different.
Concise Annual Report 2006 - Part 1 of 2 - Annual Review

The ANZ Concise Annual Report is a concise report for the purposes of section 314 of the Corporations Act 2001 and comprises
two parts: Part 1 (Annual Review) and Part 2 (Concise Report). The two parts are distributed together as one document andshould be read together. These documents may only be distributed by a person on the basis that Part 1 (Annual Review) andPart 2 (Concise Report) are distributed together.
A copy of the full Financial Report for the year ended 30 September 2006 for the Group, including the independent Auditor’sReport, is available to all members, and will be sent to a member without charge upon request. The Financial Report can berequested 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

08
10
14
20
36
42
46
48
51

Becoming a very
different bankdemands a different
perspective.

2006 Investor Snapshot
Chairman and CEO Reports
CFO Report
Our Business Performance
People, Community and the Environment
Corporate Responsibility Performance
The Board of Directors
10 Year Financial Summary
Information for Shareholders

Our customers now see
more ways to bank with us.

When we open a new branch like this one in Diamond Creek,
Victoria, we celebrate with the local community.

2 ANZ Concise Annual Report 2006

A very different bank needs to think
differently about customers. With afocus on convenience and simplicity,
we want to make our customers feel
welcome, in whatever way they want
to deal with us. This year ANZ opened
26 new branches and installed 343
new ATMs across Australia. We were
the first bank to have our call centre
open to customers 24 hours a day,
7 days a week, and we have extended
opening hours in major shopping
centres across Australia.

3Our people now see
their careers differently.

We guarantee staff aged 55 and over part-time work if theywant it, which means Wayne Bevan gets to spend more time
playing basketball with his son Daniel.

4 ANZ Concise Annual Report 2006

A very different bank requires a very
different culture. Our level of staff
engagement at 60% is the highest
among large Australian companies.
We were the first Australian company
to introduce guaranteed part-timework for employees aged 55 andover and in late 2005 we were named
the Leading Organisation for the
Advancement of Women in Australia
among organisations with more than
500 employees. Over the past year
we have invested over $50 million
developing and training our people.

5Our extended community
now sees us in a different way.

6 ANZ Concise Annual Report 2006

MoneyBusiness aims to build the money management skills andconfidence of Indigenous Australians. At Nguiu on Bathurst Island(NT), MoneyBusiness Team Builder Maggie Vigona talks to membersof the community about the program.

A very different bank needs to takea more active role in the community.
We are leaders in addressing the majorsocial issues that involve the financial
services industry – in particular financial
literacy and inclusion. We also provide
our people with opportunities to support
causes that are important to them. This
year ANZ received the Special Award for
Impact on the Community in the 2006
Prime Minister’s Awards for Excellencein Community Business Partnerships.

7

our results2006 INVESTOR SNAPSHOT

Customers

Staff

Continued to lead the other three majorbanks in customer satisfaction

Most engaged staff amongst major Australiancompanies – 60%

Number 1 lead bank for Institutional clientsin Australia and New ZealandLost-time injury frequency rate down to 3.8
injuries per million hours worked, a 10%
reduction since 2005

Awarded the Best Call Centre in Australia
for the third year in a row
In 2006, for the first time, we opened overa million new accounts in Australia

Named the Leading Organisation for the
Advancement of Women in Australia amongorganisations with more than 500 employees
Our ‘My Difference Survey’ provided our first-everdemographic snapshot of our people–

Communtiy

Shareholders

Received the Prime Minister’s Award for
Excellence in Community Business Partnershipfor Impact on a Community

Our net profit attributable to shareholdersof the company was $3,688m, and ourCash Earnings Per Share was up 13.2%

We offer staff members eight hours of volunteer
leave each year. This year 24% of Australian and New

The total dividend for 2006 was 125 cents,
up 13.6%

Zealand staff logged 50,735 hours of volunteering
activity as part of our ANZ Volunteers program

Total return for shareholders over the past
12 months, which includes growth in theshare price and dividends received, was 17.1%

ANZ Community Giving program matches staff
contributions up to $1000. 10.6% of employees
donated money as part of our Community Giving
program. This year their contributions were matcheddollar-for-dollar by ANZ, with total contributionsof $833,000

The market value of ANZ reached $50 billion
for the first time, before finishing the year
at $49 billion

8 ANZ Concise Annual Report 2006

05

195
172

06

125

05

110

49,33106

43,834

3,688
3,175

05

06

05

06

16%

13%

14%

13%

Net Profit
After Tax

MarketCapitalisation

Dividend

Cash Earnings
Per Share

($m)

($b)

2006 Investor Snapshot 9(cents per share)(cents)The major Australian bankthat truly differentiates itself
in the eyes of shareholders,customers, employees, andits various communities, will
have a major competitive
advantage.We are confident
ANZ is poised to be that bank.

10 ANZ Concise Annual Report 2006

our future

CHAIRMAN AND CEO REPORT

It has been another year of achievement for ANZ in 2006. Our shareholders havebenefited, as have our customers, our people and the community.
Over the past decade we have become a very different bank by dramatically changing
our financial performance; improving our productivity and returns; and regaining
the respect of our shareholders. With these basics in place, we increased our focus
on our customers, our people and our communities. We recognised that if we were
to fully satisfy our customers then we needed our people to have the right mindset,
capabilities and attitude.
Today we are in a very good space, but we needto accelerate the differences by:
Expanding our market position in Australia,
New Zealand, Asia and the Pacific. We have gone
against the trend and added 5,000 people overthe last four years. This gives us the foundation
to create higher revenue growth going forward.
Increasing the top end of our revenue growthtarget from 9% to 10%. We will continue to aim
for cost growth lower than our revenue growth,
as we head towards a 40% cost to income ratio.
Ensuring that each of our businesses can clearlyanswer the question “why should someone bankwith us, and not one of our competitors?”. Thisis one of the most important questions we face.
We believe ANZ is at a flexing point; we’re on
the verge of something great. We are satisfying ourshareholders and customers. The communities
in which we operate hold us in increasing regard.
Our people regard us as the best organisation
to work for in financial services.

That’s why now our major objective is to buildon the strong foundation we have created andbe a very different bank. The major Australianbank that truly differentiates itself­– in the eyesof shareholders, customers, employees, andits various communities – will have a major
competitive advantage. We are confident ANZ
is poised to be that bank.

Chairman and CEO Report 11

These results are the workof an outstanding group ofpeople: our staff. On behalfof my fellow directors andall shareholders, I thankthem for their effort andcontribution.

growthCharles Goode - Chairman

expansion

expansion

chairman’s report A MESSAGE FROM CHARLES GOODE
Our performance
Our profit after tax for the year ended 30 September 2006 was $3,688 million, up by 16%;
our cash profit (adjusted for AIFRS 2005 adjustments and non-core items) was $3,587 million,
up 14%; and our profit before provisions was up 10%.
The dividend for the year is 125 cents per share fully franked.
Revenue growth of 8% was the highest for many years. While costs increased by 6%, ourcost to income ratio fell by 1.0% to 45.6%. The overall credit environment was very favourablewith provisions for credit impairment at cyclical lows.
Expansion and Growth
The Personal Division achieved exceptional results, with revenue growth of 13% and earnings
up 22%. Personal is reaping the benefits of a clear customer proposition – simpler and moreconvenient banking – along with an expanded branch network, more ATMs and longer
opening hours.
In Institutional, good revenue growth of 8% and low credit losses led to growth in earningsof 11%.
In New Zealand, our integration program was successfully completed. The customer basehas been maintained and is now growing. We have strong businesses with options for growth.
Turning to East Asia, we celebrated 20 years in China and expanded our presence with a 20%
investment in Tianjin City Commercial Bank. In Vietnam, ANZ and Sacombank committed
to a joint venture, and we launched banking services in Cambodia through ANZ Royal Bank,a joint venture with Royal Group.
The Board
During the year, Dr Roderick Deane retired as an ANZ director, and as Chairman and Directorof ANZ National Bank Limited. Dr Deane joined the Board in 1994 and made a very
substantial contribution. We thank Dr Deane and wish him well in retirement.

Outlook

We expect the environment for banking will be supportive in the year ahead.
While growth in the Australian economy is unlikely to exceed current levels,
conditions should still be conducive to reasonable earnings growth. New Zealand’s
economy may well be softer over the next two years, but nevertheless we remain
confident of the long term future for our New Zealand business. Our positionin Asia will continue to grow in importance.

12 ANZ Concise Annual Report 2006

Charles Goode - Chairmandifference

performance

chief executive officer’s report A MESSAGE FROM JOHN McFARLANE
ANZ has once again performed well in 2006
for shareholders and we have invested andstrengthened our foundation for sustainablegrowth in future years.
This performance is simply a milestone on a longer
journey from the major banks being perceived as
the same, to making ANZ “a very different bank”.
It concerns me that many believe all banks are
the same. It would not be so prevalent a view if it
was not true. Changing this required us to create
tangible reasons:
Why a customer should deal with us?
Why the community should place its trust in us?
Why people should invest their working lives in us?
Why shareholders should invest in us?

In 2006 in Australia, we opened a new branch every
fortnight and in 2007 we will open a new branchalmost every week.
In the last four years we added 10,000 new people,
including the acquisition of The National Bank of
New Zealand.
We had a very different acquisition in New Zealand,
maintaining separate businesses and brands.
With the sizeable opportunity presented by Asia’s
economic growth and the interdependence between
Australia, New Zealand and Asia, we have begun amajor push into the region, including expanding ourbusiness in Tianjin and Shanghai in China.
We leveraged the technology and operational
capability in Bangalore built over 17 years while
maintaining a policy of having customer contact athome in Australia and New Zealand.

So against the trend of cost-cutting, we decided toinvest to make “a very different bank” a reality. Thisrequired a major change in emphasis where:

We received special recognition through the Prime
Minister’s Award for Impact on a Community.

People, customers and the community would
become the main focus rather than costs and shortterm return.

I am genuinely pleased with our progress, but realise
it is only the beginning. Therefore we are raising thebar on revenue growth and accelerating our efforts tobecome “a very different bank”. Our achievements in2006 demonstrate we are well positioned to do so.

We would build a culture and talent base that could
not easily be replicated.
We could all sleep at night with the level of risk.
In particular we recognised that the bank that comesup with ways to serve our customers better would
win over the long run. Our progress demonstrates
our commitment to more convenient banking:All in all it has been a good year for shareholders
and I want to thank you all for your continued
confidence in us.

John McFarlane - Chief Executive Officer

Chairman and CEO Report 13

This year ANZ
reported a record
net profit after tax
of $3,688 million,
up 16% on 2005.

value

This report explains how we get from our profitof $3,688 million to our dividend of 125c, andthen on the following pages, we delve into our
profit result in more detail.

profitchief financial officer’s report A MESSAGE FROM PETER MARRIOTT

3,175

3,688

Adjustments+/- Non Core Items

05

06

16%

Statutory Profit - ($m)

- Fair Value Hedge

2005

2006

$38m

($67m)($31m)($34m)- AIFRS Adjustments ($31m)
Cash Profit- Hybrid Dividend

1,824

1,830

3,133

3,560

05

06

0

3,151

3,587

($18m)($27m)We then divide this ‘cash’ profit by the average
number of ordinary shares on issue over theyear. The small increase in shares during theyear is mainly due to shares being issued under
the Dividend Re-investment Plan and various
option plans. This resulted in ‘cash’ Earnings
Per Share growth of 13.2% in 2006.

Divided by

05

06‘Cash’ Profit Available toOrdinary Shareholders - ($m)

13%‘Cash’ Earnings
Per Share - (cents)

110

06

Average Ordinary
Shares on Issue - (m)

05

125

171.8

194.5

05

Payout Ratio 64%

We make a series of adjustments to remove
items like dividends on hybrid instruments
which reduce the returns available to ordinary
shareholders, and non-core items. These noncore items included incremental costs associatedwith merging our two banks in New Zealand of$26m ($52m in 2005) and non-recurring gains
of $93m ($14m in 2005). By making theseadjustments, we end up with what is commonly
known as our ‘cash’ profit.

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

06

14%

Dividend Per Share - (cents)

This resulted in a dividend of 125 cents, up
13.6%, and a payout ratio of approximately
64%, which also allows us to fully frank thedividend for the foreseeable future.

14 ANZ Concise Annual Report 2006

Our ‘Cash’ Profit increased by 14%

Lending grew by 9%

Deposits and otherborrowings grew by 8%
204.8

190.3

268.8

245.9

107.7
02

03

Tax & OEI

112.1

145.9

162.6

149.8

217.4

(240)

Provisions

3,587

158

Expenses

Other operating income

572 Net interest income

(265)

211

3,151
05

02

06

Cash profit - ($m)

03

04

05

06

Net Loans and Advances
including Acceptances - ($b)

04

05

06

Deposits and other borrowings
excluding commercial paper - ($b)
Series break due to AIFRS

Profit and Loss Summary

Balance Sheet

Welcome to the new International Accounting Standards!
This year, ANZ reported under the new accounting
standards for the first time. The formal name for the
new standards is actually “Australian Equivalents toInternational Financial Reporting Standards”, but we’ll
shorten that mouthful to AIFRS.

One of the key drivers of our performance has been strong
overall balance sheet growth during the past 12 months.
Balance sheet growth largely comprises:a) Asset Growth
The continued strong growth of recent periods continued
in 2006, with total assets up 12% to $335,771 million.

The transition to AIFRS was particularly difficult forbanks, due to one of the new standards AASB 139 having
a very significant impact on financial institutions. To help
manage the transition, we have had a special project in placefor over 3 years, at a cost of $20 million. Unfortunately not all
standards came into effect at the same time, which can makecomparisons against previous years misleading, a bit likecomparing apples and oranges.
To help shareholders make more sensible comparisons,
we have produced a version of our 2005 accounts thatassumes all standards were in place at that time, and thefollowing table, commentary in the remainder of my CFO
report, and Divisional and geographic reports will be basedon those numbers.
Profit and Loss Summary

2005
$m

2006
$m

Movt
%

Net interest income
Other operating income

6,371
2,935

6,943
3,146

9%
7%

Operating income
Operating expenses

9,306(4,340)10,089(4,605)

8%
6%

Profit before Credit Impairment
and Income Tax
Provision for Credit Impairment

4,966
(565)

5,484
(407)

10%
(28%)

Profit before income tax
Income tax expense
Minority interest

4,401(1,247)(3)

5,077(1,486)
(4)

15%
19%
33%

Cash Profit

3,151

3,587

14%

Chief Financial Officer’s Report 15

A large component of ANZ’s assets represent lending
to individuals, businesses, large corporations and otherentities. This includes mortgage lending, unsecured personaland credit card lending and loans for various business
related activities.
Despite a softening in the rate of growth from recent years,
mortgages continued to grow solidly in both Australia (12%)
and New Zealand (13%). At the top end of our Institutional
business in our Debt Product Group, lending growth slowed
significantly to 2%, while in our Corporate and BusinessBanking businesses growth was 10% and 17% respectively.
b) Liability Growth
Consumer and Business deposits and other borrowings
are the biggest items on the liability side of our balance
sheet at $204,794 million. In both consumer and businessdeposits, ANZ performed well in 2006. Retail deposits wasa highly competitive segment in the Australian market overthe past twelve months due to the introduction of a numberof high interest rate online products. ANZ recorded thehighest growth of the major banks to gain market share
during the year with 13% growth.
In New Zealand, we achieved strong customer deposit
growth in 2006 following the introduction of high rate online
savings accounts to the New Zealand market.
We also experienced good deposit growth across our
Corporate and Institutional segments over the year.

Our net interest margin
declined by 9 basis points

Why our margin declined

Other

Competition

05

06

Net Interest Margin - (basis points)

Series break due to AIFRSNet Interest Income

Net Interest Income (“NII”) is the difference between interest
received from customer lending and interest paid by ANZ
to those providing our funding.
NII increased 9% in 2006 to $6,943 million, reflecting strong
average interest earning asset growth of 13% partly offset
by a decline in our Net Interest Margin.
Over the year, our net interest margin declined 9 basis points
to 2.31% at September 2006, with the key drivers being:a) Funding Mix (-5.1 basis points) – when asset growth
outstrips deposit growth additional funds are sought fromthe higher cost wholesale markets, negatively impacting
net interest margin.
b) Asset Mix (-2.8 basis points) – this decline occurs when
we have stronger growth in lower margin products i.e.
liquid assets and trading securities, relative to growthin higher margin products, reducing our average margin.
c) Wholesale Rate (3.1 basis points) – this impact generally
arises from changes in the interest rate environment,
including when wholesale rates and the official cash ratechange by different amounts.
d) Competition (-7.7 basis points) – the Australian and
New Zealand banking markets remain highly competitive.
During the year competition resulted in a 7.7 basis
point reduction in our net interest margin. The key areas ofcompetition included Australian mortgages, New Zealanddeposits, and Corporate and Institutional lending.
e) Other (3.5 basis points) – other included gains fromrevenue hedging.

02

03

04

05

What makes up our Other
Operating Income

3,146

2,935

3,267

2,796

2,808

231.0

3.5

Net Interest Margin - (%)

(7.7)

06

Asset mix

05

Wholesale rate

04

3.1

Funding mix

03

(2.8)

(5.1)

240.0

2.31

2.40

2.49

2.67

2.77
02

Our Other Operating
Income increased 7%

06

Other Operating Income - ($m)

14%
55%
14%
7%
4%
6%

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

Other Operating Income Split
Other Operating Income Split

Series break due to AIFRSOther Operating Income

Other Operating Income predominately comprises fee
income from across our businesses, foreign exchange andtrading income generated by our Institutional markets
business, and other items such as our share of earnings fromthe ING Australia Joint Venture. Other Operating Income
increased 7% to $3,146 million in 2006.
Lending fee income increased 6% to $430 million in 2006,
driven largely by the 10% increase in our lending volumes.
Both Personal and New Zealand recorded good growth inlending fees, with lower growth in the Institutional business.
Non-lending fees increased 9% to $1,715 million during
the year, driven largely by our Personal Division, where thestrength of our customer proposition is driving good growthin customer numbers, and good deal flow in Institutional.
Non-lending fee growth in New Zealand was relatively soft at
2% largely as a result of recent changes to our fee structures
to align with the market.
Other contributors to the improved Other Operating Income
performance include:a) Higher earnings on Trading Securities, up 58% to $209
million, partly offset by slightly lower foreign exchangeearnings, which were down 2% to $447 million.
b) Earnings in our ING Australia Joint Venture, before the impact
from transitional tax relief and capital investment earnings,
were up 36% to $186 million, helped by buoyant equity
markets. After taking into account the end of transitionaltax relief and lower earnings on capital, net profit after tax
was $243 million, of which ANZ’s share was 49%.

16 ANZ Concise Annual Report 2006

We reduced our Cost
to Income Ratio by 1%

0.51
0.22

02

03

04

05

0.13

0.15

06

Individual Provisions plus
Collective/General Provision- ($m)

Collective

Expenses

0.34

05

69

208

Series break due to AIFRS

02

04

338

87

Staff Numbers - (FTE)

03

189

05

357

443

Cost Income Ratio - (%)

04

Individual provisions fell tojust 0.13% of lending assets

527

06

-118

03

728

02

30,97606

Our total credit provision
charge fell to $407 million

32,25605

28,75545.6

04

22,48246.6

03

23,137

45.1

45.3

46.0
02

Staff numbers grew
by 1,280

06

Individual Provisions
to average net advances - (%)
Series break due to AIFRS

Individual

Provision for Credit Impairment

In 2006 we increased expenses 6% to $4,605 million,
continuing our commitment to invest in long-term earnings
sustainability, and create above peer revenue growth.

The Provision for Credit Impairment decreased by 28% from$565 million in 2005 to $407 million in 2006, reflecting thegood health of the portfolio from a credit quality perspective.

Over the past year, our personnel costs have risen 9%.
The key driver of this increase was the addition of 1,280
employees over the past 12 months.

As part of the transition to AIFRS, the old Bad and Doubtful
Debts charge was renamed Provision for Credit Impairment.

Our premises expenses were up 6% over the year, due
to growth in our ATM and branch network, market rent
increases, and higher security service costs.
Despite this level of investment, we managed to reduce
our Cost to Income ratio by a further 1% to 45.6%.
From a divisional perspective, some highlights include:a) Personal – expenses up 9% to $2,069 million reflecting
significant investment in frontline personnel with 714 staff
added in 2006 and continued investment in our branch
network, with 25 new branches opened. We also installed
330 new ATMs during the year.
b) Institutional – expenses up 11% to $1,283 million driven
largely by increased personnel costs, with staff numbers up
357, and cost per FTE increasing due to a very competitive
global market for staff.
c) New Zealand – expenses up 6% to NZD1,254 million as
we continued to invest in both brands, adding 60 new
staff. This business also incurred costs associated with theCommerce Commission settlement of NZD10 million, andan additional NZD10 million to operate domestic systems
in New Zealand rather than Australia.
d) Partnerships and Private Banking – expenses up 24%
to $62 million reflecting ongoing investment in our Asianpartnerships, including the first full year of our joint venture
operations in Cambodia.

Chief Financial Officer’s Report 17

Under the revised methodology, there are two components:
A charge for Individual Provisions – these were previously
known as Specific Provisions, and in simple terms are theactual losses during the period.
A charge for Collective Provisions – this charge represents
the change in the Collective Provision balance between
2006 and 2005. The Collective Provision is a function of
the change in portfolio size, portfolio mix, risk, and cycle
outlook.
As you can see in the chart above, Individual Provisions
as a percentage of lending assets were remarkably low
during 2006. We believe losses are likely to increase fromthese levels and we look at this in a bit more detail on thefollowing pages.

capital adequacy
Banks are required to maintain capital levels that comply
with both regulatory and operational requirements. Capital
adequacy is measured as capital as a percentage of risk
weighted assets.
Australian Prudential Regulation Authority (“APRA”)
sets regulatory capital requirements. The key requirement
is known as Tier 1, representing high quality capital,
including ordinary shares, retained earnings and generalreserves. ANZ’s current Tier 1 ratio is 6.8%.

ANZ recognises theimportance of effective risk
management to its businesssuccess. Management iscommitted to achieving strongrisk control, resulting in “nosurprises” and a distinctive
risk management capability.

In setting ANZ’s credit rating Ratings Agencies focus on
Adjusted Common Equity (“ACE”), reflecting Tier 1 capitalless preference shares and a number of deductions. ANZ
has an ACE target range of 4.00% to 4.75%, at September
2006 the Group’s ACE ratio was 4.7%.
As evidenced by the capital ratios banks are highly
leveraged organisations necessitating strong risk
management frameworks and capabilities.

risk management 2006
1.Robust Risk Management Framework

5.7

5.7

4.7

5.1

6.8

6.9

6.9

5.1

7.7

7.9

ANZ’s risk management framework combines Board policy
setting and review with regular senior management oversightand independent business unit monitoring

ANZ Board

02

03

04

05

06

Tier 1 Ratio

02

03

04

ACE Ratio

05

06

Risk Committee – Oversees principles, policies, strategies,
processes and control frameworks for the management of
Risk and approves credit transactions beyond the approval
discretion of executive management
Audit committee – reviews financial control frameworks
and compliance with policies and regulatory requirements.

Series break due to AIFRS

Senior Management
Credit and Trading Risk Committee – oversees credit policy,
major lending decisions, asset writing strategies and tradedand non-traded market risk
Group Asset & Liability Committee – oversees regulatory
capital, balance sheet structure, liquidity and funding
Operational Risk Executive committee – oversees
operational risk and compliance strategies & activities

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

18 ANZ Concise Annual Report 2006

Our Provision levels
remain strong...

Our Market Risk remains
at very low levels
2.1

2.1

9

1.6

03

04

05

06

Offshore Lending Assets- (% of total)

02

03

1.4

1.3

02

4

06

4

05

Net Non Performing Loans - ($m)

5

04

6

03

382

02

386

06

451

02

Collective Provision/General Provision
to Risk Weighted Assets - (%)

Offshore Lending Assets
are just 4% of theportfolio

525

0.99
05

628

1.01
04

0.81

1.01

1.06

03

...while Net Non
Performing Loans remain
at low levels

04

05

06

Average VaR (97.5% confidence) - ($m)

Series break due to AIFRS

2. Major Inherent Risks

3. Key Risk Developments

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

ANZ continues to improve its risk profile and capability
in a number of areas including:a) Credit Risk – is the risk that a customer will fail to meet their
obligations in accordance with the agreed terms and is the
major risk faced by ANZ. Credit risk policies and management
are executed through dedicated Risk channels that report to
the Chief Risk Officer. All major credit decisions require approvalby independent Risk personnel. The Individual Provision Charge
fell 5% in 2006 to $338 million. As a percentage of average net
lending assets, the Individual Provision Charge has fallen from
0.51% to 0.13% over the last five years.
b) Market Risk – is the risk of losses from changes 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 ensurestraded and non-traded risks and liquidity profiles are within Board
and Senior Management authorised limits. Value at Risk (“VaR”)
is a statistical estimate of the likely daily loss. The average traded
VaR exposure for 2006 was $2.12 million.
c) Operational Risk – is the risk of direct or indirect loss resulting
from inadequate or failed internal processes, people and systems,
or from external events. The operational risk framework is set at
Group level. Divisions and Business Units are responsible forOperational Risk on a day-to-day basis.
d) Compliance Risk – is the risk of failure to comply with allapplicable legal and regulatory requirements, industry standards
and internal Policies and procedures, and the corresponding
impact on ANZ’s business, reputation and financial control.

a) Improving Risk frameworks and capabilities
During the year there has been significant focus on further
developing a number of risk frameworks and policy enhancements
including risk appetite, asset writing strategies, provisioning analysis
and stress testing capabilities. As a result ANZ is in a better position
to anticipate and manage risk in a forward looking manner.
b) Reduction in Non-Performing Loans
Non-performing loans are those facilities where ANZ expects tolose a portion of the interest and / or principal. As a percentageof net advances, it is a useful measure of credit quality. Over thelast five years, this has fallen from 0.82% to just 0.25% in 2006.
c) Industry and Single Name Exposure Limits
Integral to the risk management framework are concentration limits
for countries, industries and individual customers. ANZ continuallymonitors and manages limits and exposures to minimise the riskthat ANZ is exposed to large unexpected credit losses.
d) Operational & Technology Risk
and Group Compliance processes
Operational and Technology Risk have been progressing a numberof initiatives which aim to improve the quality and standardof our risk management capabilities across ANZ, including thedevelopment of a standard risk register to capture operational risks,compliance obligations and information security risks. Further,a number of initiatives have also been progressed to improve
internet banking security, identity management and access
control processes.
A detailed explanation of risk management at ANZ is available
on our web site at www.anz.com/australia/aboutanz/
corporateinformation/corpgovpolicy

Chief Financial Officer’s Report 19

Our home markets of Australia and New Zealand represent 90% of theGroup’s profit. We have grown our Australian business significantly
in recent years and we are the largest bank in New Zealand.

20 ANZ Concise Annual Report 2006

our focus

A UNIQUE GEOGRAPHICAL PRESENCE

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

Asia
Cambodia
China
Hong Kong
Indonesia
Japan
Korea
Malaysia
Philippines
Singapore
TaiwanThailand
Vietnam
EuropeUnited Kingdom
United Statesof America

Personal NPAT - ($m)
1,033
1,256

Institutional NPAT - ($m)
1,258
1,396

New Zealand Banking* NPAT - (NZDm)
839
1006

Partnerships & Private Bank NPAT - ($m)
176

2005

169

2006

Our home markets of Australia and New Zealand represent 90% of the Group’s profit.
We have grown our Australian business significantly in recent years, and we are thelargest bank in New Zealand.
We are the only Australian bank with a significant presence in Asia, and our representationis among the largest in the region. We have a number of retail partnerships in the region,and during the year we entered into a new partnership with Tianjin City Commercial Bankin China. We continue to be in discussions with Shanghai Rural Commercial Bank, andhope to conclude these discussions soon. We remain the number one bank in the Pacific,
holding either number one or two position in each market in which we operate. We also
have a substantial presence in the key financial centres of London and New York.

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

Pacific$6,806m
45.3%$2,488m$230,898m
18,723873

New Zealand (NZD)
Operating Income		
Cost to Income		
NPAT		
External Assets		
Number of Employees
Points of representation

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

$286m
44.8%
$113m
$2,648m
1,662
52

Other
$2,752m
46.8%$951m$95,153m
9,392
312

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

$268m
44.4%
$132m
$9,596m
1,567
6

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

Our Business Performance 21

$323m
46.8%
$125m
$9,562m
913
22*New Zealand Banking includes New ZealandBusinesses and New Zealand Institutional

personal reportA MESSAGE FROM BRIAN HARTZER

convenience

simplicity

22 ANZ Concise Annual Report 2006

Brian Hartzer on very different front line staff“We’ve built great staff engagement in our branches,
and we have a fantastic team of people who serve
our customers every day. They’re passionate andempowered. The reaction of our staff in Innisfail in theaftermath of Cyclone Larry was magnificent. They truly
went the extra mile.
The branch staff met and decided to open the branch,even though one of them had lost her own home andthe branch had no electricity. Their dedication meantthat ANZ was the first bank to reopen on the morning
after the cyclone hit, and the first ATM up and running
using a customer’s generator for power. Innisfail branchprovided a critical service to their local community,
by working with the federal and state governments
to provide cash grants to locals, regardless of whether
or not they were existing ANZ customers.
Staff from all around the region pitched in to help andgive their colleagues some relief. One staff member
even bought an entire rack of bread from the Athertonbakery and drove it down to Innisfail so that it could be
distributed to customers and their families.
ANZ staff across Australia held fundraisers to help theircolleagues in Innisfail, to the point where the branch
ended up having several thousand dollars in surplus
funds to donate back to the community.
I don’t think we would have had that reaction from ourpeople if they didn’t feel really good about where theywork and were recognised for the important role they playin their community. It’s the best example I’ve seen of staff
engagement in action, and I’m proud to work with them.”

We’ve built an engaged and highly motivatedworkforce, with the skills and know-how toprovide outstanding customer service.

Personal Report 23

Our financial performance
($m)

2006

%

Income4,200
3,715
Operating Expenses(1,890) (2,069)
Profit before Provisions 1,825 2,131
Provision1
(341)
(351)
Tax & OEI
(534)
(441)
Profit after Tax
1,256
1,033
Cost to Income (CTI)
50.9% 49.3%
Staff (FTE)
12,081 12,795

2005

13%
9%
17%
(3%)
21%
22%
—
6%

1 Provision for Credit Impairment

Personal has had an outstanding year, withrevenue growth of 13% driving earnings growthof 22%. Balance sheet growth was strong, withlending up 12% and deposits up 11%. Giving
customers a good reason to bank with us otherthan simply price has helped us maintain stable
margins over the year.
All Personal businesses recorded double-digit
earnings growth, with the highlights being Pacific(up 67%), Investments and Insurance (up 48%),
Consumer Finance (up 25%), and Mortgages(up 21%).
Expenses were up 9%, as we continued ourinvestment in future growth, with the additionof 714 full-time equivalent staff, 25 newbranches, and 330 ATMs over the year.
Credit costs were relatively flat during the year.

Under the theme
ofTO BE INSERTED.
FINAL TEXT
“More Convenient Banking”
we have invested in simpler
and more convenient banking
services that customers value,establishing a compelling
answer to the question, whyshould customers choose us?
Pictured left to right - Joanna Koulianos,
Katrina Southwood and Mark Buyck.

servicepeoplewhat we do

5%
8%
3%
20%
13%
23%
28%

Earnings by business$296m Banking Products$363m Mortgages$256m Consumer Finance$167m Regional, Rural & Small Business Banking$37m 		Investments & Insurance Products$97m Esanda$65m Pacific

Personal is responsible for serving consumer and small business customers acrossAustralia, through our network of 781 branches, our Australian-based call centre,
and our network of specialist sales staff. Seven specialist business units comprise
the Personal Division:
Mortgages is the largest business unit within Personal and is responsible for our
residential mortgage products.
Consumer Finance provides credit cards and personal loans to retail customers as wellas managing our ATM and Merchant Payments businesses.
Banking Products is responsible for transaction banking (such as passbook andoverdraft accounts) and savings products (including Progress Saver, Term Deposits,
V2+ and Cash Management accounts).
Investment and Insurance Products (I&I) comprises several related businesses
including ANZ Financial Planning, Margin Lending, our E*TRADE partnership, ANZ
Trustees, Insurance Products, and our relationship with INGA.
Regional, Rural, and Small Business Banking looks after the needs of ANZ customers
in rural and regional Australia and provides services for around 190,000 small
business customers through a network of specialists based in our branch networkand on the phone.
Esanda is one of Australia’s largest asset-based finance companies and the leading
provider of vehicle and equipment finance solutions.
Pacific provides a full range of banking services to consumer and corporate
customers across eleven countries.

24 ANZ Concise Annual Report 2006

our achievements

value

The Personal Division is one of theleading examples of ANZ’s initiative
to become a very different bank.
Under the theme of “More Convenient
Banking” we have invested in simpler
and more convenient banking services
that customers value, establishing acompelling answer to the question,
why should customers choose us?
We began by opening branches when
our main competitors were shutting
their doors. We extended our call centre’s
operating hours to 24/7. Branch queue
times have been reduced and our ATM
network has continued to grow.
In the past year we opened 25 newbranches, employed more than 300
new full time staff in our branches, andinstalled 330 new ATMs – well over the
200 ATMs we targeted as part of ourCustomer Charter. In addition to newbranches and minor works, we have spentapproximately $80 million on upgrading
the remainder of our branches.
In August we made a public commitment
to extend hours at our branches in 80
major shopping centres across Australia.
Participating branches will be open
for late night shopping on a Thursday
or Friday until 7pm, and/or open on
Saturday mornings. In addition, brancheswith high customer traffic will open forextended hours during especially busy
periods, such as the days leading up to
Christmas and Easter.

Goals for 2007
Our goal for 2007 is to continue to differentiate ourselves by delivering More
Convenient Banking. We will continue to invest in the things that give newcustomers reasons to switch to ANZ, and existing customers more reasons tobuild their relationship with us. To achieve this, we will continue to invest in ourpeople, expand our branch and ATM network, and simplify our products andprocesses so that it’s easier than ever to deal with us.

Personal Report 25

As part of our commitment to delivering
More Convenient Banking, our processes
and range of products have been madesimpler. We introduced new technology
to streamline our account opening
process, making it easier than ever toswitch to ANZ. And we simplified theexception fees on a range of accounts,
to make them easier to understand andgive people more reasons to switch.
One of the most important ways thatour branch network has become very
different is less tangible, but it’s just as
important: we’ve built an engaged andhighly motivated workforce, with the skills
and know-how to provide outstanding
customer service. Our people who work in
Personal have amongst the highest levelof engagement of all ANZ divisions. We’re
proud of this, and see its impact in highrates of customer satisfaction. ANZ tracks
customer satisfaction trends throughRoy Morgan Research, which measuressatisfaction levels of customers (Very or
Fairly Satisfied) in relation to their main
financial institution. With a main financial
institution customer satisfaction ratingof 75.5% for 6 months to September
06, we continue to lead the other threemajor banks. In addition, we were voted“Reader’s Choice Award for Best Bank” by
the readers of Personal Investor Magazine.
Our specialist businesses have continued
to lead the industry in the design ofinnovative products and services that
anticipate the evolving needs of ourcustomers. The introduction of our
ANZ Everyday Visa Debit Card is one
example. As a result, we have continued
to lead the major banks in most key
product categories.

institutional reportA MESSAGE FROM STEVE TARGETT

understanding

sustaininnovation

service26 ANZ Concise Annual Report 2006

Our financial performance

As the seventh largest network bank in Asia, weoffer our clients the vision and scope of Australia’s
leading bank in Asia, with a local knowledge thatno Australian competitor can match.
Steve Targett on creating a different Institutional bank“Every bank talks about understanding its clients. What
we are trying to do differently in Institutional is tobecome active partners with our clients, understanding
and catering to their business in ways they might notnormally expect of their bank. In taking this approach, we
believe we can also create a whole new dimensionof job satisfaction and personal challenge for our staff.
There are three main differentiators for us: our Asian
network, the CEO Agenda, and our strategic partnershipwith the World Wildlife Fund.
Through the CEO Agenda, we strive to be active partners
to our clients in their strategic thinking, offering innovative
approaches to their issues, and committing our multiskilled team to join forces with their senior team.
Supporting this approach is our CEO Journal, producedin partnership with the Australian Graduate Schoolof Management, covering the big issues facing top
executives today.
Our staff enjoy the difference that ANZ is now making with
Institutional clients. Our clients responded by voting
us Number 1 Lead Bank in the Peter Lee survey, with
ANZ winning an unprecedented 16 of 22 categories.”
We also bring to our clients the fruits of our collaboration
with World Wildlife Foundation, our partner in building
sustainable finance. The policies and initiatives we aredeveloping with WWF will inform corporate decisions
about how to achieve optimal business performance
while understanding the impact on our fragile planet.

Institutional Report 27

($m)

2006

%

Income3,329
3,077
Operating Expenses(1,154) (1,283)
Profit before Provisions 1,923 2,046
Provision1
(58)
(136)
Tax & OEI
(592)
(529)
Profit after Tax
1,396
1,258
Cost to Income (CTI)
37.5% 38.5%
Staff (FTE)
5,675
5,318

2005

8%
11%
6%
(57%)
12%
11%
—
7%

1 Provision for Credit Impairment

Institutional delivered a good result this year,with earnings up 11%. Each of our businessesdelivered growth above 10%, with the exceptionof our Debt Product Group, which has been
impacted by highly competitive lending margins.
Revenue growth of 8% was within the Group’s
target range. Driving this growth was a 14%
increase in average lending assets and a 15%
increase in average deposits.
We have continued to invest in our business,particularly in our people and product capability,
which resulted in expenses increasing 11%.
During the year we added more than 350 staff,
and the competitive market for quality staff
resulted in a significant increase in staff costs.
Credit quality remains very good, and as a result
the provision for credit impairment fell from$136 million to $58 million.

What we do

Institutional provides corporate clients, from small to medium enterprises (SMEs)
to major multinationals, with tailored and strategic financial solutions.
Institutional and Corporate Relationships – Manages client relationships anddevelops financial services solutions and strategies for Business Banking clientswith funds under management (“FUM”) in excess of A$50,000, for Corporateclients with FUM in excess of A$10 million and for Institutional clients with FUM
in excess of A$150 million in Australia and New Zealand. It also works with global
corporate clients with whom ANZ Australia has an existing client relationship, in
Europe, the United States of America and Asia.
Debt and Transaction Services – Combines managing Institutional and Corporate’sbalance sheet (with a particular focus on credit quality, diversification and maximisingrisk adjusted returns) with the provision of cash management, transaction banking,trade finance, international payments, clearing and custodian services, principally
to institutional and corporate customers.
Markets – Provides foreign exchange, interest rate, and commodity services to clients
globally. In addition, the business provides origination, underwriting, structuring andrisk management services, advice and sale of credit and derivative products globally.

12%
41%
14%

14%
19%

Earnings by business$614m Debt & Transaction Services$292m Markets$204m Corporate & Structured Financing$205m Business Banking$179m Corporate Banking

Corporate and Structured Financing – Provides complex financing and advisory
services, structured financial products, leasing, private equity finance, project
finance, leveraged finance and infrastructure investment products.

Two years of substantialchange and refocus in thebusiness, in a competitiveenvironment characterised
by declining margins, havetransformed Institutional.

relationship

Pictured left to right - Lloyd Fleming, Graheme Lawrie,Kate Lyons-Crew, Dion Smith and Rashmi Somu.

28 ANZ Concise Annual Report 2006

Achievements

Two years of substantial change andrefocus in a competitive environment
characterised by declining margins,
have transformed Institutional into a
more rigorous business, strongly focusedon opportunities to provide total client
solutions. There is still work to be done,
as we fine tune our newly expanded
relationship management team andrealise the opportunities of our growing
Asian network, but our results showthat we are making real progress.
During the year Institutional:
Was voted number one lead bank in the2006 Peter Lee and Associates surveyof large corporates and institutions
in Australia and New Zealand. We werealso recognised as Australia’s leadingbusiness bank, winning Best BusinessBank at the 2006 Banking and FinanceAwards for the second year running.
Took a stronger advisory role and became
more innovative in providing products,
services and strategies which support ourclients. This “CEO Agenda” initiative, which
included a new customer relationshipmanagement platform and a thought
leadership journal for clients, gives ourclients new insights and better solutions.
One successful solution is our “Wall St
to Main St” offering, which provides
growth capital and succession planningfor midmarket clients, including 15 new
private equity investments during the year.
Built on our traditional strength as thebanker of preference for SMEs, achieving
good earnings growth while continuing
to expand our regional and industry
specialisation approach.

Five new Business Banking Centres
opened during the year, contributing
to significant growth in client numbers.
Experienced improved performanceacross its key product and transactional
businesses. Highlights were strong
Markets trading results off quality client
flow, increased capability and activity
in capital solutions and structured
debt, and a number of foreign exchange
successes, from the new retail branch
at Sydney Airport to recognition as thebest domestic provider of corporate
Foriegn Exchange services (Asiamoneypoll).
Continued to achieve growth milestones
in Asia. ANZ celebrated 20 years in China
with the opening of a new Guangzhou
office, and our Vietnam operation was
voted “most favourite” bank for the fourthyear running, achieving a sharp increasein the number of structured finance andcapital market mandates.
Successfully launched a $2.2 billion
synthetic balance sheet collateralised
loan obligation (CLO). The CLO is asophisticated balance sheet management
tool which partly transfers credit risk toinvestors in the CLO. This was the largest
bond deal ever launched in Australia.

Goals for 2007
Institutional will deliver on its newly refined client coverage model and equip its relationshipteams with the tools and knowledge they require to improve solution driven cross-selland extract more strategic opportunities from client conversations. We aim to capitaliseon the clear differences between us and our competition.
We will also build on the significant advantage we have in Asia as the dominant Australianbank, a well recognised niche commodity trade bank and a regional leader in project finance.
In Australia, New Zealand, Europe and the Americas, our objective is to increasingly deliver
to our clients the considerable opportunities of our strength in Asia.

capability

capability

leadership

Institutional Report 29

new zealand reportA MESSAGE FROM GRAHAM HODGES

growthscale

30 ANZ Concise Annual Report 2006

Graham Hodges on a very different business model“Nearly three years ago ANZ acquired The National
Bank in New Zealand, to become ANZ National. At thetime, we said it would be a very different acquisition,and it has been. The biggest point of difference wasour decision to keep both the ANZ and The National
brands, which surprised a lot of people.
Three years on, that has proven to be absolutely the rightstrategy, as more customers bank with ANZ National than
before the merger, and revenue attrition was much lower
than we anticipated. We have also managed to retain
a stable and experienced management team. With the
integration period now over, our focus has shifted fromdefending our customer base to growing the business.
Just as we had a very different approach to theacquisition and integration, we are taking a very different
approach to our new focus on growth. We have retained
our specialised business model which drives a focus
on customer needs and solutions. Our portfolio of ninebrands, of which ANZ, The National, and UDC are thelargest, enhance our customer reach and open up new
growth options.
When we combine our brands together, we are by far thebiggest player in the market. Our scale provides us withthe ability to invest more than our peers in areas suchas customer analytics and product innovation, and toprovide support to customers looking to grow. Our size
also means we have a wider range of challenging roles.
This helps us to attract the best talent in the market. Ina people industry like banking, that is essential.
With our ongoing investment in the business, thecommitment of our people, and the results we havealready achieved together, I am confident that wehave a strong future in New Zealand.”

Just as we had a very different approach to theacquisition and integration, we are taking a very
different approach to our new focus on growth.

New Zealand Report 31

Our financial performance(NZ$m)

2006%

Income2,756
2,571
Operating Expenses(1,181) (1,254)
Profit before Provisions 1,390 1,502
Provision1
(20)
(157)
Tax & OEI
(476)
(394)
Profit after Tax
1,006
839
Cost to Income (CTI)
45.9% 45.5%
Staff (FTE)
9,392
9,333

2005

7%
6%
8%
(87%)
21%
20%
—
1%

1 Provision for Credit Impairment

This year we had a much improved financial
performance from our New Zealand business,with earnings up 20% in New Zealand dollar(NZD) terms. Revenue growth of 7% was driven by
13% growth in lending assets, and 5% growthin deposits. The New Zealand market continues
to be competitive, with net interest margin down
21 basis points over the year, although margins
stabilised in the second half.
We have continued to invest in our business,with expense growth of 6%, however our Cost to
Income ratio still improved from 45.9% to 45.5%.
The credit quality environment in New Zealandremains healthy, and as a result the provision for
credit impairment fell 87% to just NZ$20 million.
While profit was up 20% in NZD terms, a
weakening in the NZD actually resulted in theAustralian dollar profit being up 14%.

The integration of The
FINAL TEXT TO BE INSERTED.
National
Bank and ANZ wassuccessfully concluded thisyear. Sir John Anderson was
pivotal to the success of theintegration, which he saw to
its conclusion before retiringas CEO at the age of 60.

brandsPictured left to right - Casey Hunt, Robin Dodd,
Kieran Williams and Tracey Matthews.

What we do
21%0
23%
3%		
17%
27%
9%

Earnings by business (NZDm)$205m ANZ Retail$266m The National Bank Retail$92m Rural Banking$172m Corporate & Commercial Banking$27m UDC$226m NZ Institutional

ANZ National Bank Limited is New Zealand’s largest full service bank. It was formedin June 2004 by the amalgamation of ANZ Banking Group (New Zealand) Limited
and The National Bank of New Zealand. Our New Zealand Banking business had
total assets of NZ$91,385 million at 30 September 2006, along with 9,392 staff,
310 branches and 705 ATMs.
The New Zealand Banking division includes the following businesses:
ANZ Retail, operating under the ANZ brand in New Zealand, provides a full rangeof banking services to personal and small business banking customers.
National Bank Retail, operating under The National Bank of New Zealand brand,
provides a full range of banking services to personal and small businessbanking customers.
Corporate and Commercial Banking in New Zealand incorporates ANZ and The National
Bank brands and provides financial solutions through a relationship management
model for medium-sized businesses with a turnover up to NZ$100 million.
Institutional Banking has a dual reporting line to both New Zealand Banking and
ANZ’s global Institutional business.
Rural Banking in New Zealand provides a full range of banking services to ruraland agribusiness customers.

UDC provides motor vehicle and equipment finance, operating leases andmanagement services and investment products.
Central support includes Operations, Technology, Treasury, ING New Zealand, Risk
Management, People Capital, Financial Management and Property.

32 ANZ Concise Annual Report 2006

integration

leading

Our Achievements
The integration of The National Bank
and ANZ was successfully concluded thisyear. Sir John Anderson was pivotal to thesuccess of the integration, which he saw
to its conclusion before retiring as CEO
at the age of 60.
A particularly telling result from theintegration process is that the management
team has virtually stayed intact, with minimalchange arising from the acquisition.
Our level of customer acquisition acrossboth brands is now the highest it has beenfor several years.
In a nation of small businesses, The
National Bank is the number one bankfor businesses with turnover of less than
$5 million (ACNielsen Consumer FinanceMonitor).
Customer satisfaction at The National
remains at the top end of our peer group,
and The National was the only majorbank to grow market share in Auckland,
New Zealand’s fastest growing market.
Satisfaction with ANZ has grown through2006 to be at its highest level in many
years, but is still below the best of its peers.

We hired 200 new frontline staff andopened 6 new branches.
In ANZ Retail Banking, we invested inour brand and community profile andsimplified our fee structure. We launcheda number of products, including a $5‘all you can eat’ account, and a Low Rate
MasterCard. We established the WoW!
Customer experience program.
ANZ funded New Zealand’s first research
into adult financial literacy, and will
repeat the research in four years toprovide an ongoing measure of financial
knowledge.
Five cent coins were withdrawn fromcirculation in New Zealand in October
2006. ANZ’s ‘5s for under fives’ appeal
encouraged customers to donate them to
Plunket, New Zealand’s leading providerof child and family health services. Morethan NZ$580,000 was raised.
As well, The National Bank raised morethan NZD860,000 for the Cancer Societyof New Zealand through its traditional
Daffodil Day Appeal.

Goals for 2007

Grow revenue by 7% to 9%, while keeping cost growth at the bottom end of a 5% to
7% range. This should deliver financial performance above the average of our major peers.
Continue to improve customer satisfaction across Retail and Business banking.
Expand our position in the high growth Auckland market.
Integrate into our business what we’ve learned from our financial literacy researchthrough better communication and simpler products and investing in programs tohelp New Zealanders increase their financial knowledge.

New Zealand Report 33

our partnerships
PARTNERSHIPS AND PRIVATE BANK

6

Partnerships and Private Bank is responsible for ANZ’s joint venturewith ING in ING Australia, our international partnerships with otherinstitutions in Asia, and our Private Bank business.
ING Australia
ANZ has a 49% stake in ING Australia, a joint venture with ING.
Further details are on the opposite page.
International Partnerships
ANZ has formed a number of partnerships in Asia, which are
outlined on the opposite page.

5
3

2

We target markets which have higher economic growth rates
than Australia and New Zealand, are underbanked and lessdeveloped, and have connectivity with Australia and New
Zealand, via trade, immigration or investment.
We target partners with strong footprints in their market,
and where ANZ can contribute significant value.
4

Private BankANZ Private Bank specialises in assisting high income andhigh net worth individuals and families to manage, grow andpreserve their family assets. It is one of the highest growthbusinesses within ANZ.

1

Profit and Loss Summary

2005
$m

2006
$m

Movt
%

IncomeOperating expenses

240
(50)

263
(62)

10%
24%

Profit before Provisions and Tax

190

201

6%

Provision for credit impairment
Tax & OEI

(17)
3

(25)
(7)

47%
(333%)

Profit after tax

176

169

(4)

Staff (FTE)

494

635

29%

34 ANZ Concise Annual Report 2006

We target markets which have higher economic
growth rates than Australia and New Zealand,are ‘underbanked’ and less developed

1. ING Australia is one of Australia’s
leading fund managers, life insurers
and superannuation providers
ING Australia Ltd has almost $40
billion in assets under management,
including over $14 billion in its
flagship OneAnswer product. ING
Australia provides a broad rangeof financial products and services
through an extensive network of
1,145 professional financial advisers,
including 374 ANZ financial planners,
which grew by 14% in 2006.
Retail FUM
Life Risk Premiums in Force$38,849m$596m

2. ANZ Royal Bank is one of the largest
banks in Cambodia
On the 15th of September 2005,
ANZ Royal officially opened its
doors in Phnom Penh. ANZ Royal isa joint venture with the Royal Groupof Companies (RGC), and is owned
55% by ANZ and 45% by RGC. In
2006, ANZ Royal collected in excess
of AU$221 million in Deposits, andprovided over USD60m in lending
limits. In September 2006, ANZ Royalcelebrated its 20,000th customerof which we estimate one third havenever previously been banked.

3. Metrobank Cards Corporationis one of the biggest card issuersin the Philippines
In October 2003, ANZ entered intoa joint venture with Metropolitan
Bank and Trust Company (MBTC) forthe cards business of Metrobank
Card Corporation, the credit card
subsidiary of MBTC. ANZ acquired
a 40% stake. Metrobank Cards now
has 635,000 cards on issue, whichis over two and a half times the
240,000 cards in circulation when
the joint venture began. It is oneof the country’s biggest credit card
issuers, moving from ninth in 2003
to fourth in 2006.

4. Panin Bank is one of the top tenbanks in Indonesia
ANZ owns a 29% share in PT Panin
Bank, a leading commercial bankin Indonesia, and one of the few
Indonesian banks that survived the
1997/1998 economic crisis without
the need for recapitalisation. It is one
of Indonesia’s top 10 banks, and now
has approximately A$5 billion in assets.
It serves over 300,000 customers
via 227 branches and 240 ATMs and9500 linked ATMs. In addition to fullcommercial banking products andservices, Panin Bank also offers Mobile,
Internet, and Phone Banking.

Our Partnerships 35

5. Sacombank is the largest joint stockbank in Vietnam.
In August 2005, ANZ entered intoa partnership with Sacombank
by securing a 10% equity share.
Sacombank is the largest commercial
joint stock bank in Vietnam in termsof chartered capital and branch
network. At present Sacombank has anationwide branch network comprising
128 branches and transaction points,
56 ATM’s and 1,004 POS outlets.
Currently there are approximately
3,215 staff and 300,000 customers.
Sacombank has been named the“best FX services provider in Vietnam”
by AsiaMoney Magazine

6. Tianjin City Commercial Bank is one ofChina’s leading City Commercial BanksIn July 2006, ANZ acquired a 20% sharein Tianjin City Commercial Bank (TCCB).
ANZ’s A$150 million investment makes
ANZ the first foreign bank to own afull 20% shareholding in a Chinese
Bank. TCCB is one of China’s leading
City Commercial Banks in terms ofcompetitiveness and is situated in
one of China’s fastest growing regions.
It has a network of 250 branches, subbranches and savings offices serving
more than 5 million accounts.

our commitment
PEOPLE, COMMUNITY AND THE ENVIRONMENT

ANZ volunteers contribute time to a range of organisations
and causes in the community. Reading For Life volunteer,
Jacqueline Tilsed, visits Richmond West Primary School weekly
to assist student, Michael, with his literacy skills.

36 ANZ Concise Annual Report 2006

We’re proud that we have the most engaged
workforce of any large Australian company,
but we need to keep building on that.

6.9
02

03

04

05

3.8

01

4.2

00

4.9

5.4

Breakout, the cultural transformation program that
we introduced six years ago, continues to provide
the building blocks of engagement by teaching
our people tools for greater self-awareness, andmore effective interaction with others. In 2006 webrought together our annual values and engagement
assessments and created the Engagement andCulture Survey. This tells us that we are creatinga cohesive and productive workplace that moreaccurately reflects what our people aspire to.

9.5

We increased our staff satisfaction to 85% before
moving to a tougher measure called ‘engagement’.
Today our level of employee engagement remains
steady at 60%. We’re proud that we have the mostengaged workforce of any large Australian company,
and want to keep building the engagement
momentum we’ve built.

9.2

ANZ’s people have already taken us a long way to
becoming a very different bank. In 1999 we faced
an employee satisfaction level of 49%. Since then,we’ve steadily worked to improve the connection ourpeople feel to their jobs and their workplace, as wellas the connections we make with our communities.

06

Lost Time Injury Frequency Rate
(Australia)(No.
(No. ofof work
work related
related lost
lost time
time injuries
injuries per
per million
million hours worked
hours worked)

51% Banking& Finance Avg.
40%

60% ANZ

25%

We have continued to provide policies that maximise
flexibility in the workplace, regardless of age or
gender. The ‘My Difference Survey’ gave us our
first ever snapshot of the demographics of ANZ’sworldwide workforce.

Staff Engagement

Our people have continued to enthusiasticallyparticipate in volunteering and Community Giving,
and we have extended Community Giving to ourcustomers and shareholders. We entrenched ourcommitment to the financial literacy and inclusion
programs that are the hallmark of ANZ’s community
involvement, through MoneyMinded, Saver Plus,
MoneyBusiness and Progress Loans. We have also
built on local efforts to build practical links with
Indigenous Australians.

In the 2006 Engagement & Culture
Survey our level of staff engagement was
60%, as it was when we conducted theprevious bank-wide survey in 2004.*

People, Community and the Environment 37

Destructive Zone
Serious Zone
Indifferent Zone
High performance/best employer zone

*In 2005 we participated in the Hewitt Best Employers
Study, where our engagement score was 63%. This isa benchmarking study of around 140 organisations inAustralia and New Zealand based on sample groupsof employees at each organisation. We participatedin the Hewitt Best Employers Study again in 2006 andwill report the results when they are available.

performanceour people and culture
A VERY DIFFERENT APPROACH TO PEOPLE

ANZ has long taken a very different approach to people. The people who workfor us invest a large part of their lives in ANZ. In return, we aim to provide a
workplace where values are real and respected, and where staff engagement
is at a world-class level. Our goal is a vibrant, energetic and high performing
culture – and we’re well on the way to achieving it.

Breakout to a very different culture
In the late 1990s we acknowledged the failings of our culture and took action
to change it for the better. We had poor levels of staff satisfaction and low levelsof customer satisfaction. In 2000 we introduced a culture change process called
Breakout, which focuses on shifting behaviours and mindsets to create avery different bank.
Six years later, over 26,000 staff have participated in Breakout workshops,
including nearly 7,000 front line staff. In 2005 we launched Breakout
Recharge, which enhances team work and collaboration. The essence of thechange that Breakout brought, and continues to bring, is to create very
different experiences for all stakeholders: our people, our customers, thecommunity and shareholders.
Assessing engagement and culture together

My Difference Survey
In December 2005 the My Difference Survey
gave our first demographic snapshot of
ANZ’s employees and their attitudes todiversity issues at work. More than 11,000
employees responded and told us:
We employ staff from at least 133 countries

In 2006 we combined our annual surveys of engagement and values into one
instrument, the Engagement and Culture Survey. It tells us how employees
connect with their work and ANZ. Measuring culture and values together provides
a clearer picture of our progress in building a high performing, values driven
culture. Today we see a stronger match between values desired by our staff,
and actual values experienced. Benchmarking the Engagement and Culture
Survey against industry research has again revealed ANZ has the mostengaged workforce of all major companies in Australia.

Religious difference is accommodated
informally
Significant progress has been made withmature age diversity, but more can be done
Work/life balance is important to ourstaff, of whom more than 50% have caring
responsibilities
We’re accepting of differences
in sexual preferences
Employees are not always open about
disability, and employees and customers
with disability need greater support
ANZ has great diversity policies but staff
cannot always access them

38 ANZ Concise Annual Report 2006

ANZ has the mostengaged workforce
of all major Australiancompanies.
wellbeingengagement

Pictured left to right - Amanda Wood, Erica Threthaway,
Stephen Wong and Erik Zimmerman.

Goals for 2007
Reduce our Lost Time Injury Frequency Rate by a further 20% in Australia
and New Zealand.
Launch a new learning facility for ANZ employees.
Improve our performance on the ANZ Engagement and Culture Survey.
Achieve our 2007 targets for women in management roles including 24% 		
female executives.
Employ 50 Indigenous Australians.

Health, safety and wellbeing

Leadership Development

Our ongoing focus on the causes of work
related injuries and health, safety andwellness, further reduced injuries. Our
Australian Lost Time Injury Frequency Rate
(LTIFR) for 2006 was 3.8 lost time injuries
per million hours worked - a reduction of
10% over the last 12 months. Strategic Healthand Safety plans have been introduced
to each division during 2006 and annual
Operational Health and Safety plans are beingrolled out across all businesses. All managers
have Health and Safety accountabilities
and undertake training. Health and Safetycommittees operate in worksites, each state
and territory in Australia and in New Zealand.

We renewed the Leadership Pathway, ourdevelopment programs for managers, senior
managers and executives, and introduced
the Management Essentials program. It
includes an intranet portal, online training
and a facilitator led workshop, and isavailable to all first time people managers.
We also piloted our foundation leadershipprogram, Leadership Essentials, and we arepiloting a customised individual approach for
ANZ’s most senior leaders. We have reviewed
and are in the process of implementing a
refreshed Business Leadership Program for
Senior Managers and Executives.

My Health is a free physical check-up for
staff, during working hours, available every
18 months to two years. Since it was launched,almost 6,000 staff have had healthchecks
and over 7,000 staff access My Health
Online, which provides comprehensive
health information.
We have also focused on demystifying
mental health through information seminars
and a staff booklet on creating a supportive
environment.

Gender Targets
We introduced targets for the representationof women in management and executive roles,
and are tracking well to achieve them.
Women in Management positions
ActualTargetEmployee Group

2005*

2006*

Dec 2006

Sep 2007

Sep 2008

Executives

19%

21%

22%

24%

27%

Senior Managers

24%

28%

30%

34%

39%

Managers

36%

39%

40%

44%

49%

Figures are at 30 Sept for each year and include Australia and New Zealand only*

People, Community and the Environment 39

our community
and the environment

supportOur community investment strategy focuses on addressing the majorsocial issues that affect the financial services industry, in particularfinancial literacy and inclusion. We also provide opportunities for ourpeople to support causes that matter to them.

inclusion

financial literacy
Improving financial knowledge, skills and confidence in our community
is a core social responsibility for ANZ, and essential to the long term
success of our business. Developments in the financial service industry
over the past 20 years have given greater choice and flexibility tomost consumers, but not everyone in our community has benefited.
Poor financial literacy and the inability to access mainstream financial
services can lead to low levels of savings and unsustainable personal
debt. The impact of this on individuals can be profound.
ANZ has committed to work with researchers, community groups
and government bodies to find long-term solutions to the problems
of financial literacy, financial exclusion and financial difficulty. The
insights that we have gained have led to innovative programs tohelp people, and often the most vulnerable in our communities,
improve their financial capability.
We pioneered MoneyMinded, Australia’s most comprehensive adultfinancial education program, to help people, particularly those on
low-incomes, build their financial skills, knowledge and confidence.
We set and achieved a target to provide MoneyMinded facilitator
training to 500 financial counsellors and community educators toreach 15,000 people in 2006.
Saver Plus is a financial literacy and matched savings program
developed in 2002 with The Brotherhood of St Laurence (BSL)
to help families on low incomes set and achieve a savings goal,and establish a long-term savings habit. This is achieved throughproviding financial education; offering personal coaching support;
and matching every dollar saved with an additional dollar (up to$1000 of matched funds). There is strong evidence the programis achieving its core objective of helping participants to establisha ‘savings habit’. An evaluation by RMIT university revealed that
12 months after completing Saver Plus 71% of participants inthe orginal program are still saving.

Case study:
Saver Plus - Real change
Donna Jackson joined the Saver Plus program
conducted by The Benevolent Society in Sydney.
She had separated from her husband, and withtwo boys to raise she was constantly worried
about making ends meet.
The Saver Plus workshops “turned the lightson” for Donna. She gave up smoking to savemoney, found new ways to pay off debt and earna regular income. By the end of the program,
Donna had her own cleaning business and evendoes her own record-keeping.
“For the first time in years I didn’t feeloverwhelmed by financial stress. We set asavings goal to get a computer for my son.
With the matched funds from ANZ it was notime before Owen was working on his own
computer,” she said.
Like Donna, many participants say the boost
in confidence and self-esteem that came withgetting control of their finances and achieving
their savings goals was the most rewarding
aspect of the program.
Saver Plus now runs in 18 communities around
Australia in partnership with BSL , Berry Street
Victoria, The Smith Family, The Benevolent
Society and the Victorian Government.

MoneyBusiness aims to build the money management skills
and confidence of Indigenous Australians and their families, andestablish a strong savings culture in Indigenous communities. It isa partnership with the Federal Government’s Department of Families,
Community Services and Indigenous Affairs (FaCSIA). We are piloting
MoneyBusiness in remote communities in Western Australia andthe Northern Territory. Eighteen local Indigenous people have so far
been employed and trained as Money Business workers who deliver
the program.

40 ANZ Concise Annual Report 2006

ANZ’s people are enthusiastic volunteers. We offer full time
Australian and New Zealand staff one day of volunteer leave per
year to make a difference in their communities. This year we havecontributed more than 50,000 volunteer hours to a wide range ofcommunity programs and causes in Australia and New Zealand.

supporting our communities
ANZ Community Giving

ANZ’s Community Giving Partners

ANZ’s Community Giving program enables staff to makecontributions to any of our 18 community partners and the ANZ
Staff Foundation through regular payroll deductions. ANZ matches
staff contributions dollar-for-dollar up to $1,000 per staff member
and up to a total of $1 million per year. We have also opened up theCommunity Giving program to our customers - via internet banking.
This year ANZ, its staff and customers contributed $833,000
to our community partners.
The Shareholder Dividend Charity Donation Program enables
shareholders to elect to donate some or all of their dividend
entitlements to their nominated charity, from a list of 28 registeredcharities. The first donations will be made with ANZ’s final dividendin December 2006. ANZ has committed up to $250,000 in the first
12 months of the program to match shareholder donations.

Staff Payroll Giving
Alzheimers Australia
ANZ Staff Foundation
Benevolent Society
Berry Street Victoria
beyond blue
Brotherhood of St Laurence
Cancer Council of Australia
CanTeen
Diabetes Research
Foodbank
Greening Australia
Habitat for Humanity
Kids Help Line
National Heart Foundation
Reconciliation Australia
RSPCA

Starlight Foundation
The Smith Family
World Vision
Customer Giving
Amnesty International
Australian Conservation
Foundation
Comic Relief Australia
Intensive Care Appeal
Life Line
McGuiness McDermott Foundation
National Breast Cancer Foundation
Oxfam Australia
ReachRoyal Flying Doctors Service
Howard Florey Instituteour environment
We have an obligation to operate in a way that seeks to minimise
the social and environmental impacts associated with ourbusiness, while at the same time enabling opportunities for
positive social and economic development. As a result of our own
assessments and discussions with stakeholders, we focus on:

We engaged with community organisations, selected clients andgovernment departments this year through one-to-one meetings
and as part of our formal stakeholder engagement program. An
Environmental Roundtable was held in June to seek feedback on
our approach and priorities.

Lending: assessing the environmental and social risks andopportunities in our lending activities

We developed a Social and Environmental Issues Policy toensure we understand and manage our exposures to these issues
associated with wholesale credit activities. This policy goes beyond
our standard requirements that all projects and transactions arelegal and have the necessary permits and approvals, including
seeking independent assessments for contentious projects
where appropriate.

Services: developing new products and services that help ourcustomers improve their environmental performance
Environment footprint: reducing the impact on the environment
from our own operations and those of our supply chain, including
energy, waste, paper, emissions, water and transport.
Achievements:
We continued to work to reduce ANZ’s environmental footprint by
a minimum of 5% per Full Time Equivalent employee over the period
2005-07. We used specific initiatives to support this goal, including
the Great Paper Chase, which saw paper usage reduce by 21%

A new Social and Environmental screening tool has been establishedto assist in the credit approval process. 86% of all new clients, newmaterial transactions and annual reviews of existing clients inAustralia underwent this screening in 2006.

2007 Goals
 nable 1,500 people to participate in Saver Plus and reach 20,000 people throughE
MoneyMinded.
Achieve 60,000 hours of staff volunteering and 15% participation in workplace giving.
Achieve our target to reduce our environmental footprint by a minimum of 5% by 2007.
Continue to improve supply chain reporting and expand the reach of our Sustainable
Procurement Policy.

People, Community and the Environment 41

our performance on
corporate responsibility
85
80
75
70

ANZ releases a Corporate Responsibility
report detailing our economic, social and65
environmental programs and outcomes. Below is a summary of how we performed
60
on our goals for our people, customers, communities and the environment in
55
2006. The full report will be availableat www.anz.com/cr. from 29th of November.

Sep 96

Sep 97 Sep 98 Sep 99 Sep 00 Sep 01 Sep 02 Sep 0385

97 98 99 00 01 02 03 04 05

Putting our customers first
80
75

70
Our aim is to offer our customers
clear and tangible reasons why they should
65 banking as convenient and simple as possible;
deal with us. This means making
providing leading, trusted and 60
responsible financial advice, solutions andservices; and investing in the development of our people so that we become
55
known for our customer service and showing the ‘human face’ of banking.

We are also focused on understanding
the social and environmental issues that85
impact our customers and society
andintegrating these into our products and80
services and business practices and decisions.
75

This year our retail customers werethe most satisfied of all major banksin Australia
70
and we regained our position as the Number 1 Lead Bank for Institutional and65
Corporate customers in Australia
and New Zealand.

85
80
75
70
65

closest
major
peer

60
55
50

*Source: Roy
Morgan Research– Main Financial
Institution %Customer satisfaction with main
Satisfied (very or
financial institution %fairly satisfied),
6 monthly moving
ANZ
Peer banks
Regional banks average

Sep 96

Sep 0660
55

2006 Goal

Commentary

Perfomance

Continue to improve ourcustomer satisfaction andmatch the performanceof community and regionalbanks.

ANZ’s retail customer satisfaction continues to be well ahead of its major bank peersin Australia at 75.5% (September 2006). Overall, our customer satisfaction decreasedby 1.1 percent this year consistent with a decline across the industry according to the Roy
Morgan Finance Monitor. Our performance is 4.4 percentage points higher than the sector
average and we have also matched or exceeded the customer satisfaction levels of someof the community and regional banks.
During 2006, ANZ also regained its position as the Number 1 Lead Bank for Institutions andCorporate clients according to research by Peter Lee Associates (August 2006).

partially
achieved

Meet or exceed theperformance standards
set out in our 2006
Customer Charter.

This is the fifth year ANZ has been managing and measuring performance on each of thepromises in our Customer Charter. We revised the Charter in November last year to include
a Responsible Lending Code - a first for banks in Australia. This year we met or exceeded the
majority of performance indicators in the new Charter. Our Mortgages business continues
to face challenges in meeting our commitment for fast account opening due to unexpectedly
high business volume.

partially
achieved

Continue to expand our branch
and ATM network particularly
in high growth areas.

We opened 26 new branches and added 343 new ATMs across Australia.

achieved

Increase environmental andsocial impact screening of all
new transactions and annualclient reviews in our Institutional
lending business to 100%.

86% of all new Institutional transactions and annual client reviews underwent an socialand environmental impact screening this year. This screening now forms part of the credit
approval process for all of Institutional’s Australian client relationships, with more workrequired to fully integrate this process into performance management reporting.

partially
achieved

2007 Customer Goals
	Continue to improve our customer satisfaction and match the performance of community and regional banks.
	Meet or exceed the performance standards set out in our Customer Charter.
	Maintain our position as No. 1 Lead Bank for Institutional and Corporate customers.
	Implement our environment and social issues screening process including 100% coverage (product andgeography), for all new transactions and annual reviews globally.

42 ANZ Concise Annual Report 2006

Sep 04

Leading and inspiring our people
63

60

60

In 2006 we continued to have the highest employee engagement of all major
corporations in Australia and New Zealand. Employee engagement measuresthe extent to which our people speak positively about ANZ and are motivated
to contribute their best to our business. It also directly impacts the bottom
line with research by Hewitt Associates showing that employee engagement
is linked to higher shareholder returns and customer satisfaction.

05

06

53

We aim to attract and retain the very best people at ANZ by creating a vibrant,
energetic and high-performing culture. We listen to the feedback of our people
and provide programs and opportunities to ensure they feel a sense of purpose
and personal connection to their work and career with us.

0204

ANZ Employee Engagement
Hewitt Best Employers Study
ANZ Engagement and Culture Survey
Financial Services Benchmark (51%)

2006 Goal

Commentary

Implement a zero harm
approach to health, safety
and security.

Strategic Health and Safety plans have been introduced to each Division to support our
zero harm approach to health, safety and security. Annual Operational Health, Safety andEnvironment plans are also being rolled out across all business units. Our Lost Time Injury
Frequency Rate reduced from 4.2 to 3.8 in Australia.

achieved

Continue our focus on achieving
20% female representation atexecutive level.

The percentage of females in executive positions increased from 19% in 2005 to 22% in2006 in Australia. We also achieved an equal split of gender in our graduate recruitment
for 2007 with 52% female graduates in Australia and 47% female graduates in New Zealand.

exceeded

Further improve our ‘best
employer’ standing in the
globally recognised Hewitt
Employee Engagement study.

Employee engagement remains steady at 60% according to research conducted by Hewitt
Associates. Our engagement score remains the highest of all major corporations in Australia
and New Zealand and nine percentage points ahead of the banking and financial services
sector benchmark.

partially
achieved

Enable 6,000 front line
employees to complete ourBreakout program.

This year 5,985 Personal Division employees completed Breakout. We exceeded the targetof 6,000 employees when the program completed on 12 October 2006. Overall, 6,905
people in Personal Division have completed the program since it commenced in July 2005.

achieved

Introduce accelerated
development programs forthe top 20% of manager level
employees.

Our My Potential program identifies the top 20% of manager level employees and ensuresthat they have access to accelerated development programs including the Accelerated
Learning Laboratory - a joint initiative of the Australian Graduate School of Management,
ANZ and other leading business organisations.

achieved

Introduce an annual 360
degree feedback mechanism
for all senior leaders.

Our 360 degree feedback tool is now made available to all staff through our company
intranet. It is also used to inform the development of our top 100 executives.

exceeded2007 Employee Goals
	Reduce our Lost Time Injury Frequency Rate by a further 20% in Australia and New Zealand.
	Launch a new learning facility for ANZ employees.
	Improve our performance on the ANZ Engagement and Culture Survey.
	Achieve our 2007 targets for women in management roles including 24% female executives.
	Employ 50 Indigenous Australians.

Performance Summary 43

Performance

ANZ received the Special Award for Impact on theCommunity in the 2006 Prime Minister’s Awards for
Excellence in Community Business Partnerships.

Earning community trust

ANZ’s Community Investment

Our community investment strategy aims to enhance the social and economic
wellbeing of the communities where we live and work. The heart of ourapproach involves developing innovative programs and partnerships withclear aims and meaningful outcomes.
We are leaders in addressing the major social issues that involve the financial
services industry – in particular financial literacy and inclusion. We also
provide our people with opportunities to support the causes that are importantto them.

Types of Contributions
Cash$7,324,110

Time (volunteering)$2,556,880

In-kind$2,075,038

Management costs$1,893,897

Total contributions*$13,849,925*A n approximate 60% increase on 2005 due toimproved reporting and new community initiatives
in Australia and New Zealand. Calculated using theLondon Benchmarking Group model for corporate
community investment.

2006 Goal

Commentary

Performance

Enable a further 1,000 families
to participate in our Saver Plus
matched savings and financial
literacy program.

Over 700 participants were involved in Saver Plus this year. New agreements with ourcommunity partners will see the program expanded nationally so that up to 5,400
people can participate in Saver Plus over the next three years.

partially
achieved

Fund the delivery of our
MoneyMinded financial education
program to reach 15,000
Australians.

This year, 15,279 people participated in MoneyMinded workshops and one-to-one
sessions. ANZ funded MoneyMinded facilitator training for more than 530 community
educators and financial counsellors who deliver the program. We also provided
financial support for eight community partners to offer the program at a grass-roots
level throughout Australia.

exceeded

Implement a national rollout of the
MoneyBusiness financial literacy
program for use with community
organisations who work with
Indigenous Australians.

MoneyBusiness is being piloted in six remote sites in the Northern Territory andWestern Australia. The evaluation will be used to inform next steps to be undertaken
by ANZ with the Australian Government. MoneyBusiness education materials are
already being used by a range of training, community and government organisations
nationally.

partially
achieved

Achieve 20% staff participationin our ANZ Volunteers program
including 40,000 hours ofvolunteer time.

24% of Australian and 12% of New Zealand staff lodged a total of 50,735 hours ofvolunteering activity this year.

exceededAchieve 10% employee
participation in Community Giving,
ANZ’s workplace giving program.

10.6% of Australian employees donated money as part of our Community Giving
program. Their contributions were matched dollar-for-dollar by ANZ totalling $537,499.

exceeded2007 Customer Goals
Enable 1,500 people to participate in Saver Plus and reach 20,000 people through MoneyMinded.
	Achieve 60,000 hours of staff volunteering and 15% participation in workplace giving.
	Evaluate the Progress Loans Victorian pilot and extend the program to three additional states, writing at least
200 new loans.
	Work with Indigenous organisations and other stakeholders to develop and implement our Reconciliation
Action Plan.

44 ANZ Concise Annual Report 2006

ANZ has set itself apart among the FT500 by enacting
a commendable response to global climate change.”
Paul Dickinson, Carbon Disclosure Project Co-ordinatorManaging environment impact and supply chain
ANZ’s Environment Charter outlines our commitment to operating in a way that
advances sustainability and reduces our environmental impact.
We have in place an Environment Management System to help us monitor andimprove our performance.
We are also working with our suppliers to minimise the social andenvironmental consequences of our business operations.
ANZ was honoured as ‘Best in Class’ for its approach to climate change in areport released by the Carbon Disclosure Project (CDP). ANZ was one of 50
FT500 companies included on the CDP Climate Leadership Index.

Progress towards our two-year goals
ElectricitysPaper		s

Water		

6

Waste and recyclings

Greenhouse Gas EmissionslKey: Favourable
Minimal Change
Unfavourablesl6

2006 Goal

Commentary

Integrate our new Sustainable
Procurement Policy into
tender requirements, newsupplier contracts andexisting contracts with key
strategic suppliers.

Our Sustainable Procurement Policy and the Sustainability Self-Assessment Tool,
have been integrated into our sourcing processes. Our tools have enabled us to beginassessing existing and potential suppliers. More than 100 of our suppliers have received
the tool for completion.

achieved

Reduce ANZ’s environmental
footprint (electricity, paper,
waste, water, greenhousegases) by a minimum of
5% per full-time equivalentstaff member over a twoyear period (October 2005
– September 2007)

Our energy consumption per full-time equivalent staff member reduced in 2006. Due tochanges in government measurement standards, our greenhouse gas emissions increasedslightly. We are continuing to implement new environmental policies and initiatives tohelp us achieve our two-year goal.

partially
achieved

2007 Environment Goals
Achieve our target to reduce our environmental footprint by a minimum of 5% by 2007.
	Continue to improve supply chain reporting and expand the reach of our Sustainable Procurement Policy.
	Engage with internal and external stakeholders to establish ANZ’s environmental performance targets
for 2008 -2010.

Performance Summary 45

Performance

our board

BOARD OF DIRECTORS 2006

The Board is responsible to shareholders for the governance of ANZ, and oversees its operations andfinancial 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 interms of ethical standards and regulatory requirements. The Board appoints the Chief Executive Officer
and regularly reviews his performance.
The Board strives to achieve a balance of skills, knowledge, experience and perspective among its
directors. This is particularly important for the banking sector, as banks have deep relationships withcustomers across every sector of the economy, and need to understand what is happening acrossthe broader economy. Banking can also be cyclical, so it is important that in achieving a balance ofexperience, the Board includes a number of longer serving directors.

Mr C B Goode, AC

Mr J McFarlane, OBE

Dr G J Clark

Mr J K Ellis

B Com (Hons), MBA, HON LLD (Melb),
HON LLD (Monash)

MA, MBA, SFFIN, FSI, FHKIB, FRSA

PHD, BSC (Hons), FAP, FTSE

Chief Executive Officer

Chairman

Chief Executive Officer since
October 1997. Mr McFarlane isalso a Director of ANZ’s largest
subsidiary, ANZ National Bank
Limited in New Zealand.

Independent Non-Executive
Director

MA, FAICD, HON FIE AUST, FAus IMM,
FTSE, HON DR ENG (CQU)

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 backgroundin the finance industry and has
been a professional non-executive
director since 1989. Mr Goodebrings a wide range of skills andsignificant experience of thefinance industry to his role as
Chairman of the Board.
Age 68, Residence Melbourne.

Chairman of the Technology
Committee

Experience and expertise
Mr McFarlane brings broad
leadership, management andbanking skills following a 31-year
career in banking. Mr McFarlane isa former Group Executive Director,
Standard Chartered Plc, Head of
Citibank in the United Kingdom
and Managing Director of Citicorp
Investment Bank Ltd.
Age 59, Residence Melbourne.

Non-executive director since
February 2004. Dr Clark is a memberof the Governance Committee.
Experience and expertise
Dr Clark is Principal of Clark
Capital Partners, a US based firmthat advises internationally ontechnology and the technology
market place. Previously he held
senior executive positions in IBM,News Corporation and Loral Space
and Communications. He brings
to the Board international businessexperience and a distinguishedcareer in micro-electronics,
computing and communications.
Age 63, Residence Based in New
York, United States of America but
also resides in Sydney.

46 ANZ Concise Annual Report 2006

Independent Non-Executive
Director
Non-executive director since
October 1995. Mr Ellis is a memberof the the Audit Committee. Mr
Ellis’ term as Chairman of the Risk
Committee ended on 30 September
2006 at which time he assumed therole of a Risk Committee member.
Experience and expertise
A trained engineer, Mr Ellis
brings to the Board his analyticalskills together with his practicalunderstanding of operational
issues, investments andacquisitions across a rangeof sectors including natural
resources, manufacturing,biotechnology and education.
Age 69, Residence Melbourne.

Directors’ Meetings
The number of Board meetings and meetings of Committees during the year the Director was eligible to attend,
and the number of meetings attended by each Director were:

Dr G J Clark
Dr R S Deane*
Mr J K Ellis
Mr D M Gonski
Mr C B Goode
Ms M A Jackson
Mr J McFarlane
Mr D E Meiklejohn
Mr J P Morschel

Board

Risk

Audit
Committee

PeopleCommittee

GovernanceCommittee

Technology
Committee

Executive
Committee

SharesCommittee

Committeeof the Board

A

B

A

B

A

B

A

B

A

B

A

B

A

B

A

B

A

B

9
6
9
9
9
9
9
9
9

9
6
9
8
9
8
9
9
9

–
–
6
6
6
–
–
5
6

–
–
6
6
6
–
–
5
6

–
–
8
–
8
8
–
8
–

–
–
8
–
8
7
–
8
–

–
2
–
–
5
5
–
–
5

–
2
–
–
5
5
–
–
5

4
–
–
4
4
–
–
4
–

4
–
–
4
4
–
–
4
–

2
1
–
–
2
–
–
–
–

2
1
–
–
2
–
–
–
–

1
–
1
1
2
3
3
1
1

1
–
1
1
2
3
3
1
1

–
–
–
–
3
3
3
3
3

–
–
–
–
3
3
3
3
3

–
–
2
1
4
1
4
4
–

–
–
2
1
4
1
4
4
–

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, Audit, People, Governance and Technology Committees.
*Retired during the year. Dr R S Deane - 30 June 2006.

Mr D M Gonski, AO

Ms M A Jackson, AC

Mr D E Meiklejohn

Mr J P Morschel

B Com, LLB, S.I.A. (Aff), FAICD, FCPA

B Ec, MBA, HON LLD (Monash),
FAICD, FCA

B Com, Dip. Ed, FCPA, FAICD, FAIM

DipS, FAIM

Independent Non-Executive
Director

Independent Non-Executive
Director

Chairman of the Audit Committee

Chairman of the Risk Committee

Non-executive director since
October 2004. Mr Meiklejohn
is a member of the GovernanceCommittee and Risk Committee.

Non-executive director since
October 2004. Mr Morschel is amember of the Risk Committee
and, on 1 October 2006, became
its Chairman. He is also a memberof the People Committee.

Independent Non-Executive
Director
Chairman of the GovernanceCommittee
Non-executive director since
February 2002. Mr Gonski is amember of the Risk Committee.
Experience and expertise
A lawyer, Mr Gonski has a broad
experience across business, thelaw and investment banking. He
also brings to his role on the Boardan appreciation for the community
through his work in the arts andthe not-for-profit sector.
Age 53, Residence Sydney.

Independent Non-Executive
Director
Chairman of the People
Committee
Non-executive director since
March 1994. Ms Jackson is amember of the Audit Committee.
Experience and expertise
A Chartered Accountant, withsignificant financial expertise,
Ms Jackson has broad commercial
and industrial experience including
her involvement in transportation,mining, the media, manufacturing
and insurance. This expertise
coupled with her work in healthand education contribute to herrole on the Board.

Experience and expertise
Mr Meiklejohn has a strong
background in finance andaccounting. He also brings to
the Board his experience acrossa number of directorships ofmajor Australian companies
spanning a range of industries.
Age 64, Residence Melbourne.

Experience and expertise
Mr Morschel has a strong
background in banking andfinancial services, and brings
the experience of being a
director of major Australianand international companies.
Age 63, Residence Sydney.

Age 53, Residence Melbourne.
For further details on the Directors see pages 56-58 of Part 2 of this Concise
Report or visit our website www.anz.com> about anz>corporate governance

Board of Directors 47

ten year summary
		
		

2006
$m

2005
$m

2004
$m

2003
$m

Financial Performance1
Net interest income		
Other operating income
Operating expenses		

6,943
3,146
(4,605)

6,371
2,935
(4,340)

5,252
3,267
(4,005)

4,311
2,808
(3,228)

Profit before income tax, credit
impairment and non-core items1
Provision for credit impairment
Income tax expense		
Minority interest
Cash profit1 		
Non-core items1 		

5,484
(407)
(1,486)
(4)
3,587
101

4,966
(565)
(1,247)
(3)
3,151
24

4,514
(632)
(1,147)
(4)
2,731
84

3,891
(614)
(926)
(3)
2,348
–

Net profit after tax 		

3,688

3,175

2,815

2,348

Financial Position
Assets2		
Net Assets		
Tier 1 capital ratio3		
Return on average ordinary equity4,5Return on average assets4
Cost to income ratio6		

335,771
19,906
6.8%
20.1%
1.1%
45.6%

300,885
19,538
6.9%
19.0%
1.1%
46.6%

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

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

Shareholder value – ordinary shares
Total return to shareholders(share price movement plus dividends)
Market capitalisation		
Dividend		Franked portion–interim–finalShare price7
–high
–low
–30 Sep

17.1%
49,331
125c
100%
100%
$28.66$22.70$26.8632.6%
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

Share information(per fully paid ordinary share)
Earnings per share7 –basic
Dividend payout ratio8
Net tangible assets9		
No. of fully paid ordinary
shares issued (millions)		
DRP issue price10–interim–final200.0c62.6%$8.53

169.5c65.0%$7.77

153.1c67.5%$7.51

142.4c64.2%$7.49

1,836.6$26.50–1,826.4$21.85$23.85

1,818.4$17.84$19.95

1,521.7$18.48$16.61Other information
Points of representation11
No. of employees (full time equivalents)
No. of shareholders12		

1,265
32,256291,262

1,223
30,976
263,467

1,190
28,755
252,072

1,019
23,137
223,545

1 ANZ excludes from cash profit significant items, abnormals, ANZ National Bank
integration costs and volatility associated with fair value movements relating toeconomic hedges. ANZ excludes these items to provide a better indication of thecore business performance. In addition, the 2005 result has been calculated onan AIFRS basis that is comparable with 2006 with the net effect of these adjustments
included in non-core items, allowing readers to see the impact on 2005 results ofaccounting standards that have only been applied from
1 October 2005.

3 Calculated in accordance with Australian Prudential Regulation Authority
requirements effective at the relevant date.
4 Excludes non-core items and minority interest. The 2005 ratio has been calculated
on an AIFRS basis that is comparable with that of 2006.
5 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 are not included in the calculation of return on average ordinary equity.

2 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 funds of NBNZ Life Insurance Limited. ANZ Life was soldin May 2002 and NBNZ Life Insurance Limited was sold on 30 September 2005.

48 ANZ Concise Annual Report 2006

Previous AGAAP

2002
$m

2001
$m

2000
$m

1999
$m

1998
$m

1997
$m

4,018
2,796
(3,153)

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)

3,661
(610)
(880)
(3)
2,168
154

3,314
(531)
(911)
(2)
1,870
–

3,070
(502)
(863)
(2)
1,703
44

2,732
(510)
(736)
(6)
1,480
–

2,247
(487)
(576)
(9)
1,175
(69)

2,045
(400)
(466)
(8)
1,171
(147)

2,322

1,870

1,747

1,480

1,106

1,024

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%

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$10.79141.4c57.8%$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

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

1,018
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

7 Periods prior to 2004 adjusted for the bonus elements of the November 2003
Rights Issue.

9 Equals shareholders equity less preference share capital, goodwill, software andother intangible assets. For periods prior to 2005, this equals shareholders equity
less preference share capital and unamortised goodwill.
10 DRP represents Dividend Reinvestment Plan.
11 Includes branches, offices, representative offices and agencies.

8 From 2003 the dividend payout ratio includes the final dividend proposed but notprovided for in terms of AASB 1044 Provisions, Contingent Liabilities and Contingent
Assets which was effective from the September 2003 financial year.

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 sharesissued under the terms of any ANZ employee incentive plan.

6 Excludes non-core items. Periods prior to 2005 also exclude goodwill amortisation.
The 2005 ratio has been calculated on an AIFRS basis that is comparable with thatof 2006.

10 Year Summary 49

our performanceover ten years

110

101
04

85

95
03

73
02

05

06

02

03

04

05

49,331

01

43,83400

34,58699

26,54498

27,31497

23,783

06

06

00

01

02

03

04

05

32,25699

30,97698

28,755

Cost to income ratio - (%)

97

22,48206

23,13705

22,50145.6

04

23,13446.6

0330,17145.3

0232,072

36,830

45.1

01

46.0

00

48.0

99

01

Market Capitalisation - ($m)

51.7

54.5

60.9

63.1

98

00

20,00205

13,88504

16,04517,01703

Assets - ($m)

9799335,771

300,885

02259,34501

98

Dividend - (cents)

195,591

183,10500

185,493

152,801
99

172,467

153,215

138,241

98

97

64

06

52

05

56

48

04

Net profit after tax - ($m)

97

125

3,688

03

3,175

02

2,815

01

2,348

1,870

00

2,322

99

1,747

98

1,480

1,024

1,106

97

06

No. of employees(Full time equivalents)

Series break due to AIFRS

50 ANZ Concise Annual Report 2006

Important Dates For Shareholders*

information
for shareholders

Date
15 December 2006
15 December 2006

Annual General Meeting-Sydney
Final Dividend Payment Date

Event

26 April 2007
14 May 2007
18 May 2007
2 July 2007
25 October 2007
8 November 2007
14 November 200718 December 2007

Interim Results Announcement
Interim Dividend Ex-Date
Interim Dividend Record Date
Interim Dividend Payment Date
Annual Results Announcement
Final Dividend Ex-Date
Final Dividend Record Date
Final Dividend Payment Date

18 December 2007

Annual General Meeting-Perth*If there are any changes to these dates, the Australian Stock
Exchange will be notified accordingly.

Dividends

Handy Contacts

The final dividend of 69 cents per share, fully
franked, will be paid on 15 December 2006.

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

A Dividend Reinvestment Plan (DRP) and
Bonus Option Plan (BOP) are available
to shareholders, and ANZ also operates
a Dividend Charity Donation Program forshareholders who are Australian resident
taxpayers. Copies of the terms and conditionsof the Plans, and details of the Donation
Program, are available from the ANZ’s Share
Registry at the addresses shown below.
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 Great Britain(including the Isle of Man and the Channel
Islands) (other than to those who haveelected to participate fully in either the DRP,
BOP or Dividend Charity Donation Program).
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 access yourshareholder information electronically insteadof receiving it by mail.

ANZ is proud to be a foundation memberof eTree, a Computershare initiative with
Landcare Australia.
Register to receive all your shareholder
communications electronically througheTree and in return ANZ will make a donationof up to $2 to Landcare Australia to support
reforestation projects across Australia and
New Zealand.
ANZ has set a target to donate the equivalentof up to 250,000 trees and we encourage moreshareholders to register and help give backto our environment.
www.eTree.com.au/anz
Credit Ratings
Short Term
Moody’s Investors Service		
Standard & Poor’s Rating GroupLong Term
Moody’s Investors Service		(outlook stable)
Standard & Poor’s Rating Group(outlook stable)

Change Of Address
Shareholders who have changed their address
will need to advise the Share Registry in
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.

Information for Shareholders 51

P-1
A1+
Aa3
AA-

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
Bridgwater Road
Bristol BS99 7NH
Telephone +44 870 702 0000
Facsimile +44 870 703 6101

The papers used in this report are PhoeniXmotion and Precision by Spicers Paper.
Precision Offset is Australian made, from pulp from Sustainable Plantation Fibre ata mill with ISO140001 and full Environmental Accreditation.
Design and production: ERD Design Communications, Photography: Lynton Crabb
Photography, Printed: Southern Colour.

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