When people are inspired ...

ANZ Concise Annual Report 2005

Australia and New Zealand Banking Group Limited
www.anz.com ABN 11 005 357 522

Concise Annual Report 2005 / Part 1 of 2 / Annual Review

... and come together in teams,
something very powerful happens ...

Pictured left: Jayant Rajan, Personal; Wesley Hall, Operations Technology & Shared Services; Sam D’amato, Institutional;
Karen Kong, Corporate; and Jim Giles, Esanda.

The ANZ Concise Annual Report is a concise report and comprises two parts: Part 1 (Annual Review) and Part 2 (Concise Report). The two parts are
distributed together as one document and should be read together. These documents may only be distributed by a person on the basis that Part 1(Annual Review) and Part 2 (Concise Report) are distributed together.
A copy of the full Financial Report for the year ended 30 September 2005 for the Group, including the independent Auditor's Report, is available toall members, and will be sent to a member without charge upon request. The Financial Report can be requested by telephone (Australia 1800 11 33 99
Overseas +613 9415 4010), by email at investor.relations@anz.com or viewed directly on the Internet at www.anz.com

... they bring significant and sustainablechange to a company year after year
after year after year after year after year.
And that makes ANZ ‘Bank of the Year’for the sixth year in a row.
04
06
10
16
32
38
42
44

2005 Investor Snapshot
Chairman and CEO’s Report
Chief Financial Officer’s Report
Our Business Performance
People, Community and the Environment
The Board of Directors
10 Year Financial Summary
Information for Shareholders

2005 HIGHLIGHTS

2005 INVESTOR SNAPSHOTMEASURING PERFORMANCE
2005 has been another good year for ANZ as we continue to deliver for all our stakeholders. We haverewarded shareholders with strong returns and built a unique culture that continues to deliver leading
staff engagement and customer satisfaction. Our community involvement and recognition has increased
significantly. Our focus remains on building a sustainable business to deliver long term for all stakeholders.

NET PROFIT AFTER TAX ($m)

MARKET CAPITALISATION ($b at 30 September)

3,018

43.834

Awarded ‘Bank of
the Year’ for the sixthyear in a row

Awarded Best Call
Centre and now
open 24/7(as voted by Personal
Investor Magazine)

DIVIDEND (cents)

The leading large
Australian organisation
for the Advancementof Women

CASH EARNINGS PER SHARE (cents)

110

175.2
161.1

101

2,815

05

04

04

Awarded New Zealand
Bank of the Year34.586

7.2%

05

04

27%

05

04

8.9%

05

04

8.8%

IMPROVED CUSTOMER SATISFACTIONLEADING STAFF ENGAGEMENTEARNING COMMUNITY TRUSTMANAGING RESPONSIBLY

We are the leading major bank for customer satisfaction
and we are now more than nine percentage points
ahead of the average of the ‘Big 4 banks’ and five
percentage points ahead of our closest major peer.

Staff engagement is the highest of any major
Australian company at 63%, placing ANZ in theBest Employer Zone (see page 35). This follows ourprevious strong performance for staff satisfaction
which increased from 49% in 1999 to 85% in 2004.

Our community investment strategy seeks toincrease the financial literacy and inclusion of adult
Australians and enable our people to support thecauses important to them. More than 18% of ourpeople contributed 24,000 hours of volunteer timein 2005 and 28% of our staff have donated funds
through workplace giving.

ANZ ranked in the top 10 of top 10% banks globallyon the Dow Jones Sustainability Index. We scored
100% for our Community Management Practice on
the Corporate Responsibility Index and we maintained
our membership on the FTSE4Good Global Index.

investor snapshot

05

01

Checking progress
Testing performance

CHAIRMAN AND CEO’S REPORTSUSTAINING PERFORMANCE AND GROWTH
Last year we outlined strategic priorities
for achieving our goal to become the mostrespected and fastest growing of the major
Australian banks. These were to createshareholder value, build market leadershipand achieve superior revenue growth; torun a low cost and low risk business with
distinctive customer service, and to earn
the trust of the community.
It is pleasing to report to shareholders thatin 2005 we made good progress towards
these goals. Through stable leadership anda consistent agenda, we have achieved 22%compound growth in total shareholder return
over the past seven years, and 33% in thepast year.
We have strengthened our strategic position
during the year. In Australia we have increased
our market share in our Personal business,and ANZ is now the third largest bank byshare of retail customers, by assets, andby value.

Over the past nine years we have taken
20 percentage points off the cost to income
ratio. Our current mid-40s ratio makes us
one of the most efficient banks in the world.
In customer satisfaction, we rate nine
percentage points higher than the industry
average for major banks, and ANZ is themost well regarded of the major banks
among retail customers. Our products havebeen highly rated. For the sixth consecutive
year independent experts have voted us
Bank of the Year.
On other leading indicators we have
performed strongly. We have built aperformance and results oriented culture
and have the highest staff engagementof any major Australian company. Throughour activities and programs in areas suchas financial literacy and inclusion we are
earning the trust of the community.
We made progress in 2005 and look forward
to continuing it in 2006.

Pictured left - Maeva Fried, Asia Pacific; Elizabeth Povey, Esanda; Joe Farrugia, Personal; Graeme Poules, Operations
Technology & Shared Services; Lynne Dunham, Institutional; Charles Goode, Chairman; and John McFarlane,
Chief Executive Officer.

06

chairman and ceo’s report

07CHAIRMAN’S REPORTA MESSAGE FROM CHARLES GOODE
The achievements of the past year would not have been possible without thecommitment and dedication of our people. On behalf of my fellow Directors andall shareholders, I thank them for their contribution to ANZ’s success and lookforward to their continuing support.

ANZ has once again met its commitment
to shareholders, producing a record profit,a 17.3% return on shareholder equity anda strong capital position.

We are managing risks well and are seeing
the results from the de-risking program
undertaken in recent years. Net specificprovisions were down by 19% to $357million.

For the year ended 30 September 2005,
profit after tax was up 7% to a record$3,018 million. Excluding significant items
and integration costs associated with The
National Bank of New Zealand, our profit
was up 12% to $3,056 million.

Our capital position is strong, with theGroup’s adjusted common equity ratio at
5.1% of risk weighted assets, above ourtarget range of 4.5% to 5.0%.

The Directors were pleased to increase
the dividend by 9% to 110 cents per share
fully franked. This was the 12th consecutive
increase in our annual dividend.
Our Australian businesses performed well,particularly our Personal business which
recorded growth above the average of thefinancial services sector. We are now, on many
criteria, the best performing major retail bankin Australia, a noteworthy achievement given
ANZ’s heritage as a predominantly
corporate bank.
Our Institutional business recorded a solid
performance in what has been a highly
competitive year. This business is undergoing a period of reinvigoration following
a number of years of relatively flat earnings
and low asset growth, arising from ourde-risking program.
Both our Corporate business and Esanda
continued to deliver solid and consistentearnings growth in an increasinglycompetitive environment.
In New Zealand, the competitive environment
coupled with our continued investment in
the ANZ retail business offset a good
performance by The National Bank of
New Zealand franchise.
Our Asia Pacific business delivered agood to invest in the region, establishing
new partnerships this year in Vietnam andCambodia. We are making good progressin establishing partnerships in China.

08

Board changes
Directors Brian Scott and John Dahlsen,
both of whom were on the ANZ Board for
20 years, retired during the year.
Their wise counsel and insightful
contributions to Board deliberations overmany years demonstrate the benefit of
having some Directors with long-standing
institutional knowledge of the company
and the experience of all phases of theeconomic cycle. We thank them sincerely
and wish them well in their retirement.
Outlook
It is likely that we are moving into a periodof slightly lower economic growth and amore competitive environment. This calls
for a systematic focus on costs and revenue
growth and I believe that ANZ is well placed
to meet future challenges.
In the coming year we should continue tobenefit from the momentum we have built
in our Australian businesses. In the medium
term, we expect to see improved returns
from the integrated business in New Zealand,
while over the longer term our position in
Asia should become of more importance.
We are focused on delivering sustainable
returns for our shareholders.

CHIEF EXECUTIVE OFFICER’S REPORTA MESSAGE FROM JOHN McFARLANE
For over a decade now, shareholders and other stakeholders have benefited
from the strategic expansion and strength of our financial performance. Profits
now exceed $3 billion, and we have expanded our position in Australia, become
the leading bank in New Zealand and the South Pacific, and we are the leading
Australian bank in Asia. We can be proud of these achievements.

Growth and Transformation

Sustainability involves a longer-term focus

That is now, but what of the future? We haveset ourselves a new challenge of becoming
Australasia’s leading bank. This requires
a new agenda with two principal themes–
Growth, and Transformation.

To be successful long-term, our focus cannot
exclusively be on today, but also on thelonger-term. Winners, over time, will not
be those who maximise short-term results,
but those who invest wisely to produce
superior returns tomorrow. Companies
nevertheless need to produce reasonable
results in the short-term to survive, while
they pursue their long run ambitions.

Growth is about expansion of our franchiseand building leadership positions in ourcore domestic businesses in Australia and
New Zealand and expanding into Asia andthe Pacific, as well as serving our clientsfrom these geographies across the world.
We expect Australia will initially drive ourgrowth and performance as it did in 2005.
Later we expect our leadership position
in New Zealand to bear fruit, and over the
longer term, Asia will become increasingly
meaningful.
Growth also means delivering strong returns
for shareholders by raising our annual
revenue growth to 7%–9% over the coming
years. We made good progress in 2005 witha substantial increase in our investment
spending; adding over 2,200 people in theyear, mainly to increase our footprint andto expand our service to customers.
Transformation is about maintaining
world-class productivity, demonstrated bya cost-income ratio of 40% or below. Last
year, we also put plans in place to transform
ANZ into a leaner, sharper, more agile, andmore externally focused competitor. This
will involve shifting our priorities towards
customers and reallocating resources frominternal activities. It means increased
automation, redesign of our operational
platforms, and leveraging low-cost offshore
capabilities owned by ANZ.
These and other initiatives give us confidence
that we will achieve our stated targets.

The highest performing companies are
not simply a financial construction of land,
labour and capital. They are much morethan this. A vibrant company is more than
the sum of its pieces. It serves its customers
well, it cares for its employees, it is partof the community in which it operates andthese strengths create the foundation forsuccess with shareholders.
Beyond this, a truly successful company
is also a community that is interdependent
with other communities. It takes on thecharacteristics of those it engages with and,in turn, influences them.
So in taking our corporations forward, weneed to think of advancing not a company
but a community. This means a very different
agenda for companies going forward andparticularly for ANZ in the years to come.

John McFarlane
chief executive officer

Charles Goodechairmanchairman and ceo’s report09

1

PROFITMovt%

Net interest income
Other operating income

5,798
3,552

5,254
3,391

10%
5%

Operating income
Operating expenses

9,350(4,515)

8,645(4,026)

8%
12%

Profit before debt provision
Provision for doubtful debts

4,835
(580)

4,619
(632)

5%
(8%)

Profit before income tax
Income tax expenses
Outside equity interests

4,255(1,234)(3)

3,987(1,168)
(4)

7%
6%
(25%)

NPAT - ($m)

Net Profit attributable to shareholders of the company

3,018

2,815

7%

Personal

Total significant items and
NBNZ incremental integration costs after tax

84

large

2,731

12%

2815

2004
$m

1870

3018

2815

2004
$189m
$62m
$84m

2348

2322

1747
00

Adjustments+ Goodwill- Hybrid dividend- Non-core items

3018

2005
$m

CHIEF FINANCIAL OFFICER’S REPORTA SUMMARY FROM PETER MARRIOTTThis year ANZ reported a record net profit after tax of $3,018 million, up 7.2% on
2004. Our dividend for the year was 110c per share, up 8.9% on 2004. This report
explains how we get from our profit of $3,018 million to our dividend of 110c,
and then on the following pages, we delve into our profit result in more detail.

01

02

03

04

05

883
1013

2005
$224m
$84m
($38m)

Profit and Loss Summary

Institutional

Net profit excluding significant items
and NBNZ incremental integration costs

857
923

(38)
3,056

NZ

7.2%

We make a series of adjustments to remove items like goodwill expense,
dividends on hybrid instruments which reduce the amount of cash
available to ordinary shareholders, and non-core items. These non-core
items include incremental costs associated with merging our two banks
in New Zealand of $52m ($14m in 2004) and non-recurring gains of$14m ($98m in 2004). By making these adjustments, we end up withwhat is commonly known as our ‘cash’ profit.

513
614
Corporate
341
376
Esanda and UDC
04
143
159
05
Asia Pacific111
Divisions95
NPAT - ($m)

04 05

ANZ reported a profit of $3,018m for the2005 year, up 7% on 2004, and our 8th
consecutive year of increasing profits. This
profit includes a number of items that distortthe underlying performance of the business,such as incremental National Bank of New
Zealand integration costs and significant
one-off transactions.

Headline Profit - ($m)

2

BALANCE SHEET GROWTH

1824

1774

3196

217.4

00

01

162.6

Average Ordinary
Shares on Issue - (m)138.0‘Cash’ Profit Available toOrdinary Shareholders - ($m)

145.9

04 05

131.8

04 05

244.4

2858

We then divide this ‘cash’ profit by the average
number of ordinary shares on issue over theyear. The increase in shares over the year ismainly due to the impact of the rights issue
in 2004, shares being issued under the
Dividend Re-investment Plan, and various
option plans. This resulted in ‘cash’ Earnings
Per Share growth of 8.8% in 2005.

DIVIDED BY

The continued strong growth of recent
periods continued in 2005, with total
assets up 13% to $293 billion.
02

03

04

05

149.8

01

02

112.1

95.8

10

Dividend Per Share - (cents)

00

107.7

‘Cash’ Earnings
Per Share - (cents)

8.9%
04 05

90.1

8.8%

This resulted in a dividend of 110 cents, anda payout ratio of approximately 63%, which
also allows us to fully frank the dividend forthe foreseeable future.

164.7

101

110

175.2

161.1

Our policy has been to grow our dividend pershare approximately in line with growth in‘cash’ Earnings Per Share.

PAYOUTRATIO 63%

One of the key drivers of our performancehas been strong overall balance sheet
growth over the past 12 months. Balance
sheet growth largely comprises:
a Asset Growth

Net Loans and Advances
including Acceptances - ($b)

04 05

1

To give a more accurate representation of theunderlying performance, we also calculate
our profit excluding these items. On thisbasis, our profit was $3,056m in 2005, up
12% on 2004. Growth in Earnings Per Share(EPS) excluding goodwill, significant items,
and incremental integration costs, commonly
known as ‘cash’ EPS, was 8.8%.

03

04

05

Deposits and other borrowings
excluding commercial paper - ($b)

b Liability Growth
Consumer and Business deposits are thebiggest items on the liability side of ourbalance sheet, with total customer deposits
of $165 billion. In both consumer andbusiness deposits, ANZ performed wellin 2005.

Most of ANZ's assets represent lending toindividuals, businesses, large corporations
and other entities. This includes mortgage
lending, unsecured personal and credit
card lending and loans for various business
related activities.

Retail deposits was a highly competitive
segment in the Australian market over the
past twelve months due to the introductionof a number of high interest rate online
products. ANZ was the only major bankto gain market share during the year with
10% growth.

Despite a softening in the rate of growthfrom recent years, mortgages continued
to grow solidly in both Australia (14%)
and New Zealand (11%).

In New Zealand retail deposits grew 7%
and market share remained stable, a pleasing
outcome given the ongoing integration of
The National Bank of New Zealand.

Asset growth in our Corporate andInstitutional segments was mixed during
the year. Lending growth slowed in
Corporate to 11%, down from 19% lastyear. Institutional lending growth of 15%
was encouraging following a number ofyears of subdued growth resulting fromour deliberate de-risking of the portfolio.

We also experienced good deposit growthacross our Corporate and Institutional
segments over the year, up 12% and
10% respectively.

2

chief financial officer’s report

11

3

5

NET INTEREST INCOME

45.3

45.6

45.1

04

05

00

Since 1996 our cost to income ratio has
reduced from 66% to 46%, making us oneof the world’s most efficient banks. Ourcurrent focus has shifted to growing revenue,
requiring additional short-term investment.
Over the past year, our personnel costs haverisen 15%, or 11% adjusted for the additional
two months contribution from NBNZ. The
key driver of this increase has been an
increase of more than 2,200 employees
over the past 12 months.

02

03

04

05

28755

30976

2

235

-3

02

03

04

a Personal – expenses up 7% to $1,639m
reflecting significant investment infrontline personnel with 697 staff added
in 2005 and continued investment in ourbranch network, with 15 new branches
opened and an additional 75 refurbished.
b Institutional – expenses up 6% to $766m
driven largely by increased personnel costs,
up 12% due to incentive compensationand costs associated with restructuring
the Markets business.

5c New Zealand – expenses up 17% to$955m due to the additional two months
of NBNZ, and as we have continued toinvest in the ANZ (NZ) brand, adding 514
new staff and opening 4 new branches.
d Corporate – expenses up 5% to $294m
following significant investment in frontline personnel.

e Esanda and UDC – expenses were wellcontrolled, increasing just 1% to $188m.

f Asia Pacific – expenses up 20% to $171m
reflecting ongoing investment in the region.

Staff Numbers - Full Time Equivalent

BAD AND DOUBTFUL DEBTS CHARGE

580

632

614

502

2808

531

610*

3552

3391

2970

2573

On a portfolio of net lending assets which
averaged $235 billion over the year, thisresulted in a charge to our profit and lossof $580m, down 8% on 2004.

ANZ recognises an expense for credit losses
based on the expected long-term loss rate
for each part of the loan portfolio. The method
used for determining this expense is referred
to as ‘Economic Loss Provisioning’ (ELP).

The reduction in ANZ’s ELP rate reflects
improvement in the credit quality of theGroup’s portfolio driven by:

For larger individual loans, the ELP model
calculates the expected loss by considering:
00

01

02

03

04

05

Other Operating Income - ($m)

00

01

02

03

04

05

ELP Charge - ($m)*Excludes $250m additional charge

43b Increased contribution from ‘Wall Street toMain Street’ (“WSTMS”). WSTMS is aimed
at providing total capital solutions for mid
market and business banking clients. Our
success is reflected in the fact that we are
now involved in the largest number of Private
Equity transactions in Australia, including
22 in 2005.

39

38

38

31
25

c Earnings from our INGA Joint Venture wereup 10% to $107 million, helped by buoyant
equity markets.

Other notable changes in our expenses
included an additional $31 million inadvertising and public relations, as weseek to leverage our improved customer
satisfaction and product awards, andhigher travel costs.

05

Other contributors to the improved Other
operating income performance include:a Foreign exchange earnings, which were up
10% to $454 million, partly offset by lower
earnings on trading instruments, whichwere down 11% to $134 million.

Our premises expenses were up 12% over
the year, driven by the additional twomonths from NBNZ, growth in our ATM andbranch network, market rent increases, andhigher security service costs.

23137

01

22482

22501

23134

Sep 05Other

FX Revenue Hedges

Competition

00

6

We also generated higher revenue from ourfinancial planners, assisted by healthy market
conditions. Institutional improved its nonlending fees, particularly in the second halfof the year.

01

Cost Income Ratio - (%)

Margin Drivers - (basis points)

2583

4

46.0

03

-7

Funding Mix

Sep 04

Lending fee income increased 4% to$1,043m in 2005 driven by the 12% increasein our lending volumes. Non-lending fees
increased 11% to $1,573m during the year,
driven largely by our Personal Division, where
good growth in customer numbers hashelped drive higher revenue from areas likecredit cards and transaction accounts.

48.0

51.7

2.35

2.49

2.67

02

Net Interest Margin - (%)

Asset Mix

d Foreign Currency revenue hedges(-3 basis points) – due to losses on foreign
currency revenue hedges reported ininterest.

01-3

Institutional Banking – interest margins
remained under pressure as the Australianand large International banks continue tocompete for business and as global credit
spreads remain at low levels.

00

OTHER OPERATING INCOME

Other operating income predominantly
comprises fee income from across ourbusinesses, foreign exchange and trading
income generated by our Institutional
markets business, and other items suchas our share of earnings from the INGA Joint
Venture. Other operating income increased$161m or 5% to $3,552 million in 2005.

12I

New Zealand Mortgages – in late 2004
a competitor attempted to gain share bysignificantly reducing their interest rates on
two year fixed mortgages. Despite largely
maintaining market share, both ANZ and
NBNZ margins were adversely impacted dueto the lower market rates.

-3

4

2.77

I

249

3

b Funding Mix (-3 basis points) – when asset
growth outstrips deposit growth additional
funds are sought from higher cost wholesalemarkets, negatively impacting net
interest margin.

In 2005 we increased expenses 12% to$4,515m continuing our commitment toinvest in long-term earnings sustainability.

The key areas of competition included:

Over the year, our net interest margin
declined 14 basis points to 2.35% at
September 2005, with the key drivers
being:a Asset Mix (-3 basis points) – this decline
happens when we have stronger growth
in lower margin assets i.e. Mortgages andInstitutional, relative to growth in higher
margin products, reducing our average margin.

2.77

NII increased 10% in 2005 to $5,798m,
reflecting strong growth in average interest
earning assets of 17% partly offset by adecline in our Net Interest Margin.

c Competition (-7 basis points) – theAustralian and New Zealand banking markets
remain highly competitive. During the year
competition resulted in a 7 basis point
reduction in our net interest margin.

2.87

Net interest income (“NII”) is the difference
between interest received from customer
lending and interest paid by ANZ to those
providing our funding.

EXPENSES

Other Operating Income Split
29%
44%
13%
4%
3%
7%

Lending Fee Income
Other Fee Income
FX Earnings
Trading Securities
INGA JV
Other

00

01

02

03

04

05

ELP Rate - (basis points)

a The probability of default (that is, theprobability of customers not meeting theiragreed commitments).
b The loss given default (that is, how much
we lose on a loan where the customer
has defaulted).
For portfolios of smaller loans with similar
characteristics such as credit cards andhome loans, we take a portfolio approach.
For example, with our $90 billion Australianmortgage portfolio, we estimate the long
run loss rate to be around 5 basis points(or 0.05%), even though our recent loss
experience has been significantly less.
In 2005 the ELP rate was 25 basis points,
down from 31 basis points in 2004.

I

significant de-risking in the Institutional
division and the absence of offshore lossesIthe acquisition of The National Bank of
New Zealand, which is weighted to lower
risk retail lendingI

generally favourable macro environment,
including record low unemployment, lowinterest rates and a healthy businessenvironment with low levels of gearing

6

The improvement in the Group’s portfolio
has also been reflected in our level of Net
Specific Provisions, which were down 19%
to $357 million, and Non-Accural loans,which were down 23% to $642 million.

chief financial officer’s report

13

ANZ recognises the importance of effective risk management to its businesssuccess. Management is committed to achieving strong risk control, resultingin ‘no surprises’ and a distinctive risk management capability.
AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“AIFRS”)

RISK MANAGEMENTANZ currently prepares its financial
statements in accordance with Australian
Generally Accepted Accounting Principles.
From 1 October 2005 the Group will reportunder AIFRS, as issued by the Australian

1. Robust Risk Management Framework

2. Major inherent risks

3. Key risk developments

ANZ’s risk management framework combines
Board policy setting and review with regularsenior management oversight andindependent business unit monitoring.

The major inherent risks faced by ANZ canbe grouped under the following categories:

In recent years ANZ has significantly
reduced its risk profile. This has beenachieved through a number of strategies
and structural drivers:a Credit Risk – is the risk of loss associatedwith customer lending, and is the majorrisk faced by ANZ. Credit risk policies andmanagement are executed through dedicatedRisk departments that report to the Chief
Risk Officer. All major credit decisions requireapproval by independent Risk personnel.
Net Specific Provisions for credit losses
fell 19% in 2005 to $357 million.

a Increased Consumer Banking Assets
Traditionally ANZ has had greater exposure
to the higher risk Institutional and Corporate
segments relative to Australian peers. While
we continue to leverage our strengths inthese divisions, we have increased our
focus on the lower risk Consumer segment.
In 2000 consumer lending comprised
approximately 55% of net lending assets;
this has increased to approximately 63%
today. This shift in business mix and resulting
reduction in risk can largely be attributed
to strong growth in Mortgages, and theacquisition of The National Bank of New
Zealand, with its consumer banking strength.

Accounting Standards Board. It is important
to note that in substance the day-to-day
operations of ANZ will not change, AIFRS
will only impact the way that we accountfor certain aspects of our business.

The following areas have been identified
as significant for ANZ. Further details areincluded in the 2005 ANZ Financial Report.

Key Area (1)AIFRS Accounting Change

Potential impact (after tax)

Goodwill

Goodwill currently amortised over expected period of benefit.
This is to be replaced by periodic impairment testing.

Expenses reduced by $224m per annum basedon 2005 full year results.

Fee Revenue

Larger number of fees deferred on initial payment andrecognised over the expected life of the financial instrument.

Profit impact is not expected to be material. Reduction
to retained earnings of $3m and $266 million as at
1 October 2004 and 1 October 2005 respectively.

Debt v Equity
Classification

ANZ StEPS issue will be treated as debt rather than equity.

Current dividend of $66m will be reclassified as interest
expense from 1 October 2005.

Share-Based
Payments

All share-based payments required to be recognised as an
expense upon issue. $1,000 employee shares, deferred sharesand options will be amortised over relevant vesting periods.

Expenses increased by $64 million after tax per annum
based on 2005 results. Reduction to retained earnings
of $12m as at 1 October 2004.

Post Employment
Benefits

ANZ will be required to recognise the net position of its
defined benefit superannuation schemes in the statementof financial position.

Profit impact is not expected to be material. Reduction toretained earnings of $142 million as at 1 October 2004.

Hedging

Introduction of stringent criteria for application of hedge
accounting. Ineffectiveness recorded in the statementof financial performance.

Impact of ineffectiveness uncertain, may result inincreased volatility. This is not expected to be material.
Reduction to retained earnings of $129m and increase
in reserves of $162m as at 1 October 2005.

I

Credit & Trading Risk Committee – oversees
credit policy, major lending decisions, asset
writing strategies and traded and non-tradedmarket risk

Credit Loss
Provisioning

Economic Loss Provisioning will be replaced by a charge
for individual provisions on impaired exposures plus
movements in Collective Provision.

It is expected that the new credit loss provisioning
charge will drive increased earnings volatility. Increase
to retained earnings of $191m as at 1 October 2005.

I

Group Asset & Liability Committee – oversees
regulatory capital, balance sheet structure,liquidity and funding

ANZ BoardI

Risk Management Committee –oversees principles, policies, strategies,
processes and control frameworks for the
management of Risk and approves credit
transactions beyond the approval discretionof executive management

I

Audit Committee – reviews financial control
frameworks and compliance

Senior Management

I(1) The total estimated impact of adopting AIFRS is likely to result in a net increase to retained earnings of $104 million as at 1 October 2004, and a net decrease to retained earnings of $386 million as at 1 October 2005 resulting ina cumulative decrease of $282 million in retained earnings.

Operational Risk Executive Committee– oversees
operational risk and compliance strategy

CAPITALBanks are required to maintain capitallevels that comply with both regulatory
and operational requirements. Capital
adequacy is generally measured as capital
as a percentage of risk weighted assets.
The key regulatory requirement is basedon Tier 1 capital, which represents highquality capital, including ordinary shares,
retained earnings and general reserves,
less items like goodwill. ANZ’s current Tier 1

I

Business Unit Risk Management – Discharge
responsibilities for business, market, credit,
operational, liquidity and reputational risk
and compliance with internal and external
obligations

c Operational Risk – is the risk of direct
or indirect loss resulting from inadequate
or failed internal processes, people andsystems, or from external events. The
operational risk framework is set at Grouplevel. Divisions are responsible forOperational Risks on a day-to-day basis.
d Compliance – is the risk of failure to comply
with all applicable legal and regulatory
requirements and industry standards andthe corresponding impact on ANZ’s business,
reputation and financial condition.

d Industry and Single Name Exposure Limits
Integral to the risk management frame
work are concentration limits for countries,
industries and individual customers. We
constantly monitor and manage both limits
and exposures to minimise the risk that ANZ
is exposed to large unexpected credit losses.

9

01

02

03

04

05

VaR (97.5% confidence) - ($m)

4

00

5

05

6

04

1.4

03

1.6

02

1.3

01

Net Non-accrual Loans - ($m)

2.1

00

12
10

3.2

ACE Ratio

386

451

14

03

c Reduction in Offshore Exposures
Lending to non-core geographies and sectors
has been significantly reduced. Since 2000
the percentage of the Group’s offshore net
lending assets has reduced from 11% to
4%. The deliberate re-balancing process
was completed with the sale of our UK based
Project and Structured Finance businessin October 2004.

4.4

525

02

Tier 1 Ratiob Reduction in Non-Accrual Loans
Loans where we expect to lose at least someinterest and/or principal, as a percentage
of non- mortgage lending assets, is a usefulmeasure of credit quality. Over the last
five years, this has fallen from 1.65% tojust 0.46% in 2005.

A detailed explanation of risk management at ANZ is available on our web site atwww.anz.com/australia/aboutanz/corporateinformation/corpgovpolicy

628

05

However it does mean that banks like
ANZ are highly leveraged organisations,necessitating strong risk management
frameworks and capabilities.

Business Unit Level

770

04

and a number of other deductions suchas the value of our investment in the ING
Joint Venture. ANZ has an ACE target rangeof 4.50% to 5.00% of Risk Weighted Assets.
At September 2005 we were slightly above
this, with an ACE ratio of 5.1%.

699

03

5.1

02

5.1

01

5.7

00

5.7

05

5.9

6.9

6.9

04

The key measure used by ratings agencies
is known as Adjusted Common Equity (“ACE”),
which is Tier 1 capital less preference shares

5.8

7.7

01

7.9

7.4

7.5

00

ratio is 6.9%. ANZ also needs to maintain acertain level of Tier 2 capital, which includes
items like subordinated debt and the generalprovision. Our current Tier 2 ratio is 3.9%.
The level of capital is also a key focus for
rating agencies when they determine ourcredit ratings.

b Market Risk – is the risk of losses fromchanges in interest rates, foreign exchange
rates or the prices of equity shares andindices, commodities, debt securities
and other financial contracts, including
derivatives. An independent market risk
team ensures traded and non-traded risks
and liquidity profiles are within Board andSenior Management authorised limits. Valueat Risk (“VaR”) is a statistical estimate of thelikely daily loss. The average traded VaR
exposure for 2005 was $1.6m – at thelower end of peer banks.

00

01

02

03

04

05

Offshore Lending Assets - (% of total)

chief financial officer’s report

15

02

Achieving goals
Reaching new heights

OUR BUSINESS PERFORMANCEINSPIRED TEAMWORK BUILDS GROWTH
ANZ provides a wide range of banking
products and services, from first homemortgages to complex derivatives forlarge institutional clients. We focus on ourdomestic markets in Australia and New
Zealand and also operate internationally.
Australia

New Zealand
New Zealand Division performance was
subdued due to The National Bank of New
Zealand integration, intense competitionin the mortgage segment, and the cost ofcontinued investment in rebuilding the
ANZ brand.

Personal Banking was again our best
performing division, gaining market sharein most areas and maintaining our majorbank lead in customer satisfaction andstaff engagement. We are now the thirdlargest retail bank in Australia and closing
in on the number two position.

Significant progress was made on
integration in 2005, particularly in systems.
Integration will be largely complete by
December 2005 with the focus shifting tobusiness as usual and capitalising on ourleading market positions.

Institutional is performing well after several
years of constrained growth as we
reduced risk.

Asia Pacific’s performance in 2005 wasadversely impacted by the non-recurrenceof one-off items booked in 2004 and ourcontinued investment in Asia. The Pacificbusiness performed well reflecting ournumber one or two market position in all
markets. Asia’s performance was subdued
by investment associated with new retailpartnerships in Vietnam and Cambodia
and 2004 one off gains from our PT Panin
Bank partnership not repeated in 2005.

Corporate once again delivered solid earnings
growth. Despite slower growth in BusinessBanking, the focus on specialist strategies
and segment propositions underpinned
the overall performance.
Esanda’s consistent performance continued,
reflecting their strong market position.

Asia PacificPictured left - From top: Kym Darcy, Corporate; Carolyn Morris, Esanda; Jackie Walters, Asia Pacific;
and Tania Turnbull, Personal.

16

our business performance17

NPAT by Divisions - ($m)
Personal

Australia
New ZealandPacific
American Samoa
Cook Islands
East TimorFiji
Kiribati
Papua New Guinea
Samoa
Solomon Islands
Tonga
Vanuatu
Middle East &South Asia

Asia
Cambodia
China
Hong Kong
Indonesia
Japan
Korea
Malaysia
Philippines
Singapore
TaiwanThailand
Vietnam

883
1013
Institutional

857
923
New Zealand Businesses

513
614
Corporate

341
376
Esanda and UDC

143

EuropeUnited Kingdom
United Statesof America

159
Asia Pacific

111

2004

95

2005

We are the only Australian bank witha significant presence in Asia, andduring the year we extended thiswith two new retail partnerships inVietnam and Cambodia. We continue
to be in discussions with two Chinese
financial institutions.
We remain the number one Australianbank in the Pacific, holding either
the number one or two position in
all markets in which we operate.
We have a substantial presence inthe key finance centres of London
and New York, and a smaller presence
elsewhere in Europe, the Middle East,and South Asia, which allows us to
support our domestic customers’international activities.

OUR BUSINESS PERFORMANCEDOMESTIC FOCUS, INTERNATIONAL PRESENCE
Our domestic markets, Australia and New Zealand, are the most significant contributors to our
performance, comprising 89% of our 2005 profit. Our focus on these markets is evidenced by factthat 89% of our staff and 94% of our points of representation reside in these geographies.
18

Australia
Operating Income
Cost to Income
NPAT
External Assets
Number of Employees
Points of representation$6,163m
44.8%$2,159m$195,500m
18,043840

New ZealandOperating Income
Cost to Income
NPAT
External Assets
Number of Employees
Points of representation$2,331m
52.3%$528m$78,474m
9,515
308

Pacific
Operating Income
Cost to Income
NPAT
External Assets
Number of Employees
Points of representation

$250m
44.0%
$90m
$2,118m
1,606
50

Asia
Operating Income
Cost to Income
NPAT
External Assets
Number of Employees
Points of representation

$256m
49.2%
$94m
$7,297m
826
19

Other
Operating Income
Cost to Income
NPAT
External Assets
Number of Employees
Points of representation

$350m
33.7%
$147m
$9,796m
986
6

our business performance19Personal Division

Encouraging
individuals tobe their best
Pictured right - Debbie Dela Cruze and Marie Agius,
ANZ Wyndham Village Branch, Victoria.

Brian Hartzer Group Managing Director

Financial performance

Our growth philosophy is simple: we’ll acquire new customers, retain existingcustomers, increase our share of their financial services spend, and pursue theextensive growth opportunities that still exist for ANZ. Our goal is to continue ourmarket share growth towards number two in retail banking.

What we do

Products, as we increase our focus on
selling insurance products.

Personal provides retail banking services
to over 3 million Australian customers
through its 756 branches. It is comprisedof five specialist business units.
Our Mortgages business unit is the largestof these, and is responsible for our award
winning residential mortgage products.
Our Consumer Finance business provides
credit cards and personal loans to retailcustomers, and is also responsible for ourATMs and Merchant Payments business.
Banking Products is responsible for ourtransaction and savings accounts. Regional
Commercial and Agribusiness products
are sold by our branch network to our ruraland regional customers. Wealth Management
includes our financial planning business,
ANZ Trustees, Margin Lending and ourinvestments in e *Trade and in the INGA
Joint Venture, but from 1 October 2005 wasrenamed Investment and Insurance

20

I

Achievements
ANZ’s Personal Division continued to build
a sustainable competitive advantage,
recording market share gains across its
product range, and strong growth in eachof our business units.
In addition to gains in market share, ANZ
is now the number three retail bank. This
strategy has also delivered recognition in
the broader market. We have been voted
Bank of the Year for the sixth year in a row
by Personal Investor Magazine.
I

ANZ’s market-leading product set delivered
growth that exceeded that of the financial
services sector on average. For example,
Mortgages grew 14%, credit cards grew animpressive 20% and Deposits grew 10%.
We have also seen solid growth in wealthmanagement distribution.

I

$m

2004

2005

%

IncomeExpensesProfit before provisions
Debt provisions
Tax & OEIProfit after tax
Cost income ratio (CTI)
Staff (FTE)

2,942(1,533)
1,409
(183)
(343)
883
52.1%
8,919

3,242
(1,639)
1,603
(198)
(392)
1,013
50.6%
9,616

10%
7%
14%
8%
14%
15%
(3%)
8%

We invest a lot of time and effort trying
to better understand what drives customer
behaviour, and using these customer insights
to drive strategy. This is clearly paying
off as we now lead the major banks incustomer satisfaction. Personal Division’s
customer satisfaction rating is 76.5%, morethan nine points ahead of the “Big fourbanks” average of 67%. At the same time,risk of defection is falling, and is down 6%
on 2004. ANZ retail customers are also theleast likely to switch to other major banks.
We’ve invested strongly in our brand. We’redifferentiating ANZ on “convenience andsimplicity”, bringing this to life through suchinitiatives as simplified technology, a $5transaction account, 24/7 call centre, newbranches and reduced queue times. In
the past year we opened 15 new branches,
installed 500 new ATMs, employed 697
new staff members and spent $100 million
on branch upgrades.

I

Earnings by business
11%
23%
31%
24%
10%
1%

There has been much comment about thelevel of competition in recent times. We havetaken a measured response to price-led
competition, protecting our customer basethrough investment in our frontline, and in
marketing and distribution. We are funding
this through a reduction in back-officecosts and productivity gains.

I

Customer acquisition will be driven
through continued focus on understanding
their needs. Over the next three years we’ll
expand the branch network by almost 10%
or around 65 branches.

I

Engaged staff, deep customer insight,
market-leading products and increased
convenience will continue to drive
customer retention.

I

We are also building strong customer
relationship management (CRM) sales
capability, growing our financial planning
footprint to drive growth of joint venture funds
under management and integrating crosssell into third party channels.

I

Further growth opportunities will result fromincreasing our presence in high growth areas
such as Western Australia and Queenslandand extending our capabilities to new brands
and segments.

Goals for 2006
Personal banking remains an attractive
market. We are operating in a favourable
credit growth environment, with clear
market segments.
Against this background, our growthphilosophy is simple: we’ll acquire newcustomers, retain existing customers,
increase our share of their spend, andpursue the extensive growth opportunities
that still exist for ANZ. Our goal is to continue
our market share growth towards number
two in retail banking.

Regional Commercial & Agribusiness Products
Banking Products
Mortgages
Consumer Finance
Wealth Management
Other

our business performance21Institutional Division
Inspiring ourpeople to build
on success
Steve Targett Group Managing Director
Pictured Right - Joseph Bowden, Andrew Mitchelland Suzie Hoey: ANZ Markets.

Steve Targett (left) with John Borghetti, Chief
Financial Officer, Qantas which is a client of ANZ.

Financial performance
$m

2004

2005

%

Institutional has built a strong base for future growth this year. We have refocused
our client model, upgraded our capabilities in key products and leveraged our
distinctive global product expertise. Our Risk Management processes foster
ownership of risk management by all our people, and we continue to build ourtalent and skill base by providing world class training for our current staff andby recruiting top industry professionals.

IncomeExpensesProfit before provisions
Debt provisions
Tax & OEIProfit after tax
Cost income ratio (CTI)
Staff (FTE)

2,041
(720)
1,321
(160)
(304)
857
35.3%
2,936

2,165
(766)
1,399
(139)
(337)
923
35.4%
3,103

6%
6%
6%
(13%)
11%
8%
0%
6%

What we do

We are now working to rebuild the market
share lost during recent years. The intenselycompetitive markets experienced this year
continued to put pressure on margins. We
expect this margin pressure to continue, andaim to counter the impact on our results by
reducing the amount of debt we hold on
our balance sheet by improved distribution
to our global investor base.

Institutional has one client coverage teamand three specialist businesses.
The Client Relationship Group is responsiblefor delivering solutions to meet client needs
for those with turnover above $150 million.
Our Markets business is a major
participant in the financial markets providing
specialist services in foreign exchange,
capital markets, commodities, structured
derivatives and interest rate services.
Corporate & Structured Financing provides
advice in mergers and acquisitions,divestments, takeovers/ defences, project
finance, corporate restructuring, cross-border
structures, privatisations, private equity
and tailored strategic and financial advice.
Trade and Transaction Services is responsible
for trade finance, transaction banking forlarger clients, and our custody business.

22

We have strong long term relationships
with our Institutional clients and are widely
acknowledged leaders in relationshipmanagement. As the strongest advisor incomplex and structured finance products,
we have the best understanding of client
funding and capital needs, and of offshorebanking needs. We remain the leader inTrade Finance services, and a leader intransactional banking and foreign exchange
across all segments.

I

Achievements
In addition to delivering 8% earnings
growth this year, Institutional also rebuilt
the foundations for strong future growth.
We have sold non-core activities, focused
our strategy on key strengths and newopportunities, targeted the most capable
people and refreshed our product offering.
We completed our de-risking program during
the year, which was a deliberate strategy to
improve the quality of our portfolio.

I

We maintained the momentum of our
successful Trade and Transaction Services
business and our Wall Street to Main Street
strategy, which provides investmentbanking type solutions for our nonInstitutional clients.
We’ve adopted a product neutral, customer-segmented approach, while maintaining
the benefits our clients receive from ourSpecialised Industry knowledge. Our aim
for 2006 is to improve our cross sell andimprove our full service offering for clients.

Earnings by business
32%
22%
24%
22%

I

We have invested in skill based training
for our people and recruited where we needspecialist skills.

I

We are building our product offering in
debt capital markets and alternative asset
capabilities. During the year we restructured
our Markets business by successfully
merging and integrating the Capital Markets
and Foreign Exchange and Commodities
business units.

I

In capital markets, where ANZ has not
traditionally been a strong player, our league
table position has improved. We undertook
the largest Commercial Mortgage Backed
Securities transaction in the Australianmarket.

I

Our cross sell is growing as evidenced byincreased swaps activity within our investor
and borrower base. We successfully solddown units in our Energy Infrastructure
Trust and did four public-private partnership

Client Relationship Group
Trade & Transaction Services
Markets
Corporate and Structured Financing

transactions, including the Royal Women’s
Hospital in Melbourne. Our Asian network
provides us with a significant growth
opportunity in an expanding market.
Goals for 2006
With the de-risking agenda now firmly
behind us, Institutional will renew its focus
on providing the full range of banking andinvestment banking services for our clients.
We will continue to leverage strong customer
relationships, build on underweightsegments, maintain focus on efficiency andrisk management and retain and recruit theright people. At the same time Institutional
will continue to build momentum inTrade, Wall Street to Main Street, and ourcurrent product range, while seeking theopportunities available from new markets.

our business performance23

New Zealand
Challenging people
to work together in
integrated teams
Pictured - Te Whetu Leef, The National Bankof New Zealand; Silla Mulitalo, ANZ; andPeter Coates, The National Bank of New Zealand.

Sir John Anderson
Chief Executive, ANZ National Bank Limited

Financial performance

ANZ National Bank has achieved a strong strategic position, as evidenced by its
standing in all core banking markets. Customer attrition is significantly better than
expected and market share of customers is close to 40% across all major sectors.

What we do

Achievements

The New Zealand Businesses divisioncomprises all of ANZ’s operations in New
Zealand with the exception of Institutionaland our UDC asset finance business. In
the retail and business banking segments
we continue to operate through both The
National Bank of New Zealand (NBNZ)
and ANZ brands, offering a full range of
personal and business banking services.

Earnings for the New Zealand businesses
were up 20%, assisted by an additional
two months contribution from NBNZ.

Our Rural Banking business operates under
the NBNZ brand and offers general andtailored banking services to our broad
range of rural customers. Corporate Banking
provides transactional banking services
and meets the sophisticated productrequirements of our customers under the
ANZ brand. We hold leading market positions
in all segments.

24This result for the merged ANZ National
Bank was impacted by intense pricecompetition in the retail market andsubsequent margin compression, lower
Treasury earnings along with our continued
focus on amalgamation, integration andestablishing capability for future growth.
New Zealand remains an attractive banking
environment, with sound credit quality
and strong volume growth.
I

We invested substantial resources inbuilding our retail capability in both NBNZ
and ANZ, with an emphasis on the ANZ
brand. We opened four new branches,
added 514 staff, established a mobile
mortgage team, and provided 680 ATMs
across the two brands.

$m

2004

2005

%

IncomeExpensesProfit before provisions
Debt provisions
Tax & OEIProfit after tax
Cost income ratio (CTI)
Staff (FTE)

1,670
(818)
852
(97)
(242)
513
49.0%
8,066

1,953
(955)
998
(92)
(292)
614
48.9%
8,580

17%
17%
17%
(5%)
21%
20%
0%
6%

ANZ customer service ratings hit a sevenyear high in the first quarter of 2005 and
NBNZ continues to lead the major banks incustomer service.
I

I

Much of the focus since the acquisition
almost two years ago has been on
maintaining our customer franchises andbuilding the business. This customer-focus
is beginning to pay off and the ANZ brandis clearly showing signs of turnaround.
Customer attrition has slowed by 65%
over 2004, while NBNZ has maintained its
share of main bank customers. We haveretained our share in the competitive deposit
market and the ANZ on-line call account has
been a major success with over $900 million
deposited since its launch in December 2004.
The gradual erosion in the home loan market
has slowed since integration. We havemaintained our dominant position in therural market, though we had a small loss

Earnings by business
30%
39%
12%
20%
-1%

of share to niche players and new entrants
to the market, who are competing primarily
on price. Our commitment to this market
remains strong through our experienced
relationship management teams.
I

The integration program is on track. Much
ground has been covered during its first twophases, due to be completed in December
this year. Teams have been restructured,
operations co-located, the rural integration
program is complete and work is nearing
completion on establishing the new IT
infrastructure. We are also on target tomeet the Reserve Bank of New Zealand’s
mandated regulatory requirements.

under-represented and making better useof our strategic alliances (with ING, forexample). We will maintain a conservativerisk policy while being flexible to changing
customer needs.
I

Delivering a quality customer experiencethrough operational excellence by continued
investment in our front-line, ensuring we’reeasy to do business with, being agile andresponsive, and continuously reviewing
our customer systems and processes.

I

Leveraging our scale to operate more
efficiently, rationalising functions, integrating
systems and processes and automating
back-office processes.

Our aim is to be the leading bank in New
Zealand. We will achieve this through:I

Harnessing our unique dual brand position
to extend our reach.

Sustainable and profitable revenue growthby investing for the long term, exploiting
opportunities in markets in which we areI

Developing and growing our people,
translating their talent into a sustainable
competitive advantage.

Goals for 2006I

ANZ Retail
NBNZ Retail
Rural Banking
Corporate Banking
Central Support

our business performance25

Corporate Division
Recognising
the performanceof our people
Graham Hodges Group Managing Director
Pictured Right - Aman Singh, Toni Nicholls and
Rob Goudswaard: Small Business Banking.

Pictured Right - Graham Hodges (right) with Rick Smith,Managing Director, PFD Food Services, a client of ANZ.

Financial performance

A core advantage is the wide customer base, the segmentation of which has given
us the flexibility to respond effectively and rapidly to changing market conditions.
We expect the strength of our customer proposition will continue to drive customer
satisfaction and market share, while our low cost to income and disciplined
execution will enable footprint investment in the business.

26

What we do

Achievements

Corporate division is comprised of three
specialist businesses, each focused on
the needs of a different tier of customers.

Corporate maintained its successful trackrecord of strong financial performanceand low risk growth in 2005.

Corporate Banking provides relationshipbanking and a range of sophisticatedfinancial solutions to around 3,000 clients
who have annual turnover of $10 million
to $150 million. Business Banking provides
a more traditional relationship banking
offering to around 38,000 businesscustomers who have up to $50,000 in funds
under management or annual turnover up
to $10 million. Small Business Banking
services around 170,000 small businesses
with funds under management below$50,000 with service largely offered via
the branch network.

Our earnings were up 10% to $376 million,
with lending growth of 11% and deposit
growth of 12%. We continued to invest
heavily in our footprint, while keeping ourcost to income ratio in the low 30s. High
employee engagement (63% in BusinessBanking and 57% in Corporate Banking)combined with a strong customer proposition,
places us in a leading position
with customers.
I

In Small Business Banking we invested
heavily in frontline staff, employing 80
new small business specialists andsimplifying processes.

I

In Business Banking, the strategy has been
to expand our geographic footprint andindustry specialisation, as well as to

$m

2004

2005

%

IncomeExpensesProfit before provisions
Debt provisions
Tax & OEIProfit after tax
Cost income ratio (CTI)
Staff (FTE)

829
(280)
549
(61)
(147)
341
33.8%
1,761

897
(294)
603
(66)
(161)
376
32.8%
1,941

8%
5%
10%
8%
10%
10%
(3%)
10%

I

Our Corporate Banking teams successfully
operate in the mature mid-market businesssegment. ANZ has innovated in the midmarket, offering its Wall Street to Main Street(WSTMS) strategy of providing investmentbanking type solutions to business clients.
The strategy is working and we are seeing
a significant increase in these transactions.
It meets two of a private company’s main
life-cycle needs: achieving growth or
facilitating generational change. ANZ has
a clear market leading position thanks to

49% Business Banking Australia
37% Corporate Banking Australia
14% Small Business Banking

the way in which we’ve melded the cultureof traditional relationship bankers with theservices of WSTMS specialists. ANZ is now
responsible for the greatest number of private
equity deals in this segment in Australia.

develop a market leading customer service
proposition, adopting a structured andsustainable approach to organic growth.
This includes use of business brokers
and an attractive mix of products to drive
customer acquisition, increased productsales per customer and maintain a highrate of customer retention. The BusinessBanking portfolio is well secured and risk
profiles remain low.

Earnings by businesshigh customer satisfaction, and that among
all major banks, the Corporate division’s
customers are the least likely to switch.
Goals for 2006

I

We continue to face a number of challenges.
These include the entry of new players,
commoditisation of the credit product,
margin pressure, and changing businessownership resulting from generational change
and the growth of the self employed sector.

Corporate division’s goal is to achieve
growth above that of the financial services
sector in each of our businesses. With
the strong team we have established anda solid track record behind us, we seek
to deepen existing relationships and win
new customers.

I

Our response to these challenges has
been to strive to be the best, most engaged
business bankers; to segment our customer
base in a disciplined way; to offer industry
specialisation, specialist customer solutions
and innovative products; and to have thebest possible business platforms, channels
and processes.

We expect the strength of our customer
proposition will continue to drive customer
satisfaction and market share, while ourlow cost to income and disciplined execution
will enable further investment in ourbusiness. We will continue to focus on ourrisk management capabilities and raise
the bar in execution and leadership.

I

Independent research shows that in both
Corporate and Business Banking, we haveour business performance27

Asia PacificInvesting in people
and partnerships

Elmer Funke KupperGroup Managing Director

Pictured Right - Tho Narith, Kuoung Muyleng, Heng Darany
and Heak Lina: ANZ Royal Bank Cambodia.

Financial performance - Geographic

With a presence in 23 countries, ANZ is already Australia’s leading bank in the
Asia Pacific region. This gives us a great starting point to make the most of theeconomic growth in the region. We will continue to invest in our existing businesses
in the Pacific and Asia, and add skills, products and new distribution channels.

$m

2004

2005

%

IncomeExpensesProfit before provisions
Debt provisions
Tax & OEIProfit after tax*
Cost income ratio (CTI)
Staff (FTE)

484
(209)
275
(34)
(50)
191
42.6%
2,221

506
(239)
267
(31)
(52)
184
46.6%
2,432

5%
14%
(3%)
(9%)
4%
(4%)
9%
10%

Earnings by businesschart to be replaced
46% Pacific
22% Asian Retail Partnerships
32% Asian Network* Includes profit from Institutional and Group Centre businesses in the Asia Pacificregion of $89 million (2004: $80 million)

What we do

Achievements

The Asia Pacific division comprises threegeographically defined businesses in theSouth Pacific, and across East Asia andSoutheast Asia.

Asia Pacific Division’s profit was down 14%
to $95 million in 2005. On a geographic
basis, which includes all of our activities
in Asia Pacific including Institutional,
profit was down 4% to $184 million.

Pacific offers a full range of retail andcommercial banking services in 11 countries
throughout the South Pacific. Our Asian
network, which serves primarily Australian,
New Zealand and Asian corporates who
trade, operate and invest across 11 countries
in the east Asia region. International
Partnerships covers ANZ’s retail partnerships
with local banks in Indonesia, thePhilippines, Vietnam and Southeast Asia.
Together, these businesses make ANZAustralia’s leading bank in Asia Pacific.

28

The core business performed well, withstrong growth on volume and earnings. This
underlying momentum was offset by lower
earnings from our investment in Panin Bankin Indonesia, lower Treasury earnings in Asia,and the costs associated with establishing
our International Partnership business.
I

We are the leading bank in the South Pacific,
with an average market share across theregion of almost 40%. The business has
one of the highest staff engagement levels
in ANZ (68%) and in 2005 showed strong
profit growth. We continue to strengthen
our franchise by investing in training, newproducts and distribution.

Supporting local and regional economic
development is an important componentof our Pacific strategy. As one of the largest
corporations and employers in the Pacific,
ANZ contributes in a real way to local
communities.
I

I

In Asia, we are seeing strong growth inmanufacturing, trade and infrastructure
investment. For example, regional tradereached US$949 billion in 2004, fuellingstrong demand for trade finance. ANZ’s
Asian Network is uniquely placed to service
customers that trade or invest across the
Asia Pacific region and into Australia and
New Zealand.
The international partnership agenda istaking shape. Our strategy is to participate
in the growth in consumer banking in Asia
by developing partnerships with local banks
that can benefit from our experience inretail banking, Small to Medium Enterprises,
Trade and Risk Management.

Simplify and re-engineer our processes toimprove customer service and productivity

By combining the local franchise with ANZ’s
expertise, we can grow faster together thanwe could on our own.

I

We are adopting a portfolio approach,making modest initial investments andtargeting a number of partnerships acrossthe region. Today, we have partnerships
in Indonesia (PT Panin Bank 29%), thePhilippines (Metrobank Cards Corporation40%), Vietnam (Sacombank 10%) andCambodia (ANZ Royal Bank 55%). In addition,
we are targeting two equity investments
in China in 2006.

I

Accelerate growth in the Institutional
Banking segment

I

Expand our skills and talent pool to support
faster growth

I

Invest in our Expatriate and Private
Banking businesses

Asia network

International Partnerships
I

Make a number of strategic investments
in local retail banks in Asia that will put us
in a unique position to capture the growthin consumer banking.

I

Work with existing partners to transfer ANZ
skills to local markets

I

Continue to grow our Asian credit cardbusiness at double digit rates.

Goals for 2006
Pacific
I

Maintain revenue momentum and growmarket share

I

Continue with investment in new products
and distribution channels, including
new branches

our business performance29

We have built on the strong growth of the last 5 years and are facing up to
increasing competitive pressures by re-doubling our focus on our core businesses
and entering new businesses in adjacent markets, where we can win throughleveraging core capabilities.

Esanda and UDC

Through the Group Centre’s leadership ANZ has achieved the highest staff
engagement of Australia’s major companies, a significantly reduced risk profilethat is now in line with major peers and leading technology capabilities developed
across Australia, New Zealand and India.

Corporate Centre

Elizabeth Proust Managing Director
Pictured - Elizabeth Proust with
Brett Jefferson of City Ford.

Pictured Right - Peter Hawkins, Shane Freeman,Peter Hodgson, Bob Edgar and Mike Grime.

Financial performance
$m

2004

2005

%

Income456
Expenses(186)
Profit before provisions 270
Debt provisions(67)
Tax & OEI
(60)
Profit after tax
143
Cost income ratio (CTI) 40.8%
Staff (FTE)
1,297

481
(188)
293
(62)
(72)
159
39.1%
1,351

5%
1%
9%
(7%)
20%
11%
(4%)
4%

What we do
Esanda celebrated a significant milestone
in 2005 as it entered its 50th year of
business, occupying a market leading
position in virtually every segment in whichit competes and a leadership position overall.
Esanda provides vehicle and equipment
finance, rental services, and savings andinvestment products. It operates in Australia
as Esanda and Esanda FleetPartners andin New Zealand as UDC and Esanda
FleetPartners.

II

We are also expanding our cross-sell
capabilities and focus, ensuring that wedeliver to our customers the best financial
products available.

I

To assist our growth in the higher return
fleet management segment, we have
sharpened our sales and pricing focus
in Esanda FleetPartners and Commercial
Asset Finance with strong growth displayedin both businesses.

Achievements
Our focus on improving core businessperformance was rewarded with profit
up 11% to $159 million.
Return on equity has grown to 24%, up from
11% just 5 years ago. Despite increased
investment in frontline staff, cost to income
ratio has fallen from around 50% in 2000,
to just 40% today. The business’ risk profile
has improved, allowing a significant
reduction in provisions.
I

30

Our focus is now creating accelerated andsustainable growth through a combinationof new product development and new
business development in adjacent markets
where we can leverage core capabilities.
For example, we have expanded our fleet
capabilities into the heavy equipment market(mining, farming and industrial) and haveentered the private sales market–the fastest
growing segment of the vehicle market.

I

What we do

Likewise, our aim is to build our non-prime
auto finance business, tapping into amarket that is growing at three times therate of the prime market.

In line with our strategy to grow the consumer
market, we launched an internet basedsavings product called Esanda Online Saver
which has attracted over $160 million funds
under management since its launch in
May 2005.

The Group Centre comprises:
Operations, Technology and Share Services(“OTSS”)
Group People CapitalGroup Risk Management
Group Strategic Development
Group Financial Management, including
Treasury

Goals for 2006
I

During 2005 OTSS conducted a long-term
technology strategy review aimed atstreamlining ANZ’s core banking systemand enhancing the single view of customer
capabilities. We will continue to progress
this agenda in 2006.

I

The New Zealand technology integration isscheduled for completion by December 2005.

I

We will continue to explore expansion
opportunities of our Bangalore technology
facility, which is focused on providing
non-customer facing technology support.

I

Treasury will continue to raise ANZ’s
wholesale funding requirements at globallycompetitive interest rates.

I

Implement “International Financial
Reporting Standards” and achieve
Sarbanes Oxley s404 compliance.

Achievements
The Group Centre reported a loss of $124
million in 2005, 6% higher than 2004.
The key drivers included increased risk
management and compliance costs, reduced
Treasury and hedge earnings, partly offset
by lower provisions for offshore losses.
I

Significant progress in finalising the New
Zealand technology integration program,with over 900 separate changes
successfully implemented.

I

Successfully completed the “ANTS” project,which was focussed on simplying ANZ’score systems. This was one of the mostcomplex and largest technology architecture
projects in the bank’s history and provides
ANZ with a solid foundation for futuresystems requirements.

Goals for 2006
We will continue to extract efficiency gains
to fund frontline investment and market
extensions, and use our specialist productfocus, strong partner relationships and thereputation for security and reliability that
we have built over 50 years to deliver simple,
easy to use products. We do this with alow cost base, leadership in almost every
segment in which we operate and an
accelerated growth agenda.

and subordinated debt and €500 million
from a preference share issue.

I

Successful relocation of our Disaster Recovery
Data Centre to a new, world class facility.

I

Continued to expand our wholesale funding
base, to meet the strong growth in demand
for lending, raising A$21 billion in seniorCorporate Centre LeadershipPeter Hawkins, Group Managing Director,
Group Strategic Development;
Shane Freeman, Group General Manager
People Capital; Peter Hodgson, Chief Risk
Officer; Bob Edgar, Chief Operating Officer;
Mike Grime, Managing Director, Operations
Technology & Shared Services; andPeter Marriott, Chief Financial Officer(pictured page 10).
our business performance

31

03

Empowering individuals
Creating opportunities

PEOPLE, COMMUNITY AND THE ENVIRONMENTINSPIRING, ENERGISING AND BUILDING RELATIONSHIPSANZ aims to bring a human face to banking
and build relationships of trust and mutual
respect with the community.
In 2005 we continued to inspire andenergise our people, bringing our Breakout
cultural transformation workshops to branchstaff around the country. We introduced
innovative policies to create a more flexible
and responsive workplace as ANZ wasrecognised as having the most engaged
workforce of all major Australian companies.
We deepened our commitment to financial
literacy and inclusion of adult Australians,
particularly amongst the most vulnerable
people in society. With the Commonwealth
Government of Australia, we will provide
financial education programs for remote
Indigenous communities and expand our
Saver Plus matched savings and financial
literacy program to benefit low-income
families. Over 400 financial counsellors
and community educators were trained todeliver our MoneyMinded financial literacy
program to help people with lower levelsof financial literacy and those facing
financial hardship. We are working tocomplete our second national survey ofadult financial literacy in Australia. Our
response will include a greater focus
on providing convenient, simple andresponsible financial products, services
and marketing communication. We aim
to rapidly expand our financial literacy andinclusion programs to help more people
improve their financial knowledge, skills
and confidence.
During 2005 our people came together
with communities to achieve some
remarkable outcomes. In our response to
the Asia Tsunami disaster, we worked with
community partners such as World Vision,
volunteered our time and services, collectedcustomer contributions and provided
more than $1 million through donations
made by staff and then matched dollar fordollar by ANZ. Our people also provided theentire volunteer network to support theinaugural Oxfam Community Aid Abroad
Comic Relief fundraiser.

Pictured left - Saver Plus family: Leonie with daughters Lisa (left) and Jessica (right).

32

people, community and the environment

33

OUR PEOPLE AND CULTURE
INDIVIDUALS AT THE HEART OF CHANGE

Pictured - 12 weeks paid Parental Leave gives Natalie Paine and baby Jack a head start.

We listen and respond to our people, providing programs and opportunities that
aim to create a vibrant, energetic and high-performing culture. We invest in thedevelopment of our people and encourage them to use ANZ’s values to guidetheir actions and decisions.

Building a vibrant, high-performing culture
ANZ has invested in its people over the past
five years with the goal to create a vibrant,
energetic and high-performing culture where
ANZ’s values are the basis for the actions
our people take and the decisions they makeeach day.
This year, industry research revealed that
ANZ has the most engaged workforce of
all major companies in Australia.

25%

Staff Engagement
Destructive Zone
Serious Zone
Indifferent Zone
High Performance/
Best Employer Zone

4.2

Attracting and nurturing talentOver the past 18 months, we have added
some 3,000 mostly customer-facing positions
to support our growth agenda and network
expansion. We are also one of the largest
recruiters of graduates amongst all publicly
listed companies in Australia.
We invest in the personal and professional
development of our people and systematically
identify and advance the top 20% of
performers at each level.

00

01

02

03

04

Flexibility for a diverse workforce
ANZ has adopted a number of innovative
workplace policies designed to create flexible
working conditions responsive to the needsof our people at various stages of their lives.
For example, this year we introduced a newpolicy guaranteeing those Australian staff
aged over 55 the right to work part-time ifthey choose.
We have made diversity a real priority,with a particular focus on women. We haveextended the priority childcare services
available to our people through ourpartnership with ABC Learning Centres andprovided 12 weeks paid parental leave forprimary care givers, with no qualifying period
and paid up front. We also introduced amentoring program to increase representationof women in senior management. In 2005,
more than 18% of our senior management
positions were held by women.

4.9

5.4

34

60% 63% ANZ

6.9This year we commenced “Breakout for thefrontline”, which will see some 7,000 branchstaff participate in the program over the next
18 months. We also introduced “Breakout
Recharge” which focuses on creating andbuilding cohesive and effective teams.

These and other investments have helped
to radically change our culture over the past
five years. In addition to our levels of
employee engagement, we have also seen
positive developments in organisational
climate through our annual values assessment
survey. The survey of senior leaders and arandom sample of staff in 2005 showed that
respondents rated the most visible values
in our culture as “customer focus” and“community involvement”. By comparison,in 2000, cost reduction was perceived tobe our primary value.

40%

9.5

Cultural transformation
Now in its fifth year, over 21,000 staff haveparticipated in our “Breakout” program aspart of ANZ’s long-term commitment totransforming our culture. The program
includes workshops to help staff use ANZ’svalues in their decision-making and toeffectively balance the competing needsof staff, shareholders, customers and thecommunity in their roles and activities.

We seek their ideas and feedback on
our progress via our annual employee
engagement survey. The survey is used
to identify and address key issues andopportunities for improvement, and focus
groups are subsequently held across thebusiness to provide deeper guidance andappropriate responses.

54% Banking& Finance Avg.

9.2

“Employee engagement” means much more
to us than simply a staff survey outcome.
It’s the result of a comprehensive strategy
to inspire and energise our people to deliver
their best every day. This involves attracting
and nurturing the very best talent, investingin their development, and recognising andrewarding their contribution, values andbehaviours.

Our people are actively involved in ourefforts to make ANZ a great place to work.

05

Lost Time Injury Frequency Rate
(Compensated claims per million hours worked)

Our commitment to employee well-being
extends to providing our people with freehealth information and services throughMy Health Online, and My Healthcheck- an
initiative that offers a paid physical checkup
during working hours once every two years
to all staff.
Consistent with our broad commitment toimproving the financial literacy of Australians,
more than 5,000 staff participated in Financial
Fitness workshops covering budgetingand savings, retirement planning andsuperannuation, and investment basics.
Employee community contributions

Wellbeing

We offer our people opportunities to get
involved in local community programsand the causes that are important to them,creating some extraordinary outcomes.
In 2005, 3,675 or 18% of Australian staff
contributed more than 24,000 hours as partof ANZ’s Volunteers program, which provides
employees with eight hours leave each year
to complete volunteering activities of theirchoice. ANZ’s program is amongst theleaders globally – the average corporate
volunteering participation rate is 8.5%.

We introduced a significantly enhanced
Health, Safety and Security strategy in2005. This includes our Branchsafe program,designed to better manage and assess
security and risk in our branches. Ongoingfacilities improvement programs during
the year included a significant investment
in branch refurbishments and upgrades,
particularly in New South Wales.
Wecontinued to reduce our lost time injury
frequency rate, which is the best among ourpeer group.

Throughout the year 28% of our Australianstaff donated money to numerous community
partners through our Community Giving
program, where ANZ matches staff
contributions dollar-for-dollar up to $1,000
per person. The high participation rate wasachieved through staff donations to the
Tsunami relief efforts, which resulted in ANZ
and its people donating $1 million to support
the work of World Vision. The average
participation rate for similar schemes at largeorganisations is 3-4%.

ANZ was also recognised as the leading large
Australian organisation for the Advancementof Women by the Equal Opportunity for
Women in the Workplace Agency (EOWA).

people, community and the environment

35

Our community investment strategy focuses on enhancing the well-being andprosperity of the communities where our people live and work, and where ourbusiness operates. Earning the trust of the community is one of our core values.

THE COMMUNITY AND ENVIRONMENTPERSONAL CHALLENGES AND SHARED GOALS

We aim to be leaders in addressing the major social issues that involve thefinancial services industry – in particular financial literacy and financial inclusion.
Our programs also provide opportunities for our staff to support causes thatare important to them.

Our Community
ANZ’s community programs aim to build
the financial knowledge, skills and confidenceof all Australians, particularly the mostvulnerable.

The program was created with theBrotherhood of St Laurence (BSL) and isdelivered through partnerships with BSL,
Berry Street Victoria, The Benevolent Society
and The Smith Family.

There is no short-term “fix” to these issues.
It requires continued focus, passion andpersistence across our entire businessand deep partnerships with government,
regulators and community organisations
to achieve lasting change.

Earlier this year ANZ provided $481,000
in matched savings to the 257 families who
participated in the 2004 pilot program and,at the end of September 2005, a further 453
families had saved $384,703 to be matchedby ANZ.

Together we aim to create confident, capableconsumers who can access and use financial
products and services to improve theirpersonal financial well-being, which in turnwill help to create stronger communities
and a healthy economy.
Innovative programs

An RMIT University evaluation of the Saver
Plus pilot program revealed that 92% ofparticipants achieved their savings goal,and 35% exceeded their goal. A key finding
was that three months after they completed
the program 84% of participants were stillsaving regularly and 34% of these weresaving more than they had previously.

Saver Plus is a financial literacy program
aimed at helping families on low-incomesto improve their financial knowledge, develop
a long-term savings habit, and save for theirchildren's education. As part of the program,
ANZ rewards the efforts of participants bymatching every dollar saved up to a total
amount of $2,000. Participants agree todirect their savings towards their children's
education and learning needs, such as
the purchase of personal computers.

MoneyMinded is Australia's firstcomprehensive adult financial literacy
program, to help people, particularly lowincome earners and those facing financial
hardship, develop financial knowledge, skills
and confidence. Its development was fundedby ANZ, and guided by stakeholders suchas the Australian Financial Counselling andCredit Reform Association and Australian
Securities Investment Commission.

With 40 years experience in community
work (including 20 in financial counselling),
Jan Pentland sees MoneyMinded as an
excellent financial literacy resource.
Jan Pentland
Financial Counsellor, AFCCRA Chair.

36

More than 400 financial counsellors andcommunity educators have been trained
to deliver the program around Australia
with 3,500 people attending at least one
MoneyMinded session and almost 1,000
people attending multiple workshops.
Together with our community partners, ourgoal is to reach 100,000 people over the
next five years.
Expanding our partnerships
In July this year ANZ and the Commonwealth
Government Department of Family andCommunity Services, launched
MoneyBusiness, a culturally specificprogram to bring financial literacy andmoney management skills to Indigenous
people in six sites including Katherine,
Tennant Creek, Nguiu (Tiwi Islands),
Galiwinku (Elcho Island) in the Northern
Territory and Geraldton and Kununurra
in Western Australia.
ANZ will contribute $1 million in funding
over the next 3 years and share ourexperience in developing financial literacy
and matched savings programs to enable
MoneyBusiness to reach 2,000 Indigenous
people. We will also work with theGovernment and the local communities
to adapt Saver Plus to reach up to 300
Indigenous families.
ANZ has also formed a partnershipwith Traditional Credit Union (TCU), an
indigenous credit union based in Darwin.
Together we are developing a financial
inclusion strategy, including the deliveryof MoneyBusiness to help TCU members
build better lives for themselves andimprove their living standards throughenhanced money management skills.
The Victorian State Government, has funded
Berry Street Victoria to translate and deliver
MoneyMinded to the Iraqi community
in Shepparton as part of its social policy
action plan A Fairer Victoria. We are also
investigating opportunities with the State
Government to extend these programs to
support other communities within Victoria.

Pictured - World Vision Chief Operating Officer, Toby Hall and Chief Executive Officer, Tim Costellowith David Surtees ANZ (right) who worked with World Vision on Career Break from ANZ.

to be identified and addressed in thecredit process. Formal internal engagement
has been established to oversee more
effective integration of environmental
and social considerations in lending
policies and decision-making principles
and frameworks. This includes a program
to build broad staff awareness andunderstanding of the business rationale
for environmental and social issues.

ENVIRONMENTANZ has established an Environment
Charter, strategy and internal
responsibilities for reducing the impactof our operations and business activities
on the environment. Our aim is to alignANZ’s environmental performance withour commitment to make a sustainable
contribution to society.
Environment Charter
A significant step in ANZ’s environmental
commitment was the introduction in July
2005 of a new Group Environment Charter.
It sets higher standards for managing
our environmental footprint and provides
guidance for improving environmental
performance through our relationships
with partners, customers and suppliers.

Operational Environmental Footprint
Programs are in place to reduce the impactof our operations on the environment andin 2005 we fulfilled our commitments to:
I

Reduce electricity consumption

I

Reduce paper usage

I

Enhance our existing procurement policies
and practices to address environmental
risks and opportunities in our supply chainI

We continue to work on implementing
an environmental management system
to identify, measures and track ourenvironmental performance.

Responsible lending
An environmental and social issues screenof clients and transactions is being
introduced across ANZ’s Institutional &Corporate divisions. This allows key risks

people, community and the environment

37

04

Company ethics
Perspective and knowledge

THE BOARD OF DIRECTORSSUSTAINING PERFORMANCE AND GROWTH
The Board is responsible to shareholders
for the governance of ANZ, and oversees
its operations and financial performance.
It sets the strategic direction and financial
objectives, determines the appropriate risk
appetite for the organisation, and monitors
operational performance. It also monitors
compliance in terms of ethical standards andregulatory requirements. The Board appoints
the Chief Executive Officer and regularly
reviews his performance.
The Board Charter clearly sets out the Board's
purpose, powers, and specific responsibilities.
The business of ANZ is managed under the
direction of the Board. The Board delegatesto the Chief Executive Officer and throughhim, to other senior management, theauthority and responsibility for managing
the everyday affairs of ANZ. The Board
monitors management and performanceon behalf of shareholders.

Chairman and the Chief Executive Officer.
This is supported by the ANZ Board Charter(anz.com>about ANZ>corporate governance)
which states that the Chairman must be an
independent non-executive director and thatthe majority of the Board must comprise
independent non-executive directors.
The Board strives to achieve a balance ofskills, knowledge, experience and perspective
among its directors. This is particularly
important for the banking sector, as banks
have deep relationships with customers
across every sector of the economy, andneed to understand what is happening
across the broader economy. Banking canalso be cyclical, so it is important that inachieving a balance of experience, the Board
includes a number of longer serving directors.
Details regarding the skills, experience,and expertise of each director are on thefollowing pages.

The ANZ Board is chaired by a non-executive
independent director. Its structure provides
for a division of responsibility between the
Pictured - From left: Greg Clark, Roderick Deane, Margaret Jackson, David Gonski and David Meiklejohn.

38

the board of directors

39

THE BOARD OF DIRECTORSSTRATEGIC DIRECTION AND EXPERIENCE

MR C B GOODE, AC

DR R S DEANE

MR D M GONSKI, AO

MR D E MEIKLEJOHN

b com (hons) (melb), mba (columbia university,
new york), hon lld (melb), hon lld (monash)

phd, b com (hons), fca, fcis, fnzim

b com, llb, s.i.a. (aff), faicd, fcpa

b com, dip. ed, fcpa, faicd, faim

Independent Non-Executive Director
Chairman of ANZ National Bank Limitedin New Zealand

Independent Non-Executive Director
Chairman of the Nominations, Governance& Corporate Responsibility Committee

Independent Non-Executive Director
Chairman of the Audit Committee

Non-executive director since September 1994.
Dr Deane is a member of the Compensation& Human Resources Committee and theTechnology Committee.

Non-executive director since February 2002.
Mr Gonski is a member of the Risk
Management Committee.

Chairman
Independent Non-Executive Director
Non-executive director since July 1991. Mr Goode
was appointed Chairman in August 1995 and is
an ex officio member of all Board Committees.
Experience and expertise
Mr Goode has a background in the financeindustry and has been a professional nonexecutive director since 1989. He brings a wide
range of skills and significant experience of thefinance industry to his role as Chairman of
the Board.

Non-executive director since October
2004. Mr Meiklejohn is a member of theNominations, Governance & Corporate
Responsibility Committee.

Experience and expertise
Dr Deane has skills and experience acrossa variety of sectors including government,banking and finance, economics, andtelecommunications, and also with charitable
and cultural organisations.

Experience and expertise
A lawyer, Mr Gonski has a broad experience
across business, the law and investmentbanking. He also brings to his role on the
Board an appreciation for the community
through his work in the arts and the not-forprofit sector.

Age 67. Residence Melbourne.

Age 64. Residence Wellington, New Zealand.

Age 52. Residence Sydney.

MR J MCFARLANEMR J K ELLISMS M A JACKSON, AC

dipqS, faim

ma, mbama (oxon), faicd, hon fie aust, fausimm,
ftse, hon dr eng (cqu)b ec, mba, hon lld, faicd, fca

Independent Non-Executive Director

Independent Non-Executive Director
Chairman of the Compensation & Human
Resources Committee
Non-executive director since March 1994.Ms
Jackson is a member of the Audit Committee.
Experience and expertise
A Chartered Accountant, with significant
financial expertise, Ms Jackson has broad
industrial experience including her involvementin transportation, mining, the media,
manufacturing and insurance. This expertise
coupled with her work in health and education
contribute to her role on the Board.
Age 52. Residence Melbourne.

Non-executive director since October 2004.
Mr Morschel is a member of the Risk
Management Committee and the Compensation& Human Resources Committee.

Experience and expertise
Mr Meiklejohn has a strong backgroundin finance and accounting. He also brings to
the Board his experience across a number of
directorships of major Australian companies
spanning a range of industries.
Age 63. Residence Melbourne.

MR J P MORSCHEL

Chief Executive Officer
Chief Executive Officer since October 1997.
Mr McFarlane is also a Director of ANZ
National Bank Limited in New Zealand.
Mr C B Goode
Mr J McFarlane
Dr G J Clark

Dr R S Deane
Mr J K Ellis
Mr D M Gonski

Ms M A Jackson
Mr D E Meiklejohn
Mr J P MorschelExperience and expertise
Mr McFarlane brings broad leadership,
management and banking skills following
a 30-year career in banking. Mr McFarlane isa former Group Executive Director, Standard
Chartered Plc, Head of Citibank, United Kingdom
and Managing Director, Citicorp Investment
Bank Ltd.
Age 58. Residence Melbourne.

DR G J CLARK

Independent Non-Executive Director
Chairman of the Risk Management Committee
Non-executive director since October 1995.
Mr Ellis is a member of the Audit Committee.
Experience and expertise
A trained engineer, Mr Ellis brings to theBoard his analytical skills together with hispractical understanding of operational issues,
investments and acquisitions across a
range of sectors including natural resources,
manufacturing, biotechnology and education.
Age 68. Residence Melbourne.

Experience and expertise
Mr Morschel has a strong background inbanking and financial services, and brings
the experience of being a director of major
Australian and international companies.
Age 62. Residence Sydney.
Visit our website at www.anz.com for listingsof current directorships or see pages 51–53
of Part 2 of this Concise Report

DIRECTORS’ MEETINGS

phd, bsc (hons)

Independent Non-Executive Director
Chairman of the Technology Committee

The number of Board meetings and meetings of Committees 1 October 2004 to 30 September 2005 that each director
was eligible to attend, and the number of meetings attended by each director were:Non-executive director since February 2004.
Dr Clark is a member of the Nominations,
Governance & Corporate Responsibility
Committee.
Experience and expertise
Dr Clark is Principal of Clark Capital Partners,
a US based firm that advises internationallyon technology and the technology market
place. Previously he held senior executive
positions in IBM, News Corporation and Loral
Space and Communications. He brings to theBoard international business experience anda distinguished career in micro-electronics,
computing and communications.
Age 62. Based in New York, United Statesof America but also resides in Sydney.

Board

A

Risk
Management
Committee

Audit
Committee

Compensation &Human Resources
Committee

B

A

B

A

B

A

B

Dr G J Clark

8

8
3

–
–

–

3

–
–

–

Mr J C Dahlsen*

4

4

–
–

–
–

Dr R S Deane

8

8

3

3

–

–

6

6

Mr J K Ellis

8

8

7

7

9

8

Mr D M Gonski

8

8

7

7

–

–

–
–

–
–

Mr C B Goode

8

8

7

7

9

9

6

Ms M A Jackson

8

8

–
–
–

–
–
–

9

9

–

–

8

–
–

Mr J McFarlane

88

Mr D E Meiklejohn
Mr J P Morschel
Mr B W Scott *

8
8
5

8
8
5

7

7

–

–

Nominations,
Governance &Corporate
Responsibility
Committee

A

B

Technology
Committee

Executive
Committee

SharesCommittee

Committeeof the Board

A

B

A

B

A

B

A

B

–
–
–
–

–
–
–
–

–

–

5

5

2

2

–

–

–
–
–

–
–
–

–

–

1

1

2

2

2

2

–
–

2

5

–
–

2

5

3

3

1

1

6

5

5

2

2

7

7

4

4

4

4

6

6

–

–

–

5

5

–
–

6
4

6
4

–

–

2

2

–
–
–
–
–

–

8

–
–
–
–
–

3

–
–

–
–

3

–
–

–
–

1

1

–
–
–

–
–
–

7

7

1

1

3

3

–

–

3
3

3
3

3
1
1

3
1
1

–
–
–

–
–
–

Column A - Indicates the number of meetings the Director was eligible to attend.
Column B - Indicates the number of meetings attended. The Chairman is an ex-officio member of the Risk Management, Audit, Compensation & Human Resources, Nominations, Governance & Corporate Responsibility, and Technology Committees.
*Retired during the year. Mr Dahlsen - 3 February 2005 & Dr Scott - 23 April 2005.

40

the board of directors

41

TEN YEAR SUMMARY

1,2

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Net interest income
Other operating income
Operating expenses

5,798
3,552
(4,515)

5,254
3,391
(4,026)

4,311
2,808
(3,228)

4,018
2,970
(2,905)

3,833
2,573
(3,092)

3,801
2,583
(3,314)

3,655
2,377
(3,300)

3,547
2,142
(3,442)

3,437
2,110
(3,502)

3,327
1,839
(3,397)

Profit before tax, debt provisionand prior period abnormals
Provision for doubtful debts1
Income tax expense
Outside equity interests

4,835
(580)
(1,234)
(3)

4,619
(632)
(1,168)
(4)

3,891
(614)
(926)
(3)

4,083
(860)
(898)
(3)

3,314
(531)
(911)
(2)

3,070
(502)
(863)
(2)

2,732
(510)
(736)
(6)

2,247
(487)
(576)
(9)

2,045
(400)
(466)
(8)

1,769
(175)
(469)
(9)

Net Profit after tax
before prior period abnormals
Net prior period abnormal profit (loss)

3,018
–

2,815
–

2,348
–

2,322
–

1,870
–

1,703
44

1,480
–

1,175
(69)

1,171
(147)

1,116
–

Net profit after tax

3,018

2,815

2,348

2,322

1,870

1,747

1,480

1,106

1,024

1,116

293,185
19,488
6.9%
17.5%
1.1%
45.6%

259,345
17,925
6.9%
17.8%
1.1%
45.3%

195,591
13,787
7.7%
20.6%
1.2%
45.1%

183,105
11,465
7.9%
21.6%
1.3%
46.0%

185,493
10,551
7.5%
20.2%
1.1%
48.0%

172,467
9,807
7.4%
19.3%
1.1%
51.7%

152,801
9,429
7.9%
17.6%
1.0%
54.5%

153,215
8,391
7.2%
15.9%
0.7%
60.9%

138,241
6,993
6.6%
17.2%
0.7%
63.1%

127,604
6,336
6.7%
18.3%
0.9%
65.8%

32.6%
43,834
110c
100%
100%
$24.45$19.02$24.0017.0%
34,586
101c
100%
100%
$19.44$15.94$19.02

6.7%
27,314
95c
100%
100%
$18.45$15.01$17.17

15.3%
26,544
85c
100%
100%
$19.70$15.23$16.8826.2%
23,783
73c
100%
100%
$16.71$12.63$15.2836.3%
20,002
64c
100%
100%
$12.87$9.18$12.7019.6%
16,04556c
75%
80%$12.11$8.12$9.80–15.6%
13,88552c
60%
60%$11.52
$7.65
$8.62

62.4%
17,017
48c
100%
100%
$11.08$6.79$10.7933.9%
10,687
42c
50%
100%
$6.96
$5.17
$6.91

160.9c68.4%$8.05

153.1c67.5%$7.51

142.4c64.2%$7.49

141.4c57.8%$6.58

112.7c62.0%$5.96

102.5c
59.1%
$5.49

86.9c
62.1%
$5.21

69.7c
67.8%
$4.98

65.8c
61.6%
$4.59

73.2c
55.5%
$4.24

1,826.4$21.85–

1,818.4$17.84$19.95

1,521.7$18.48$16.61

1,503.9$19.24$18.32

1,488.3$15.05$18.33

1,506.2$11.62$14.45

1,565.4$10.95$11.501,539.4$10.64$10.78

1,508.6
$9.77
$9.92

1,478.1
$5.59
$7.60

1,223
30,976
263,467

1,190
28,755
252,072

1,019
23,137
223,545

1,018
22,482
198,716

1,056
22,501
181,667

1,087
23,134
179,829

1,147
30,171
179,945

1,205
32,072
151,564

1,473
36,830132,450

1,744
39,721
121,847

Financial Performanceancial Performance

Financial Position
Assets2
Net Assets
Tier 1 capital ratio
Return on average ordinary equity3,4
Return on average assets3
Cost to income ratio5
Shareholder value – ordinary shares
Total return to shareholders(share price movement plus dividends)
Market capitalisation
Dividend
Franked portion–interim–finalShare price6
–high
–low
–30 Sep
Share information(per fully paid ordinary share)
Earnings per share6 –basic
Dividend payout ratio7
Net tangible assets8
No. of fully paid ordinary
shares issued (millions)
DRP issue price9–interim–finalOther information
Points of representation10
No. of employees (full time equivalents)11
No. of shareholders12

1
2
3
4
5
6

From 1997, the annual debt provision charge has been calculated based on economic loss provisioning; prior year data has not been restated for this change in measurement approach
From 1998 to 2001, consolidated assets include the statutory funds of ANZ Life as required by an accounting standard. For the year 2004, consolidated assets include the statutory fundsof NBNZ Life Insurance Limited. ANZ Life was sold in May 2002 and NBNZ Life Insurance Limited was sold on 30 September 2005.
Excludes significant items and outside equity interests
For the periods 1997 to 2002 the return on average ordinary equity calculation accrues the dividend over the year. From 2003, dividends may no longer be accrued and as such are not includedin the calculation of return on average ordinary equity
Excludes goodwill amortisation, abnormals and significant items
Periods prior to 2004 adjusted for the bonus elements of the November 2003 Rights Issue

42

7

From 2003 the dividend payout ratio includes the final dividend proposed but not provided for in terms of AASB 1044 Provisions, Contingent Liabilities and Contingent Assets which was
effective from the September 2003 financial year.
8 Equals shareholders equity less preference share capital and unamortised goodwill
9 DRP represents Dividend Reinvestment Plan
10 Includes branches, offices, representative offices and agencies
11 Prior to 1997, excludes temporary staff
12 From 2000 onwards the number of shareholders does not include the number of employees whose only shares are held by ANZEST Pty Ltd as the trustee for shares issued under the terms of any
ANZ employee incentive plan.

ten year summary43

INFORMATION FOR SHAREHOLDERSA SUMMARYDIVIDENDS

CREDIT RATINGS

The final dividend of 59 cents per share,
fully franked, will be paid on 16 December
2005. A Dividend Reinvestment Plan (DRP)
and Bonus Option Plan (BOP) are available
to shareholders. Copies of the terms andconditions of the Plans are available fromthe ANZ Share Registry at the addresses
shown below.

Short Term

REMOVAL FROM MAILING LIST

Shareholders who do not wish to receive
a copy of the Concise Annual Report must
advise the Share Registry in writing or
you can register your email address via
www.anz.com and elect to receive shareholder
information via email instead of by mail.
CHANGE OF ADDRESS

Shareholders who have changed theiraddress will need to advise the Share Registryin writing, quoting their shareholder number,name and company as applicable.
If you have purchased your shares througha broker you will need to inform your brokerof the change.

®

ANZ is proud to be a foundation memberof eTree, a Computershare initiative with
Landcare Australia.
Register to receive all your shareholder
communications electronically through eTreeand in return ANZ will make a donation of
up to $2 to Landcare Australia to support
reforestation projects across Australia and
New Zealand.
So far through this initiative ANZ
has donated the equivalent of almost
200,000 trees and we encourage moreshareholders to register and help giveback to our environment.
www.eTree.com.au/anz

44

Moody’s Investors Service

P-1

Date

Event

Standard & Poor’s Rating GroupA1+

16 December 2005

Annual General Meeting
Adelaide

16 December 2005

Final Dividend Payment

27 April 2006

Interim Results Announced

15 May 2006

Interim Dividend Ex-Date

19 May 2006

Interim Dividend Record Date

3 July 2006

Interim Dividend Payment

HANDY CONTACTS

26 October 2006

Annual Results Announced

ANZ
Registered Office
Level 6
100 Queen Street
Melbourne VIC 3000
Australia
Telephone +613 9273 6141
Facsimile +613 9273 6142
Company Secretary: Tim L’Estrange

9 November 2006

Final Dividend Ex-Date

15 November 2006

Final Dividend Record Date

15 December 2006

Final Dividend Payment

15 December 2006

Annual General Meeting
SydneyLong Term
Moody’s Investors Service(outlook stable)

Aa3

Standard & Poor’s Rating Group(outlook stable)AA-* If there are any changes to these dates, the Australian Stock Exchange

will be notified accordingly

Investor Relations
Level 22
100 Queen Street
Melbourne VIC 3000
Australia
Telephone +613 9273 6466Facsimile +613 9273 4899
investor.relations@anz.com
Share Registry
australia
GPO Box 2975
Melbourne VIC 3001
Australia
Telephone 1800 11 33 99 / +613 9415 4010
Facsimile +613 9473 2500
anzshareregistry@computershare.com.au
new zealand
Private Bag 92119
Auckland 1020
New Zealand
Telephone 0800 174 007
Facsimile +649 488 8787
united kingdom
PO Box 82
The Pavilions
Bridgewater Road
Bristol BS99 7NH
Telephone +44 870 702 0000
Facsimile +44 870 703 6101

Design and production: ERD Design Communications Photography: Chris Kapa Printing: Southern Colour

In order to reduce costs, minimise thepotential for fraud and enhance conveniencefor shareholders, ANZ has implemented
a direct credit payment policy regarding
dividend payments to shareholders inAustralia, New Zealand and the UK (otherthan to those who have elected to participate
in either the DRP or the BOP).

IMPORTANT DATES FOR SHAREHOLDERS*