Limited
I.I. Chundrigar RoadP O Box 5556
KarachiPakistan
Tel: (92-21) 241 4131
Fax: (92-21) 241 4914

Australia and New Zealand Banking
Group Limited
P O Box 9-595
8F, 44 Chung Shan North Road
Section 2
TaipeiTaiwanTel: (886-2) 568 3353
Fax: (886-2) 511 1232

Australia and New Zealand Banking
Group Limited
P O Box 7
Minerva House
Montague Close
London SE1 9DH
United Kingdom
Tel: (44-171) 378 2656
Fax: (44-171) 378 2257

Australia and New Zealand Banking
Group Limited
8th Floor, Yanmar Tokyo Building
1-1 Yaesu 2-Chome, Chuo Ku
Tokyo 104
Japan
Tel: (81-3) 3271 1151
Fax: (81-3) 3281 8417

JERSEYANZ Grindlays Bank (Jersey) Ltd
P O Box 80
West House, Wests CentrePeter Street
St HelierJerseyChannel Islands
Tel: (44-1534) 874 248
Fax: (44-1534) 877 695
ANZ Grindlays Trust Corporation(Jersey) Ltd
West House, Wests CentrePeter Street
St HelierJerseyChannel Islands
Tel: (44-1534) 607 351
Fax: (44-1534) 37 600

JORDANANZ Grindlays Bank Limited
P O Box 9997
Shmeissani
Amman 11191
JordanTel: (962-6) 660 201/7
Fax: (962-6) 679 115

KOREA
Australia and New Zealand Banking
Group Limited
18th Floor, Kyobo Building
1 Chongro 1, Chongro-ku
KPO 1065
Seoul
Korea
Tel: (82-2) 730 3151
Fax: (82-2) 737 6325

MALAYSIA
Australia and New Zealand Banking
Group Limited
Wisma Genting
4th Floor, Jalan Sultan Ismail
50250 Kuala Lumpur
Malaysia
Tel: (60-3) 261 6088
Fax: (60-3) 261 3210

MEXICO
Australia and New Zealand Banking
Group Limited
Ejercito Nacional No 926 - 2o Piso11510 Mexico D.F.
Tel: (52-5) 580 1036
Fax: (52-5) 580 1031

PAPUA NEW GUINEA
Australia and New Zealand Banking
Group (PNG) Ltd
3rd Floor, Defens Haus
Cnr Champion Parade & Hunter Street
Port Moresby
Papua New Guinea
Tel: (675) 322 3333
Fax: (675) 322 3306

PHILIPPINES
Australia and New Zealand Banking
Group Limited
Tower One, Ayala Triangle, Ayala
AvenueMakati City
Philippines
Tel: (632) 848 5091
Fax: (632) 848 5086

QATAR
ANZ Grindlays Bank Limited
Rayyan RoadP O Box 2001
Doha
Qatar
Tel: (974) 418 222
Fax: (974) 428 077

SAMOA
ANZ Bank (Samoa) Limited
P O Box L 1855
Apia
Western Samoa
Tel: (685) 22 422
Fax: (685) 24 595

THAILAND
Australia and New Zealand Banking
Group Limited
9th Floor, Tower A, Diethelm Towers
93/1 Wireless Road
Bangkok 10330
ThailandTel: (66-2) 256 6350
Fax: (66-2) 256 6347

TONGA
Australia and New Zealand Banking
Group Limited
Cnr Salote & Railway RoadsP O Box 910
Nuku’alofa
Tonga
Tel: (676) 24 944
Fax: (676) 23 870

UNITED ARAB EMIRATESANZ Grindlays Bank Limited
P O Box 4166
Al Maktoum Street
Near Deira Clock Tower
Deira, Dubai
United Arab Emirates
Tel: (971-4) 508 8111
Fax: (971-4) 508 8222

Grindlays Private Banking
13 St James’s Square
London SW1Y 4LF
United Kingdom
Tel: (44-171) 451 3500
Fax: (44-171) 451 3652

UNITED STATES OF AMERICA
Australia and New Zealand Banking
Group Limited
1177 Avenue of the Americas
New York, NY 10036
USA
Tel: (1-212) 801 9800
Fax: (1-212) 801 9859

VANUATU
ANZ Bank (Vanuatu) Ltd
ANZ House, Kumul Highway
Port Vila
VanuatuTel: (678) 22 536
Fax: (678) 22 814

VIETNAM
Australia and New Zealand Banking
Group Limited
14 Le Thai To Street
Hanoi
Vietnam
Tel: (84-4) 825 8190
Fax: (84-4) 825 8188

ANZ Grindlays, Mumbai, India.

SINGAPORE
Australia and New Zealand Banking
Group Limited
10 Collyer Quay
17-01/07 Ocean Building
Singapore 0104
Tel: (65) 535 8355
Fax: (65) 539 6111

SOLOMON ISLANDS
Australia and New Zealand Banking
Group Limited
Mendana Avenue
HoniaraSolomon Islands
Tel: (677) 21 835
Fax: (677) 22 957

SRI LANKAANZ Grindlays Bank Limited
P O Box 112
37 York Street
Colombo 1
Sri Lanka
Tel: (94-1) 446 150/7
Fax: (94-1) 446 158

Australia and New Zealand Banking Group Limited – 1997 Annual Report119Phone Directory
Customer Banking
Enquiries
13 13 14

ANZ Phone
Banking
13 13 14Credit Card
Enquiries
13 22 73

8.00am-8.00pm, Monday to Friday

24 Hours, 7 days a week

8.00am - 6.00pm, Monday to Friday• Account balances & enquiries• Account balances

ANZ Gold Card

• Periodical payment information• Transaction history

13 17 24

• Statement information• Order statements• Cheque/Deposit book ordering• Funds transfer• Account maintenance• Product information• Stop payments• Cheque/Deposit book ordering

Qantas/Telstra Card

• Fee information• Bill payments

13 19 51

Qantas/Telstra Gold Card

13 27 24

Business/Purchasing Card

Home Buyers Line
1800 035 500
8am-11pm, 7 days a week

Small Business Hotline
1800 035 500
8am-11pm, 7 days a week
• Arrange a callback from an ANZBusiness Manager• Arrange an appointment to see an
ANZ Business Manager

ANZ Direct
Home Loans & Investment
Loans

1800 032 481

13 14 09

Lost or Stolen Cards
1800 033 844

Car Loans

24 Hours, 7 days a week

13 22 07
Superannuation, Insurance &Investments

13 11 95

EFTPOS &Fast Track Help Centre
1800 035 315
24 Hours, 7 days a week

EsandaCustomer Compliments& Concerns
1800 805 154

Esanda Finance

13 23 73
Esanda Investments

Merchant Enquiries
1800 039 025
8.00am-6.00pm, Monday to Friday

13 12 15International Services
1800 678 273

ANZ Funds Management
Unit Trusts

ANZ Securities

1800 022 893

ANZ Stockbroking

Life Insurance &Superannuation

13 13 70
ANZ Margin Lending

1800 021 052

1800 639 330 (Australia wide)
1800 243 554 (NSW)
07 3228 3283 (QLD)

Rollovers/Approved Deposits/
Superannuation Savings

ANZ Futures

1800 655 431

02 9322 6514 (Australia wide)
03 9205 1450 (VIC)

1800 036 190
D.I.Y. Super
Charitable Trusts Information
Line

1800 808 910
Estate Planning &Management(ANZ Trustees)

1800 011 047
V2 Plus General Enquiries

13 28 33
V2 Plus Rate Recorded
Message1800 033 043

120

ANZ product and service
information is also available
on ANZ’s internet site:www.anz.com

Shareholder Information
Dividends
The final dividend of 26 cents per share will be paidon 21 January 1998 bringing the full year dividend to48 cents per share. The interim dividend paid in July
1997 was fully franked and the final dividend is fully
franked at 36% for Australian taxation purposes.
Dividends may be paid directly to a bank account inAustralia, New Zealand or United Kingdom.
Shareholders who want their dividends paid this way
should advise the relevant share registry in writing
prior to books closing date. Dividend Reinvestment
and Bonus Option plans are available to shareholders.
The plans are detailed in a booklet called “Shareholder
Alternatives”, copies of which are available from theshare registries at the addresses shown.

Annual General Meeting
The Annual General Meeting
will be held at the
Melbourne Concert Hall,
100 St Kilda Road, Melbourne
on Wednesday, 21 January 1998.

Chairman’s Address
A summary of the Chairman’s
address to the AGM will be publishedin the “Shareholder Contact”
magazine issued in February 1998.

Stock Exchange Listings
The Group’s ordinary shares are listed on the Australian
Stock Exchange, the London Stock Exchange and the
New Zealand Stock Exchange. The Capital Securities
offered in February 1993 are listed on the New York
Stock Exchange.

American Depositary Receipts
The Bank of New York sponsors an American
Depositary Receipt (ADR) program in the UnitedStates of Amer ica. The ADRs were listed on the New
York Stock Exchange on 6 December 1994. ADR
holders should deal directly with the Depositary, Bankof New York, New York, Telephone (212) 815-2729,
Fax (212) 571-3050 on all matters relating to their
ADRs.

Enquiries
Shareholders who wish to contact the Company on
any matter related to their shareholding are invited totelephone or write to the most convenient shareregistry.

Change of Address
It is important that shareholders notify the share registryin writing if there is a change to their address. For
added protection shareholders should quote their
Shareholder Number.

Credit Ratings (December 1996)
Short Term Debt
Moody’s Investors Service
Standard & Poor’s Ratings Group

P-1
A-1+

Long Term Debt
Moody’s Investors Service
Standard & Poor’s Ratings Group

Aa3
AA-

Registered Office
Level 2, 100 Queen Street, Melbourne,
Victoria 3000 Australia
Phone: (03) 9273-6141
Fax: (03) 9273-6142
Secretary: R T Jones
General Manager Investor Relations: D H Ward

Share Registry
Australia

Coopers & Lybrand
Level 12, 333 Collins Street,
Melbourne,Victoria 3000
Phone: (03) 9205 4999
Toll Free: 1800 331 721 (outside Melbourne metropolitan area)
Fax: (03) 9205 4900

Removal from Annual Report Mailing List

New ZealandShareholders who do not want the Annual Report or
who are receiving more than one copy should advise
the share registry in writing. These shareholders
will continue to receive all other shareholder
information.

C/- ANZ Banking Group (New Zealand) Limited
8th Floor, 215-229 Lambton Quay, Wellington
Phone: (04) 496 7000
Fax: (04) 496 8872

To Consolidate Shareholdings
Shareholders who wish to consolidate their separate
holdings should advise the share registry in writing.

United Kingdom

7th Floor, Jupiter House
Triton Court
14 Finsbury Square
London EC2A IBR UK
Phone: (0171) 920 0010
Fax: (0171) 920 0120

Australia New Zealand Argentina Bahrain Bangladesh
Brazil Chile China Cook Islands Fiji France Germany Greece
Guernsey Hong Kong India Indonesia Iran Israel
Japan Jersey Jordan Korea Malaysia Mexico Nepal Pakistan
Papua New Guinea Philippines Qatar Samoa
Singapore Solomon Islands Sri Lanka Switzerland Taiwan
Thailand Tonga United Arab Emirates
United Kingdom United States of America Vanuatu Vietnam

Australia and New Zealand Banking Group Limited
ACN 005 357 522
Registered Office: Level 2, 100 Queen Street, Melbourne, Victoria 3000, Australia.
Telephone: (03) 9273 6141 Facsimile: (03) 9273 6142