Australia and New Zealand
Banking Group Limited
ABN 11 005 357 522

Consolidated Results
Dividend Announcement andAppendix 4E

Full Year
30 September 2005

The Consolidated Results and Dividend Announcement constitutes the preliminary final report and is the Appendix 4E required by theAustralian Stock Exchange. It should be read in conjunction with the September 2005 Annual and Financial Reports and is lodged
with the Australian Stock Exchange under listing rule 4·3A.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

CONSOLIDATED RESULTS, DIVIDEND ANNOUNCEMENT and APPENDIX 4E
Full year ended 30 September 2005

CONTENTSPAGEHIGHLIGHTS

1

FINANCIAL HIGHLIGHTS

5

Net Profit
Significant items and NBNZ incremental integration costs in the profit and loss
Profit excluding significant items and NBNZ incremental integration costs in the profit and loss
Earnings per share
Net profit by business unit
Net profit by geography
Statement of Financial Position
Financial Ratios

RESULTS COMMENTARY2005 result
Comparison with March 2005 half
Significant items and NBNZ incremental integration costs
Income and expenses
Earnings per share
Dividends
EVA Reconciliation
Credit Risk
Market Risk
Statement of Financial Position
Capital Management
The National Bank of New Zealand - Integration
Impact of NBNZ on September 2005 results
ING New Zealand joint venture
ING Australia Performance
Critical Accounting Policies

5
5
5
6
6
6
7
8

11
11
12
12
13
19
19
20
21
23
24
26
28
28
29
30
31

BUSINESS PERFORMANCE REVIEW35

GEOGRAPHIC SEGMENT PERFORMANCE

47

FIVE YEAR SUMMARY

53

CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTS56

APPENDIX 4E STATEMENT

97

DEFINITIONS

98

ALPHABETICAL INDEX

100

This Results Announcement has been prepared for Australia and New Zealand Banking Group Limited (the “Company”) together with
its subsidiaries which are variously described as “ANZ”, “Group”, “ANZ Group”, “us”, “we” or “our”.
All amounts are in Australian dollars unless otherwise stated. The information on which this announcement is based is in the processof being audited by the Group’s auditors, KPMG. The Company has a formally constituted Audit Committee of the Board of Directors.
This report was approved by resolution of a Committee of the Board of Directors on 24 October, 2005.
When used in this Results Announcement the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” andsimilar expressions, as they relate to the ANZ Group and its management, are intended to identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
Such statements constitute “forward-looking statements” for the purposes of the United States Private Securities Litigation ReformAct of 1995. The ANZ Group does not undertake any obligation to publicly release the result of any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

HIGHLIGHTSFor Release: 25 October 2005

ANZ cash EPS* up 8.8%
Strong revenue growth in the second half
Earnings per share•

Cash EPS 175.2 cents - up 8.8% (excl. non core items)*•

EPS 160.9 cents - up 5.1%

Profit after tax•$3,018 million - up 7.2%•

$3,056 million - up 11.9% (excl. non core items)*•$1,564 million second half, up 4.8% on first half (excl. non core items)*

Shareholder return•

Dividend 110 cents - up 8.9%•

Total Shareholder Return 33%

Ratios•Cost-income ratio 45.6% (45.3%) (excl. non core items)*•

Cash return on equity 18.8% (19.1%) (excl. non core items)*•

Adjusted common equity ratio stable at 5.1%

Business Comment•

Strong performance in Australia, particularly in Personal Banking•

NZ result subdued as expected due to margins and integration•

Substantial staff investment with 2,221 additional FTE•

Net specific provisions down 19% and non-accruals down 23%•

New Growth and Transformation program with revised targets:––

7% - 9% revenue growth per annum
Cost-Income to 40% over time

* Excluding non-core items - significant items and NBNZ incremental integration costs
1

HIGHLIGHTS (continued)

For Release: 25 October 2005

ANZ cash EPS* up 8.8%
Strong revenue growth in the second half
Australia and New Zealand Banking Group Limited (ANZ) today announced a record operating profit
after tax of $3,018 million for the year ended 30 September 2005, up 7.2% on the previous year.
Excluding non-core items∗, operating profit after tax was $3,056 million up 11.9% and cash
earnings per share were 175.2 cents up 8.8%.
The full-year dividend was increased by 8.9% to 110 cents, in line with ANZ’s policy to increase
dividends at the rate of cash earnings per share growth.
Second half operating profit after tax was particularly strong at $1,564 million, up 4.8% on the first
half, with revenues up 4.9% including other operating income up 7.6%.
ANZ Chief Executive Officer Mr John McFarlane said: “This is a good result, ahead of our original
target of 7% to 8% cash EPS growth for the year. I was particularly pleased with the quality of theresult in the second half especially, the strength in revenues.
“Lending and deposit growth were up 12% and 10% respectively on the year, offset by a margin
decline of 14 basis points.
“Risks were substantially lower than last year, and we were able to produce a good profit
notwithstanding a high level of spending for the future.
“In line with earlier commitments, we have continued to invest in the sustainability of the business,
which has seen an additional 2,221 staff employed in the year, largely in the front line. As aconsequence, expense growth* for the year was 11%, or 8% when adjusted for the additional
two-month contribution from NBNZ. We expect this level of investment to deliver improved returns
over the coming year, and particularly into 2007, which should then see the cost-income ratio move
downwards once again.
“Credit quality remains at its best level in over a decade, with a 19% reduction in Net Specific
Provisions and a 23% reduction in Non-Accrual Loans. With 14 years of uninterrupted growth inAustralia, while the environment remains benign, it would not be surprising for credit standards inthe market to reflect a false sense of security, so it is important we remain vigilant,” he said.
Business PerformanceCommenting on each of the business divisions, Mr McFarlane said: “Geographically, the highlight
was Australia, with earnings* up 14% in the year. New Zealand was up 11% on the same basis,
benefiting from a full 12 months of The National Bank of New Zealand this year, versus 10 months
the previous year.

∗

Excluding non-core items - significant items and NBNZ incremental integration costs

2

HIGHLIGHTS (continued)“Most divisions produced double-digit earnings growth. Personal Banking Australia was particularly
strong, up 15% on the year, with Corporate Australia at 10%, and Esanda 11%. Institutional had arespectable year in the face of strong competition up 8%, building momentum after several years
focusing on risk reduction.
“Our Personal division in Australia benefited from strong performances by the individual businesses.
Credit card balances grew 21% in the year, mortgages 14%, and deposits 10%. We were the only
major bank to increase share in retail deposits. The momentum in Personal is quite remarkablegiven ANZ’s heritage as a corporate bank. We continue to build upon our commitment toconvenience and simplicity, with 15 new branches opening during the year.
“Institutional is in a stage of reinvigorating its business following a number of years of relatively flat
earnings and asset growth, as a consequence of a comprehensive de-risking program. Lending anddeposits growth of 15% and 10% respectively, supported by solid non-interest income growth in thesecond half, give me confidence that we are on track to regain our number one position in thissegment.
“In New Zealand, the NBNZ franchise showed solid progress, however the extremely competitiveenvironment coupled with increased spending to stabilise the ANZ retail business, subdued theresult. Integration is on track and will virtually be complete by the end of 2005 allowing our focus
to be on leveraging the benefits of market leadership externally. The run off of historical conduit
transactions in 2006 will subdue the New Zealand geographic performance in the year ahead.
“Corporate Australia performed well, with good growth coming from the innovative Wall Street toMain Street strategy, however the exceptional asset growth in Business Banking has begun to slow.
“Underlying performance in Asia Pacific remains strong. The 2005 growth rate is distorted by thebenefit of one-off earnings in PT Panin bank in 2004. We have continued to expand in the region,
with new partnerships in Vietnam and Cambodia, and our negotiations in China are now at anadvanced stage.
“Esanda continued to deliver consistent earnings growth in an increasingly competitive environment.
Australia performed particularly well but was offset by the impact of restructuring UDC franchise
agreements during the year,” Mr McFarlane said.
Growth and Transformation
Commenting on the new Growth and Transformation agenda and related internal targets announced
earlier in the year, Mr McFarlane said: “ANZ has now had seven years of consistent performance.
This has partly been as a result of our ability to set stretch targets and to deliver against them.
“We have now set ourselves the task of becoming Australasia’s leading bank.
“New internal financial targets have been established for the next several years of 7% to 9% annual
revenue growth and a reduction, over time, in the cost-income ratio to 40%.
“Over the past few years, we have strengthened our strategic position and have increased share.
We now have the second largest personal customer base across Australia and New Zealand, and are
unique in our positioning and experience in Asia.
“We have the highest personal customer satisfaction of the major banks. Staff engagement is thehighest of the major companies in Australia. Our community programs are also beginning todifferentiate us. At the same time, we delivered a strong Total Shareholder Return of 33% over the
past year together with a conservative risk profile and continued world-class efficiency levels.

3

HIGHLIGHTS (continued)“Notwithstanding the higher investment spending in the past year, going forward, we will continue
to invest in faster growth segments. In the near term, we expect Australia will continue to drive ourgrowth, with good momentum in our major divisions. In the medium term, we expect New Zealand
will deliver improved returns, and over the longer term Asia will become increasingly meaningful.
“At the same time, we will become leaner, sharper, more agile, and more externally focused. We
are well advanced in a program to achieve this, including realising the benefits of New Zealandintegration, reducing back office costs through process redesign and leveraging our capability in
Bangalore, increased automation, and simplifying our technology architecture to improve speed tomarket. Important also is leveraging our unique performance culture and values. These and othersteps give us confidence that we will achieve our stated targets,” Mr McFarlane said.
Outlook“The economic environment in Australia, New Zealand and internationally, remains supportive of
reasonable earnings growth in the medium term, despite the softening associated with more stablehousing and high oil prices.
“System credit growth in 2006 is likely to remain around 9% to 10%, and while it would be prudent
to remain cautious about margins, we do not expect last year’s unusual margin decline to berepeated in 2006.
“The coming year will also see the full impact from the run-off of certain structured financetransactions and the end of transitional tax relief benefits in the ING Australia joint venture.
“The year ahead will see the full year cost impact from our investment program however, we expect
the revenue benefits will start to emerge more fully, delivering good momentum into the following
year.
“Despite these factors, all in all, the environment in 2006 should be broadly similar to that in 2005,
enabling us to produce continued good results in the year ahead,” Mr McFarlane said.

For media enquiries, contact:

For analyst enquiries, contact:

Paul Edwards
Head of Group Media Relations
Tel: 03-9273 6955 or 0409-655 550
Email: paul.edwards@anz.com

Stephen Higgins
Head of Investor Relations
Tel: 03-9273 4185 or 0417-379 170
Email: higgins@anz.com

4FINANCIAL HIGHLIGHTSNet Profit
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net interest income

2,945

2,853

3%

5,798

5,254

10%

Other operating income

1,848

1,704

8%

3,552

3,391

5%

Operating income

4,793

4,557

5%

9,350

8,645

8%

Operating expenses(2,315)(2,200)5%(4,515)(4,026)

12%

Profit before debt provision

2,478

2,357

5%

4,835

4,619

5%

Provision for doubtful debts

(296)

(284)

4%

(580)

(632)

-8%

Profit before income tax

2,182

2,073

5%

4,255

3,987

7%

Income tax expense

(637)

(597)

7%

(1,234)(1,168)

6%

(2)

(1)

100%

(3)

(4)

-25%

1,543

1,475

5%

3,018

2,815

7%

Outside equity interests
Net profit attributable to shareholders of the Company

Significant items1 and NBNZ incremental integration costs2 in the profit and loss
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Swap income

-

-

n/a

-

110

-100%

Interest

-

-

n/a

-

2

-100%

Income tax expense

-

-

n/a

-

(28)

-100%

Significant items
TrUEPrS

Cash dividends3
Gain on sale of NBNZ Life1,4Gain on finalising INGA completion accounts after tax1,4

-

-

n/a

-

-

n/a

14

-

n/a

14

-

n/a

-

-

n/a

-

14

-100%

Total significant items

14

-

n/a

14

98

-86%

NBNZ incremental integration costs after tax2,5

(35)

(17)

large

(52)

(14)

large

(21)

(17)

24%

(38)

84

large

Profit excluding significant items1 and NBNZ incremental integration costs2 in the profit and loss

Net interest income

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

2,945

2,853

3%

5,798

5,252

10%

Other operating income

1,834

1,704

8%

3,538

3,267

8%

Operating income

4,779

4,557

5%

9,336

8,519

10%

Operating expenses(2,262)(2,175)

4%(4,437)(4,005)

11%

Profit before debt provision

2,517

2,382

6%

4,899

4,514

9%

Provision for doubtful debts

(296)

(284)

4%

(580)

(632)

-8%

Profit before income tax

2,221

2,098

6%

4,319

3,882

11%

Income tax expense

(655)

(605)

8%

(1,260)(1,147)

10%

(2)

(1)

100%

(3)

(4)

-25%

1,564

1,492

5%

3,056

2,731

12%

Outside equity interests
Net profit excluding significant items
and NBNZ incremental integration costs
1.

2.
3.
4.
5.

In 2005 ANZ has classified $14 million after tax profit on the sale of NBNZ life businesses as a significant item. In 2004 ANZ has classified the $14 million profit
after tax on settlement of the INGA completion accounts and $84 million net profit after tax arising from the TrUEPrS transaction as significant items. ANZ
excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 12)
In 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sept 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration (refer page 12)
Dividends on TrUEPrS preference shares treated as significant items (2005: $nil; 2004: $36 million) do not impact net profit, but do impact earnings per shareTax on gain on INGA completion accounts: $nil. Tax on gain on sale of NBNZ Life: $nil
Tax on incremental NBNZ integration costs: $26 million (2004 full year: $7 million; Sept 2005 half: $18 million; Mar 2005 half: $8 million)

5

FINANCIAL HIGHLIGHTS (continued)
Earnings per share1
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Earnings per ordinary share (basic)

82.0

78.8

4%

160.9

153.1

5%

Earnings per ordinary share (diluted)

80.4

76.9

5%

157.5

149.7

5%

83.2

79.8

4%

163.0

150.4

8%

89.4

85.9

4%

175.2

161.1

9%

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Personal Banking Australia

528

485

9%

1,013

883

15%

Institutional

471

452

4%

923

857

8%

New Zealand Businesses

307

307

0%

614

513

20%

Corporate Australia

192

184

4%

376

341

10%

Earnings per ordinary share (cents)

Earnings per ordinary share (basic) excluding significant items2and NBNZ incremental integration costs3
Earnings per ordinary share (basic) excluding significant items and
NBNZ incremental integration costs3 and goodwill amortisation
2

Net profit by business unit

Net profit after income tax

Esanda and UDC

82

77

6%

159

143

11%

Asia Pacific

47

48

-2%

95

111

-14%

Group Centre

(63)

(61)

3%

(124)

(117)

6%

1,564

1,492

5%

3,056

2,731

12%

Net profit (excl significant items2 and NBNZ
incremental integration costs3)
2

Significant items and NBNZ incremental integration costs3

Net profit

(21)

(17)

24%

(38)

84

large

1,543

1,475

5%

3,018

2,815

7%

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net profit by geography

Australia2

1,108

1,051

5%

2,159

1,886

14%

New Zealand2, 3, 4

280

286

-2%

566

509

11%

Asia Pacific

100

84

19%

184

191

-4%

Other

76

71

7%

147

145

1%

1,564

1,492

5%

3,056

2,731

12%

(21)

(17)

24%

(38)

84

large

1,543

1,475

5%

3,018

2,815

7%

Net profit excluding significant items and NBNZ
2

incremental integration costs3
Significant items2 and NBNZ incremental integration costs3
Net profit
1.
2.

3.
4.

Refer page 74 for details of calculation
In 2005 ANZ has classified $14 million after tax profit on the sale of NBNZ life businesses as a significant item. In 2004 ANZ has classified the $14 million profit
after tax on settlement of the INGA completion accounts, $84 million net profit after tax and $36 million dividends arising from the TrUEPrS transaction as
significant items. ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 12)
In 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sept 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration
New Zealand includes only 10 months of NBNZ in 2004. Adjusted for this (refer page 28) year on year growth was 5%

6

FINANCIAL HIGHLIGHTS (continued)
Statement of Financial Position
As at
Sep 05As at
Mar 05As at
Sep 04

$M

$M

$M

Movt
Sep 05v. Mar 05%

Movt
Sep 05v. Sep 04%

AssetsLiquid assets
Due from other financial institutions
Trading and investment securities
Net loans and advances including acceptances

8,855

6,363

31%

82%

6,348

6,428

4,781

-1%

33%

13,226

12,853

13,2243%

0%244,401

231,480

217,428

6%

12%

Other
Total assets

11,60017,61018,233

17,549-3%

0%293,185

277,849

259,345

6%

13%

Liabilities
Due to other financial institutions

12,027

10,056

7,349

20%

64%

Deposits and other borrowings

185,693

180,410

168,557

3%

10%

Liability for acceptances

13,44912,922

12,466

4%

8%

Bonds and notes

39,07332,321

27,602

21%

42%

Other

23,455

23,13225,4461%-8%273,697258,841

241,4206%

13%

19,48819,00817,925

3%

9%

As at
Sep 05As at
Mar 05As at
Sep 04

$M

$M

$M

Movt
Sep 05v. Mar 05%

Movt
Sep 05v. Sep 04%

Personal Banking Australia

104,119

97,807

91,207

6%

14%

Institutional

48,08046,041

41,889

4%

15%

New Zealand Businesses

55,14452,09349,967

6%

10%

Corporate Australia

21,15819,877

19,0106%11%Esanda and UDC

14,28013,813

13,5883%

5%

Asia Pacific

1,806

1,644

1,557

10%

16%

Total liabilities
Total shareholders' equity

Net loans and advances including acceptances by business unit

Other1

(186)

205

210

large

large

244,401

231,480

217,428

6%

12%

As at
Sep 05As at
Mar 05As at
Sep 04

$M

$M

$M

Movt
Sep 05v. Mar 05%

Movt
Sep 05v. Sep 04%

Personal Banking Australia

42,07739,86838,416

6%

10%

Institutional

29,66329,77526,984

0%

10%

New Zealand Businesses

46,07846,47043,003-1%

7%

Corporate Australia

18,00017,023

16,1256%

12%Esanda and UDC

12,907

12,167

11,857

6%

9%

Net loans and advances including acceptances
1.

Includes Group Centre provision for doubtful debts balance

Deposits and other borrowings by business unit

Asia Pacific

5,602

5,305

5,123

6%

9%

Other

31,36629,802

27,0495%

16%

Deposits and other borrowings

185,693

180,410

168,557

3%

10%

7

FINANCIAL HIGHLIGHTS (continued)
Financial Ratios

EVA TM 1

Halfyear
Sep 05
$M

Half
year
Mar 05
$M

Full
year
Sep 05
$M

Full
year
Sep 04
$M

985

926

1,911

1,750

17.4%

17.2%

17.3%

18.1%

17.6%

17.4%

17.5%

17.8%

Profitability ratios
Return on:
Average ordinary shareholders' equity2,3
Average ordinary shareholders' equity

2,3

4(excluding significant items and NBNZ

incremental integration costs )5

Average ordinary shareholders' equity2,3 (excluding goodwill amortisation, notional
goodwill, significant items4 and NBNZ incremental integration costs5)

18.9%

18.7%

18.8%

19.1%

Average assets

1.06%

1.10%

1.08%

1.16%

Average risk weighted assets

1.43%

1.46%

1.45%

1.54%

Total income3

13.6%

14.4%

14.0%

15.5%

Net interest average margin

2.30%

2.40%

2.35%

2.49%

Profit per average FTE ($)

50,57450,426

100,997

102,933

45.4%

45.8%

45.6%

45.3%

46.4%

46.3%

46.4%

44.9%

1.50%

1.55%

1.52%

1.59%

1.53%

1.57%

1.55%

1.60%

Efficiency ratios6
Operating expenses6 to operating income (excluding significant items4 and NBNZ
incremental integration costs5)
Operating expenses to operating income
6

Operating expenses6 (excluding significant items4 and NBNZ incremental integration
costs5) to average assets
Operating expenses6 to average assets
Debt provisioning
Economic loss provisioning ($M)

296

284

580

632

Net specific provisions ($M)

206

151

357

443

Ordinary share dividends (cents)
Interim - 100% franked (Mar 04: 100% franked)

n/a

51

51

47

Final - 100% franked (Sep 04: 100% franked)

59

n/a

59

54

71.9%

64.7%

68.4%

67.5%

66.0%

59.4%

62.8%

64.1%

46

38

84

98

Ordinary share dividend payout ratio

7

Ordinary share dividend payout ratio7 excluding goodwill, significant items4 and NBNZ
incremental integration costs5
Preference share dividend
Dividend paid ($M)
1.
2.
3.
4.

5.
6.
7.

TM

TM

EVA refers to Economic Value Added, a measure of shareholder value. See page 20 for a reconciliation of EVA to reported net profit and a discussion of EVATM
and an explanation of its usefulness as a performance measure
Average ordinary shareholders’ equity excludes outside equity interests
Excludes preference share dividend
In 2005 ANZ has classified $14 million after tax profit on the sale of NBNZ life businesses as a significant item. In 2004 ANZ has classified the $14 million profit
after tax on settlement of the INGA completion accounts, $84 million net profit after tax and $36 million dividends arising from the TrUEPrS transaction as
significant items. ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 12)
In 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sept 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration
Operating expenses exclude goodwill amortisation
Dividend payout ratio is calculated using the proposed final dividend as at 30 September 2005 and the 31 March 2005, 30 September 2004 and 31 March 2004
dividends

8

FINANCIAL HIGHLIGHTS (continued)
Financial Ratios, cont’d
As at
Sep 05As at
Mar 05As at
Sep 04Movt
Sep 05v. Mar 05%

Movt
Sep 05v. Sep 04
%

8.05

7.69

7.51

5%

7%

Net Assets
Net tangible assets1 per ordinary share ($)
Net tangible assets attributable to ordinary shareholders ($M)

14,70514,014

13,651

5%

8%

Total number of ordinary shares (M)1,826.4

1,822.7

1,818.4

0%

0%

6.9%

7.0%

6.9%

1

Capital adequacy ratio (%)
Tier 1
Tier 2

3.9%

3.6%

4.0%

Total capital ratio

10.5%

10.3%

10.4%

Adjusted common equity ratio2

5.1%

5.1%

5.1%

General provision ($M)

2,167

2,080

1,992

4%

9%

General provision as a % of risk weighted assets

0.99%

0.99%

1.01%

0%

-2%

Impaired assets

Gross non-accrual loans ($M)

642

640

829

0%

-23%

Specific provisions on non-accrual loans3 ($M)

(256)

(314)

(378)

-18%

-32%

386

326

451

18%

-14%

Specific provision3 as a % of total non-accrual loans

Net non-accrual loans

39.9%

49.1%

45.6%

-19%

-13%

Gross non-accrual loans as % of net advances

0.26%

0.28%

0.38%

-7%

-32%

Net non-accrual loans as a % of net advances

0.16%

0.14%

0.21%

14%

-24%

Net non-accrual loans as a % of shareholders' equity4

2.0%

1.7%

2.5%

18%

-20%

30,976

29,83228,755

4%

8%

9.5

9.3

9.0

2%

6%

43,83437,584

34,586

17%

27%

Other information
Full time equivalent staff (FTEs)
Assets per FTE ($M)
Market capitalisation of ordinary shares ($M)
1.
2.
3.
4.

Equals Shareholders’ equity less preference share capital, outside equity interest and unamortised goodwill
Adjusted common equity is calculated as Tier 1 capital less preference shares at current rates and deductions from total capital. This measure is commonly used
to assess the adequacy of common equity held. See page 81 for a reconciliation to Tier 1 capital
Excludes specific provision on unproductive facilities
Includes outside equity interest

9This page has been left blank intentionally

10

RESULTS COMMENTARY2005 result
Australia and New Zealand Banking Group Limited (ANZ, or the Group) recorded a profit after tax of $3,018 million
for the year ended 30 September 2005, an increase of 7% over the September 2004 year. After excluding significant
items and National Bank of New Zealand (NBNZ) incremental integration costs referred to on page 12, profit
increased 12% to $3,056 million.

Earnings per share
Basic earnings per share (EPS) increased 5.1% (7.8 cents) to 160.9 cents, whilst EPS excluding significant items and
NBNZ incremental integration costs and goodwill amortisation increased 8.8% (14.1 cents) to 175.2 cents as a resultof:!
Profit growth (+19.0 cents).
!
The issuance of shares under the dividend reinvestment and bonus option plans and employee share option
schemes net of shares bought back (-0.5 cents).
!
The issuance of shares under the 2 for 11 rights issue in November 2003 (-4.4 cents). This was offset byincreased profit following the acquisition of NBNZ, which was EPS accretive in its first year. However, withintegration largely complete, it is no longer possible to distinguish the contributions from the previous ANZ and
NBNZ businesses in New Zealand.

Profit growthProfit excluding significant items in Australia increased 14% with growth in Personal Banking Australia (15%),
Corporate Australia (10%), Esanda (15%), and the Australian component of Institutional (8%). The Group Centre
result improved principally from the cessation of the Group Centre charge for doubtful debts. Profit excluding
significant items and NBNZ incremental integrations costs in New Zealand increased 11% due to a 4% appreciation in
the average NZD exchange rate and a full 12 months contribution from the NBNZ businesses following acquisition.
Adjusting for these items, profit in New Zealand increased 1% with growth impacted by intense competition in themortgage market and the decision to exit certain structured finance transactions. Profit in Asia Pacific reduced 4%,
impacted by lower earnings from PT Panin Bank and lower Treasury earnings in Singapore. Profit in the UK and US
was flat reflecting reduced earnings associated with the sale of the London headquartered project finance business.

Profit drivers
Profit after tax increased 7% over the 2004 year, 12% after excluding significant items and NBNZ incremental
integration costs, and 10% after also adjusting the 2004 year for an additional two months contribution from NBNZ.
Significant influences on the result include:
Net interest "10%Net interest income was driven by lending growth of 12%, particularly in Mortgages (14%),and deposit growth in Personal Banking Australia (10%) and Corporate Australia (12%).
Volume growth was partly offset by a 14 basis point decline in margin. The investment of theproceeds from the December 2004 Euro hybrid issue increased net interest by $21 million($14 million after tax) but is EPS neutral.

Other income "5%

Other income growth was driven by volume from growth in fees, higher foreign exchange
income, notably in the Pacific, and increased private equity earnings. These increases wereoffset by reduced profit on trading securities with a higher proportion of income booked asinterest. Income from significant items reduced with the 2004 year including $110 million
swap income on the redemption of TrUEPrS.

Excl significant items*"10%
Adjusted for NBNZ**"8%

Excl significant items*"8%Adjusted for NBNZ**"7%

Operating expenses "12%Excl significant items*"11%
Adjusted for NBNZ**"8%

Doubtful Debts #8%
Excl significant items*#8%
Adjusted for NBNZ**#10%

Operating expense increases were driven by an 8% increase in staff numbers with investment
in growth initiatives, an increased marketing spend and higher compliance costs.
The reduction in provision for doubtful debts reflected the Group’s strengthening risk profile
and a reduced Group Centre charge for offshore losses.

Income tax "6%

The increase in tax expense is broadly in line with growth in profit before tax. The effective
tax rate reduced slightly from 29.3% to 29.0%.

Exchange rates #1%

The appreciation of the AUD has resulted in a $30 million decrease in the contribution from
earnings denominated in foreign currencies (net of a $40 million reduction in profit after tax
on contracts put in place to hedge USD and NZD revenues).

Excl significant items*"10%
Adjusted for NBNZ**"7%* Excludes significant and NBNZ incremental integration costs. Refer footnotes 1 & 2 on page 5 for an explanation** Excludes significant items and NBNZ incremental integration costs. 2004 adjusted for an additional two months
contribution from NBNZ (refer page 28)

11

RESULTS COMMENTARY (continued)

2005 result, cont’dAsset quality
Asset quality continued to improve:!
Net specific provisions reduced 19% to $357 million with the reduction principally in Institutional. This
represented a loss rate of 15 basis points compared to the ELP charge of 25 basis points.
!
Net non-accrual loans reduced 14% to $386 million with lower levels of new non-accrual loans and the realisationof two large power exposures in the US.
!
The ELP rate reduced 6 basis points over the year in line with the Group’s strengthening risk profile. The Group
Centre charge for offshore losses reduced by $41 million (2 basis points) and the ELP rate reduced in all business
units over the September 2004 year reflecting lower risk.
Comparison with March 2005 half
The Group recorded a profit after tax of $1,543 million for the half year ended 30 September 2005, an increase of 5%
over the March 2005 half. Profit excluding significant items and NBNZ incremental integration costs increased 5% to$1,564 million.
Basic earnings per share increased 4.1% (3.2 cents) to 82.0 cents. Earnings per share excluding significant items
and NBNZ incremental integration costs and goodwill amortisation increased 4.1% (3.5 cents) to 89.4 cents.
Profit in Australia increased 5% driven by 9% growth in Personal Banking Australia and 4% growth in Corporate
Australia. Profit in New Zealand reduced 4%, or 2% after excluding significant items and NBNZ incremental
integration costs, due largely to a 2% reduction in Institutional offsetting higher profit in UDC. Profit in New Zealandbusinesses was flat. Profit in the Asia Pacific geographies increased 19%, other geographies increased 7%.
Asset quality remained stable with gross non-accrual loans increasing only $2 million to $642 million and ELP
remaining unchanged at 25 basis points. Net specific provisions increased 36% from the low provisioning levels
reported in the March half, with increases in Australia and New Zealand partly offset by recoveries overseas.
Significant items and NBNZ incremental integration costs!

Significant items
Significant items in the profit and loss are those items that management believe do not form part of the corebusiness and, as such, should be removed from profit when analysing the core business performance. The
following are considered significant items:- Sale of NBNZ Life (2005 year)
On 30 September 2005 ANZ National sold the NBNZ Life and Funds Management businesses into a joint venturewith ING. Profit after tax on sale of $14 million was recognised. (Refer page 29 for further details)- INGA completion account profit (2004 year)
In 2004 ANZ finalised the completion accounts on the sale of ANZ Funds Management and insurance businesses
to INGA. This sale occurred in 2002. The final settlement of this transaction resulted in a $14 million after tax
profit.
- TrUEPrS (2004 year)
During 2004 the Group bought back TrUEPrS, a hybrid Tier 1 instrument. Previously deferred income that wasearned on close out of interest rate swaps that had been hedging the TrUEPrS distributions was recognised in
profit. The impact of TrUEPrS, being the release of deferred swap income of $108 million before tax and$2 million other swap income, the $36 million periodic and final cash dividends paid to holders of TrUEPrS, andthe funding benefit from holding TrUEPrS for part of the 2004 year, have been classified as significant items.

!

NBNZ incremental integration costs
Expenditure on the integration of ANZ National Bank includes both the reallocation of existing resources tointegration and incremental integration costs. Incremental costs are those costs that will not recur once
integration is complete and thus do not form part of the core ongoing cost base. During the 2005 year $52 million
after tax (2004 full year: $14 million; Sep 2005 half: $35 million; Mar 2005: $17 million) or $78 million before tax(2004 full year: $21 million; Sep 2005 half: $53 million; Mar 2005 half: $25 million) of incremental integration
costs were incurred.

12

RESULTS COMMENTARY (continued)
Income and expenses
Net Interest
Half

Half

Movt

Full

Full

Movt

year

year

Sep 05year

year

Sep 05

Mar 05 v. Mar 05

Sep 05

Sep 04v. Sep 04

Sep 05%%

Net interest income ($M)

2,945

2,853

3%

5,798

5,254

Net interest average margin (%)

2.30

2.40

n/a

2.35

2.49

n/a

256,604

239,9597%

248,304

212,153

17%

Average interest earning assets ($M)!

10%2005 result
Net interest income at $5,798 million was 10% ($544 million) higher than the 2004 year with an additional twomonths from NBNZ contributing $137 million.
VolumeAverage net loans and advances grew by $33.3 billion (18%) with growth attributable to Personal Banking
Australia ($12.9 billion or 15% with $11.2 billion in Mortgages), Institutional Australia ($5.6 billion or 27%),
Corporate Australia ($2.0 billion or 16%) and New Zealand ($12.6 billion or 26%) including exchange rate impacts
from a stronger New Zealand dollar ($1.8 billion) and the first full year from NBNZ. Average net loans andadvances reduced by $0.7 billion (7%) in Overseas Markets as a result of the strategy to reduce higher risk
exposures and the exchange rate impact of an appreciating Australian dollar ($0.3 billion).
Average deposits and other borrowings grew $21.0 billion (13%) with growth in Treasury ($4.4 billion) to fundasset growth, Personal Banking Australia ($3.7 billion or 10%), Institutional Australia ($3.0 billion or 18%), andCorporate Australia ($1.6 billion or 10%). Average deposits and other borrowings increased in New Zealand($9.0 billion or 20%), driven by Treasury ($2.6 billion) and exchange rate impacts ($1.7 billion). Average deposits
and other borrowings declined ($2.0 billion or 9%) in Overseas Markets, reflecting the substitution of offshore
commercial paper issuance with domestic certificates of deposit, and a $0.9 billion reduction resulting fromexchange rate movements.
MarginNet interest average margin contracted by 14 basis points from the 2004 year:- Funding mix (-3 basis points)
Changes in the funding mix reduced the net interest margin by 3 basis points due to substitution of wholesalefunding for customer deposits (3 basis points), with offsetting impacts from movements in customer deposit mix
and an increase in net non-interest bearing interest items.
- Asset mix (-3 basis points)
Movements in the composition of assets in the portfolio negatively impacted the net interest margin by 3 basis
points. This reflects growth in lower yielding Mortgage and Institutional assets (1 basis point) and declining
proportions of higher yielding Asset Finance, Corporate and Structured Financing and Consumer Finance (3 basis
points) lending, partly offset by a decline in liquid assets (-1 basis point).
- Competition (-7 basis points)
Competitive pressures reduced margins by 7 basis points with this impact arising mainly in Mortgages(particularly in New Zealand), Institutional, Esanda and higher yielding customer deposits, plus migration ofcustomers to lower yielding credit cards and New Zealand fixed rate mortgages (2 basis points).
- Wholesale rates (nil)Wholesale rate movements had offsetting impacts with less basis risk in variable rate mortgages and credit
cards (1 basis point) and increased earnings from the investment of capital and rate insensitive deposits(3 basis points), offset by reduced Treasury mismatch earnings (4 basis points).
- Other items (-1 basis point) include:▪

increased retail broker payments (-1 basis point)▪

reduced earnings from foreign exchange revenue hedging (-3 basis points)▪

lower funding costs associated with unrealised trading gains decreased as a result of movements in the AUD.
This increase (+1 basis point) is reflected in the net interest margin, however it is directly offset by anequivalent reduction in trading income▪

reduced interest forgone on non-accrual loans (+1 basis point)▪

increased proportion of credit cards earning interest (+1 basis point)

13

RESULTS COMMENTARY (continued)
Income and expenses, cont’d
Net Interest, cont’d!

Comparison with March 2005 half

Net interest increased $92 million (3%).
VolumeAverage net loans and advances grew by $12.9 billion (6%) with growth in Australia attributable to Personal
Banking Australia ($6.5 billion or 7% with Mortgages contributing $5.4 billion), Institutional ($2.3 billion) andCorporate Australia ($0.7 billion). New Zealand’s average net loans and advances increased by $3.6 billion (6%)
with minimal impacts from exchange rate movements. Average net loans and advances reduced by $0.6 billion(6%) in Overseas Markets due to de-risking, with no significant impacts from movements in exchange rates.
Average deposits and other borrowings increased $6.5 billion (4%) from growth in Personal Banking Australia($1.5 billion), Institutional ($2.7 billion) and Corporate Australia ($0.7 billion). Average deposits and otherborrowings increased $0.5 billion in New Zealand, and a further $0.8 billion in Overseas Markets.
MarginNet interest average margin contracted by 10 basis points:- Asset mix (-2 basis points).
Lower proportions of higher yielding assets in Asset Finance and Corporate and Structured Financing reduced
margin by 2 basis points.
- Funding mix (-3 basis points).
Higher proportions of more expensive wholesale and customer liabilities (-2 basis points) within the portfolio
and falling levels of net non-interest bearing interest items (-1 basis point) contributed to a decline in net
interest margin.
- Wholesale rates (+1 basis point)
Increased income on the investment of capital and rate insensitive deposits (+1 basis point), was partly offset
by lower Treasury mismatch earnings.
Wholesale rate impacts from the funding of variable rate mortgages were unchanged during the half toSeptember 2005 due to a relatively stable short end of the yield curve.
- Competition (-4 basis points)
Competitive pressures reduced margins (-4 basis points) with this impact arising mainly in Mortgages(particularly in New Zealand) and Institutional lending with slight margin reductions in Corporate, BusinessBanking and Rural portfolios. In addition customer migration to lower yielding credit cards and New Zealand
fixed rate mortgages (-1 basis point) reduced the net interest margin (-1 basis point).
- Other (-2 basis points)▪

Funding costs associated with unrealised trading gains increased as a result of movements in the AUD. Thisdecrease in interest income is reflected in the net interest margin, however it is directly offset by anequivalent increase in trading income.

14

RESULTS COMMENTARY (continued)
Income and expenses, cont’d
Other Operating Income
Half
year
Sep 05
$M

Movt
Half
Sep 05year
Mar 05 v. Mar 05
%
$M

Full
year
Sep 05
$M

Movt
Full
Sep 05year
Sep 04 v. Sep 04
%
$M

1,354

1,262

7%

2,616

2,421

Foreign exchange earnings

233

221

5%

454

411

10%

Profit on trading instruments

94

40

large

134

151

-11%

153

181

-15%

334

284

18%

1,834

1,704

8%

3,538

3,267

8%

Other operating income
Total fee income

Other
Total other income excluding significant items
Significant items

1

Total other income
1.

!

8%

14

-

n/a

14

124

-89%

1,848

1,704

8%

3,552

3,391

5%

Refer page 122005 result
Other operating income increased $161 million (5%) or $271 million (8%) after excluding significant items (referpage 12 for details), with an additional two months contribution from NBNZ in 2005 of $53 million (refer page 28
for details). The following explanations exclude significant items:- Fee income increased $195 million (8%) including $37 million from the additional two months contribution from
NBNZ.
▪

Lending fee income increased $41 million (4%):- The additional two months contribution from NBNZ was $10 million.
- Personal Banking Australia increased $12 million (7%) with volume related increases in Consumer Financeand increased package registration and honour fees in Banking Products.
- Corporate Australia increased $13 million (6%) driven by increased lending volumes.
- Asia Pacific increased $4 million (20%) due to increases in loan approval fees in Kiribati, Fiji and Tonga as aresult of lending growth.
- Esanda and UDC increased $2 million (5%) due primarily to the full year impact of changes in the fee
structure for business lending made in February 2004.
- Institutional decreased $3 million (1%) with a $7 million reduction in Client Relationship Group due tolower commercial bill fee income as a result of lower volumes and bill margins, offset by a $3 million
increase in Trade and Transaction Services from expansion in trade business and a $3 million increase instructured debt fees in Corporate and Structured Financing.

▪

Non-lending fee income increased $154 million (11%):- The additional two months contribution from NBNZ was $27 million.
- Personal Banking Australia increased $70 million (12%) with a $31 million (8%) increase in Consumer
Finance driven by volume growth, a rise in cross sell initiatives and higher Bpay revenue. WealthManagement increased $21 million (29%) as a result of increased income generated by financial planners.
Banking Products increased $16 million (14%) driven by an uplift in account service and transaction feeswith growth in the number of transaction accounts.
- Institutional increased $24 million (7%). Corporate and Structured Financing increased $18 million (17%)
due to strong performances across Debt Capital Markets, Capital Solutions and advisory fees and Trade andTransaction Services increased $9 million (5%) reflecting growth in the custody business.
- New Zealand increased $15 million after adjusting for the additional two months contribution from NBNZ($27 million) mainly as a result of the appreciation in the NZD.
- Esanda and UDC grew $12 million (27%) with an emphasis on generating revenue through the provision ofvalue-added fleet management services and higher predetermination fees from improved collection rates.

Movements in exchange rates over 2004 increased fee income growth by $10 million.
- Foreign exchange earnings increased $43 million (10%) with an additional two months contribution from NBNZ($11 million). Markets increases were primarily driven by offshore sites, particularly in the Pacific where tourism
and increased trade benefited PNG and Fiji. Trade and Transaction Services increases were as a result of newrevenue channels in Melbourne and Brisbane for international payments as well as improved volumes andspreads.
- Profit on trading instruments decreased $17 million (11%) with a higher proportion of income booked as interest
and a higher cost of the hedge of capital investment earnings in INGA ($12 million) reflecting stronger equity
markets in 2005. This is offset in higher equity accounted income from INGA which is reported in otheroperating income. The additional two months contribution from NBNZ was $2 million.

15

RESULTS COMMENTARY (continued)
Income and expenses, cont’d
Other Operating Income, cont’d- Other operating income increased $50 million (18%) including the additional two months contribution from
NBNZ ($3 million).
▪

Institutional increased $19 million with Corporate and Structuring Financing increasing $15 million due toimproved private equity and infrastructure trust earnings and Markets making a $10 million gain on sale of
Sydney Futures Exchange shares in 2005, offset by an $11 million reduction in Client Relationship Group due
to finalisation of the sale of development properties in 2004.

▪

Personal Banking Australia increased $18 million (14%) with Consumer Finance increasing $7 million largely
from profit sharing arrangement with Diners, Banking Products increasing $3 million due to strong equity
accounted earnings from E*Trade, and Wealth Management increasing $9 million due to increased equity
accounted profit from INGA reflecting stronger equity markets, growth in funds under management, afavourable claims experience and increased insurance sales through the ANZ network.

▪

Esanda and UDC increased $4 million mainly due to the $7 million impact of aligning the revenue recognitionon leases in the New Zealand fleet business with Group accounting policies.

▪

Corporate Australia increased $3 million due to earnings from private equity investments reflecting the
success of the “Wall St to Main St” strategy.

▪

Asia Pacific reduced $6 million as a result of lower equity accounted income from PT Panin Bank with lower
provision adjustments included in equity accounted earnings ($15 million) and a $11 million withholding tax
credit in 2004 partly offset by an improved core business performance.

- Movements in exchange rates increased total other income by $13 million.

!

Comparison with March 2005 half

Other operating income increased $144 million (8%) or $130 million (8%) after excluding significant items (referpage 12 for details). The following explanations exclude significant items:- Fee income increased $92 million (7%).
▪

Lending fee income increased $27 million (5%) principally in Institutional with a $18 million increase in
Corporate and Structured Financing from increased project financing fees and a $5 million increase in
Personal Banking Australia as a result of a $3 million increase in Mortgages due to balance sheet growth.

▪

Non-lending fee income increased $65 million (9%):- Personal Banking Australia increased $29 million (9%), of which $17 million in Consumer Finance wasdriven by volume growth, seasonal timing of fee income and cross sell initiatives. Wealth Management
increased $5 million due to seasonality arising from the financial year end and an increase in income
generated by financial planners. Banking Products increased $4 million driven by increased account andtransaction numbers.
- Institutional increased $20 million (12%) with Trade and Transaction Services increasing $9 million (9%)
reflecting an increase in structured trade deals and growth in the custody business. Corporate andStructured Financing increased $7 million (12%) due largely to increased advisory fees.
- New Zealand increased $7 million (4%) driven by the seasonality of annual account fees.
- Corporate Australia increased $3 million (9%), which included an increase in advisory fees.

- Foreign exchange earnings increased $12 million (5%) primarily driven by offshore sites particularly in Fiji and
PNG which experienced a good coffee season and increased mining exports.
- Profit on trading instruments increased $54 million due largely to a lower proportion of revenue being booked asinterest due to higher funding costs associated with unrealised trading gains ($38 million). Total income inMarkets increased $11 million.
- Other operating income decreased $28 million (15%):▪

Institutional decreased $20 million. Corporate and Structured Financing decreased $14 million due to lower
private equity and infrastructure trust earnings as well as the $4 million profit on sale of the London
headquartered project finance business in the first half of 2005. Markets decreased $9 million following a$10 million gain on sale of Sydney Futures Exchange shares in the March 2005 half.

▪

The Group Centre decreased $14 million including lower capital investment earnings from INGA, reflecting
the impact of capital repatriations during the year.

▪

Asia Pacific reduced $5 million as a result of lower equity accounted income from PT Panin Bank being
partially offset by a solid core business performance.

▪

Esanda and UDC increased $3 million mainly due to the impact of aligning the revenue recognition in New
Zealand FleetPartners with Group policies.

- The impact of movement in exchange rates on other operating income was immaterial.

16

RESULTS COMMENTARY (continued)
Income and expenses, cont’dExpenses
Halfyear
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Personnel expenses

1,246

1,167

7%

2,413

2,122

14%

Premises expenses

197

193

2%

390

353

10%

Computer expenses

281

260

8%

541

552

-2%

Operating expenses

Goodwill amortisation

90

89

1%

179

146

23%

Other expenses

426

439

-3%

865

772

12%

Restructuring costs

22

27

-19%

49

60

-18%

NBNZ incremental integration costs1

53

25

large

78

21

large

Total operating expenses

2,315

2,200

5%

4,515

4,026

12%

Total employees

30,976

29,832

4%

30,97628,755

8%

1.

These costs are personnel costs of $36 million (2004 full year: $9 million; Sep 2005 half: $23 million; Mar 2005 half: $13 million), computers costs of $17 million(2004 full year: $1 million; Sep 2005 half: $15 million; Mar 2005 half: $2 million), and other costs of $25 million (2004 full year: $11 million; Sep 2005 half:$15 million; Mar 2005 half: $10 million). Refer page 12 for details!

2005 result

Operating expenses increased $489 million (12%) over the 2004 year partly due to the inclusion of a full twelve
month contribution from NBNZ ($111 million including additional goodwill amortisation. Refer page 28) andincreased NBNZ incremental integration costs of $57 million.
- Personnel expenses increased $291 million (14%) partly due to the additional two months contribution from
NBNZ ($50 million). Adjusting for this, personnel costs increased $241 million (11%) as a result of annual
salary increases together with a 2,221 (8%) increase in staff, mainly in the following business units:▪ Personal Banking Australia staff numbers increased by 8%. Consumer Finance increased by 19% to deal
with increased volumes and cross sell activity and higher card acquisition activity, including white labelledcard initiatives. Retail Banking increased by 6% due to 15 new branch openings, forward hire for a further 6
new branch openings in early 2006 and higher staff levels to cover increasing network volumes. Regional
Commercial and Agribusiness Products increased 5% to support the “take a fresh look” campaign.
▪ New Zealand Businesses increased by 6% due to the “ANZ Turnaround” program including increases inbranch network staffing levels, a rise in Corporate Banking to support business growth and increases insupport staff driven largely by information technology staff with the transition of systems to New Zealand.
▪ Group Centre staff numbers were up 10% with Operations, Technology and Shared Services increasing 6%
due to technology project-related activity in India.
▪ Asia Pacific staff numbers were up 11% due mainly to the formation of the ANZ Royal Bank joint venture in
Cambodia, an increase in staffing in Amerika Samoa Bank and rural banking initiatives in Fiji.
▪ Corporate Australia increased 10% driven by a significant investment in frontline staff in Small BusinessBanking and continued investment in Corporate and Business Banking.
▪ Institutional increased 6% due to a 21% increase in Trade and Transaction Services reflecting businessexpansion particularly in the Trade Finance and Custodian Service businesses.
- Premises costs increased $37 million (10%) with the additional two months contribution from NBNZ ($7 million).
The increase was largely in rental expense reflecting additional space requirements, new ATMs, market
increases and the sale and lease back of certain properties. There was also a rise in the cost of security services.
- Computer costs decreased $11 million (2%) despite the additional two months contribution from NBNZ($9 million). The reduction was mainly in Personal Banking Australia, down $19 million due to lower merchantacquiring line costs, certain branch banking software now being fully amortised and a higher level of project
related technology spend in 2004.
- Goodwill amortisation increased $33 million mainly as a result of the additional two months NBNZ goodwill
amortisation.
- Other expenses increased $93 million (12%) with the additional two months contribution from NBNZ($18 million). Adjusting for this other expenses increased $75 million:▪ Advertising spend increased $31 million including expenditure on the “ANZ NOW” and “ANZ Bank of theYear” advertising campaigns.
▪ Travel expenses increased $24 million with Operations, Technology and Shared Services increasing$7 million which included increased travel to Indian based technology operations and smaller increases
spread across most business units.
▪ Non-lending losses increased $13 million mainly as a result of cheque conversion losses.
- Restructuring costs reduced $11 million. The 2005 year included a $20 million write-down in the value of theSales and Service Platform (SSP) in the branch network. The 2004 year included the write-down of hardware
and software being developed for ATMs ($8 million).
- NBNZ incremental integration costs increased $57 million. Refer page 28 for details on integration.
- Movements in exchange rates increased cost growth by $31 million.
17

RESULTS COMMENTARY (continued)
Income and expenses, cont’dExpenses, cont’d!

Comparison with March 2005 half

Operating expenses increased $115 million (5%) or $87 million (4%) excluding NBNZ incremental integration
costs.
- Personnel costs were up $79 million (7%) due to annual salary increases and a 4% increase in staff numbers
mainly in the following business units:▪

Personal Banking Australia increased 4%. Consumer Finance increased by 5% to deal with increased
volumes and cross sell activity and higher card acquisition activity, including white labelled card initiatives.
Other (including Retail banking) increased 4% due to new branch openings, forward hire for a further 6 newbranch openings in early first half 2006 and higher staff levels to cover increasing network volumes.

▪

Institutional numbers were 6% higher due to a 12% increase in Trade and Transaction Services reflecting
business expansion particularly in the Trade Finance and Custodian Services businesses.

▪

Asia Pacific increased 8% due mainly to the formation of the ANZ Royal Bank joint venture in Cambodia.

▪

Group Centre increased 6% with an additional 4% staff in Operations, Technology and Shared Services,largely due to technology project related activity.

▪

New Zealand Businesses increased by 2% due to “ANZ Turnaround” program and increases in support staff
driven largely by information technology staff with the transition of systems to New Zealand.

- Premises costs increased $4 million (2%) with a $3 million increase in rental expense reflecting additional spacerequirements.
- Computer costs increased $21 million (8%). The increase was mainly due to a $18 million rise in Operations,Technology and Shared Services due to increased use of computer contractors for the New Zealand businesssystem integration and a higher level of project-related technology spend.
- Other expenses were $13 million (3%) lower as a result of a reduced charge for non-lending losses ($18 million)
as the first half included a charge for cheque conversion losses. Increased travel costs of $14 million wereoffset by reductions in other expense categories.
- The impact of movements in exchange rates on operating expenses was immaterial.
Income Tax Expense
Half
year
Sep 05$M
Total income tax expense on profit
Effective tax rate

!

Half
Movt
year
Sep 05
Mar 05 v. Mar 05
$M
%

637

597

29.2%

28.8%

7%

Full
year
Sep 05
$M

Full
Movt
year
Sep 05
Sep 04 v. Sep 04
$M
%

1,234

1,168

29.0%

29.3%

6%

2005 result

The Group’s income tax expense increased by $66 million to $1,234 million resulting in an effective tax rate of
29.0%, a decrease of 0.3% from the September 2004 year. This decrease reflects the net effect of several small
items including the non-taxability of profit on sale of the NBNZ Life and Funds Management businesses and theSydney Futures Exchange shares and higher earnings in lower tax rate jurisdictions. This has been partly offset byhigher goodwill amortisation due to a full year contribution from NBNZ and the lower tax benefit due to the run offof certain New Zealand structured financing transactions.
!

Comparison with March 2005 half

The Group’s effective tax rate for the half year ended 30 September 2005 increased 0.4% from March 2005 to
29.2%. The effective tax rate increased due to lower equity accounted earnings from INGA and lower tax benefit
due to the run off of certain New Zealand structured financing transactions in the September half. The March half
included the tax deduction for the employee share issue and the non-taxable profit on sale of Sydney Futures
Exchange shares, whilst the September half included non-taxable profit on the sale of the NBNZ Life and Funds
Management businesses.

18

RESULTS COMMENTARY (continued)
Earnings per share
EPS excluding goodwill, significant items and NBNZ incremental integration costs for the Group increased to175.2 cents, up 8.8% or 14.1 cents on the 2004 year and increased 4.1% or 3.5 cents on the March 2005 half.
Half
year
Sep 05
$M

Movt
Half
Sep 05year
Mar 05 v. Mar 05
$M
%

Full
year
Sep 05
$M

Movt
Full
Sep 05year
Sep 04 v. Sep 04
$M
%

160.9

153.1

Earnings per share
Basic

82.0

78.8

4%

5%

89.4

85.9

4%

175.2

161.1

9%

80.4

76.9

5%

157.5

149.7

5%

Basic (excluding goodwill, significant items and NBNZ
1

incremental integration costs2)
Diluted3
1.

2.
3.

In 2005 ANZ has classified the $14 million profit after tax relating to the gain on sale of the NBNZ Life business as a significant item. In 2004 ANZ has classified
the $14 million profit after tax on settlement of the INGA completion accounts, $84 million profit after tax and $36 million dividends arising from the TrUEPrStransaction as significant items. ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (referpage 12)
In 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sept 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration (refer page 12)
The US Stapled Trust securities issued on 27 November 2003 mandatorily convert to ordinary shares in 2053 unless redeemed or bought back prior to that date.
The US Stapled Trust Security issue can be de-stapled and the investor left with coupon paying preference shares at ANZ’s discretion at any time, or at theinvestor’s discretion under certain circumstances. AASB 1027 requires that potential ordinary shares for which conversion to ordinary share capital is mandatory
must be included in the calculation of diluted EPS. The inclusion of this issue in EPS increased the diluted number of shares by 60.1 million and reduced diluted
EPS by 2.5 cents

Dividends
Halfyear
Sep 05
$M

Half
year
Mar 05
$M

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Interim (fully franked)

n/a

51

51

47

9%

Final (fully franked)

59

n/a

59

54

9%

Ordinary share dividend payout ratio (%)

71.9%

64.7%

68.4%

67.5%

Dividend payout ratio excluding goodwill, significant
items 1 and NBNZ incremental integration costs2 (%)

66.0%

59.4%

62.8%

64.1%

Dividend per ordinary share (cents)

1 & 2.

Refer above

The Directors propose that a final dividend of 59 cents be paid on each ordinary share, up 5 cents (9.3%) on the 2004
final dividend in line with the growth in EPS excluding goodwill, significant items and NBNZ incremental integration
costs. The proposed dividend will be fully franked. The proposed annual dividend of 110 cents is up 8.9% from 2004.
The Group has a dividend reinvestment plan and a bonus option plan. Participation in these plans is limited to 50,000
shares in each plan. Election notices for these plans must be received by 5.00 pm on the record date, namely,
14 November 2005. It is proposed that the final dividend will be payable on 16 December 2005. Dividends payable
to shareholders with a registered address in the United Kingdom, Channel Islands, The Isle of Man and New Zealand
will be converted to their local currency at ANZ’s daily forward exchange rate at the close of business on the record
date for value on the payment date.
The change in the geographic mix of the Group’s earnings following the acquisition of NBNZ further limits the Group’s
franking capacity. However, the Group expects current timing differences will generate future franking credits andtherefore the Group expects it will be able to maintain full franking for the foreseeable future. In addition,
amendments to New Zealand thin capitalisation rules from July 2005 required some internal debt funding to thatcountry to be replaced with equity funding. The franking impact will be limited by redirecting United Kingdom capital
to New Zealand.

19

RESULTS COMMENTARY (continued)
EVA Reconciliation
One measure of shareholder value is EVATM (Economic Value Added) growth relative to prior periods. EVATM for theyear ended 30 September 2005 at $1,911 million was up $161 million from $1,750 million in 2004. EVA for the
September 2005 half was $985 million, up $59 million from $926 million in the March 2005 half.
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

1,543

1,475

5%

3,018

2,815

7%

Goodwill amortisation - NBNZ

81

81

0%

162

129

26%

Goodwill amortisation (excluding NBNZ)1

32

30

7%

62

60

3%
large

EVATM
Net profit after tax

2

Significant items and NBNZ incremental integration costs

21

17

24%

38

(84)

Imputation credits

302

281

7%

583

540

8%

Risk adjusted profit

1,979

1,884

5%

3,863

3,460

12%

Cost of ordinary capital

(948)

(920)

3%

(1,868)(1,648)

13%

Cost of preference share capital

(46)

(38)

21%

(84)

(62)

35%

EVATM

985

926

6%

1,911

1,750

9%

1.
2.

3.

3

Includes notional amortisation of goodwill relating to INGA (refer footnote 1 on page 30)
In 2005 ANZ has classified $14 million profit after tax relating to the gain on sale of the NBNZ Life and Funds Management businesses as a significant item. In
2004 ANZ has classified the $14 million profit after tax on settlement of the INGA completion accounts, $84 million net profit after tax and $36 million dividends
arising from the TrUEPrS transaction as significant items. ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of
its core business (refer page 12)
In 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sept 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration

EVATM is a measure of risk adjusted accounting profit. It is based on operating profit after tax, adjusted for significant
items, goodwill amortisation, the cost of capital, and imputation credits (measured at 70% of Australian tax). Of
these, the major component is the cost of capital, which is calculated on the risk adjusted or economic capital at a
rate of 11%. At the Group level, total capital is used so the cost of capital reflects the full resources provided byshareholders.
At ANZ, economic capital is equity allocated according to a business unit’s inherent risk profile. It is allocated forseveral risk categories including: credit risk, operating risk, interest rate risk, basis risk, mismatch risk, investment
risk, trading risk and other risk. The methodology used to allocate capital to business units for risk is designed tohelp drive appropriate risk management and business strategies.
At ANZ, EVATM is a key measure for evaluating business unit performance and correspondingly is a key factor in
determining the variable component of remuneration packages. Business unit results are equity standardised byeliminating the impact of earnings on each business unit’s book capital and attributing earnings on the business unit’s
risk adjusted or economic capital.

20

RESULTS COMMENTARY (continued)
Credit Risk
Economic loss provisions (ELP)The Group economic loss provision charge (ELP) was $580 million, a decrease of $52 million (8%) over the
September 2004 year. This improvement continues to reflect strong underlying credit quality and the cessation of theGroup centre charge for offshore losses (September 2004: $41 million).
The ELP rate decreased 6 basis points over the year in line with the Group’s strengthening risk profile, including
strong growth in secured Mortgages products with the ELP rate reducing in all business units over the year.
Methodologies relating to NBNZ lending were also refined during 2005.
% ofGroup N etAdvances

Halfyear
Sep 05H alf
year
M ar 05

Fullyear
Sep 05

Fullyear
Sep 04

42%

0.21%

0.20%

0.20%

0.21%

ELP rates by segm ent 1
Personal Banking Australia
Institutional

20%

0.28%

0.30%

0.29%

0.37%

New Zealand Businesses

22%

0.17%

0.18%

0.17%

0.24%

Corporate Australia

9%

0.33%

0.33%

0.33%

0.34%

Esanda and UDC

6%

0.44%

0.44%

0.44%

0.51%

Asia Pacific

1%

1.37%

1.39%

1.38%

1.60%

100%

0.25%

0.25%

0.25%

0.29%

0%

0.00%

0.00%

0.00%

0.02%

100%

0.25%

0.25%

0.25%

0.31%

296

284

580

632

O perating segm ents total
Group Centre
Total
ELP charge ($m illion)
1.

ELP rate = Annualised economic loss provisioning divided by average net lending assets

Net specific provisions

Net specific provisions were $357 million, down $86 million from the year to September 2004. This reduction is afactor of lower large single name losses, coupled with low default levels and strong recoveries, as expected at such astrong point in the credit cycle. This result follows a sustained period of de-risking, predominantly in our domestic
and offshore Institutional portfolios. The increase in New Zealand was due to exposure to two medium-sizedcorporate accounts and a few smaller exposures impacted by the significant downturn in the apple and pear exportindustry.

Net specific provisions

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Personal Banking Australia

86

60

43%

146

137

7%

Institutional

(18)

1

large

(17)

166

large

New Zealand Businesses

65

26

large

91

36

large

Corporate Australia

18

23

-22%

41

43

-5%

Esanda and UDC

48

24

100%

72

47

53%

7

17

-59%

24

14

71%

206

151

36%

357

443

-19%

Asia PacificTotal net specific provisions

General provision balance

The general provision balance at 30 September 2005 was $2,167 million (0.99% of risk weighted assets), an increaseof $175 million from $1,992 million (1.01% of risk weighted assets) at 30 September 2004. This represents a surplus
of $525 million over the APRA minimum guideline.

21

RESULTS COMMENTARY (continued)
Credit Risk, cont’dGross non-accrual loans

Gross non-accrual loans decreased to $642 million, down from $829 million as at 30 September 2004. This was
assisted by strong credit quality, favourable economic conditions and fewer large single name defaults. Over the year
several large non-performing exposures were finalised, including many of the Power and Telecommunications legacy
accounts. The adverse movement in New Zealand was due to exposure to two medium-sized corporate accounts anda few smaller exposures impacted by the significant downturn in the apple and pear export industry.
The default rate (new non accruals/average gross lending assets) has reduced by 12 basis points since September
2004 to 41 basis points. This improvement is largely the result of lower new non-accrual loans in the Institutional
business.

Gross non-accrual loans

As at
Sep 05As at
Mar 05As at
Sep 04

$M

$M

$M

Movt
Sep 05v. Mar 05%

Movt
Sep 05v. Sep 04%

Personal Banking Australia

48

37

40

30%

20%

Institutional

233

287

479

-19%

-51%

New Zealand Businesses

162

81

86

100%

88%

Corporate Australia

85

120

112

-29%

-24%

Esanda and UDC

78

78

73

0%

7%

Asia Pacific

36

37

39

-3%

-8%

Total gross non-accrual loans

642

640

829

0%

-23%

Net non-accrual loans

Net non-accruals are $386 million (Sep 2004: $451 million) representing 2.0% of shareholders’ equity as at
September 2005 (Sep 2004: 2.5%). The Group has a specific provision coverage ratio of 40%.

Net non-accrual loans

As at
Sep 05As at
Mar 05As at
Sep 04

$M

$M

$M

Movt
Sep 05v. Mar 05%

Movt
Sep 05v. Sep 04%

Personal Banking Australia

20

15

17

33%

18%

Institutional

169

169

299

0%

-43%

New Zealand Businesses

96

28

30

large

large

Corporate Australia

40

56

51

-29%

-22%

Esanda and UDC

39

43

37

-9%

5%

Asia Pacific

22

15

17

47%

29%

Total net non-accrual loans

386

326

451

18%

-14%

Specific provision coverage

40%

49%

46%

-18%

-13%

22

RESULTS COMMENTARY (continued)
Market Risk
Below are aggregate Value at Risk (VaR) exposures at 97.5% and 99% confidence levels covering both physical andderivatives trading positions for the Bank’s principal trading centres. Figures are converted from USD at closing
exchange rates.

97.5% confidence level 1 day holding period
As at
Sep 05$M

High for
period
Sep 051$M

Low forperiod
Sep 051$M

Ave forperiod
Sep 051$M

As at
Sep 04$M

High for
period
Sep 041$M

Low forperiod
Sep 041$M

Ave forperiod
Sep 041$M

Value at risk at 97.5% confidence
Foreign exchange

0.8

1.7

0.3

0.8

0.5

1.9

0.3

0.7

Interest rate

1.3

2.2

0.2

0.9

1.0

1.6

0.2

0.6

Credit Spread

0.8

1.5

0.2

0.8

0.5

1.0

0.3

0.6

Diversification benefit

(1.2)

n/a

n/a

(0.9)

(0.7)

n/a

n/a

(0.5)

1.7

3.0

0.8

1.6

1.3

2.5

0.8

1.4

High for
period
Sep 051$M

Low forperiod
Sep 051$M

Ave forperiod
Sep 051$M

As at
Sep 04$M

High for
period
Sep 041$M

Low forperiod
Sep 041$M

Ave forperiod
Sep 041$M

Total VaR

99% confidence level 1 day holding period
As at
Sep 05$M
Value at risk at 99% confidence
Foreign exchange

0.9

2.1

0.4

1.1

0.9

2.8

0.4

1.0

Interest rate

1.7

2.8

0.2

1.2

0.8

2.0

0.1

0.7

Credit Spread

1.4

2.4

0.4

1.2

1.0

1.5

0.5

0.8

Diversification benefit

(1.8)

n/a

n/a

(1.3)

(0.9)

n/a

n/a

(0.6)

2.2

4.0

1.0

2.2

1.8

3.4

1.0

1.9

Total VaR
1.

Numbers are based on full year period

The table below shows all outstanding revenue hedges, interest income earned and fair value of these hedges.
Revenue related hedges
30 September 2005
Notional Amount taken to
Principal Amount
Income30 September 2004
Unrealised
Gains/(Losses)

Notional Amount taken to
Principal Amount
IncomeUnrealised
Gains/(Losses)

$M

$M

$M

$M

$M

$M

USD Revenue Hedges

-

15

-

36

31

14

NZD Revenue Hedges

3,957

(27)

41

3,450

14

(58)

Total

3,957

(12)

41

3,486

45

(44)

The Group uses a variety of derivative instruments to hedge against the adverse impact on future offshore revenue
streams from exchange rate movements. As at 30 September 2005 ANZ had $4.0 billion (Mar 2005: $3.9 billion; Sep
2004: $3.5 billion) hedge contracts in place.
Movements in average exchange rates resulted in a reduction of $30 million (1%) in the Group’s profit after tax (netof profit and loss on revenue hedges). Earnings from revenue hedges reduced by $57 million (before tax) from 2004.
Hedge revenue is booked in the Group Centre as interest income.

23

RESULTS COMMENTARY (continued)
Statement of Financial Position
Total assets increased by $33.8 billion (13%) since 30 September 2004 to $293.2 billion. Exchange rate movements
accounted for a net reduction of $3.1 billion consisting of a reduction of $1.9 billion in New Zealand and $1.2 billion inOverseas Markets. Excluding the impact of exchange rate movements, total assets increased $25.0 billion (15%) in
Australia, $10.6 billion (16%) in New Zealand and $1.3 billion (7%) in Overseas Markets.
The explanations in the table below describe movements in the major asset classes.

Liquid assets "82%

Excl Exchange Rates"89%

Due from otherfinancial institutions"33%
Excl Exchange Rates"37%

Trading securities"15%
Excl Exchange Rates"15%

Investment
securities #10%
Excl Exchange Rates#8%

Liquid assets increased by $5.2 billion (82%) to $11.6 billion at 30 September 2005.
Australia increased $1.9 billion due largely to an increase in customer-related repo activity andovernight lending in Institutional. New Zealand increased $1.7 billion as a result of larger
holdings of bank certificates of deposit for liquidity purposes. Overseas Markets increased$1.6 billion due to increased trade bills and letters of credit volumes.
Due from other financial institutions increased by $1.6 billion (33%) to $6.3 billion at
30 September 2005 due largely to increase in volume of bank overdrafts, securities borrowing
volumes in Trade and Transaction Services Australia and interbank lending in New Zealandand the United Kingdom.
Trading securities volumes increased $0.8 billion (15%) to $6.3 billion at 30 September 2005
due largely to more active trading in Institutional Australia ($1.4 billion) partly offset by
reduced holdings in Treasury ($0.8 billion) with changes in the composition of the liquidity
portfolio.
Investment security volumes decreased $0.8 billion to $6.9 billion at 30 September 2005 due
to changes in the composition of the liquidity portfolio and reduced holdings related to
discontinued structured finance activities in New Zealand ($0.5 billion).

Net loans andadvances "13%Net loans and advances increased 13% ($26.0 billion) since September 2004. Excluding theimpact of exchange rate movements, the increase was 14% ($28.2 billion).

Excl Exchange Rates"14%

Growth in Australia of 15% ($21.1 billion) was largely the result of increases in the following
businesses:- Personal Banking Australia (14% or $12.8 billion), predominantly in Mortgages($10.8 billion) as a result of growth in housing loans. Consumer Finance increased$1.1 billion reflecting the success of the low rate MasterCard product. Regional Commercialand Agribusiness Products grew $0.7 billion and Banking Products grew $0.2 billion.
- Institutional Australia (24% or $5.4 billion) largely in Client Relationship Group($4.0 billion) driven by increased demand for funding of mergers and acquisition activity.
Growth of $0.8 billion in Corporate and Structured Financing was due mainly to increased
project finance activity, and higher volumes in Trade and Transaction Services ($0.7 billion)
were as a result of growth in overdrafts.
- Corporate Australia (14% or $1.9 billion) largely in Business Banking ($1.1 billion) driven
by continued investment in frontline staff and process simplification, the industry
specialisation approach to customers and a competitive customer service proposition.
- Esanda (9% or $1.0 billion) driven by new business writings, particularly in the Commercial
Asset Finance and Broker channels.
New Zealand grew by $6.2 billion (11%). Excluding the impact of exchange rates, growth was$7.8 billion, or 14%, with increases in NBNZ Retail ($2.6 billion), ANZ Retail ($1.4 billion),
Institutional ($1.9 billion) and Corporate Banking ($1.4 billion).
Overseas Markets declined by $1.3 billion largely due to the sale of the London headquarteredproject finance business and the impact of exchange rate movements ($0.7 billion).

Customer’s liability
Customer’s liability for acceptance increased by $1.0 billion to $13.4 billion at 30 September
for acceptance "8% 2005 with growth predominantly in Institutional Australia ($0.5 billion) and Corporate Banking($0.3 billion).
Excl Exchange Rates"8%

Other assets "8%
Excl Exchange Rates"9%

Other assets increased $0.7 billion (8%) to $9.9 billion as at 30 September 2005 due mainly
to increase in trade dated asset volumes.

Shares in associates The $0.1 billion reduction is due to $245 million capital repatriation from INGA, partly offset by
and joint venture
equity accounted earnings retained in associates and the establishment of the new joint
venture with ING in New Zealand.
entities #4%

24

RESULTS COMMENTARY (continued)
Statement of Financial Position, cont’d
Total liabilities increased by $32.3 billion (13%) from 30 September 2004. Exchange rate movements accounted for a
net reduction of $3.3 billion consisting of a $1.6 billion reduction in New Zealand and a $1.7 billion reduction inOverseas Markets.
The explanations in the table below describe movements in the major liability classes.
Due to other financial
institutions "64%
Excl Exchange Rates "71%

Due to other financial institutions increased $4.7 billion (64%) to $12.0 billion at
30 September 2005.
Volumes in Australia increased $2.0 billion. The increase was mainly in Institutional notably
in Markets ($1.2 billion) with increased interbank repo activity and increased Clearing
Services volumes in Trade and Transaction Services ($0.8 billion).
Excluding exchange rate movements New Zealand increased $1.5 billion largely in
Structured Finance, and Overseas Markets increased $1.4 billion largely in the United
Kingdom with reduced Certificate of Deposit and Term Deposit issuance in Treasury.

Deposits and otherborrowings "10%Deposits and other borrowings increased $17.1 billion (10%) to $185.7 billion at
30 September 2005. Exchange rate movements reduced deposits and other borrowings by
Excl Exchange Rates "12% $2.7 billion with a $1.4 billion reduction in New Zealand and a $1.3 billion reduction inOverseas Markets. Excluding exchange rate movements:
Australia increased $16.1 billion (17%) largely as a result of increases in the following
businesses:-

Treasury funding increased $7.4 billion with higher certificates of deposit volumes tomeet the Group’s increased short term funding requirements.

-

Personal Banking Australia increased $3.7 billion due to high yielding term deposit andcash management account products.

-

Institutional increased $2.0 billion largely due to several corporate deposits in Trade andTransaction Services.

-

Corporate Australia increased $1.9 billion.

-

Esanda increased $1.1 billion.

New Zealand increased $4.7 billion, largely in Treasury ($2.1 billion) with an increase incommercial paper and certificate of deposit issuance to help fund the growing New Zealandbalance sheet. Deposits grew in ANZ Retail and NBNZ Retail by $1.7 billion.
Overseas Markets decreased $0.9 billion, with Americas decreasing $1.4 billion, UK & Europe
decreasing $0.5 billion and Asia/Pacific increasing $1.1 billion. Reduced funding resulting
from the Euro Hybrid issue has been partly offset by additional funding requirement given
increased asset volumes.
Payables and other liabilities decreased $2.6 billion (18%) to $11.6 billion at 30 September
2005 with a reduction in securities lending volumes and lower unrealised losses on
Excl Exchange Rates #17% revaluation of derivative instruments.
Payables and otherliabilities #18%
Bonds and Notes"42%

Bonds and notes increased $11.5 billion (42%) to $39.1 billion at 30 September 2005.
Excluding exchange rate movements, bonds and notes increased by $13.3 billion (48%) in
Excl Exchange Rates "48% response to increased term funding requirements.
Loan Capital "8%
Excl Exchange Rates "13%Loan capital increased $0.7 billion (8%) to $9.1 billion at 30 September 2005 or $1.1 billion(13%) excluding exchange rate movements.

25

RESULTS COMMENTARY (continued)
Capital Management

Tier 1As at
Sep 05As at
Mar 05As at
Sep 04

6.9%

7.0%

6.9%

Tier 2

3.9%

3.6%

4.0%

Deductions(0.3%)(0.3%)(0.5%)

Total

10.5%

10.3%

10.4%

ACE

5.1%

5.1%

5.1%

219,573

209,524

196,664

RWA $m

ACE Ratio

The ACE ratio at 5.1% remains above the Group’s targeted capital range with only $204 million of the planned$350 million buy-back having been completed. During the period, ACE ratio declined 2 basis points principally due to:!

current period earnings before goodwill amortisation and after preference share dividends of $3.2 billion(+161 basis points);!

ordinary share dividend commitments of $2.0 billion (-102 basis points);!

reduced capital deductions of $0.1 billion (+6 basis points) principally due to a capital repatriation from INGA
being offset by profit retention in funds management businesses and an increase in capitalised expenses;!

buy-back of ordinary equity of $204 million (-10 basis points) being offset by share issues of $309 million(+16 basis points) through the Bonus Option Plan, Dividend Reinvestment Plan, option conversions and issues tostaff;!

increase in risk weighted assets, excluding the impact of exchange rate movements (-67 basis points); and!

exchange rate movements (-5 basis points).

Hybrid Capital and Tier 1 Capital

The Group raises hybrid capital to supplement the Group’s ACE capital to further strengthen the Group’s capital baseand ensure compliance with APRA’s prudential capital requirements, principally its Tier 1 capital requirements.
In December 2004 the Group raised $871 million (+44 basis points) through the issuance of a €500 million hybrid
capital instrument (Euro Hybrid) into the European market. The instrument is similar in structure to the Group’s
existing Australian (ANZ StEPS) and US Stapled Trust Security issuances, with full details of the issue having been
provided in the March 2005 profit announcement.
The Euro Hybrid issue, coupled with the items identified within the ACE Capital discussion, resulted in the Group’s
Tier 1 ratio remaining unchanged over the full year.
Hybrid Capital details
ANZ StEPS

US Stapled Trust Security

Euro Hybrid

Amount (in issue currency)$1,000 million

USD1,100 million€500 million

Accounting classification

EquityDebt

EquityMaturity date

14 September 2053

15 December 2053

15 December 2053

September 2005 balance (net of issue costs)$987 million$1,443 million$871 million

Interest rate

BBSW +1.00%

Tranche 1 Coupon: 4.48%
Tranche 2 Coupon: 5.36%

Euribor +0.66%

Buy-Back of Ordinary Equity

The Group commenced an on-market buy-back of $350 million of ordinary equity on 10 January 2005. Up until
15 September 2005, when ANZ went into a voluntary black-out period for buying back shares, the Group had
repurchased 9.6 million shares at an average cost of $21.15 per share for a total of $204 million. The buyback period
has been extended to 30 March 2006.

26

RESULTS COMMENTARY (continued)
Capital Management, cont’dPrudential Issues – APRA’s proposals on International Financial Reporting Standards (IFRS) changes and Tier 1
hybrid capital

ANZ will adopt IFRS from 1 October 2005. However, APRA have indicated that revised prudential reporting
obligations to incorporate the new standards will not be effective until 1 July 2006. Between 1 October 2005 and1 July 2006, ANZ will submit prudential reports to APRA on a modified AGAAP basis.
Below is the estimated impact of adopting IFRS on ANZ’s capital as at 1 October 2005 (refer also to Note 1 on
pages 61 to 69). This is subject to any further IFRS adjustments and APRA finalising its position on a number of IFRS
issues, particularly the treatment of deferred fee income and the collective provisions under the prudential capital
standards.
$ million

Book equity

ACE & Tier 1

Tier 2

Fee revenue(266 )

0

0

Defined benefits schemes(107 )(107 )

0Credit Provisioning

191

191

(235 )

Reclassification of StEPS(992 )

00

INGA(181 )

0

0

Goodwill written back

224

0

0

Derivatives accounting

33(108 )

0

Asset revaluation reserve

-

31

(31 )

Other
Total adjustment

(32 )

(32 )

0

(1,130 )(25 )(266 )APRA has also proposed changes to the composition of Tier 1 capital, with a tightening of the rules around the volume
and eligibility of instruments that will qualify as Tier 1 capital, including:!

changing the volume of eligible hybrid Tier 1 capital from 25% of Tier 1 capital before hybrids and deductions, to
25% of Tier 1 including hybrids and deductions, with the 25% being split into 10% for a new category being
non-innovative or “pure preference shares” and 15% for innovative or structured issuances;!

introducing a new class of hybrid Tier 1 capital, non-innovative or “pure preference shares”. APRA’s paper
identifies “pure preference shares” as “non-cumulative irredeemable preference shares without innovative capitalfeatures” issued directly by the licensed banking entity;!

including in the innovative Tier 1 hybrid capital classification any issue that has an incentive for the issuer to call,such as a ‘step-up’ feature or an option to convert into ordinary shares, or an instrument issued through a Special
Purpose Vehicle, or any Tier 1 instrument not representing ‘shares’; and!

phasing in the new rules between July 2006 and January 2008, with a further transition period to January 2010 for
institutions that cannot become compliant at January 2008 based upon the hybrid capital instruments they haveon issue at the date of the discussion paper. This timetable is designed to align with the introduction of Basel II
requirements.

At the time of publication of this Results Announcement, the rules are yet to be finalised and accordingly it is notpossible to determine the absolute impact the changes will have on the Group’s capital position and future strategy.
However, it is anticipated that all of the Group’s existing hybrid capital issues will continue to be classified as
innovative capital and that the Group is likely to be above the new 15% limit at January 2008. ANZ will be requestingthat APRA continue to apply the additional transition rules through to 2010. The changes mean that ANZ will have tofund risk weighted asset growth and business initiatives from either fundamental (ACE) or non-innovative Tier 1
capital.

27

RESULTS COMMENTARY (continued)
The National Bank of New Zealand - Integration
ANZ National Bank is the largest provider of banking services in New Zealand following the amalgamation of The
National Bank of New Zealand Limited in June 2004.
The primary focus of the integration programme in 2005 has been the delivery of integrated technology and businesssolutions in line with the overall integration objectives which ensure that customer satisfaction levels are maintained
or improved, operational risk is minimised and the transition for staff is seamless.
Integration has progressed well in 2005 with the expected organisational and financial outcomes delivered. The
overall integration objectives remain unchanged and include:! satisfying the Reserve Bank of New Zealand (RBNZ) Conditions of Registration! maintaining separately branded retail, corporate and commercial banking businesses;! strengthening our Rural banking business primarily under The National Bank brand;! growing our Institutional businesses under the ANZ brand;! merging and rationalising head office and support functions;! aligning, to the extent possible, technology systems; and! realisation of integration synergies.
The key integration achievements for 2005 have been:! agreement with the RBNZ that the systems plans are a reasonable basis to satisfy the Conditions of Registration
with the domestic systems to be completed as planned by 31 December 2005 and the international systems to becompleted by 30 June 2006;! completed new IT infrastructure establishment in New Zealand to support the systems migrating from Australia to
New Zealand;! completed the migration to New Zealand of target systems in General Ledger, Procurement, Property and
HR/Payroll;! commenced the migration to ANZ Group systems in Institutional, Corporate and Commercial; and! completed the Rural integration programme while maintaining its number one market share in this segment.
As the full impact of RBNZ requirements has been clarified during the year, the total cost of integration is now
estimated to be NZD240 million, a modest increase on the original estimate of NZD220 million. To date integration
costs of NZD188 million have been incurred in line with expectations.
The RBNZ recently announced a changed approach to its “Outsourcing Policy” which has driven a change in theConditions of Registration. An analysis has commenced on how this may change the nature and cost of compliance.
In 2005, revenue attrition relating to integration activities continues to track favourably against expectations, withlittle attrition evident. The cost synergies in 2005 are tracking slightly ahead of expectations with cost synergies andrevenue benefits both NZD1 million ahead, and estimated benefits forecast for 2007 remain on track.
Impact of NBNZ on September 2005 results
The 2004 financial year included only ten months contribution from NBNZ following its acquisition from Lloyds TSB on
1 December 2003. Hence, management believe that a comparison of profit and loss data between the 2005 and the2004 years does not reflect the core business performance.
The following table has been provided to assist readers in understanding the impact of the contribution from NBNZ on
2004, had it been consolidated for the entire year. Commentary comparing the results for 2005 with 2004 will referto results notionally adjusted for these impacts where this assists the reader to analyse the income and expense
trends.
Tenmonths to
Sep 04$M

Fourmonths to
Mar 04$M

Half of fourmonths to
Mar 04$M

Net interest income

708

273

137

Other operating income

259

106

53

Operating income

967

379

190

Operating expenses

(572)

(222)

(111) 1

Profit before debt provision

395

157

79
(14)

Provision for doubtful debts

(62)

(27)

Profit before income tax

333

130

65

Income tax expense & Outside equity interest

(138)

(54)

(27)

Net profit

195

76

38

1.

Includes goodwill amortisation

28

RESULTS COMMENTARY (continued)
Impact of NBNZ on September 2005 results, cont’d
The following table gives the internal funding1 of the New Zealand operations.
Sep 05NZD M

Mar 05
NZD M

Sep 04
NZD M

1,765

1,765

1,765

-

1,129

1,129

1,765

2,894

2,894

725

516

507

Ordinary share capital

1,450

1,450

1,450

Redeemable preference share capital

3,339

2,210

2,210

Retained earnings

1,122

1,040

751

5,911

4,700

4,411

3,078

3,285

3,379

Debt
Debt Funding - Australia
Debt Funding - United Kingdom

Subordinated debt
EquityUnamortised goodwill
1.

Includes structural funding provided to New Zealand from the Group. Short term internal funding is excluded from this table

As a result of amendments to thin capitalisation tax rules in New Zealand, the Group restructured its internal fundingof the New Zealand group on 23 September 2005. This involved the replacement of NZD1.129 billion ofintercompany debt with redeemable preference share capital. This will increase profit in New Zealand by
approximately NZD50 million after tax in 2006. However, this will be partly offset by the impact of unwinding certain
structured finance transactions which are also impacted by the thin capitalisation amendments. The franking andprofit impact on the Group of the change in New Zealand funding will be limited due to redirecting capital from United
Kingdom to New Zealand.

ING New Zealand joint venture
In September 2005 ANZ National Bank Limited entered into a joint venture with ING Insurance International Limited(INGII). The joint venture, ING (NZ) Holdings Ltd (INGNZ), is 49% owned by ANZ National Bank Ltd and 51% owned
by INGII.
On 30 September 2005:!

ANZ National Bank Limited and INGII invested NZD163 million and NZD170 million respectively into INGNZ.

!

ANZ National Bank Limited sold the NBNZ Life and Funds Management businesses to INGNZ for NZD158 million
resulting in the following impact on the Group’s financial statements:- Reduction in unamortised goodwill of NZD114 million.
- Recognition of approximately NZD16 million ($14 million) profit on sale of 51% of the NBNZ Life and Funds
Management businesses.
- An investment in INGNZ of NZD145 million (being initial investment adjusted for unrecognised profit on ANZ
National Bank’s 49% share of the profit on sale of the NBNZ Life and Funds Management businesses joint
venture and costs).

!

The intangible and tangible components of the investment in INGNZ are deducted from Tier 1 and total capital,
respectively, in the Group’s capital adequacy ratio.

!

INGNZ acquired at market value the New Zealand-based businesses previously owned by INGA. The profit on saleof the New Zealand-based businesses of approximately $40 million is recognised in INGA, however, ANZ’s share ofthis profit is eliminated on consolidation.

29

RESULTS COMMENTARY (continued)
ING Australia Performance
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Funds management income

239

226

6%

465

443

5%

Risk income

122

110

11%

232

181

28%

361

336

7%

697

624

12%

(250)

(238)

5%

(488)

(449)

9%

111

98

13%

209

175

19%

Capital investment earnings

79

101

-22%

180

164

10%

Net income

190

199

-5%

389

339

15%

Costs (excl goodwill on purchase of ANZ business)

Income tax expense

(48)

(35)

37%

(83)

(57)

46%

Profit after tax

142

164

-13%

306

282

9%

ANZ share
ANZ share of INGA earnings @ 49%

70

80

-13%

150

138

9%

Notional goodwill amortisation

(22)

(21)

5%

(43)

(41)

5%

ANZ equity accounted profit

48

59

-19%

107

97

10%

ANZ capital hedges

(10)

(11)

-9%

(21)

(13)

62%

Net funding cost

(5)

(6)

-17%

(11)

(17)

-35%

Net return to ANZ1

33

42

-21%

75

67

12%

5,047

4,417

14%

9,464

7,701

23%

61

724

-92%

785

403

95%

Gross fund flows excluding V2 Plus
Net fund flows including V2 Plus
1.

Notional Goodwill amortisation of $43 million (2004 full year: $41 million; Sep 2005 half: $22 million; Mar 2005 half: $21 million) is reported in the Group Centre

On 30 September 2005 ING Australia sold its New Zealand-based businesses to a joint venture between ING Groupand ANZ National Bank. Further details are contained on page 29.
2005 result

The net return to ANZ from INGA increased by 12%.
! Funds management income increased by 5% based on higher average funds under management underpinned bystrong investment markets, and improved net flows in both personal investments and employer super businesses.
! Risk income increased by 28% due to growth in in-force premiums and continued favourable claims experience.
Sales growth was primarily in group life insurance products.
! Core operating costs were lower than 2004, offset by an increase in investment management fees due to higher
funds under management. Additional costs were incurred on projects remediating past unit pricing issues andupgrading systems and processes. These projects should be completed in 2006.
! Capital investment earnings were higher than 2004, but negatively impacted by interest costs of $26 million (nil in
2004) related to a return of shareholder capital during the year. ANZ partially hedged against volatility in thisincome stream. As a result, gains in capital investment earnings were partially offset by hedge losses. ANZ ceased
hedging capital investment earnings from 1 October 2005.
! Tax expense increased 46% due to the loss of transitional tax relief for life companies from 1 July 2005, higher
operating profit and higher capital investment earnings.
Comparison with March 2005 halfFunds management income increased by 6% due to higher average funds under management which were impacted
by improved net flows in employer superannuation business. Risk income increased by 11% due to ongoingfavourable claims experience in the second half, supported by continued strong sales of life insurance products
through the ANZ network and direct marketing initiatives. Core operating costs for the half were in line with the
March half. Increased legacy unit pricing remediation costs resulted in an overall 5% increase in expenses. Capital
investment earnings were below the abnormally high returns achieved in the first half. Gross gains in capital
investment earnings were again partially offset by hedge losses. Tax expense increased due to the loss of transitionaltax relief for life companies from 1 July 2005, and higher operating profit, partially offset by lower second-half capital
investment earnings.

30

RESULTS COMMENTARY (continued)
Critical Accounting Policies
The Group prepares its consolidated financial statements in accordance with Australian Accounting Standards andother authoritative accounting pronouncements. All material changes to accounting policy are approved by the Audit
Committee of the Board.
Details of critical accounting policies will be provided in the 30 September 2005 Financial Report. There have been nomaterial changes to the Group’s critical accounting policies or their related methodologies since September 2004.
A brief discussion of critical accounting policies and their impact on the Group follows:a)Economic Loss Provisioning

The Group recognises an expense for credit losses (provision for doubtful debts) based on the expected long termloss ratio for each part of the loan portfolio. The provision for doubtful debts is booked to the General Provision
which is maintained to cover the losses inherent in the Group’s existing loan portfolio. The method used by theGroup for determining the expense charge is referred to as Economic Loss Provisioning (ELP).
The Group uses ELP models to calculate the expected loss by considering:- the size, composition and risk profile of the current loan portfolio; and- the history of credit losses for each type and risk of lending.
The charge to profit for ELP was 0.25% of average net lending assets or $580 million (Sep 2004: 0.31% or$632 million).
As at September 2005, the balance of the General Provision of $2,167 million (Sep 2004: $1,992 million)
represented 0.99% (Sep 2004: 1.01%) of risk weighted assets.
b)

Specific provisioning

A specific provision is maintained to cover identified Non Accrual Loans. When a specific debt loss is identified as
being probable, its value is transferred from the General Provision to the Specific Provision. The Specific
Provision equates to the full amount of the expected loss plus any enforcement/recovery expenses.
Recoveries resulting from proceeds received from accounts which were written off in prior years are transferredback to the General Provision.
The recognition of specific losses has an impact on the size of the General Provision rather than directly impacting
profit. However, to the extent that the General Provision is drawn down beyond a prudent amount it will be
restored through a transfer from the current year’s earnings. The amount of net transfer from the General
Provision to the Specific Provision, net of recoveries, during the year was $357 million (Sep 2004: $443 million).
c)Deferred acquisition costs and deferred income

The Group recognises assets that represent deferred acquisition costs relating to the acquisition of interest
earning assets, and liabilities that represent deferred income relating to income received in advance of services
performed.
Deferred acquisition costs - at 30 September 2005 the Group’s assets included $524 million (Sep 2004:$465 million) in relation to costs incurred in acquiring interest earning assets. During the year, amortisation of$258 million (Sep 2004: $218 million) was recognised as an adjustment to the yield earned on interest earning
assets.
Deferred income - at 30 September 2005, the Group’s liabilities included $79 million (Sep 2004: $156 million) in
relation to income received in advance.
The balances of deferred acquisition costs and deferred income at period end were:
Deferred Acquisition Costs 1

Deferred Income

Sep-05$M

Sep-04$M

Sep-05$M

Sep-04$M

Personal Banking Australia

153

145

27

36

Esanda

284

250

-

-

New Zealand Businesses

61

38

15

41

Institutional

6

10

19

11

Other 2

20

22

18

68

Total

524

465

79

156

1.
2.

Deferred acquisition costs largely include the amounts of brokerage capitalised and amortised in the three Business segments: Personal Banking Australia, Esanda
and the New Zealand Business. Deferred acquisition costs also include capitalised debt raising expenses
Includes Group Centre, Corporate Australia, INGA and Asia Pacific31

RESULTS COMMENTARY (continued)
Critical Accounting Policies, cont’dc)Deferred acquisition costs and deferred income, cont’dDeferred acquisition costs analysis:
S eptem ber 2 0 0 5
Am ortisation
Ca pitalised
Costs
Costs 1
$M
$M
Personal Banking Australia
EsandaN ew Zealand Businesses

S ep tem ber 2 0 0 4
A m ortisa tion
Cap ita lised
Costs
Costs 1
$M
$M

63

71

64

66

165

1 99

1 47

17 0

20

43

7

30

Institutional

4

-

-

-

O ther 2

6

4

-

24

T o ta l

258

3 17

2 18

29 0

1.
2.

d)

Costs capitalised during the year exclude brokerage trailer commissions paid, relating to the acquisition of mortgage assets of $83 million (2004 full year:$87 million)
Includes Group Centre, Corporate Australia, INGA and Asia Pacific

Derivatives and Hedging

The Group buys and sells derivatives as part of its trading operations and to hedge its interest rate risk, foreignexchange risk and the equity risk in INGA. Derivative instruments entered into for the purpose of hedging are
accounted for on the same basis as the underlying exposures or risks. The Group classifies derivatives into two
types according to their underlying purpose - trading or hedging.
Profit and loss relating to trading derivatives is reported in the statement of financial performance as trading
income. The fair value of trading derivatives is recorded on a gross basis as other assets or other liabilities asappropriate unless there is a legal right of set-off. The fair value of a derivative financial instrument is the netpresent value of future expected cash flows arising from that instrument.
In order to be classified as a hedging derivative, the hedging relationship must be expected to be effective.
Hedging derivatives are accounted for in the same manner as the underlying asset or liability they are hedging.
For example, if the hedged instrument is accounted for using the accrual method, the hedging instrument will also
be accounted for using the accrual method.
Movements in the value of foreign exchange contracts that are hedging overseas operations are not recognised asincome or expenses. Instead these movements are recognised in the foreign currency translation reserve
together with the net difference arising from the translation of the overseas operation.
Derivatives entered into as part of the Group’s trading operations are carried at their fair values with any change
in fair value being recognised as part of trading income.
e)Special purpose and off balance sheet vehicles

The Group may invest in or establish special purpose entities (SPEs) to enable it to undertake specific types oftransactions. Where the Group has established SPEs which are controlled by the Group to facilitate transactions
undertaken for Group purposes, these are consolidated in the Group’s financial statements.
The main type of SPEs that are not consolidated into the Group are:-Securitisation vehicles - Assets are transferred to an SPE, which funds the purchase by issuing securities. ANZ
can provide specific services to the SPE, including management and servicing of assets and/or providing
liquidity support, swaps and credit guarantees. ANZ earns fees at a commercial rate for providing these
services.

-

Structured finance entities - These entities are set up to assist with the structuring of client financing. ANZ
may provide credit facilities to the vehicle and may also manage these vehicles.

-

Managed funds - These funds invest in specified investments on behalf of clients. INGA, INGNZ and ANZ
National Bank Limited as managers of funds, expose ANZ to operational risk and reputational risk.

32

RESULTS COMMENTARY (continued)
Critical Accounting Policies, cont’df)Valuation of investment in INGA

The Group adopts the equity method of accounting for its 49% interest in INGA. As at 30 September 2005, theGroup’s carrying value was $1,479 million (Sept 2004: $1,697 million). The change since September 2004
reflects a capital repatriation and a dividend received during the year together with the equity accounted profit for
the year.
The carrying value is subject to a recoverable amount test to ensure that this does not exceed its recoverable
amount at the reporting date. The Group obtained an independent valuation at 31 March 2005 and at that time
the carrying value did not exceed the recoverable amount. At 30 September 2005, a management review was
conducted to determine whether there were any indicators of impairment of the value of the investment. This
assessment did not indicate the existence of impairment indicators and accordingly no writedown was made.
g)

Valuation of goodwill in ANZ National Bank Limited

Goodwill arising from the acquisition of NBNZ is systematically amortised over the period of time during which thebenefits of the acquisition are expected to arise, such period of benefit not exceeding 20 years.
The carrying value of goodwill is reviewed at each balance date and is written down to the extent that it is nolonger supported by probable future benefits.
The Group obtained an independent valuation of ANZ National Bank Limited as at 31 March 2005 which
determined that no writedown in the carrying value of NBNZ goodwill was required at that time. At 30 September
2005, a management review was conducted to determine whether there were any indicators of impairment in the
carrying value of NBNZ goodwill. This assessment did not indicate the existence of impairment indicators andaccordingly no writedown was made.
h) Software capitalisation

At 30 September 2005, the Group’s fixed assets included $381 million (Sep 2004: $430 million; Mar 2005:$401 million) in relation to costs incurred in acquiring and developing software. During the September 2005 half
year, amortisation expense of $64 million (Sep 2004 half: $66 million; Mar 2005 half: $57 million) was
recognised.
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

401

430

-7%

430

465

-8%

Balance at start of period
Software capitalised during the period

51

45

13%

96

114

-16%

Amortisation during the period

(64)

(57)

12%

(121)

(129)

-6%

Software written-off

(8)

(16)

-50%

(24)

(41)

-41%

Acquisitions

-

-

n/a

-

17

-100%

Other

1

(1)

large

-

4

-100%

381

401

-5%

381

430

-11%

Total software capitalisation

33

This page has been left blank intentionally

34

BUSINESS PERFORMANCE REVIEWProfit and Loss (including effect of movements in foreign currencies)
Half
year
Sep 05
$M

Half
Movt
year
Sep 05
Mar 05 v. Mar 05
$M
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net profit after income tax
Personal Banking Australia

528

485

9%

1,013

883

15%

Institutional

471

452

4%

923

857

8%

New Zealand Businesses

307

307

0%

614

513

20%

Corporate Australia

192

184

4%

376

341

10%

Esanda and UDC

82

77

6%

159

143

11%

Asia Pacific

47

48

-2%

95

111

-14%

(63)

(61)

3%

(124)

(117)

6%

1,564

1,492

5%

3,056

2,731

12%

(21)

(17)

24%

(38)

84

large

1,543

1,475

5%

3,018

2,815

7%

Group Centre

1

Net profit (excl significant items2 and NBNZ
incremental integration costs3)
2

Significant items and NBNZ incremental integration costs3

Net profit

Profit and Loss (prior period figures adjusted to remove the impact of exchange rate movements4)
Half
year
Sep 05
$M

Half
Movt
year
Sep 05
Mar 05 v. Mar 05
%
$M

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net profit after income tax
Personal Banking Australia

528

485

9%

1,013

883

15%

Institutional

471

451

4%

923

858

8%

New Zealand Businesses

307

306

0%

614

532

15%

Corporate Australia

192

185

4%

376

341

10%

Esanda and UDC

82

77

6%

159

145

10%

Asia Pacific

47

48

-2%

95

109

-13%

Group Centre1

(63)

(65)

-3%

(124)

(167)

-26%

1,564

1,487

5%

3,056

2,701

13%

(21)

(17)

24%

(38)

84

large

1,543

1,470

5%

3,018

2,785

8%

-

5

-100%

-

30

-100%

1,543

1,475

5%

3,018

2,815

7%

Net profit (excl significant items and NBNZ
2

incremental integration costs3)
2

Significant items and NBNZ incremental integration costs3

Net profit
FX impact on reported net profit

4

Reported net profit
1.
2.

3.
4.

Group Centre includes the operations of Treasury
In 2005 ANZ has classified $14 million after tax profit on the sale of NBNZ life businesses as a significant item. In 2004 ANZ has classified the $14 million profit
after tax on settlement of the INGA completion accounts and $84 million net profit after tax arising from the TrUEPrS transaction as significant items. ANZ
excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 12)
In 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sept 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration (refer page 12)
ANZ has removed the impact of exchange rate movements to provide readers with a better indication of the business unit performance in local currency terms.
Retranslation is net of revenue hedge earnings

The Group from time to time modifies the organisation of its businesses to enhance the focus on delivery of
specialised products or services to customers. Prior period numbers are adjusted for such organisational changes toallow comparability. The significant changes since 31 March 2005 have been:! Institutional - Institutional Banking has been renamed Client Relationship Group. The Non-Continuing Businesscomprising the London headquartered project finance and certain structured finance transactions that ANZ has
exited as part of its de-risking strategy has been reported as a separate business unit.
! Personal Banking Australia. A new business unit, Wealth Management, has been created that comprises the equity
accounted earnings from INGA's core business and the Financial Planning business.
! ING Australia - To provide better alignment with ANZ businesses, INGA equity accounted profit result has been
split for management purposes between core business and the more volatile capital investment earnings. The corebusiness portion rolls up alongside the Financial Planning distribution arm as part of Wealth Management within
Personal Banking Australia. The capital investment earnings, capital hedge results, funding costs and notional
goodwill amortisation are now reported in the Group Centre! There were also a number of minor restatements as a result of customer segmentation, changes to internaltransfer pricing methodologies and the realignment of support functions.
35

BUSINESS PERFORMANCE REVIEW (continued)
Personal Banking Australia
Brian Hartzer
Regional Commercialand Agribusiness Products♦ Banking Products♦ Mortgages♦

Consumer Finance
Wealth Management
1♦ Other
♦
♦

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

1,085

1,019

6%

2,104

1,912

10%

Other external operating income

525

488

8%

1,013

912

11%

Net inter business unit fees

64

61

5%

125

118

6%

Net interest income

Operating income

1,674

1,568

7%

3,242

2,942

10%

External operating expenses

(694)

(669)

4%

(1,363)(1,263)8%

Net inter business unit expenses

(142)

(134)

6%

(276)

(270)

2%

Operating expenses

(836)

(803)

4%

(1,639)(1,533)

7%

Profit before debt provision

838

765

10%

1,603

1,409

14%

Provision for doubtful debts

(104)

(94)

11%

(198)

(183)

8%

Profit before income tax

734

671

9%

1,405

1,226

15%

Income tax expense and outside equity interests

(206)

(186)

11%

(392)

(343)

14%

Net profit attributable to members of the Company

528

485

9%

1,013

883

15%

Consisting of:Regional Commercial and Agribusiness Products

60

57

5%

117

106

10%

Banking Products

117

113

4%

230

208

11%
15%

Mortgages

166

149

11%

315

275

Consumer Finance

122

118

3%

240

189

27%

Wealth Management

52

47

11%

99

84

18%

Other1

11

1

large

12

21

-43%

528

485

9%

1,013

883

15%

104,119

97,807

6%

104,119

91,207

14%

Balance Sheet
Net loans & advances including acceptances
Other external assets

1,924

2,059

-7%

1,924

2,025

-5%

External assets

106,043

99,866

6%

106,043

93,23214%

Deposits and other borrowings

42,07739,868

6%

42,07738,416

10%

Other external liabilities

2,263

2,057

10%

2,263

2,038

11%

External liabilities

44,34041,925

6%

44,34040,454

10%

Net interest average margin

2.15%

2.17%

-1%

2.16%

2.27%

-5%

Return on assets

1.02%

1.01%

1%

1.02%

1.02%

0%

RatiosReturn on risk weighted assets

1.85%

1.83%

1%

1.84%

1.84%

0%

Operating expenses to operating income

49.9%

51.2%

-3%

50.6%

52.1%

-3%

Operating expenses to average assets

1.62%

1.67%

-3%

1.64%

1.77%

-7%

(86)

(60)

43%

(146)

(137)

7%

0.17%

0.13%

31%

0.15%

0.16%

-6%

20

15

33%

20

17

18%

Net specific provisions
Net specific provision as a % of average net advances
Net non-accrual loans
Net non-accrual loans as a % of net advances

0.02%

0.02%

0%

0.02%

0.02%

0%

Total employees

9,616

9,251

4%

9,616

8,919

8%

1.

Other includes the branch network, whose costs are fully recovered from product business units, Private Banking and marketing and support costs

36

BUSINESS PERFORMANCE REVIEW (continued)
Personal Banking Australia
Brian Hartzer
2005 result

Profit after tax increased by 15% with strong performances across all businesses. Credit card lending grew by 21%,Mortgage lending increased 14% and deposits grew 10%, making ANZ the number three retail bank in Australia (asmeasured by share of main financial institutions). Within Other, a strong performance in Private Banking was offset
by higher marketing and brand spend. Staff engagement was at record levels and customer satisfaction for the year
to August 2005 (as measured by Roy Morgan Research) was up 1.7% to 75.3%, the highest of the major Australianbanks. Performance was underpinned by our award-winning product range, winning Personal Investor Bank of theYear award for the sixth straight time, and the continuing re-investment and expansion in our distribution network to
improve convenience and simplicity for customers.
Significant factors affecting the result were:!

Net interest income increased 10%.
Mortgages net interest income increased 14%, consistent with lending growth. Consumer Finance net interest
income grew 11% with lending growth of 21% being offset in part by a margin decrease of 12 basis points, duelargely to growth in the low rate MasterCard product. Regional Commercial and Agribusiness Products net interest
income increased 10% with lending growth of 15% offset by a 30 basis point reduction in margin due to mix andcompetitive pressures. Banking Products net interest income increased 5% underpinned by 9% growth in deposit
volumes mainly in lower margin cash management and term deposit products.

!

Other external operating income increased $101 million (11%).
Fee income increased by $83 million (11%). Banking Products fees increased by 12% underpinned by 8% growthin the number of Transaction accounts and new fee initiatives. Wealth Management fees increased 28% driven byhigher sales through our financial planners. Consumer Finance fees grew 9%, reflecting increases in merchant andcredit card accounts.
Other operating income increased by $18 million (14%) due to increased equity accounted income from INGA
operating businesses and E*Trade, and the profit sharing arrangement with Diners.

!

Operating costs increased 7%. Personnel costs were up 11% due to both increases in salaries and staff numbers(up 697 or 8%), mainly in the front line to handle higher business volumes and service new points ofrepresentation. Computer expenses decreased $19 million (10%) due to lower merchant acquiring line costs, ahigh level of technology spend in the previous year and certain branch banking software now being fully
amortised. Premises costs increased by $26 million reflecting the Footprint expansion including opening 15 newbranches and installing 330 (net) new ATMs, and security upgrades. Other costs increased $28 million reflecting
increased marketing spend in Cards and Mortgages, “ANZ NOW” brand advertising, and increased EFTPOS
interchange expenses driven by account acquisition.

!

Provision for doubtful debts increased by 8% reflecting volume growth in mortgages partly offset by higher
recoveries in credit cards. Non-accrual loans remained stable reflecting continuing sound credit quality in existing
businesses.

Comparison with March 2005 half

Overall profit after tax increased 9%. Profit after tax in mortgages grew 11% and Regional Commercial andAgribusiness Products increased 5% reflecting lending growth. Wealth Management profit grew 11% reflecting higher
sales through our financial planners and increased equity accounted income from INGA operating businesses.
Banking Products profit increased 4% driven by deposit growth. Consumer Finance profit increased 3% over the halfwith 8% revenue growth partly offset by new business investments.
Operating income increased 7% driven by solid growth in all core businesses. Revenues increased 7% in Mortgages,
8% in Consumer Finance, 4% in Banking Products and 5% in Regional Commercial and Agribusiness Products
underpinned by balance sheet growth partly offset by margin contraction. Revenue in Wealth Management increased
8% driven by increased fee income.
Operating costs increased by 4%, driven by higher staff numbers (including financial planners) to handle higher
business volumes and continuing investment in our branch network. This was partly offset by a seasonal reduction inmarketing spend.
Provision for doubtful debts increased 11%, due largely to the 6% increase in lending volumes and an increased
proportion of low rate MasterCard volumes that attract a higher provisioning level. Higher net specific provisions are
driven by volume growth, the increased proportion of low rate Mastercard volumes and recoveries in Mortgages in the
March half that were not repeated.

37

BUSINESS PERFORMANCE REVIEW (continued)
Institutional
Steve Targett
Client Relationship Group♦ Corporate and Structured
Trade and Transaction Services
Financing♦ Markets♦ Non-continuing Business
♦
♦

Half
year
Sep 05
$M

Half
year
Mar 05$M

Net interest income

371

391

-5%

Other external operating income

756

677

12%

Net inter business unit feesMovt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

762

708

8%

1,433

1,356

6%

(17)

(13)

31%

(30)

(23)

30%

Operating income

1,110

1,055

5%

2,165

2,041

6%

External operating expenses

(315)

(308)

2%

(623)

(576)

8%

Net inter business unit expenses

(71)

(72)

-1%

(143)

(144)

-1%

Operating expenses

(386)

(380)

2%

(766)

(720)

6%

Profit before debt provision

724

675

7%

1,399

1,321

6%

Provision for doubtful debts

(69)

(70)

-1%

(139)

(160)

-13%

Profit before income tax

655

605

8%

1,260

1,161

9%

Income tax expense and outside equity interests

(184)

(153)

20%

(337)

(304)

11%

Net profit attributable to members of the Company

471

452

4%

923

857

8%

Client Relationship Group

148

143

3%

291

297

-2%

Trade & Transaction Services

104

98

6%

202

179

13%

Markets

117

109

7%

226

196

15%

Corporate & Structured Financing - Continuing Business

82

72

14%

154

117

32%

Consisting of:- Non-Continuing Business

20

30

-33%

50

68

-26%

471

452

4%

923

857

8%

Balance Sheet
Net loans & advances including acceptances

48,08046,041

4%

48,08041,88915%

Other external assets

22,821

21,6985%

22,821

18,25525%

External assets

70,90167,7395%70,90160,14418%

Deposits and other borrowings

29,66329,775

0%29,663

26,984

10%

Other external liabilities

23,687

21,6789%23,687

21,7639%

External liabilities

53,35051,453

4%

53,35048,747

9%

Net interest average margin

1.37%

1.60%

-14%

1.48%

1.61%

-8%

Return on assets

1.30%

1.41%

-8%

1.35%

1.43%

-6%

Return on risk weighted assets

1.22%

1.28%

-5%

1.22%

1.28%

-5%

Operating expenses to operating income

34.8%

36.0%

-3%

35.4%

35.3%

0%

Operating expenses to average assets

1.07%

1.18%

-9%

1.12%

1.20%

-7%

Ratios

Net specific provisions
Net specific provision as a % of average net advances

18

(1)

large

17

(166)

large

-0.08%

0.00%

n/a-0.04%

0.40%

large

169

169

0%

169

299

-43%

Net non-accrual loans
Net non-accrual loans as a % of net advances

0.35%

0.37%

-5%

0.35%

0.71%

-51%

Total employees

3,103

2,923

6%

3,103

2,936

6%

38

BUSINESS PERFORMANCE REVIEW (continued)
Institutional
Steve Targett
2005 result

Profit after tax increased by $66 million (8%), including an additional two months’ contribution from NBNZ of$16 million. The impact of exchange rate movements was immaterial. The result reflects the successful outcomes ofstrategic initiatives to return the business to sustainable growth. This was achieved despite a $18 million reduction inearnings following the sale of the London-headquartered project finance business and the exit from certain non-core
structured finance transactions. The focus of the business is now on further initiatives to deliver revenue growth,
combined with disciplined use of capital and continuing strong risk management.
Profit increased in three of the four Institutional businesses. Strong deal flow and increased M&A activity delivered a
32% earnings increase for Corporate and Structured Financing’s continuing business, while a strong performancefrom the International Trade Finance business underpinned a 13% increase for Trade and Transaction Services. Profit
from Markets increased by 15%, due to stronger client sales activity. Asset growth in the Client Relationship Groupwas offset by tighter credit spreads and competitive pressures, resulting in reduced margins and a 2% decrease inearnings.
Significant factors affecting the result were:!

Net interest income grew by $54 million (8%). Trade and Transaction Services increased $37 million due toincreased lending and deposit volumes and improved margins in International Trade Finance. Markets increased$20 million as a reduction in funding costs associated with unrealised trading gains resulted in a higher proportionof revenue being booked as interest. Client Relationship Group increased by a modest 2%, with lending growth of
18% offset by ongoing margin erosion. Net interest from non-continuing operations decreased by $23 million due
to the sale of the London-headquartered project finance business.

!

Overall loan volumes increased 15%, deposit volumes increased 10% and net interest margin decreased by
13 basis points.

!

Other operating income increased $77 million (6%). Markets increased $37 million (8%) on the back of strong
client flow. Corporate and Structured Financing increased other operating income by $37 million (20%), reflecting
a strong contribution from structured debt, advisory and the private equity portfolio. This result was offset by adecrease of 6% in Client Relationship Group, due to lower fee income and a $14 million reduction in noncontinuing operations.

!

Operating expenses have increased by 6%, reflecting investment in people and systems in the transaction banking
and custodian services businesses.

!

Provision for doubtful debts was 13% lower reflecting improved credit quality and lower offshore exposures,
including the London project finance assets. Net specific provisions were $183 million lower, with no individuallylarge new specific provisions in the year and writebacks on some offshore accounts. Net non-accrual loans havedecreased by 44% due to continuing improvements in the portfolio quality.

!

Income tax expense increased $33 million, driven by increased profit and reduced non-taxable income, as certain
structured finance transactions roll off.

Comparison with March 2005 half

Profit after tax increased by $19 million (4%). The impact of exchange rate movements on translation of offshore
earnings was immaterial.
Operating income increased by 5%. Non interest income grew strongly reflecting improved cross sell from the Client
Relationship Group. Trade and Transaction Services foreign exchange revenue increased 8% with increased tradeflows through Asia and the UK, strong growth in custody partly relating to client acquisition and increased
International Payments foreign exchange revenue. Markets increased 4% with stronger client sales activity inAustralia, New Zealand, the Pacific and Asia. Client Relationship Group increased 2% with higher net interest income.
Corporate and Structured Financing’s continuing revenue increased 14% driven by strong fee growth. Revenue in
non-Continuing Business reduced by $5 million.
Operating expenses increased 2%. Staff costs were higher, due to investment in people and systems in thetransaction banking and custodian services businesses.
Provision for doubtful debts was flat. Recoveries of offshore provisions and the absence of large new provisions
resulted in a net credit specific provision for the half.

39

BUSINESS PERFORMANCE REVIEW (continued)
New Zealand Businesses1
Sir John Anderson
ANZ Retail
NBNZ Retail♦ Rural Banking

Corporate Banking
Central Support (including Treasury)♦ Excludes Institutional, UDC,
integration and central funding

♦

♦

♦

♦

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net interest income

721

713

1%

1,434

1,211

18%

Other external operating income

266

247

8%

513

453

13%

4

2

100%

6

6

0%

Operating income

991

962

3%

1,953

1,670

17%

External operating expenses

(490)

(460)

7%

(950)

(801)

19%

(2)

(3)

-33%

(5)

(17)

-71%

Operating expenses

(492)

(463)

6%

(955)

(818)

17%

Net inter business unit fees

Net inter business unit expenses

Profit before debt provision

499

499

0%

998

852

17%

Provision for doubtful debts

(46)

(46)

0%

(92)

(97)

-5%

Profit before income tax

453

453

0%

906

755

20%

Income tax expense and outside equity interests

(146)

(146)

0%

(292)

(242)

21%

Net profit attributable to members of the Company

307

307

0%

614

513

20%

Consisting of:
ANZ Retail

92

95

-3%

187

185

1%

NBNZ Retail

122

119

3%

241

166

45%

Rural Banking

38

37

3%

75

55

36%

Corporate Banking

63

61

3%

124

92

35%

Central Support

(8)

(5)

60%

(13)

15

large

307

307

0%

614

513

20%

55,14452,093

6%

55,14449,967

10%

Balance Sheet
Net loans & advances including acceptances
Other external assets

5,013

3,884

29%

5,013

3,467

45%

External assets

60,15755,977

7%60,15753,43413%

Deposits and other borrowings

46,07846,470-1%

46,07843,003

7%

Other external liabilities

7,348

4,870

51%

7,348

4,244

73%

External liabilities

53,426

51,3404%

53,42647,247

13%

Net interest average margin

2.49%

2.67%

-7%

2.58%

2.73%

-5%

Return on assets

1.05%

1.14%

-8%

1.09%

1.09%

0%

Return on risk weighted assets

1.47%

1.55%

-5%

1.55%

1.55%

0%

Operating expenses to operating income

49.6%

48.1%

3%

48.9%

49.0%

0%

Operating expenses to average assets

1.68%

1.72%

-2%

1.70%

1.75%

-3%

Ratios

Net specific provisions
Net specific provision as a % of average net advances

(65)

(26)

large

(91)

(36)

large

0.24%

0.10%

large

0.17%

0.09%

89%

96

28

large

96

30

large

Net non-accrual loans
Net non-accrual loans as a % of net advances

0.17%

0.05%

large

0.17%

0.06%

large

Total employees

8,580

8,437

2%

8,580

8,066

6%

1.

For a reconciliation of the New Zealand businesses results to the New Zealand Geographic results refer page 50

40

BUSINESS PERFORMANCE REVIEW (continued)
New Zealand businesses
Sir John Anderson
2005 result

Profit after tax for the New Zealand businesses increased $101 million (20%) including an additional two months
contribution in 2005 from NBNZ ($50 million). After adjusting for an additional two months contribution from NBNZ in2005 and the impact of a 4% strengthening in the average NZD exchange rate, which impacted all trends, profit after
tax growth in 2005 was 5%.
NBNZ Retail, Corporate Banking and Rural Banking posted strong profit growth with increases of 45%, 35% and 36%
respectively (including the additional two months contribution from NBNZ). Solid asset and deposit growth andfavourable wholesale funding impacts were partly offset by lower margins from price competition and unfavourable
product mix switching. ANZ Retail profit after tax was flat, reflecting the competitor-driven net interest margin
reduction, an increased proportion of low margin fixed rate mortgages, and reduced fee income from the restructuringof honour fees to address customer concerns as part of the ANZ Turnaround initiative. Lower Treasury mismatchearnings was the main driver of the reduction in Central Support earnings.
Key influences on the result excluding the impact of the 4% strengthening in the average NZD exchange rate include
the following:!

Net interest income increased 14% ($178 million). This included an additional two months contribution from NBNZ($125 million). Excluding this net interest increased 3%. Lending volumes increased 13% with growth in NBNZ
Retail (13%), ANZ Retail (11%), Corporate Banking (18%) and Rural (12%). Deposit volumes increased 7% in
customer businesses with solid deposit growth in ANZ Retail (8%), NBNZ Retail (6%), Corporate Banking (8%)
and Rural (5%). Treasury wholesale funding volumes increased by $5.5 billion to fund asset growth across the
New Zealand businesses.
Net interest margins have reduced 15 basis points impacted by: competition from the ‘mortgage price war’ andcustomer migration from variable rate to fixed rate mortgages, increasing wholesale funding costs, changes indeposit mix with growth in lower margin call and term deposit products in ANZ Retail, and a $26 million reductionin Treasury due to lower mismatch earnings and from a rising interest rate environment. Lending margins in Rural
decreased slightly. These factors were partially offset by stronger deposit margins in NBNZ Retail.

!

Other operating income increased 9% due largely to the additional two months contribution from NBNZ($37 million). Excluding this, other operating income was flat with growth in loan approval fees in ANZ Retail and
NBNZ Retail impacted by significant competitor-driven fee discounting and waivers. Fees in ANZ Retail reduced$12 million with a change in fee structures as part of the “ANZ Turnaround” initiative. Rural Banking andCorporate Banking fees increased 7% and 10% respectively, driven by lending growth. NBNZ Retail achieved
growth in sales commissions and Life Company profits.

!

Operating expenses increased 13%. Excluding the additional two months contribution from NBNZ ($79 million)
expense growth was contained to 4%. Salary increases and an increase in numbers of front-line staff (6% higher)
were offset by constraints on discretionary spend growth, and reduced internal charges from Australia following
the transfer of support functions back to New Zealand and certain branch software now being fully amortised.

!

Provision for doubtful debts reduced by $9 million. The additional two months contribution from NBNZ($12 million) and increased lending volumes were offset by a reduction in expected loss factors in NBNZ following
further analysis of loss history, improved credit quality and an increased proportion of low risk residential and rural
lending. Net specific provisions and non accrual loan increases relate to two isolated corporate accounts andexposures to the apple and pear export industry.

Comparison with March 2005 half

Profit after tax was flat, with growth in NBNZ Retail, Rural Banking, and Corporate Banking all at 3% being offset by
reductions in ANZ Retail (-3%), and Treasury. The impact of movements in exchange rates was negligible.
!

Net interest income increased 1%. Lending volumes increased 6% with growth in all businesses, whilst deposits in
NBNZ Retail and ANZ Retail grew 3% and 4% respectively. Interest margin has declined by 18 basis points
reflecting the impact of competition, in particular the ‘mortgage price war’, product switching from floating to fixed
rate loans, and a change in funding mix to more expensive deposit and wholesale products.

!

Other operating income increased 8%. Volume growth in all segments and higher commissions from INGA wereoffset by reduced pricing, including increased discounting of mortgage loan approval fees.

!

Operating costs increased 6% with a 2% increase in staff numbers reflecting an increased investment in frontline
staff.

!

Provision for doubtful debts was flat with the impact of volume growth being offset by an increased proportion oflower risk housing loans. An increase in net specific provisions results largely from two corporate accounts andexposures to the apple and pear export industry.

41

BUSINESS PERFORMANCE REVIEW (continued)
Corporate Australia
Graham Hodges
Corporate Banking Australia
Business Banking Australia♦ Small Business Banking
♦
♦

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net interest income

353

344

3%

697

640

9%

Other external operating income

151

143

6%

294

275

7%

Net inter business unit fees

(48)

(46)

4%

(94)

(86)

9%

Operating income

456

441

3%

897

829

8%

External operating expenses

(117)

(115)

2%

(232)

(214)

8%

Net inter business unit expenses

(31)

(31)

-

(62)

(66)

-6%

Operating expenses

(148)

(146)

1%

(294)

(280)

5%

Profit before debt provision

308

295

4%

603

549

10%

Provision for doubtful debts

(34)

(32)

6%

(66)

(61)

8%

Profit before income tax

274

263

4%

537

488

10%

Income tax expense and outside equity interests

(82)

(79)

4%

(161)

(147)

10%

Net profit attributable to members of the Company

192

184

4%

376

341

10%

Business Banking Australia

95

91

4%

186

172

8%

Corporate Banking Australia

71

67

6%

138

120

15%

Consisting of:

Small Business Banking

26

26

0%

52

49

6%

192

184

4%

376

341

10%

21,15819,877

6%

21,15819,010

11%

Balance Sheet
Net loans & advances including acceptances
Other external assets

105

108

-3%

105

88

19%

External assets

21,263

19,985

6%

21,26319,09811%

Deposits and other borrowings

18,00017,023

6%

18,00016,125

12%

Other external liabilities

6,110

5,790

6%

6,110

5,711

7%

External liabilities

24,11022,813

6%

24,11021,836

10%

Ratios
Net interest average margin

3.85%

3.93%

-2%

3.89%

3.94%

-1%

Return on assets

1.64%

1.65%

-1%

1.64%

1.62%

1%

Return on risk weighted assets

1.89%

1.92%

-2%

1.90%

1.92%

-1%

Operating expenses to operating income

32.5%

33.1%

-2%

32.8%

33.8%

-3%

Operating expenses to average assets

1.26%

1.30%

-3%

1.28%

1.33%

-4%

(18)

(23)

-22%

(41)

(43)

-5%

0.18%

0.24%

-25%

0.21%

0.24%

-13%

Net specific provisions
Net specific provision as a % of average net advances

40

56

-29%

40

51

-22%

Net non-accrual loans as a % of net advances

Net non-accrual loans

0.19%

0.28%

-32%

0.19%

0.27%

-30%

Total employees

1,941

1,881

3%

1,941

1,761

10%

42

BUSINESS PERFORMANCE REVIEW (continued)
Corporate Australia
Graham Hodges
2005 result

Profit after tax increased by 10%. Significant influences on the result were:!

Net interest income increased 9% driven by growth in both average lending (13%) and average deposits (10%).
The growth in average lending (Corporate Banking 10% and Business Banking 16%) and average deposit volumes(Corporate Banking 12%, Business Banking 9% and Small Business Banking 12%) resulted from a continued focus
on new customer acquisition as well as growth from existing customers. Key factors in achieving growth were
ANZ’s competitive customer service proposition, continued investment in people and process simplification, as wellas the industry and local market specialisation approach to customers. Overall balance sheet growth has
continued to slow in the Business Banking segment. This reflects the impact of a modest reduction in growth innew business due to the slowdown in the property market and increased competition combined with the impact ofon-going loan amortisation flowing from the continued strong cash performance of businesses in this market
segment.
The net interest margin declined by 5 basis points, with the fall weighted to the second half of the year. For theyear, the fall was largely driven by portfolio mix changes. Competitive pressure had a modest impact on both
deposit and lending margins.

!

Other external operating income increased 7%, with a strong contribution from the success of the ‘Wall St to Main
St’ proposition, which has included private equity exit profits and deal fees. Higher net inter business unit fees
reflects continued investment in the branch network.

!

Operating expenses increased only 5% despite a significant investment in frontline staff in Small Business Banking
and ongoing investment in Business Banking. Despite the significant set-up investment in Small Business staff,
revenue per FTE has remained relatively stable over the period and the cost to income ratio reduced from 33.8%
to 32.8%.

!

Provision for doubtful debts increased by 8%. This is below the growth in average lending assets and reflects thesound credit quality and strong focus on risk management and compliance in both the Business Banking andCorporate Banking segments.

!

Net specific provisions, at $41 million, were down 5% and below economic loss provisioning levels. Consistent
with the emphasis placed on credit quality, non-accrual loans decreased to a low level of 0.19% of net advances.

Comparison with March 2005 half

Profit after tax increased 4%, with growth in Corporate Banking of 6% and Business Banking of 4%. Net interest
income increased 3% from growth in both average lending and average deposit volumes (both 4%). Net interest
margins declined 8 basis points due to changes in product mix, reflecting a combination of higher growth rates inlower margin products and growing competition in business markets. Operating costs increased by 1% driven bycontinued investment in frontline staff, funded in part through effective cost management and an expense refunds
relating to prior periods. The Small Business result for this period reflects the significant investment made in thisestablishing business. Provision for doubtful debts increased by 6% reflecting growth in lending volumes.

43

BUSINESS PERFORMANCE REVIEW (continued)
Esanda and UDC
Elizabeth Proust
A leading provider of vehicle and equipment finance, rental
services and fixed and at call investments. Operates in Australia
as Esanda and Esanda FleetPartners and in New Zealand as UDC
and Esanda FleetPartners

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net interest income

186

183

2%

369

360

3%

Other external operating income

64

57

12%

121

104

16%

Net inter business unit fees

(5)

(4)

25%

(9)

(8)

13%

Operating income

245

236

4%

481

456

5%

External operating expenses

(81)

(81)

0%

(162)

(159)

2%

Net inter business unit expenses

(12)

(14)

-14%

(26)

(27)

-4%

Operating expenses

(93)

(95)

-2%

(188)

(186)

1%

Profit before debt provision

152

141

8%

293

270

9%

Provision for doubtful debts

(31)

(31)

0%

(62)

(67)

-7%

Profit before income tax

121

110

10%

231

203

14%

Income tax expense and outside equity interests

(39)

(33)

18%

(72)

(60)

20%

Net profit attributable to members of the Company

82

77

6%

159

143

11%

38.0%

40.3%

-6%

39.1%

40.8%

-4%

Net specific provisions

(48)

(24)

100%

(72)

(47)

53%

Net non-accrual loans

39

43

-9%

39

37

5%

1,351

1,349

0%

1,351

1,297

4%

Operating expenses to operating income

Total employees

2005 result

Profit after tax increased 11%. Profit growth in Australia (15%) was partly offset by a flat result in New Zealand,
which was impacted by structural changes and competitive pressure. Significant influences on the result were:! Net interest income grew 3% with a 5% increase in lending volumes due to solid new business writings in Australia
offset by reduced volumes in New Zealand. An 11 basis point decline in margins resulted from the run-off ofhigher yielding loans during the year which were increasingly replaced by new business from lower risk, lower
margin segments.
! Other operating income grew 16%, due to increased fees from value-added fleet management services, the fullyear impact of changes in the fee structure, higher new business writings, higher predetermination fees and the$7 million impact of aligning the revenue recognition on leases in the New Zealand Fleet business with Groupaccounting policies.
! Operating expenses increased by 1% due to annual salary increases and an increased investment in growth withadditional front-line staff. The continued control of expenses and growth in income has resulted in the cost to
income ratio being reduced to 39.1% from 40.8% in 2004.
! Provision for doubtful debts decreased by 7% despite a 5% increase in lending volumes reflecting the continued
improvement in credit quality over recent years. Net specific provisions were higher compared to the 2004
historically low level, largely associated with the commercial loan portfolio and the exited aircraft lease business($9 million).
! In May 2005, Esanda On-Line Saver was launched nationally. By the end of September $163 million in deposits
were held, with approximately 66% of On-Line customers new to the Group.
Comparison with March 2005 half

Profit after tax grew by 6%. Net interest income grew 2% driven by a 3% increase in lending volumes. Other
operating income increased 12% due primarily to increased fees and the $7 million impact of aligning the revenue
recognition on leases in the New Zealand Fleet business with Group accounting policies. Operating expenses
decreased by 2% with an increase in personnel costs due to annual salary increases offset by the finalisation ofindirect taxation related issues. Provision for doubtful debts were flat. Net non-accrual loans were $4 million lower
reflecting the overall improvement in credit quality. Net specific provisions increased with the commercial loan
portfolio recording several specific provisions and a write-off on the exited aircraft lease business ($9 million).

44

BUSINESS PERFORMANCE REVIEW (continued)
Asia Pacific
Elmer Funke Kupper
Provision of retail and corporate banking services in the Pacific Region
and Asia, including ANZ’s share of PT Panin Bank in Indonesia; thisbusiness excludes Institutional businesses, which are a ‘matrix’
responsibility and included in Institutional business unit results.
Geographic results are included on page 51

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

85

78

9%

163

153

7%

Net interest income
Other external operating income

76

73

4%

149

147

1%

Operating income

161

151

7%

312

300

4%

External operating expenses

(91)

(81)

12%

(172)

(145)

19%

Net inter business unit expenses

1

-

n/a

1

2

-50%

Operating expenses

(90)

(81)

11%

(171)

(143)

20%

Profit before debt provision

71

70

1%

141

157

-10%

Provision for doubtful debts

(12)

(11)

9%

(23)

(23)

0%

Profit before income tax

59

59

-

118

134

-12%

Income tax expense and outside equity interests

(12)

(11)

9%

(23)

(23)

0%

Net profit attributable to members of the Company

47

48

-2%

95

111

-14%

55.9%

53.6%

4%

54.8%

47.7%

15%

(7)

(17)

-59%

(24)

(14)

71%

22

15

47%

22

17

29%

2,195

2,040

8%

2,195

1,979

11%

Operating expenses to operating income
Net specific provisions
Net non-accrual loans
Total employees

2005 result

Profit after tax decreased by 14%. Excluding the impact of exchange rate movements profit reduced 12%. Corebusiness performance was offset by lower equity accounting earnings for PT Panin Bank with lower provisionadjustments included in the equity accounted result ($15 million) and a $6 million tax credit in 2004.
Excluding exchange rate movements the main drivers of the results were:! Net interest income increased 11%. A 23% growth in lending volumes and 16% growth in deposits were largely
offset by the structural change in the interest rate environment in PNG, with average Treasury Bill rates falling by
approximately 600 basis points in the March 2005 half year.
! Other external operating income increased 4%. Fee growth increased 12% largely in Fiji, PNG and the Cards
business in Indonesia and was partly offset by lower equity accounting earnings for PT Panin Bank.
! Operating expenses increased $33 million as a result of costs associated with building partner relationships inChina, Vietnam and Cambodia, and continued support for the centralisation of regional operations in Fiji. In
addition, the management team in Asia has been strengthened to provide additional specialist product skills to
support higher growth rates in Asia.
! Provision for doubtful debts increased by 9% mainly due to growth in assets. The increase in net specificprovisions is due to provisioning for one account.
! Income tax expense increased $1 million with the higher effective tax rate resulting from a $6 million tax credit
arising from the repayment of foreign currency loans upon the exercise of options in PT Panin in 2004 which
reduced the rate for that year.
Comparison with March 2005 half

Profit after tax reduced 2%. Net interest increased 9% driven by 10% growth in lending volumes. Other operating
income grew 4% with strong card and other fee growth being offset by reduced equity accounted income fromPT Panin. Operating expenses increased largely as a result of advancing the partnership business agenda in Asia.
The impact of exchange rate movements was immaterial.

45

BUSINESS PERFORMANCE REVIEW (continued)
Group Centre
Group People Capital♦ Group Strategic Development
Group Risk Management ♦ Group Financial Management♦ Treasury♦ Operations, Technology andShared Services
♦
♦

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

144

125

15%

269

268

0%

Other external operating income

(4)

19

large

15

20

-25%

Net inter business unit fees

2

-

n/a

2

(7)

large

Net interest income

Operating income

142

144

-1%

286

281

2%

External operating expenses

(474)

(461)

3%

(935)

(847)

10%

Net inter business unit expenses

257

254

1%

511

522

-2%

Operating expenses

(217)

(207)

5%

(424)

(325)

30%

Profit before debt provision

(75)

(63)

19%

(138)

(44)

large

Provision for doubtful debts

-

-

n/a

-

(41)

-100%

Profit before income tax

(75)

(63)

19%

(138)

(85)

62%

Income tax expense and outside equity interests

12

2

large

14

(32)

large

Net profit attributable to members of the Company

(63)

(61)

3%

(124)

(117)

6%

10

9

11%

19

53

-64%

4,190

3,951

6%

4,190

3,797

10%

Including:Treasury
Total employees

2005 result

The result for the Group Centre was a loss of $124 million compared with a loss of $117 million in 2004. Significant
influences on the result were:! The strengthening of the average NZD exchange rate resulted in a $29 million after tax reduction in income oncontracts put in place to hedge NZD denominated earnings. These losses were offset in New Zealand Businesses,
and the New Zealand component of the Institutional and Esanda and UDC businesses. In addition the maturity ofcontracts put in place to hedge USD revenues resulted in a further decline of $11 million after tax.
! The investment of the Euro hybrid issue proceeds and retained profits increased profit after tax by approximately$14 million.
! Group Treasury earnings reduced $34 million largely as a result of reduced domestic mismatch income attributed
to a benign interest rate environment, combined with lower earnings resulting from a restructuring of Asianbalance sheet management books.
! Other operating income reduced $5 million with lower capital investment earnings (net of hedge earnings) fromINGA.
! Operating expenses increased $99 million with increased risk management and compliance costs including
Basel II, GST, IFRS and the US Sarbanes Oxley legislation. Goodwill amortisation increased $33 million, largely asa result of an additional 2 months related to the NBNZ acquisition. The non-lending losses charge increased$15 million mainly related to cheque conversion fraud. Includes centrally funded growth projects.
! Provision for doubtful debts reduced $41 million with no additional charge in the Group Centre as a result of an
end to the provision for unexpected offshore credit losses.
Comparison with March 2005 half

The half year loss of $63 million was flat with the March 2005 half. Revenue was flat, with higher net interest offset
by lower capital investment earnings (net of hedge earnings) in INGA following the payment of dividends. External
operating expenses increased 3% with the impact of a 6% increase in staff offset by the inclusion of provisioning forcheque conversion fraud in the March half.

46

GEOGRAPHIC SEGMENT PERFORMANCE
Geographic performance
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

1,108

1,051

5%

2,159

1,984

9%

New Zealand

259

269

-4%

528

495

7%

Asia Pacific

100

84

19%

184

191

-4%

Net profit attributable to shareholders of the company
Australia

Other

76

71

7%

147

145

1%

1,543

1,475

5%

3,018

2,815

7%

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net profit excluding significant items1 and NBNZ incremental
integration costs2
Australia

1,108

1,051

5%

2,159

1,886

14%

New Zealand

280

286

-2%

566

509

11%

Asia Pacific

100

84

19%

184

191

-4%

Other

76

71

7%

147

145

1%

1,564

1,492

5%

3,056

2,731

12%

1.

2.

In 2005 ANZ has classified $14 million after tax profit on the sale of NBNZ life businesses as a significant item. In 2004 ANZ has classified the $14 million profit
after tax on settlement of the INGA completion accounts and $84 million net profit after tax arising from the TrUEPrS transaction as significant items. ANZ
excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 12)
In 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sept 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration (refer page 12)

Net profit after income tax
Australia

New
Zealand

Asia
Pacific

Other

Total

1,013

503

75

-

1,591

Full Year 2005
Personal1
Institutional

559

200

85

57

901

Corporate

376

124

49

-

549

122

37

-

-

159

2

Esanda and UDC
Group Centre

89

(336)

(25)

90

(182)

2,159

528

184

147

3,018

Australia

New
Zealand

Asia
Pacific

Other

Total

Personal1

883

406

69

-

1,358

Institutional2

516

184

64

77

841

Corporate

341

92

59

-

492

Esanda and UDC

106

37

-

-

143

138

(224)

(1)

68

(19)

1,984

495

191

145

2,815

3

Full Year 2004

Group Centre

3

1.
2.
3.

New Zealand Personal includes small business banking and Rural
Includes foreign exchange earnings in the PacificIncludes integration costs and shareholder functions in Australia and New Zealand47

GEOGRAPHIC SEGMENT PERFORMANCE (continued)
Australia

Net interest income
Fee income
Other operating income

Half
year
Sep 05
$M

Half
year
Mar 05
$M

1,939

1,859

4%

957

877

9%

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

3,798

3,450

10%

1,834

1,680

9%
-18%

265

266

0%

531

650

Operating income

3,161

3,002

5%

6,163

5,780

7%

Operating expenses(1,410)(1,362)4%(2,772)(2,551)

9%

Profit before debt provision

1,751

1,640

7%

3,391

3,229

5%

Provision for doubtful debts

(216)

(200)

8%

(416)

(444)

-6%

Income tax expense

(427)

(389)

10%

(816)

(802)

2%

-

-

n/a

-

1

-100%

Outside equity interest
Net profit attributable to members of the Company

1,108

1,051

5%

2,159

1,984

9%

Net interest average margin

2.30%

2.38%

-3%

2.34%

2.48%

-6%

Return on risk weighted assets

1.54%

1.57%

-2%

1.55%

1.61%

-4%

1

Operating expenses to operating income

44.5%

45.2%

-2%

44.8%

44.0%

2%

Operating expenses1 to average assets

1.45%

1.52%

-5%

1.49%

1.56%

-4%

Net specific provision

(151)

(101)

50%

(252)

(361)

-30%

Net specific provision as a % of average net advances

0.18%

0.13%

38%

0.16%

0.26%

-38%

Net non-accrual loans

202

220

-8%

202

213

-5%

Net non-accrual loans as a % of net advances

0.12%

0.14%

-14%

0.12%

0.14%

-14%

Total employees

18,043

17,3894%

18,043

16,815

7%

Lending growth

5.8%

8.4%

14.6%

13.8%

External assets

195,500

185,434

5%

195,500

170,455

15%

Risk weighted assets

145,136

139,243

4%

145,136

129,76412%

1.

This excludes goodwill amortisation of $8 million (2004 full year: $8 million; Sep 2005 half: $4 million; Mar 2005 half: $4 million)

2005 result

Profit after tax increased by 9%. Excluding the Australian component of significant items (refer page 12), profit
increased by 14%. Significant influences on the result were:! Net interest income increased by 10%. Average net loans and advances increased 17%, driven by growth in
Personal Banking Australia 15%, Institutional 27%, Corporate Australia 16% and Esanda 8%. Average deposit
and other borrowing volumes increased 15%, comprising Personal Banking Australia 10%, Institutional 18%,
Corporate Australia 10%, Group Treasury 33% and Esanda 12%. Margins decreased 14 basis points with achange in the asset mix increased volumes of wholesale funding, lower earnings on contracts put in place to hedge
offshore revenue, and competition in Institutional, Mortgages and retail deposits. This was partly offset inMarkets, where a higher proportion of revenue was booked as net interest ($29 million), partly offset by lower
other operating income.
! Fee income increased by 9% with a 11% increase in Personal Banking Australia underpinned by growth intransaction account Merchant and card numbers and higher income from financial planners. Institutional increased
5% with growth in Corporate & Structured Financing offsetting the impact of increased competition in Client
Relationship Group. Esanda grew 18% reflecting increased new business volumes and higher predetermination
fees.
! Other operating income decreased $119 million. The 2004 year included $124 million profit from significant items,(refer page 12). Markets decreased $13 million, offset by higher net interest income. Excluding these impacts,
other operating income increased 3% with higher earnings from the sale of equity securities (including Private
Equity).
! Operating expenses increased by 9% reflecting an increased investment in frontline staff, annual salary increases,
and increased compliance costs including the US Sarbanes Oxley legislation and IFRS.
! Provision for doubtful debts decreased by 6% driven by a $41 million reduction in the Group Centre. The impact ofvolume growth was partly offset by improved credit quality in most portfolios. Net specific provisions decreased$109 million mainly in Institutional reflecting an improvement in overall credit quality and no new large credit
provisions during the year.
Comparison with March 2005 half

Profit after tax increased 5%. Net interest income increased 4% with higher lending volumes partly offset by 8 basis
point margin contraction. Fee income increased 9% with growth in Personal Banking Australia (8%), Institutional(15%), Corporate (7%) and Esanda (9%). Operating expenses increased 4% reflecting the 4% increase in staff
numbers. Net specific provisions increased $50 million due largely to seasonal credit card delinquencies and the final
write-off of the exited aircraft lease business in Esanda.
48

GEOGRAPHIC SEGMENT PERFORMANCE (continued)
New Zealand
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net interest income

798

789

1%

1,587

1,371

16%

Fee income

288

277

4%

565

507

11%
37%

Other operating income

104

75

39%

179

131

Operating income

1,190

1,141

4%

2,331

2,009

16%

Operating expenses

(725)

(661)

10%

(1,386)(1,128)23%

Profit before debt provision

465

480

-3%

945

881

7%

Provision for doubtful debts

(56)

(57)

-2%

(113)

(118)

-4%

Income tax expense

(149)

(154)

-3%

(303)

(266)

14%

(1)

-

n/a

(1)

(2)

-50%

259

269

-4%

528

495

7%

Outside equity interests
Net profit attributable to members of the Company
Net interest average margin

2.29%

2.43%

-6%

2.36%

2.50%

-6%

Return on risk weighted assets

0.97%

1.04%

-7%

1.00%

1.15%

-13%

Operating expenses1 to operating income

53.9%

50.6%

7%

52.3%

49.4%

6%

Operating expenses1 to average assets

1.68%

1.60%

5%

1.64%

1.63%

1%

(78)

(29)

large

(107)

(44)

large

0.25%

0.10%

large

0.18%

0.09%

100%

Net specific provision
Net specific provision as a % of average net advances
Net non-accrual loans

111

42

large

111

47

large

Net non-accrual loans as a % of net advances

0.17%

0.07%

large

0.17%

0.08%

large

Total employees

9,515

9,256

3%

9,515

8,816

8%

Lending growth (including FX impact)

5.6%

5.0%

10.8%

180.3%

Lending growth (excluding FX impact)

6.5%

6.9%

13.9%

162.4%

External assets

78,47473,566

7%

78,47469,801

12%

Risk weighted assets

55,50153,472

4%

55,50149,863

11%

1.

This excludes goodwill amortisation of $168 million (2004 full year: $135 million; Sep 2005 half: $84 million; Mar 2005 half: $84 million)

The following table represents the New Zealand geography in local currency (NZD).
Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
NZ$M

Full
year
Sep 04
NZ$M

Movt
Sep 05v. Sep 04
%

855

1%

1,722

1,543

12%

300

4%

613

571

7%

112

81

38%

193

147

31%

Operating income

1,292

1,236

5%

2,528

2,261

12%

Operating expenses

(787)

(716)

10%

(1,503)(1,270)18%

Profit before debt provision

505

520

-3%

1,025

991

3%

Provision for doubtful debts

(60)

(62)

-3%

(122)

(133)

-8%

Income tax expense

(162)

(167)

-3%

(329)

(299)

10%
-50%

Half
year
Sep 05
NZ$M

Half
year
Mar 05
NZ$M

Net interest income

867

Fee income

313

Other operating income

Outside equity interests

(1)

-

n/a

(1)

(2)

282

291

-3%

573

557

3%

External assets

86,30580,1798%86,30574,687

16%

Risk weighted assets

61,03758,2805%

61,03753,35314%

Net profit attributable to members of the Company

49

GEOGRAPHIC SEGMENT PERFORMANCE (continued)
New Zealand, cont’d
Reconciliation of Geographic result
Half
year
Sep 05
$M

Half
year
Mar 05$M

New Zealand Businesses

307

UDC

20

NZ Institutional - continuing operations

84

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

307

0%

614

513

20%

17

18%

37

37

0%

85

-1%

169

150

13%

NZ Business

15

16

-6%

31

34

-9%

Integration costs- non-continuing operations

(44)

(21)

large

(65)

(29)

large

NZ shareholder functions

(123)

(135)

-9%

(258)

(210)

23%

New Zealand geography

259

269

-4%

528

495

7%

2005 result
Profit after tax increased by 7%. After adjusting for the impact of a 4% strengthening in the average NZD exchange
rate, which impacted all trends, $14 million profit on sale of the NBNZ Life businesses and the inclusion of anadditional two months contribution from NBNZ in 2005 ($29 million including acquisition and funding costs), profit
after tax reduced 5%. Increased profit in New Zealand Businesses has been offset by higher funding costs from rate
rises, reduced profit as a result of the planned roll-off of certain structured finance transactions and increased
integration spend.
Key influences on the result excluding the impact of exchange rates include:! Net interest income increased $160 million including an additional two months contribution from NBNZ($127 million including acquisition and funding costs). Lending volumes increased 14% with growth in New
Zealand businesses (13%) and Institutional (40%, mainly in Client Relationship Group and Structured Financing)
offsetting a reduction in UDC (-12%). Customer deposit volumes increased 7% in New Zealand businesses. Net
interest margins declined 14 basis points as a result of the mortgage price war and migration of customers tofloating from fixed rate loans, higher funding costs from growth in wholesale debt and lower margin deposits,
slight margin reductions in UDC, Rural and Institutional Banking, and lower Treasury mismatch earnings.
! Fee income increased $39 million as a result of an additional two months contribution from NBNZ ($38 million)
with retail loan approval fees constrained, as a result of competitive discounting, and a decision to restructure thehonour fee in ANZ Retail, offsetting volume driven growth in fees in Institutional.
! Other operating income was $43 million higher with an additional two months contribution from NBNZ($15 million), profit on sale of NBNZ Life ($14 million after tax) and increased income from private equity
transactions.
! Operating expenses increased $215 million including an additional two months contribution from NBNZ($115 million including goodwill amortisation) and an increased integration spend ($34 million). An increased
investment in front-line staff and integration has resulted in staff numbers increasing by 8%.
! Provision for doubtful debts reduced by $10 million with increased lending volumes being offset by the revision of
expectedloss factors in NBNZ following further analysis of loss history and an increased proportion of low risk
residential and rural lending. Increased net specific provisions and non-accrual loans result largely fromtwo corporate accounts and exposures to the apple and pear export industry.
Comparison with March 2005 half

Profit after tax reduced by 4% with an increased integration spend and a $2 million reduction in Institutional
offsetting increased profit in UDC ($3 million). The New Zealand Businesses result was flat. The Institutional result
includes a reduction in profit related to non-continuing structured finance activities. The impact of exchange rate
movements was negligible.
! Net interest income increased 1%. Lending volumes increased 7% with 6% growth in New Zealand Businesses
and 16% growth in Institutional offset by a reduction in UDC of 7%. Net interest margins have reduced 11 basis
points reflecting the impact of the mortgage price war, migration from fixed to floating loans and growth in higher
cost funding sources partially offset by a net benefit from wholesale rates with increased earnings on theinvestment of capital and rate insensitive deposits.
! Fee income increased 4% as a result of increased lending volumes generally and growth in Institutional offset bycompetitive discounting of loan approval fees and the restructured honour fee in ANZ Retail.
! Other operating income increased 39% as a result of the $14 million after tax profit on sale of the NBNZ Lifebusinesses, growth in New Zealand Businesses resulting from higher commissions from INGA, and the impact in
UDC of aligning the revenue recognition in New Zealand FleetPartners with Group policies. These were partly offset
by the write-down of a private equity investment in Institutional.
! Operating costs increased 10% driven by a 3% increase in staff (largely frontline) and an increased integration
spend.
! Provision for doubtful debts reduced 2% with volume growth offset by an increased proportion of lower risk
housing loans. Net specific provisions increased largely as a result of two corporate accounts and exposure to theapple and pear export industry.
50

GEOGRAPHIC SEGMENT PERFORMANCE (continued)
Asia Pacific
Elmer Funke Kupper
Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

102

17%

221

224

-1%

55

15%

118

110

7%

79

11%

167

150

11%

Half
year
Sep 05
$M

Half
year
Mar 05$M

Net interest income

119

Fee income

63

Other operating income

88

Operating income

270

236

14%

506

484

5%

Operating expenses

(125)

(114)

10%

(239)

(209)

14%

Profit before debt provision

145

122

19%

267

275

-3%

Provision for doubtful debts

(16)

(15)

7%

(31)

(34)

-9%

Income tax expense

(28)

(22)

27%

(50)

(47)

6%

Outside equity interests

(1)

(1)

0%

(2)

(3)

-33%

19%

184

191

-4%

Net profit attributable to members of the Company

100

84

1

45.6%

47.9%

-5%

46.6%

42.6%

9%

Net specific provision

(9)

(15)

-40%

(24)

(19)

26%

27

21

29%

27

22

23%

2,432

2,275

7%

2,432

2,221

10%

Operating expenses to operating income

Net non-accrual loans
Total employees
1.

This excludes goodwill amortisation of $3 million (2004 full year: $3 million; Sep 2005 half: $2 million; Mar 2005 half: $1 million)

2005 result

Profit after tax decreased 4%, with 2004 including adjustments to equity accounted earnings (refer page 45). Corebusiness performance improved by 17%. The appreciation of the AUD suppressed profit growth by 2% ($3 million).
Excluding exchange rate movements:!

Net interest increased 3% with strong growth in lending volumes largely offset by the impact of the structuralchange in the interest rate environment in PNG, with average Treasury Bill rates falling by approximately 600 basis
points in the March 2005 half. Stronger trade volumes in Asia were offset by reduced Treasury earnings in
Singapore.

!

Fee income increased 12% with higher transaction volumes in Corporate & Structured Financing, Trade &Transaction Services and Cards in Asia and higher lending volumes in the Pacific.

!

Other external operating income increased 12% with ANZ’s strong market position in the Asia Pacific region
increasing foreign exchange earnings. This was partly offset by reduced equity accounting adjustments in
PT Panin Bank.

!

Operating expenses increased 18% with costs associated with building partner relationships in China, Vietnam andCambodia, centralisation of regional operations in Fiji and the increase in specialist resources in Asia.

!

Provision for doubtful debts reduced by 2% largely due to the focus on lower risk trade transactions in Asia. The
increase in net specific provisions is a result of provisioning for one large account.

!

Income tax expense increased, despite lower profit before tax, largely as a result of a tax credit arising from therepayment of foreign currency loans upon the exercise of options in PT Panin in 2004.

Comparison with March 2005 half

Profit after tax increased 19%. Operating income increased 14% with strong asset growth across all geographies,
improved foreign exchange earnings in the Pacific and increased fee income in Asia. The first half year was impacted
by lower Treasury earnings in Singapore. Operating expenses increased by 10% as investments were made toprogress partnerships in Cambodia, China and Vietnam, together with the addition of specialists product skills in Asia.
The impact of exchange rate movements was immaterial.

51

GEOGRAPHIC SEGMENT PERFORMANCE (continued)
Other
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Net interest income

89

103

-14%

192

209

-8%

Fee income

46

53

-13%

99

124

-20%

Other operating income

37

22

68%

59

39

51%

Operating income

172

178

-3%

350

372

-6%

Operating expenses

(55)

(63)

-13%

(118)

(138)

-14%

Profit before debt provision

117

115

2%

232

234

-1%

Provision for doubtful debts

(8)

(12)

-33%

(20)

(36)

-44%

Income tax expense

(33)

(32)

3%

(65)

(53)

23%

Net profit attributable to members of the Company

76

71

7%

147

145

1%

32.0%

35.4%

-10%

33.7%

37.1%

-9%

32

(6)

large

26

(19)

large

Operating expenses to operating income
Net specific provision
Net non-accrual loans

46

43

7%

46

169

-73%

Total employees

987

912

8%

987

903

9%

2005 result

Profit after tax increased 1%. Excluding the impact of exchange rates, profit increased by 7%. Significant influenceson the result were:!

Net interest income decreased 8%. Higher earnings on capital following interest rate increases and higher
earnings on funds lent to New Zealand were offset by a decline in Institutional following the sale of the London
headquartered project finance business and the continued strategy to de-risk the overseas portfolios. A reductionof $9 million in Markets due to the increased cost of funding derivative positions was offset by an increase in otheroperating income.

!

Fee income reduced 20% following the sale of the project finance businesses.

!

Other operating income increased 51% mainly due to the profit on sale of the project finance businesses($4 million) and a $14 million increase in Markets.

!

Operating expenses decreased 14% as a result of the sale of the project finance business, predominantly
personnel expenses. Reductions in staff numbers resulting from the sale of the project finance business wereoffset by increases in technology staff in India, however, the increased costs in India were charged to otherbusinesses.

!

Provision for doubtful debts decreased 44% as a result of the sale of the project finance business and the
reduction in exposure to the US and UK Power sectors. The credit to specific provisions resulted from the recoveryof several bad debts previously provided for. Net non-accrual loans reduced as a result of the realisation of twolarge power exposures in America and the sale of the project finance business.

!

Income tax expense increased by 23% due mainly to the release in 2004 of a $7 million tax provision relating toprior year tax expense in the US.

Comparison with March 2005 half

Profit after tax increased 7%. The impact of exchange rates was immaterial. Net interest income decreased by 14%
due largely to the increased funding cost of derivative positions in Markets, which is offset in other income. Fee
income decreased by 13% following the sale of the London headquartered project finance business. Other income
increased 68% with the increased income in Markets referred to above offset by the one off impact of the profit on
the sale of the project finance business in the March half. Operating expenses decreased 13% due a reduction incosts in discontinued businesses. Provision for doubtful debts decreased by 33% driven by the continued strategy tode-risk the overseas portfolios. The credit to net specific provisions resulted from bad debt recoveries.

52

FIVE YEAR SUMMARY

2005
$M

2004
$M

2003
$M

2002
$M

2001
$M

Net interest income

5,798

5,254

4,311

4,018

3,833

Other operating income

3,552

3,391

2,808

2,970

2,573

Operating expense(4,515)(4,026)(3,228)(2,905)(3,092)

(580)

(632)

(614)

(860)

(531)

Statement of Financial Performance

Provision for doubtful debts
Profit before income tax

4,255

3,987

3,277

3,223

2,783

Income tax expense(1,234)(1,168)

(926)

(898)

(911)

(3)

(4)

(3)

(3)

(2)

3,018

2,815

2,348

2,322

1,870

293,185259,345

195,591

183,105

185,493

19,48817,925

13,787

11,465

10,551

17.3%

18.1%

20.6%

23.2%

20.2%

17.5%

17.8%

20.6%

21.6%

20.2%

20.4%

Outside equity interest
Net profit attributable
to shareholders of the Company
Statement of Financial Position
AssetsNet assets
RatiosReturn on average ordinary equity1
Return on average ordinary equity1 excluding significant items2 and
NBNZ incremental integration costs3
Return on average ordinary equity1 excluding goodwill amortisation, notional
goodwill, significant items2 and NBNZ incremental integration costs3

18.8%

19.1%

21.2%

22.0%

Return on average assets

1.1%

1.2%

1.2%

1.3%

1.1%

Tier 1 capital ratio

6.9%

6.9%

7.7%

7.9%

7.5%

46.4%

44.9%

45.1%

41.3%

48.0%

45.6%

45.3%

45.1%

46.0%

48.0%

32.6%

17.0%

6.7%

15.3%

26.2%

Operating expenses4 to operating income
Operating expenses4 to operating income excluding significant items2 and
NBNZ incremental integration costs3
Shareholder value - ordinary shares
Total return to shareholders(share price movement plus dividends)
Market capitalisation

43,834

34,58627,31426,54423,783110 cents

101 cents

95 cents

85 cents

73 cents- high$24.45$19.44$18.45$19.70$16.71- low$19.02$15.94$15.01$15.23$12.63- closing$24.00$19.02$17.17$16.88$15.28

Earnings per share - basic5

160.9c153.1c142.4c141.4c112.7cDividend payout ratio

68.4%

67.5%

64.2%

57.8%

62.0%

Net tangible assets

$8.05

$7.51

$7.49

$6.58

$5.96

1,826.4

1,818.4

1,521.7

1,503.9

1,488.3

Permanent employees (FTEs)

29,471

27,383

21,586

21,38021,403

Temporary employees (FTEs)

1,505

1,372

1,551

1,102

1,098

30,97628,755

23,13722,48222,501Dividend (100% Franked)
Share price5

Share information (per fully paid ordinary share)

Number of fully paid ordinary shares on issue (millions)
Other information

Total employees
Points of representation

1,223

1,190

1,019

1,018

1,056

Number of shareholders6

263,467

252,072

223,545

198,716

181,667

1.
2.

3.
4.
5.
6.

Average ordinary shareholders’ equity excludes outside equity interests
In 2005 ANZ has classified $14 million after tax profit on the sale of NBNZ life businesses as a significant item. In 2004 ANZ has classified the $14 million profit
after tax on settlement of the INGA completion accounts, $84 million net profit after tax and $36 million dividends arising from the TrUEPrS transaction as
significant items. ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 12)
In 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sept 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration
Operating expenses excludes goodwill amortisation of $179 million (2004: $146 million; 2003: $18 million; 2002: $20 million; 2001: $17 million)
September 2003 and prior periods adjusted for the bonus element of the rights issue
Excludes employees whose only ANZ shares are held in trust under ANZ employee share schemes

53This page has been left blank intentionally54

Australia and New Zealand Banking Group Limited

CONSOLIDATED FINANCIAL STATEMENTS AND OTHER DISCLOSURES

Full year ended
30 September 2005

55

CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTS

PAGE

Consolidated Statement of Financial Performance

57

Consolidated Statement of Financial Position

58

Consolidated Statement of Changes in Equity

59

Consolidated Statement of Cash Flows60

Notes to Financial Statements

61

1.

Accounting policies

61

2.

Income703.

Operating expenses

71

4.

Income tax expense

72

5.

Dividends

73

6.

Earnings per share

74

7.

Net loans and advances

75

8.

Impaired assets

76

9.

Provision for doubtful debts

79

10. Loan capital80

11. Share Capital80

12. Capital adequacy81

13. Average balance sheet and related interest83

14. Interest spreads and net interest average margins

88

15. Derivative financial instruments

89

16. Contingent liabilities and contingent assets

91

17. Note to the Statement of Cash Flows93

18. Changes in composition of the Group95

19. Associates, joint venture entities and investments

95

20. Exchange rates

96

21. Significant events since balance date96

Appendix 4E Statement

97

Definitions

98

Alphabetical Index

100

56

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE

Note

Total income

2

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

10,9989,981

10%20,97917,50820%
23%

Interest income

9,150

8,277

11%

17,427

14,117

Interest expense(6,205)(5,424)

14%(11,629)(8,863)31%

Net interest income

2

2,945

2,853

3%

5,798

5,254

10%

Other operating income

2

1,848

1,704

8%

3,552

3,391

5%

4,793

4,557

5%

9,350

8,645

8%

(2,315)(2,200)5%(4,515)(4,026)

12%

2,478

2,357

5%

4,835

4,619

5%

Operating income
Operating expenses

3

Profit before debt provision
Provision for doubtful debts

9

Profit before income tax
Income tax expense

4

Profit after income tax

(296)

(284)

4%

(580)

(632)

-8%

2,182

2,073

5%

4,255

3,987

7%

(637)

(597)

7%

(1,234)(1,168)

6%

1,545

1,476

5%

3,021

2,819

7%

(2)

(1)

100%

(3)

(4)

-25%

1,543

1,475

5%

3,018

2,815

7%

(159)

(284)

-44%

(443)

233

large

(159)

(284)

-44%

(443)

233

large

1,384

1,191

16%

2,575

3,048

-16%

82.0

78.8

4%

160.9

153.1

5%

80.4

76.9

5%

157.5

149.7

5%

59

51

16%

110

101

9%

8.05

7.69

5%

8.05

7.51

7%

Net profit attributable to outside equity interest
Net profit attributable
to shareholders of the Company

Currency translation adjustments, net of hedges after tax
Total adjustments attributable to shareholdersof the company recognised directly into equity
Total changes in equity other than those resulting
from transactions with shareholders as owners
Earnings per ordinary share (cents)
Basic

6

DilutedDividend per ordinary share (cents)

5

Net tangible assets per ordinary share ($)

The notes appearing on pages 61 to 96 form an integral part of these financial statements

57

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONMovt
Sep 05v. Sep 04%

As at
Sep 05As at
Mar 05As at
Sep 04

$M

$M

$M

Movt
Sep 05v. Mar 05%

Liquid assets

11,600

8,855

6,363

31%

82%

Due from other financial institutions

6,348

6,428

4,781

-1%

33%

Trading securities 1

6,285

6,108

5,478

3%

15%

Note

AssetsInvestment securities
Net loans and advances

7

Customer's liability for acceptances
Regulatory deposits

6,941

6,745

7,746

3%

-10%

230,952

218,558

204,9626%

13%

13,44912,922

12,466

4%

8%

159

143

176

11%

-10%
-4%

Shares in associates and joint venture entities

1,872

1,764

1,960

6%

Deferred tax assets

1,337

1,234

1,454

8%

-8%

Goodwill2

2,898

3,118

3,269

-7%

-11%

Other assets 3,4

9,903

10,493

9,158

-6%

8%

Premises and equipment

1,441

1,481

1,532

-3%

-6%

293,185

277,849

259,345

6%

13%

Total assets
Liabilities
Due to other financial institutions

12,027

10,056

7,349

20%

64%

Deposits and other borrowings

185,693

180,410

168,557

3%

10%

Liability for acceptances

13,44912,922

12,466

4%

8%

Income tax liabilities

1,797

1,715

1,914

5%

-6%

Payables and other liabilities 411,607

12,431

14,212-7%-18%

Provisions
Bonds and notes

865

845

6%

8%

32,321

27,602

21%

42%

9,137

8,121

8,475

13%

8%

Total liabilities

273,697258,841

241,420

6%

13%

Net assets

19,48819,00817,9253%

9%

Ordinary share capital

8,074

8,028

8,005

1%

1%

Preference share capital

1,858

1,858

987

0%

88%

136

295

579

-54%

-77%

9,393

8,809

8,336

7%

13%

19,461

18,99017,9072%

9%Loan capital5

10914
39,073

Shareholders ' equity

Reserves
Retained profits
Share capital and reserves attributable toshareholders of the Company
Outside equity interests
Total shareholders ' equity

Derivative financial instruments

15

Contingent liabilities and contingent assets

16

1.
2.
3.
4.
5.

27

18

18

50%

50%

19,48819,00817,9253%

9%Includes bills held in portfolio $1,182 million (Mar 2005: $1,395 million; Sep 2004: $1,875 million)
Excludes notional goodwill in equity accounted entities, mainly $711 million included in the net carrying value of INGA (Mar 2005: $733 million; Sep 2004:$754 million)
Includes interest revenue receivable $1,441 million (Mar 2005: $1,520 million; Sep 2004: $1,568 million)
Other assets includes life insurance assets of $nil (Mar 2005: $50 million; Sep 2004: $65 million). Payables and other liabilities includes policy holder liabilities of$nil (Mar 2005: $31 million; Sep 2004: $30 million)
Includes $1,443 million (Mar 2005: $1,425 million; Sep 2004: $1,535 million) hybrid loan capital that qualifies for Tier 1 capital as defined by the Australian
Prudential Regulation Authority

The notes appearing on pages 61 to 96 form an integral part of these financial statements

58

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

9,886

8,992

10%

8,992

6,387

41%

-

-

n/a

-

3,562

-100%

Dividend reinvestment plan

75

78

-4%

153

135

13%

Group employee share acquisition scheme

2

14

-86%

16

47

-66%

Group share option scheme

56

48

17%

104

86

21%

Group share buyback

(87)

(117)

-26%

(204)

-

n/a

New preference share issues

-

871

-100%

871

-

n/a

Redemption of preference shares

-

-

n/a

-

(1,225)

-100%

9,932

9,886

0%

9,932

8,992

10%

(66)

218

large

218

(239)

large

(159)

(284)

-44%

(443)

233

large

-

-

n/a

-

224

-100%

(225)

(66)

large

(225)

218

large

Share capital
Balance at start of period
Ordinary shares
Rights issue

Preference shares

Total share capital
Foreign currency translation reserve
Balance at start of period
Currency translation adjustments,
net of hedges after tax
Transfer from general reserve

General reserve
181

181

0%

181

239

-24%

TrUEPrs preference share gain on buy back

Balance at start of period

-

-

n/a

-

180

-100%

Transfer (to) from retained profits/FCTR

-

-

n/a

-

(238)

-100%

181

181

0%

181

181

0%

Asset revaluation reserve

31

31

0%

31

31

0%

Capital reserve

149

149

0%

149

149

0%

Total reserves

136

295

-54%

136

579

-77%

8,809

8,336

6%

8,336

7,203

16%

Retained profits
Balance at start of period
Net profit attributable
to shareholders of the Company
Total available for appropriation

1,543

1,475

5%

3,018

2,815

7%

10,3529,811

6%11,354

10,01813%-100%

Transfers from (to) reserves

-

-

n/a

-

14

Ordinary share dividends provided for or paid

(913)

(964)

-5%

(1,877)(1,598)17%

Preference share dividends paid

(46)

(38)

21%

(84)

(98)

-14%

9,393

8,809

7%

9,393

8,336

13%

19,461

18,9902%

19,461

17,907

9%

Retained profits at end of period
Total shareholders' equity attributable toshareholders of the Company

The notes appearing on pages 61 to 96 form an integral part of these financial statements

59

CONSOLIDATED STATEMENT OF CASH FLOWSCash flows from operating activities
Interest received
Dividends received
Fees and other income received
Interest paid
Personnel expenses paid
Premises expenses paid
Other operating expenses paid
Income taxes paid
Australia
Overseas
Net GST paid
Net (increase) decrease in trading securities
Net cash provided by operating activities
Cash flows from investing activities
Net decrease (increase)
Liquid assets - greater than three months
Due from other financial institutions
Regulatory deposits
Loans and advances
Shares in associates and joint venture entities
Investment securities
Purchases
Proceeds from sale or maturity
Controlled entities and associates
Purchased (net of cash acquired)Proceeds from sale (net of cash disposed)
Premises and equipment
Purchases
Proceeds from sale
Other
Net cash (used in) investing activities
Cash flows from financing activities
Net (decrease) increase
Due to other financial institutions
Deposits and other borrowings
Payables and other liabilities
Bonds and notes
Issue proceeds
Redemptions
Loan capital
Issue proceeds
Redemptions
Decrease in outside equity interests
Dividends paid
Share capital issues
Share capital buyback
Euro Hybrid preference share issue
Euro Hybrid issues costs
Preference share buyback
Net cash provided by financing activities
Net cash provided by operating activities
Net cash (used in) investing activities
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Foreign currency translation on opening balances
Cash and cash equivalents at end of period

Note

17

17

The notes appearing on pages 61 to 96 form an integral part of these financial statements

60

Half
year
Sep 05
Inflows(Outflows)
$M
9,169
106
2,221
(6,003)(1,285)(186)(1,094)Halfyear
Mar 05
Inflows(Outflows)
$M
8,699
38
1,095
(5,411)(1,213)(181)(1,050)

Full
year
Sep 05
Inflows(Outflows)$M
17,868144
3,316(11,414)(2,498)(367)(2,144)

Full
year
Sep 04
Inflows(Outflows)$M
14,515
3
3,257(8,258)(2,110)(312)(2,093)

(294)
(305)
24
(183)
2,170

(278)
(195)
(6)
(638)
860

(572)
(500)
18
(821)
3,030

29
(276)
(19)
514
5,250

(358)
(358)
(19)
(13,365)
(86)

(370)
(13)
24
(15,423)
243

(728)
(371)
5
(28,788)
157

(325)
522
(76)
(22,757)(35)(7,603)
7,394(9,585)
10,462(17,188)
17,856(14,411)
11,701

(149)
144

-

(149)
144

(3,224)
-

(170)
81
255
(14,234)(155)
5(1,975)(16,787)(325)
86(1,720)(31,021)

(300)
53
1,735
(27,117)

2,080
5,802
(652)

2,892
14,054(687)

4,972
19,856(1,339)(272)
11,216(1,061)9,649(2,396)

8,319(2,629)17,968(5,025)

14,181(4,100)

1,225
(93)
8
(884)
58
(87)
14,7102,170(14,234)
14,7102,646
11,696(640)
13,702

(924)
62
(117)
875
(4)
21,841860(16,787)
21,841
5,914
7,854(2,072)
11,696

1,225
(93)
8
(1,808)
120
(204)
875
(4)
36,551
3,030(31,021)36,5518,560
7,854(2,712)
13,702

2,694
(368)
(1)
(1,561)
3,695(1,045)23,3785,250(27,117)
23,378
1,511
7,315
(972)
7,854

NOTES TO FINANCIAL STATEMENTS
1.

Accounting policies

These consolidated financial statements:!

should be read in conjunction with any public announcements made by the Parent Entity and its controlled entities(the Group) for the year ended 30 September 2005 in accordance with the continuous disclosure obligations under
the Corporations Act 2001 (as amended);!

are made out in accordance with the Corporations Act 2001 (as amended), ASX listing rules, applicable AccountingStandards, Urgent Issues Group Consensus Views, the Corporations Regulations 2001, and other mandatory
reporting requirements;!

do not include all notes of the type normally included in the annual financial report; and!

have been prepared in accordance with the historical cost convention, as modified by the revaluation of trading
instruments and the deemed cost of properties.

Where necessary, amounts shown for previous periods have been reclassified to facilitate comparison.
The accounting policies followed in preparing these consolidated financial statements are the same as those to be
applied in the 30 September 2005 Annual and Financial Reports. The accounting policies are consistent with those of
the previous financial year.
Details of critical accounting policies are shown on pages 31 to 33. Details of the impact of adopting the Australianequivalents to International Financial Reporting Standards that have been identified as significant to the Group aredetailed below.

Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS)Management of the Group’s transition to AIFRS

For reporting periods commencing 1 October 2005, the Group is required to prepare financial statements using
Australian Equivalents to International Financial Reporting Standards (AIFRS), issued by the Australian AccountingStandards Board.
On 1 October 2005, the Group commenced application of AIFRS, covering all financial systems and records. The
Group will report for the first time in compliance with AIFRS when the results for the half year ending 31 March 2006
are released.
The Group is required to prepare an opening balance sheet in accordance with AIFRS as at 1 October 2004. Most
accounting policy adjustments to retrospectively apply AIFRS will be made against retained earnings in this opening
balance sheet. However, transitional adjustments relating to those standards for which comparatives are not required
will only be made on 1 October 2005. The standards are AASB 132: ‘Financial Instruments: Disclosure andPresentation’, AASB 139: ‘Financial Instruments: Recognition and Measurement’, and AASB 4: ‘Insurance Contracts’.
Impact of transition to AIFRSThe key impacts identified below are based on accounting policy decisions and known interpretations of AIFRS current
at the date of this financial report. Further developments in AIFRS attributable to:!

new or revised accounting standards or interpretations issued by the Australian Accounting Standards Board; or!

additional guidance on the application of AIFRS to the financial services industry; or!

changes to the Group’s operations,

if any, may result in changes to accounting policy decisions made to date and, consequently, the likely impacts
outlined below. Any such changes will be reflected within the Group’s first AIFRS compliant financial report for thehalf year ending 31 March 2006, or a later financial report as appropriate.
The key impacts identified below are separated between those applicable for the comparative financial year (i.e. from
1 October 2004), and those applicable from 1 October 2005. The table contains forward looking statements and issubject to the qualifications set out on the contents page.
All amounts are stated on an after tax basis, unless otherwise stated.

61

NOTES TO FINANCIAL STATEMENTS (continued)
Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS),
cont’dIssues with effective impact from 1 October 2004
(i)

Goodwill
No initial impact onretained earnings
Potential volatility infuture earnings(ii)

The adoption of AIFRS does not impact the carrying amount of goodwill on transition
as the Group has elected not to restate past business combinations. Under AIFRS,
the past practice of systematically amortising goodwill over the expected period of
benefit ceases and is replaced by impairment testing annually or more frequently if
events or circumstances indicate that goodwill might be impaired. As a result, theGroup amortisation expense for the AIFRS comparative financial year ended
30 September 2005 will decrease by $224 million (including notional INGA goodwillof $43 million).

Defined benefits
superannuationplan

On adoption of AASB 119: ‘Employee Benefits’, surpluses (assets) and/or deficits(liabilities) that arise within defined benefit superannuation schemes will berecognised in the Statement of Financial Position.

Initial reduction inretained earnings

Under AGAAP, the Group accounts for the defined benefit superannuation schemes
on a cash basis and does not currently recognise an asset or liability for the net
position of the defined benefit superannuation schemes.

Actuarial movements
through retained
earnings

The Group has elected to apply the option available under AASB 119 to recognise
actuarial gains and losses in the Statement of Financial Position (i.e. the ‘direct toretained earnings’ approach). The non-cash expense reflecting the notional cost of
the benefits accruing to members of the defined benefit schemes in respect ofservice provided over the reporting period is charged to the Statement of Financial
Performance. All transitional adjustments and ongoing movements reported foreach scheme will be actuarially determined in accordance with AASB 119.
At 1 October 2004, the Group will recognise a net liability position of $142 million
after recognising a net deferred tax asset of $56 million which will be applied
against retained earnings.
For the AIFRS comparative year ended 30 September 2005, a $35 million
adjustment will be made to retained earnings to recognise a decrease in the Group’s
pension liability, representing largely a net actuarial gain. The impact on theStatement of Financial Performance of moving from a contributions basis to aservice cost basis is not expected to be material.

(iii)

Share based
payments
Initial reduction inshareholders’ equity
Higher ongoing
expenses

The Group currently recognises immediately an expense equal to the full fair valueof all deferred shares issued as part of the short term and long term incentive
arrangements. The deferred shares vest over one to three years and may be
forfeited under certain conditions. The Group does not currently recognise an
expense for options issued to staff or for shares issued under the $1,000 employee
share plan.
On adoption of AASB 2: ‘Share-based Payment’, the Group will recognise an
expense for all share based remuneration, including deferred shares and options,and will recognise this expense over the relevant vesting period.
The Group has elected to retrospectively apply AASB 2 to share based payments
granted prior to 7 November 2002 and which remained unvested as at 1 October2004.
On 1 October 2004, this change in accounting policy will result in:- the establishment of a share options reserve of $43 million to reflect the fairvalue of options granted to employees;- a reduction in paid up capital of $49 million, in order to reflect the fair value ofvested shares;- recognition of a deferred tax liability of $18 million; and- a net decrease to retained earnings of $12 million.
For the AIFRS comparative year ended 30 September 2005, the impact of thechange is expected to be:- an increase in the share options reserve of $23 million;- an increase in paid up capital of $41 million; and- a decrease in profit after tax of $64 million.

62

NOTES TO FINANCIAL STATEMENTS (continued)
Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS),
cont’dIssues with effective impact from 1 October 2004 (cont’d)(iv)

Fee revenue –financial service
fees recognisedover the period ofservice
Initial reduction inretained earnings(v)

Securitisation
Additional
assets/liabilities
recognised

Under AASB 118: ‘Revenue’, certain service type fees (such as administration fees)
will be deferred and amortised over the period of service. On 1 October 2004,$3 million of fees that have previously been recognised in the Statement of Financial
Performance will be recognised as a liability in the Statement of Financial Position,with a corresponding reduction to retained earnings. For the AIFRS comparative
year ended 30 September 2005, the impact of this change on the Statement of
Financial Performance is expected to be immaterial.
AIFRS has introduced new requirements for the recognition of financial assets,
including those transferred to a special purpose entity for securitisation. The
accounting treatment of existing securitisations has been reassessed.
Consequently, some vehicles, which were previously not consolidated, are being
consolidated by the Group. This will result in an increase in assets and liabilities
recorded within the Statement of Financial Position of $4.9 billion as at 1 October
2004 for the Group.
Vehicles set up for assisting customers securitise their own assets will continue tonot be consolidated under AIFRS.
For the comparative AIFRS year ended 30 September 2005, the Group willrecognise a decrease of $400 million in both assets and liabilities, reflecting the net
impact of repayment and securitisation of new assets during the year.
Within the Statement of Financial Performance, income and expenses will be
increased to recognise the income and expense items recorded within thesevehicles. The overall impact on net profit is expected to be immaterial.

(vi)

Foreign currencytranslation reserve
Initial increase inretained earnings,
no change toshareholders’ equity(vii) Asset revaluation
reserve – balance
relating to land andbuildings
Initial increase inretained earnings, nochange toshareholders’ equity(viii) Taxation
Change inmethodology
Immaterial impacts

The Group has elected to apply the option under AASB 121: ‘The Effects of Changes
in Foreign Exchange Rates’, to reset amounts recorded within the Foreign currencytranslation reserve to zero. On 1 October 2004, adopting this election will result in
an increase in retained earnings of $218 million for the Group.

The Group has elected to apply the option under AASB 1: ‘First time Adoption ofAustralian Equivalents to International Financial Reporting Standards’, to recognise
the value of Land and Buildings at deemed cost. As a result, the Group Assetrevaluation reserve of $31 million and relating to Land and Buildings will be reset tozero as at 1 October 2004 and adjusted against retained earnings.

Under AASB 112: ‘Income taxes’, a balance sheet method of tax effect accounting
will be adopted, replacing the ‘Statement of Financial Performance’ approachcurrently used by the Group.
Income tax expense comprises current and deferred taxes, with income tax expense
recognised in the Statement of Financial Performance, or recognised in equity to theextent that it relates to items recognised directly in equity.
Deferred tax is calculated using the balance sheet method by determining
temporary differences between the carrying amount of assets and liabilities forfinancial reporting purposes and the tax base of those assets and liabilities as used
for taxation purposes.
At 1 October 2004, an additional net deferred tax asset of $14 million will berecognised with a corresponding increase to retained earnings.

(ix) Intangible assets –softwareNo impact onearnings
Reclassification only

Capitalised software assets will be reclassified from Premises and Equipment to a
separately identifiable intangible asset on transition to AIFRS. For the Group, thiswill result in a reclassification of $430 million as at 1 October 2004. There will be no
impact on the Statement of Financial Performance.

(x)

At 1 October 2004, the Group has elected under AASB 1: ‘First time Adoption ofAustralian Equivalents for International Financial Reporting Standards’, to notrestate the classification and accounting treatment of business combinations that
occurred prior to 1 October 2004.

Business
combinations
No impact

63

NOTES TO FINANCIAL STATEMENTS (continued)
Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS),
cont’dIssues with effective impact from 1 October 2005
(xi)

Credit Loss
Provisioning
Initial increase inretained earnings
Volatility in future
earnings

AASB 139: ‘Financial Instruments: Recognition and Measurement’ adopts an
incurred loss approach for credit loss provisioning and provides guidance on themeasurement of incurred losses. Provisions are raised for losses that have alreadybeen incurred for exposures that are known to be impaired. The estimated losseson these impaired exposures are then discounted to their present value. As this
discount unwinds during the period between recognition of impairment and recoveryof the written down amount, it is recognised in the Statement of Financial
Performance as interest income.
The current General Provision in the Statement of Financial Position will be replacedon adoption of AIFRS by a Collective Provision.
Exposures not individually known to be impaired are placed into pools of similar
assets with similar risk characteristics to be collectively assessed for losses thathave been incurred, but not identified yet. The required provision is estimated on
the basis of historical loss experience for assets with credit risk characteristics
similar to those in the collective pool. The historical loss experience is adjusted
based on current observable data.
The Collective Provision under AIFRS shares the same underlying measurement
objectives as the current General Provision. However, as a result of the applicationof a new estimation methodology, certain judgemental risk measures have changed.
The Group believes that the resulting Collective Provision, while lower than thecurrent General Provision, comfortably falls within the probable range of losses thathave been incurred but not identified in our portfolio.
On adoption of AIFRS, the current Economic Loss Provisioning (ELP) charge to profit
will be replaced by a charge for individual provisions on impaired exposures
together with a charge for movements in the Collective Provision.
As a result of these changes:- at 1 October 2005, there will be a reduction of $6 million to retained earnings
relating to individual provisions on impaired exposures as a result of discounting
estimated future cash flows;- at 1 October 2005, the Collective Provision will be $307 million less than the
AGAAP General Provision. After tax, this will result in an increase to retained
earnings of $197 million at 1 October 2005. Due to current uncertainty around
AIFRS accounting interpretations and the development of Australian industry
practice in this area, this Collective Provision on impaired exposures may besubject to further refinement;- individual provisions and movements in the Collective Provision will be charged
direct to the Statement of Financial Performance, driving increased earnings
volatility for the Group; and- movements in the Collective Provision will be driven by changes in the Group’s
portfolio size, portfolio mix, credit risk and economic cycles.

(xii) Fee revenue financial service
fees recognised as
an adjustment toyield
Initial reduction inretained earnings

Under AASB 139: ‘Financial Instruments: Recognition and Measurement’, fee
income (such as loan approval fees) integral to the yield of an originated financial
instrument (such as loans and advances measured at amortised cost), net of any
direct incremental costs, will be capitalised and deferred over the expected life of
the financial instrument.
On 1 October 2005, certain fees that have previously been recognised in theStatement of Financial Performance, will be deferred and recognised against net
loans and advances in the Statement of Financial Position with a corresponding
reduction to retained earnings. The impact will be $266 million for the Group. The
annual impact on net profit from this change is not expected to be material.
However, there will be an increase in interest income (offset by a reduction in fee
income) and a reclassification to interest earning assets of customers’ liabilities for
acceptances of $13.4 billion.

64

NOTES TO FINANCIAL STATEMENTS (continued)
Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS),
cont’dIssues with effective impact from 1 October 2005 (cont’d)(xiii) Derivative financial
instruments,
including hedging
Initial reduction inretained earnings
Volatility in future
earnings
New assets andliabilities recognised

Under AIFRS, all derivative financial instruments, including those used as hedging
instruments, will be measured at fair value and recognised in the Statement of
Financial Position. This will require an adjustment to reflect the market value ofcounterparty risk in the fair value of derivatives. This will result in a decrease inretained earnings of $24 million at 1 October 2005. (Under AGAAP, counterparty
risk is notionally allowed for as part of the General Provision.)
At 1 October 2005, recognition of the fair value of derivatives relating tosecuritisation vehicles and structured finance transactions will reduce retained
earnings by $64 million. The Group continues to evaluate hedging relationships andeffectiveness for certain structured finance transactions, which may introduce
volatility within the Statement of Financial Performance. Accordingly, the likely
AIFRS impact cannot be reliably estimated at present.
AIFRS permits hedge accounting (if certain criteria are met) for fair value hedges,
cash flow hedges and hedges of investments in foreign operations. Fair value andcash flow hedge accounting can only be considered where prospective andretrospective effectiveness tests are met and the hedge relationship has beenadequately documented. Ineffectiveness precludes the use of hedge accounting.
The Group uses cash flow and fair value hedging in respect of its interest rate risk
exposures.
As at 1 October 2005, the Group has designated certain fair value and cash flow
hedges and financial liabilities as fair value through profit and loss, resulting in an
increase in net assets of $97 million, represented by a decrease in retained earnings
of $65 million, and an increase in reserves of $162 million. Any volatility throughthe Statement of Financial Performance due to hedge ineffectiveness is not expected
to be material.

(xiv) Financial
instruments
classification andmeasurement
Certain assets
reclassified andmeasured at fairvalue
Initial decrease inretained earnings

Under AIFRS, certain financial assets of the Group currently carried at amortised
cost will be either:- reclassified as available for sale, resulting in measurement at fair value withmovements being taken to an ‘Available for Sale’ equity reserve; or- reclassified as financial assets held at fair value through the profit and loss, withmovements in fair value being taken to the Statement of Financial Performance.
On 1 October 2005, the reclassification of financial assets as either available for salefinancial assets or financial assets designated at fair value, will not result in amaterial adjustment for the Group.
Under AIFRS, most financial liabilities will continue to be recognised at amortised
cost and, as a result, there will be no material adjustment to the Statements ofFinancial Position and Performance.
Financial instruments will be measured under AIFRS at ‘bid’ or ‘offer’ prices rather
than the current use of ‘mid’ prices. On 1 October 2005, this change inmeasurement will result in a decrease to retained earnings of $5 million.

(xv) Classification of
hybrid financial
instruments
Reclassification of
ANZ StEPS fromequity to debt

Under AASB 132: ‘Financial Instruments: Disclosure and Presentation’, ANZ StEPS,
a hybrid Tier 1 instrument currently treated as equity, will be reclassified as debt.
Prepaid issue costs, currently offset against the preference share capital balance,
will be capitalised and amortised to interest over a 5 year period from the date ofissue.
At 1 October 2005, an amount of $987 million will be transferred from Preference
Share Capital to Loan Capital, and capitalised prepaid issue costs of $5 million will
have been amortised. Ongoing distributions to the holders of ANZ StEPS will betreated as an interest expense in the Statement of Financial Performance rather
than as dividends.

65

NOTES TO FINANCIAL STATEMENTS (continued)
Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS),
cont’dIssues with effective impact from 1 October 2005 (cont’d)(xvi) Accounting for
INGA
Initial reduction inretained earnings

Under AASB 131: ‘Interests in Joint Ventures’, and in line with current policy, theGroup is required to equity account for its interest in INGA. The adoption of AIFRS
by INGA will result in the following significant measurement and recognitiondifferences to AGAAP:- increased policy liabilities resulting from a change in the discount rates applied in
the actuarial calculation of policy liabilities and the separate presentation andchange in basis of deferred acquisition costs (largely commissions) previously
included within net policy liabilities;- write-off of the excess of the market value over net assets (EMVONA) for INGA’s
life insurance controlled entities, which under AIFRS will no longer be recognised,
together with a reassessment of other non-allowable intangibles; and- initial entry fee income previously taken upfront will be deferred and amortised toincome over time.
The Group’s 49% share of INGA’s net AIFRS adjustment is $181 million, thus
reducing the Group’s retained earnings and the carrying value of its interest in INGA
as at 1 October 2005.
Following the adoption of AIFRS, the Group’s investment in INGA will also be
impacted by INGA’s adoption of classifying and measuring its shareholder
investments as “available for sale” assets. This change in measurement is likely toresult in a reduction in investment return volatility experienced by INGA, as only
realised gains and losses will be reported in its net profit.

(xvii) Accounting for ING
New Zealand
Immaterial impacts

On 30 September 2005, ANZ announced its funds management and life insurance
joint venture with ING had been extended through the creation of a New Zealandjoint venture. The adoption of AIFRS by ING New Zealand is not expected to have amaterial impact on the Group’s financial statements.

Summary of financial impacts
A summary of the material after-tax financial impacts of conversion to AIFRS is set out in the following tables:!

Table 1 represents the impact of the transition to AIFRS on shareholders’ equity as at 1 October 2004, for thosestandards with an effective date of 1 October 2004;!

Table 2 sets out the additional impacts on shareholders’ equity as at 1 October 2005, including those standards
with an effective date of 1 October 2005;!

Table 3 sets out the expected comparative adjustment to the result for the year ended 30 September 2005; and!

Table 4 sets out our estimated retrospective adjustment to the result for the year ended 30 September 2005 forthose impacts that will only be implemented with effect from 1 October 2005. These numbers have not been
audited.

References are provided within the tables to the detailed narrative disclosure in the section above.

66

NOTES TO FINANCIAL STATEMENTS (continued)
Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS),
cont’dTable 1: Shareholders’ equity reconciliation as at 1 October 2004
Group
Reference
Total shareholders' equity under AGAAP as at 1 October 2004

$M
17,925AIFRS 1 October 2004 after tax adjustments to shareholders' equity
Retained earnings impacts:
Initial recognition of defined benefit superannuation plans net
obligation

(ii)

(142)

Net adjustment for share based payments

(iii)

(12)

Transfer from foreign currency translation reserve

(vi)

218

Transfer from asset revaluation reserve

(vii)

31

Initial recognition of balance sheet tax effect accounting(viii)

14

Other

(5)

Foreign currency translation reserve:
Transfer to retained earnings

(vi)

(218)

(vii)

(31)

Initial recognition of share options reserve

(iii)

43

Decrease in paid up capital in respect of share based payments

(iii)

(49)

Asset revaluation reserve:
Transfer to retained earnings
Other reserves and share capital impacts:

Other

2

AIFRS restated shareholders' equity as at 1 October 2004

67

17,776

NOTES TO FINANCIAL STATEMENTS (continued)
Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS),
cont’dTable 2: Shareholders’ equity reconciliation as at 1 October 2005
Group
Reference
AIFRS restated shareholders ' equity as at 1 October 2004

Table 1Other current AGAAP shareholders' equity movements for theyear ended 30 September 20051$M
17,776(1,455)AIFRS net profit after tax for the year ended 30 September 2005

Table 3

3,182

AIFRS 1 October 2005 after tax adjustments to shareholders' equity
Retained earnings impacts:
Actuarial movements within defined benefit superannuation plans

(ii)

35

Adjustment to credit loss provision

(xi)

191

Deferral of financial services fees recognised as an adjustment to yield

(xii)

(266)

Adjustment to reflect counterparty risk in the(xiii)(24)

Recognition of fair value of derivatives2

fair value of derivatives(xiii)(129)

49% share of INGA joint venture opening AIFRS adjustments

(xvi)

(181)

Other

(12)

Other reserves and share capital impacts:
Movements in share options reserve

(iii)

23

Movement in paid up capital in respect of share based payments

(iii)

41

Hedge accounting adjustment to establish cash flow hedging reserve(xiii)

162

(xv)

(987)

Reclassification of ANZ StEPS hybrid financial instrument from preference
share capital to liabilities
Other

2

AIFRS restated shareholders ' equity as at 1 October 2005
1.

Represents movements in Shareholders’ Equity other than profit for the year:
Change in Share Capital
Change in Reserves
Change in Outside Equity Interests
Dividends paid
Net adjustment

2.

18,358$M
940(443 )
9(1,961 )(1,455 )Represents the fair value of derivatives relating to securitisation and structured finance transactions of $64 million and $65 million for the fair value of derivatives
that no longer meet hedge accounting criteria as well as the impact of designating certain financial liabilities as fair value through the profit and loss

68

NOTES TO FINANCIAL STATEMENTS (continued)
Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS),
cont’dTable 3: Restatement of AGAAP after tax profit and loss for the year ended 30 September 2005 to an AIFRS
comparative basis
Group
Reference
AGAAP net profit after tax for the year ended
30 September 2005

$M

3,018

Writeback of goodwill amortisation

(i)

224

Recognition of share based payments expense

(iii)

(64)

Other1

4

Total AIFRS after tax adjustments to net profit after tax
for the year ended 30 September 2005

164

AIFRS net profit after tax for the year ended 30 September 2005: comparative basis
1.

3,182

Comprises after tax profit impact for- financial services fees recognised over the period of service,- income and expense items recorded within securitisation vehicles, and- recognition of non-cash pensions expense for defined benefit superannuation plans, net of AGAAP contributions expense

Table 4: Estimated unaudited impact on net profit after tax for the year ended 30 September 2005 for issues
which will be formally implemented with effect from 1 October 20051
Group
Reference
AIFRS net profit after tax for the year ended
30 September 2005: comparative basis Table 3

$M

3,182

Credit loss provisioning

(xi)

16

(xiii)

25

(xv)

(66)

Derivatives- Change in fair value - structured finance and securitisation transactions- Hedge ineffectiveness

2-

ANZ StEPS hybrid financial instrument distribution treated as interest expense
Other

3

(6)

Total estimated AIFRS net profit after tax for the year ended
30 September 2005
1.

2.
3.

3,151

Table 4 sets our the estimated retrospective adjustment to the result for the year ended 30 September 2005 for those issues that will only be implemented witheffect from 1 October 2005. These estimates may change. Table 4 is only disclosed as part of our Results Announcement - it does not form part of our audited
financial results and thus has not been audited or reviewed by KPMG. In conjunction with Table 3, these estimates are presented in order to give an estimate of
the overall impact of IFRS on the Group accounts for the year ended 30 September 2005
Unable to be reliably estimated for the 2005 year
Comprises after tax profit impact for- financial services fees recognised as an adjustment to yield- Group’s equity accounted for 49% share of INGA’s earnings, and- financial instrument valuation

69

NOTES TO FINANCIAL STATEMENTS (continued)
2.

Income
Half

Half

Movt

Full

Full

Movt

year

year

Sep 05year

year

Sep 05

Sep 05

Mar 05v. Mar 05

Sep 05

Sep 04v. Sep 04

$M

$M

%

$M

$M

%

Interest income

9,150

8,277

11%

17,427

14,11723%

Interest expense(6,205)(5,424)

14%(11,629)(8,863)31%

Net interest income

2,945

2,853

3%

5,798

5,254

10%

535

508

5%

1,043

1,002

4%

Fee income
Lending
Other

819

754

9%

1,573

1,419

11%

1,354

1,262

7%

2,616

2,421

8%

Foreign exchange earnings

233

221

5%

454

411

10%

Profit on trading instruments

94

40

large

134

151

-11%

Total fee income
Other income

Net profit before tax from the close out of the
-

-

n/a

-

108

-100%

Hedge of TrUEPrS cash flows

-

-

n/a

-

2

-100%

INGA completion account profit1

-

-

n/a

-

14

-100%

TrUEPrs swap1

Gain on sale of NBNZ Life

14

-

n/a

14

-

n/a

Share of joint venture: Profit from INGA joint venture

48

59

-19%

107

97

10%

Share of associates' profit (net of writeoffs)

20

25

-20%

45

47

-4%

Private equity and infrastructure earnings2

5

17

-71%

22

11

100%

Other

80

80

0%

160

129

24%
-4%

1

Total other income

494

442

12%

936

970

Total other operating income

1,848

1,704

8%

3,552

3,391

5%

Total income

10,9989,981

10%20,97917,50820%

Profit before income tax as a % of total income

19.8%

20.8%

-5%

20.3%

22.8%

-11%

1.
2.

Significant items, refer page 12
Includes earnings from private equity and infrastructure portfolios. Includes share of associates’ profit $5 million (2004 full year: $1 million; Sep 2005 half:$4 million; Mar 2005 half: $1 million) not included in share of associates’ profit above

Interest spread and net interest average margin (%)
Gross interest spread

1.79

1.93

n/a

1.86

2.08

n/a

Interest forgone on impaired assets(0.01)(0.01)

n/a(0.01)(0.02)

n/a

Net interest spread

1.78

1.92

n/a

1.85

2.06

n/a

Interest attributable to net non-interest bearing items

0.52

0.48

n/a

0.50

0.43

n/a

Net interest average margin
Average interest earning assets ($M)

2.30

2.40

n/a

2.35

2.49

n/a

256,604

239,9597%

248,304

212,153

17%

70

NOTES TO FINANCIAL STATEMENTS (continued)
3.

Operating expenses
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Personnel
Pension fund

81

80

1%

161

145

11%

Employee entitlements and taxes

103

87

18%

190

149

28%

Salaries and wages

832

793

5%

1,625

1,425

14%

Temporary staff

62

49

27%

111

92

21%

Other

191

171

12%

362

320

13%

1,269

1,180

8%

2,449

2,131

15%

Total personnel expenses
Premises
Depreciation and amortisation

14

13

8%

27

24

13%

Rent

108

105

3%

213

197

8%

Utilities and other outgoings

62

60

3%

122

109

12%

Other

16

16

0%

32

23

39%

200

194

3%

394

353

12%

Total premises expenses
ComputerComputer contractors

34

19

79%

53

25

large

Data communications

29

31

-6%

60

69

-13%

Depreciation and amortisation

120

115

4%

235

242

-3%
-2%

Rentals and repairs

35

23

52%

58

59

Software purchased

58

57

2%

115

115

0%

Other

19

18

6%

37

43

-14%

295

263

12%

558

553

1%

Total computer expenses
Other
Advertising and public relations

82

79

4%

161

130

24%

Amortisation of goodwill

90

89

1%

179

146

23%
0%

Audit fees

3

2

50%

5

5

Depreciation of furniture and equipment

20

23

-13%

43

43

0%

Freight and cartage

23

22

5%

45

41

10%
27%

Non-lending losses, frauds and forgeries

22

40

-45%

62

49

Postage and stationery

57

56

2%

113

111

2%

Professional fees

63

62

2%

125

112

12%

Telephone

25

30

-17%

55

57

-4%

Travel

69

55

25%

124

100

24%

Other

75

75

0%

150

135

11%

529

533

-1%

1,062

929

14%

Total other expenses

22

30

-27%

52

60

-13%

Operating expenses1

Restructuring

2,315

2,200

5%

4,515

4,026

12%

Employees (FTE) - Permanent

29,471

28,3884%

29,471

27,3838%

Employees (FTE) - Temporary

1,505

1,444

4%

1,505

1,372

10%

Total employees

30,976

29,832

4%

30,97628,7558%

1.

Includes NBNZ incremental integration costs $78 million (2004 full year: $21 million; Sep 2005 half: $53 million; Mar 2005 half: $25 million) refer page 12

71

NOTES TO FINANCIAL STATEMENTS (continued)
4.

Income tax expense
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

2,182

2,073

5%

4,255

3,987

7%

655

622

5%

1,277

1,196

7%

Operating profit before income tax
Prima facie income tax at 30%
Tax effect of permanent differences
Overseas tax rate differential

7

10

-30%

17

20

-15%

Rebateable and non-assessable dividends

(9)

(14)

-36%

(23)

(20)

15%

Other non-assessable income

(17)

(15)

13%

(32)

(32)

0%

Profit from associated entities and joint venture entities

(20)

(25)

-20%

(45)

(43)

5%

Life insurance accounting

(2)

(3)

-33%

(5)

(4)

25%

Goodwill amortisation

28

28

0%

56

46

22%

Other

(5)

(4)

25%

(9)

7

large

637

599

6%

1,236

1,170

6%

-

(2)

-100%

(2)

(2)

0%

Total income tax expense on profit

Income tax (over) under provided in prior years

637

597

7%

1,234

1,168

6%

Australia

427

389

10%

816

802

2%

Overseas

210

208

1%

418

366

14%

637

597

7%

1,234

1,168

6%

29.2%

28.8%

1%

29.0%

29.3%

-1%

Effective tax rate72

NOTES TO FINANCIAL STATEMENTS (continued)
5.

Dividends
Halfyear
Sep 05
$M

Movt
Half
Sep 05year
Mar 05 v. Mar 05
$M
%

Full
year
Sep 05
$M

Movt
Full
Sep 05year
Sep 04 v. Sep 04$M%

Dividend per ordinary share1 (cents)
Interim (fully franked)

n/a

51

n/a

51

47

9%

Final (fully franked)

59

n/a

n/a

59

54

9%

Ordinary share dividend1,2Interim dividend paid

930

-

n/a

930

850

9%

Final dividend paid

-

983

-100%

983

777

27%

Bonus option plan adjustment3

(17)

(19)

-11%

(36)

(29)

24%

913

964

-5%

1,877

1,598

17%

Ordinary share dividend payout ratio4 (%)

71.9%

64.7%

11%

68.4%

67.5%

1%

Ordinary share dividend payout ratio excluding goodwill, andsignificant items5 and NBNZ incremental integration costs6

66.0%

59.4%

11%

62.8%

64.1%

-2%

Total

1.
2.
3.
4.

5.
6.

Excludes preference share dividend
Dividends recorded when determined
This relates to prior period dividend payments
Dividend payout ratio calculated using proposed final dividend of $1,077 million not included in the above table. Dividend payout ratio for 2005 half year
calculated using $930 million dividends paid in the September 2005 half. Dividend payout ratio for 2004 full year calculated using $983 million dividends paid in
the March 2005 half
In 2005 ANZ has classified the $14 million profit after tax relating to the gain on sale of the NBNZ Life business as a significant item. ANZ excludes significant
items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 12)
In 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sept 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration

Half
year
Sep 05
$M

Half
Movt
year
Sep 05
Mar 05 v. Mar 05
%
$M

Full
year
Sep 05
$M

Full
Movt
year
Sep 05
Sep 04 v. Sep 04%$M

Preference share dividend1
TrUEPrS2

-

-

n/a

-

36

-100%

ANZ StEPS3

34

32

6%

66

62

6%

12

6

100%

18

n/a

n/a

46

38

21%

84

98

-14%

Euro Hybrid

Dividend per preference share
TrUEPrS (USD cents)

1.
2.
3.

-

-

n/a

-

20.7

-100%

ANZ StEPS (AUD)

$3.40

$3.18

7%

$6.58

$6.22

3%

Euro Hybrid (EUR)€ 14.22€ 7.2397%€ 21.45n/an/a

The US Stapled Trust Security issue, which was issued when TrUEPrS was bought back, is treated as debt, hence distributions are reported as an interest expenseand not included in this note
The 2004 dividend on TrUEPrS is included in significant items. Refer page 12
StEPS payments are distributions paid to holders which represent interest on unsecured Notes which are stapled to a fully paid preference share73

NOTES TO FINANCIAL STATEMENTS (continued)
6.

Earnings per share

Number of fully paid ordinary shares on issue (M)

Half
year
Sep 05
$M

Half
Movt
year
Sep 05
Mar 05 v. Mar 05
%
$M

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

1,826.4

1,822.70%1,826.4

1,818.4

0%

1,543
46

1,475

5%

3,018

2,815

7%

38

21%

84

98

-14%

1,497

1,437

4%

2,934

2,717

8%

-

-

n/a

-

1,521.8

-100%

Basic
Net profit attributable to members of the Company ($M)
Preference share dividends
Net profit excluding preference share dividends1
Weighted average number of ordinary shares prior to rights issue (M)Weighted average number of ordinary shares issued post rights issue (M)

-

-

n/a

-

10.0

-100%

Weighted average number of ordinary shares issued under rights issue (M)

-

-

n/a

-

232.0

-100%

Weighted average number of shares prior to dilution for rights issue (M)

-

-

n/a

-

1,763.8-100%

0.9933

Discount factor based on Theoretical Rights2

-

-

-

Adjustment for the impact of rights issue (M)

-

-

-

10.3

1,824.7

1,822.7

1,823.7

1,774.1

82.0

78.8

4%

160.9

153.1

5%

1,522

1,460

4%

2,982

2,761

8%

1,824.7

1,822.70%1,823.7

1,774.1

3%

9.3

7.7

21%

9.7

6.2

56%

Adjusted weighted average number of shares (M)Basic earnings per share3 (cents)
DilutedNet profit attributable to members of the company excluding interest
on US Hybrid securities4 ($M)
Adjusted weighted average number of shares on issue (M)Weighted average number of options potentially convertible to shares (M)Weighted average number of convertible US Hybrid securities
at current market price4 (M)Adjusted weighted average number of shares - diluted (M)Diluted earnings per share3 (cents)

60.1

69.1

-13%

60.1

64.5

-7%

1,894.1

1,899.5

0%

1,893.5

1,844.8

3%

80.4

76.9

5%

157.5

149.7

5%

1,497

1,437

4%

2,934

2,717

8%

(14)

-

n/a

(14)

(98)

-86%

Adjusted Basic
Net profit attributable to members of the company1 ($M)
Significant items - included in profit after tax5
- preference dividend5 for TrUEPrS

-

-

n/a

-

36

-100%

35

17

large

52

14

large

Earnings excluding significant items5 and NBNZ incremental integration costs6

1,518

1,454

4%

2,972

2,669

11%

Earnings per share (cents) excluding significant items5 and
NBNZ incremental integration costs6

83.2

79.8

4%

163.0

150.4

8%

Net profit attributable to members of the Company1 ($M)

1,497

1,437

4%

2,934

2,717

8%

(14)

-

n/a

(14)

(98)

-86%

-

-

n/a

-

36

-100%
large

NBNZ incremental integration costs6

Significant items - included in profit after tax- preference dividend5 for TrUEPrSNBNZ incremental integration costs

35

17

large

52

14

Goodwill amortisation (excluding NBNZ)7

32

30

7%

62

60

3%

Goodwill amortisation - NBNZ

81

81

0%

162

129

26%

1,631

1,565

4%

3,196

2,858

12%

89.4

85.9

4%

175.2

161.1

9%

6

Earnings excluding goodwill7, significant items5 and
NBNZ incremental integration costs6
Earnings per share (cents) excluding goodwill amortisation,
significant items5 and NBNZ incremental integration6 costs
1.
2.

Excludes preference share dividend
The EPS for 2004 has been adjusted for the bonus element of the rights issue: two rights shares for eleven existing shares issued 28 November 2003 (last trading
shares cum rights 28 October 2003). The calculation is as follows:
Market price (ex dividend) on 28 October 2003
Theoretical ex rights price
Discount factor prior to rights issue
Discount factor for reporting period of rights issue

3.
4.
5.

6.
7.

$17.63$16.920.9597
0.9933($17.63 x 5.5 + $13.00) / 6.5$16.92 / $17.63
1(1 / 0.9597) (59 / 366) + (307 / 366)

Discounted for rights issue in March 2004
Interest expense on US Hybrid securities was $72 million (2004 full year: $63 million; Sep 2005 half: $37 million; Mar 2005 half: $35 million). Share price $24.00
at 30 September 2005. Refer Note 10 for details on US Hybrid
In 2004 ANZ has classified the $14 million profit after tax on settlement of the INGA completion account, $84 million net profit after tax and $35 million dividends
arising from the TrUEPrS transaction as significant items. ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of
its core businessIn 2005 ANZ has incurred $52 million after tax NBNZ incremental integration costs (2004 full year: $14 million; Sep 2005 half: $35 million; Mar 2005 half:$17 million). NBNZ incremental integration costs are excluded to enable analysis of the cost base following completion of the integration
Includes INGA notional goodwill amortisation

74

NOTES TO FINANCIAL STATEMENTS (continued)
7.

Net loans and advances

$M

Movt
Sep 05v. Mar 05%

Movt
Sep 05v. Sep 04%

84,48478,6606%

14%

48,993

46,40042,0566%

16%

10,915

10,248

9,760

7%

12%

Overdrafts

5,276

5,101

4,390

3%

20%

Credit cards outstanding

5,434

4,853

4,523

12%

20%

As at
Sep 05As at
Mar 05As at
Sep 04$M$M

Term loans - housing1

89,558Term loans - non housing
Lease finance / hire purchase

Australia

Other

1,575

1,607

1,091

-2%

44%

161,751

152,693

140,480

6%

15%

Term loans - housing

34,86033,12331,5195%

11%

Term loans - non housing

25,012

23,54922,472

6%

11%

986

1,018

1,010

-3%

-2%

Overdrafts

1,647

1,683

1,604

-2%

3%

Credit cards outstanding

1,026

1,043

1,032

-2%

-1%

859

640

584

34%

47%

64,39061,05658,221

5%

11%

New Zealand

Lease finance / hire purchase

Other

Overseas markets
Term loans - housing
Term loans - non housing

592

519

464

14%

28%

7,511

7,219

8,730

4%

-14%

Lease finance / hire purchase

217

201

111

8%

95%

Overdrafts

303

339

558

-11%

-46%

Credit cards outstanding

134

126

128

6%

5%

Other

68

303

122

-78%

-44%

Total gross loans and advances1,2

8,825

8,707

10,1131%-13%234,966

222,456

208,814

6%

13%

Less:
Provision for doubtful debts(2,440)(2,401)(2,376)

2%

3%

Income yet to mature(1,574)(1,497)(1,476)5%

7%

230,952

218,558

204,9626%

13%

Total net loans and advances
1.
2.

1,2

Securitised mortgages outstanding $1,615 million (Mar 2005: $1,921 million; Sep 2004: $2,272 million) not included in net loans and advances
Bills held in portfolio, $1,182 million (Mar 2005: $1,395 million; Sep 2004: $1,875 million) are included in trading securities

75

NOTES TO FINANCIAL STATEMENTS (continued)
8.

Impaired assets
Movt
Sep 05v. Sep 04%

As at
Sep 05As at
Mar 05As at
Sep 04$M$M$M

Non-accrual loans

642

640

829

0%

-23%

Restructured loans

28

30

32

-7%

-13%

Movt
Sep 05v. Mar 05%

Summary of impaired assets

Unproductive facilities

43

77

29

-44%

48%

Gross impaired assets

713

747

890

-5%

-20%

(256)

(314)

(378)

-18%

-32%

Less specific provisions:Non-accrual loans
Unproductive facilities

(17)

(7)

(6)

large

large

Net impaired assets

440

426

506

3%

-13%

Non-accrual loans
Non-accrual loans

642

640

829

0%

-23%

Specific provisions

(256)

(314)

(378)

-18%

-32%

Total net non-accrual loans

386

326

451

18%

-14%

Australia

355

408

422

-13%

-16%

New Zealand

194

105

115

85%

69%

Overseas markets

93

127

292

-27%

-68%

Total non-accrual loans

642

640

829

0%

-23%

Australia

202

220

213

-8%

-5%

New Zealand

111

42

47

large

large

Overseas markets

73

64

191

14%

-62%

Total net non-accrual loans

386

326

451

18%

-14%

Before specific provisions

After specific provisions

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Australia

303

282

7%

585

652

-10%

New and increased non accrual loans

New Zealand

204

78

large

282

174

62%

Overseas markets

69

27

large

96

249

-61%

Total new non accrual loans

576

387

49%

963

1,075

-10%

76

NOTES TO FINANCIAL STATEMENTS (continued)
8.

Impaired Assets, cont’d

Further analysis on non-accrual loans at 30 September 2005 and interest and/or other income received during theperiod is as follows:

Gross balance
outstanding$M

Specific
Provision$M

Interest
and / orother income
received$M

1

Non-accrual loans
Without provisions
Australia

82-

New Zealand

3

-

-

Overseas markets

46

-

1

131

-

2

Australia

264

152

5

New Zealand

130

68

1

With provisions and no, or partial, performance1

Overseas markets

44

18

7

438

238

13
3

With provisions and full performance1
Australia

91

New Zealand

61

15

4

Overseas markets

3

2

2

73

18

9

Total non-accrual loans

642

256

24

Restructured loans

28

-

1

Unproductive facilities

43

17

-

Total

713

273

25

1.

A loan’s performance is assessed against its contractual repayment schedule

As at
Sep 05As at
Mar 05As at
Sep 04$M$M

Australia

29

New Zealand7

Overseas markets
Gross unproductive facilities

$M

Movt
Sep 05v. Mar 05%

Movt
Sep 05v. Sep 04
%

66

22

-56%

32%

-

-

n/a

n/a

7

11

7

-36%

0%

43

77

29

-44%

48%

Australia

7

3

-

large

n/a

New Zealand

7

-

-

n/a

n/a

Unproductive facilities

Specific provision

Overseas markets

3

4

6

-25%

-50%

Specific provision

17

7

6

large

large

Net unproductive facilities

26

70

23

-63%

13%

The following amounts are not classified as impaired assets and therefore are not included within the summary on
page 76.
Movt
Sep 05v. Sep 04%

As at
Sep 05As at
Mar 05As at
Sep 04$M$M$M

Australia

282

262

188

8%

50%

New Zealand

66

90

77

-27%

-14%

Movt
Sep 05v. Mar 05%

Accruing loans past due 90 days or more

Overseas markets

77

33

32

28

3%

18%

381

384

293

-1%

30%

NOTES TO FINANCIAL STATEMENTS (continued)
8.

Impaired Assets, cont’dInterest and other income forgone on impaired assets

The following table shows the estimated amount of interest and other income forgone, net of interest recoveries, on
average impaired assets during the period.
Half
year
Sep 05
$M

Half
Movt
year
Sep 05
Mar 05 v. Mar 05
%
$M

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Gross interest and other income receivable on non-accrualloans, restructured loans and unproductive facilities
Australia

14

12

17%

26

29

-10%

New Zealand

5

4

25%

9

8

13%

Overseas markets

8

8

0%

16

25

-36%

27

24

13%

51

62

-18%

(7)

(3)

large

(10)

(6)

67%

Total gross interest and other income receivableon impaired assets
Interest and other income received
Australia
New Zealand

(3)

(2)

50%

(5)

(1)

large

Overseas markets

(7)

(3)

large

(10)

(12)

-17%

(17)

(8)

large

(25)

(19)

32%

Australia

7

9

-22%

16

23

-30%

New Zealand

2

2

0%

4

7

-43%

Total interest income and other income received
Net interest and other income forgone

Overseas markets
Total net interest and other income forgone

1

5

-80%

6

13

-54%

10

16

-38%

26

43

-40%

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

78

NOTES TO FINANCIAL STATEMENTS (continued)
9.

Provision for doubtful debts

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

2,080

1,992

4%

1,992

1,534

30%

Acquisition (disposal) of provisions

-

(13)

-100%

(13)

216

large

Adjustment for exchange rate fluctuations

(3)

(32)

-91%

(35)

53

large

General provision
Balance at start of period

Charge to statement of financial performance

296

284

4%

580

632

-8%

Transfer to specific provision

(266)

(205)

30%

(471)

(525)

-10%

Recoveries
Total general provision

60

54

11%

114

82

39%

2,167

2,080

4%

2,167

1,992

9%

321

384

-16%

384

484

-21%

Specific provision
Balance at start of period
Acquisition of provisions

-

-

n/a

-

57

-100%

Adjustment for exchange rate fluctuations

(4)

(7)

-43%

(11)

(2)

large

Bad debts written off

(310)

(261)

19%

(571)

(680)

-16%

Transfer from general provision

266

205

30%

471

525

-10%

Total specific provision

273

321

-15%

273

384

-29%

2,440

2,401

2%

2,440

2,376

3%

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04%

Australia

216

162

33%

378

459

-18%

New Zealand

99

47

large

146

80

83%

Overseas markets

37

43

-14%

80

86

-7%

352

252

40%

604

625

-3%

(86)

(47)

83%

(133)

(100)

33%
-10%

Total provisions for doubtful debts

Provision movement analysis
New and increased provisions

Provision releases

266

205

30%

471

525

Recoveries of amounts previously written off

(60)

(54)

11%

(114)

(82)

39%

Net specific provisions

206

151

36%

357

443

-19%

Net credit to general provision

90

133

-32%

223

189

18%

Charge to statement of financial performance

296

284

4%

580

632

-8%

Movt
Sep 05v. Sep 04%

As at
Sep 05As at
Mar 05As at
Sep 04

$M

$M

$M

Movt
Sep 05v. Mar 05%

Australia

160

191

209

-16%

-23%

New Zealand

90

63

68

43%

32%

Domestic markets

250

254

277

-2%

-10%

Overseas markets

23

67

107

-66%

-79%

Total specific provision

273

321

384

-15%

-29%

Specific provision balance

79

NOTES TO FINANCIAL STATEMENTS (continued)
10. Loan capital
Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05
%

Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

1,443

1,425

1%

1,443

1,535

-6%

Hybrid loan capital
US stapled trust security issue1

394

389

1%

394

419

-6%

Subordinated notes

Perpetual subordinated notes

7,300

6,307

16%

7,300

6,521

12%

Total Loan Capital

9,137

8,121

13%

9,137

8,475

8%

1.

Loan capital of USD1.1 billion is subordinated in right of payment to the claims of depositors and all other creditors of the parent entity and its controlled entities
which have issued the notes. Hybrid loan capital constitutes Tier 1 capital as defined by the Australian Prudential Regulation Authority for capital adequacy
purposes

11. Share Capital
Issued and quoted securities

Number quoted

Issue priceper share

Amount paid
up per share

Ordinary shares
As at 30 September 2005

1,826,449,480

Issued during the full year

17,678,450

Bought back during full year

9,630,777

Preference shares
As at 30 September 2005
ANZ StEPS

10,000,000

$100

$100

Euro Hybrid

500,000€ 1,000€ 1,000

500,000€ 1,000€ 1,000

Issued during full year
Euro Hybrid 1
1.

On 13 December 2004 the Group issued €500 million hybrid capital into the European market. The instruments consist of a coupon paying note issued by ANZ
Jackson Funding PLC stapled to a fully paid up €1,000 preference share issued by Australia and New Zealand Banking Group Limited

Half
year
Sep 05Halfyear
Mar 05Movt
Sep 05v. Mar 05

Full
year
Sep 05

Fullyear
Sep 04Movt
Sep 05v. Sep 04

15.8%

15.6%

1%

15.5%

15.7%

-1%

Net profit as a % of shareholders' equity
including preference shares at end of period

80

NOTES TO FINANCIAL STATEMENTS (continued)
12. Capital adequacy

$M

Movt
Sep 05v. Mar 05%

Movt
Sep 05v. Sep 04%

19,00817,925

3%

9%

1,443

1,425

1,535

1%

-6%

(31)

(31)

(31)

0%

0%

(1,077)

(930)

(983)

16%

10%

(213)

(266)

(218)

-20%

-2%

(3,902)(4,007)(4,170)

-3%

-6%

(524)

(492)

(465)

7%

13%

As at
Sep 05As at
Mar 05As at
Sep 04$M$M

Total shareholders' equity and outside equity interests

19,488Hybrid loan capital

Qualifying capital
Tier 1Less:

1Asset revaluation reserve
Dividend

2

Accumulated retained profits and reserves of insurance,
funds management and securitisation entities
Unamortised goodwill and other intangibles
Capitalised expenses3
Investment in ANZ Lenders Mortgage Insurance
Tier 1 capital

(27)

(27)

(27)

0%

0%

15,157

14,68013,5663%

12%

Tier 2
Asset revaluation reserve

31

31

31

0%

0%

Perpetual subordinated notes

394

389

419

1%

-6%

1,448

1,390

1,342

4%

8%

1,873

1,810

1,792

3%

5%

Subordinated notes5

6,701

5,769

6,052

16%

11%

Tier 2 capital

8,574

7,579

7,844

13%

9%

General provision for doubtful debts4

Deductions
Investment in funds management and securitisation entities

84

106

107

-21%

-21%

Investment in joint ventures with ING6

528

478

708

10%

-25%

Other

172

183

204

-6%

-16%

Total deductions

784

767

1,019

2%

-23%

22,947

21,492

20,391

7%

13%

Tier 1 capital

15,157

14,68013,566

3%

12%

Less:

3,233

3,263

2,535

-1%

28%

Total qualifying capital
Adjusted common equity

Preference share capital
Deductions

784

767

1,019

2%

-23%

11,14010,65010,012

5%

11%

Tier 1

6.9%

7.0%

6.9%

-1%

0%

Tier 2

3.9%

3.6%

4.0%

8%

-3%

10.8%

10.6%

10.9%

2%

-1%

(0.3%)(0.3%)(0.5%)

0%

-40%

10.5%

10.3%

10.4%

2%

1%

Adjusted common equity 7
Ratios (%)

Less:

Deductions

Total
Adjusted common equity
Risk weighted assets
1.
2.
3.
4.
5.
6.
7.

5.1%

5.1%

5.1%

0%

0%

219,573

209,524

196,6645%12%Represents the US Stapled Trust Security Issue approved by APRA as qualifying for Tier 1 status. Refer Note 10
Relates to dividend not provided forComprises loan and lease origination fees, capitalised securitisation establishment costs and costs associated with debt raisings
Net of attributable future income tax benefit
For capital adequacy calculation purposes, subordinated note issues are reduced by 20% of the original amount over the last four years to maturity
Joint ventures with ING in Australia and New ZealandTier 1 capital, less preference share capital (converted at 30 September 2005 rates), less deductions

81

NOTES TO FINANCIAL STATEMENTS (continued)
12. Capital adequacy, cont’dAssetsSep
2005$M

Risk Weighted Assets
Sep
2004
$M

Sep
2005
$M

Sep
2004
$M

Statement of financial position

Zero risk weighted assets

23,16024,467--

Claims on approved banks and local governments

16,054

12,593

3,211

2,519

Advances secured by mortgages eligible for 50% risk weighting

118,895

106,01359,44853,007

Other assets - credit risk

127,204

113,218

127,204

113,218

Total statement of financial position assets - credit risk

285,313

256,291

189,863

168,744

Trading assets - market risk
Total statement of financial position assets

Notional Amount

7,872

3,054

n/a

n/a

293,185259,345

189,863

168,744

Credit Equivalent

Risk Weighted Assets

Sep
2005
$M

Sep
2004
$M

Sep
2005
$M

Sep
2004
$M

Sep
2005
$M

Sep
2004
$M

Direct credit substitutes

9,657

10,262

9,657

10,262

7,337

8,173

Trade and performance related items

13,175

11,887

5,683

5,265

4,953

4,728

Commitments

87,31978,91414,017

12,385

12,24910,239782,380

672,500

12,309

11,692

3,681

3,790

892,531

773,563

41,666

39,604Off-balance sheet exposures

Foreign exchange, interest rate and other market
related transactions
Total off balance sheet exposures - credit risk
Total risk weighted assets - credit risk
Risk weighted assets - market risk
Total risk weighted assets

82

28,22026,930218,083

195,674

1,490

990

219,573

196,664

NOTES TO FINANCIAL STATEMENTS (continued)
13. Average balance sheet and related interest
Averages used in the following tables are predominantly daily averages. Interest income figures are presented on a
tax-equivalent basis. Non-accrual loans are included under the interest earning asset category, “loans, advances andbills discounted”. Intragroup interest earning assets and interest bearing liabilities are treated as external assets andliabilities for the geographic segments.
Full year Sep 05

Full year Sep 04

Ave balInt

Rate

Ave bal

Int

Rate

$M

$M

%

$M

$M

%

Interest earning assets
Due from other financial institutions
Australia

807

42

5.2%

578

29

New Zealand

2,242

126

5.6%

2,284

115

5.0%
5.0%

Overseas markets

2,664

90

3.4%

2,322

43

1.9%

Investments in public securities
Australia

8,202

444

5.4%

7,231

389

5.4%

New Zealand

2,226

133

6.0%

3,038

150

4.9%

Overseas markets

2,647

88

3.3%

3,175

95

3.0%

151,066

10,5437.0%

129,658

8,893

6.9%

61,035

5,132

8.4%

48,346

3,701

7.7%

9,060

461

5.1%

9,810

421

4.3%

Loans, advances and bills discounted
Australia
New ZealandOverseas markets
Other assets
Australia

2,124

101

4.8%

1,524

127

8.3%

New Zealand

2,912

101

3.5%

2,252

58

2.6%

Overseas markets

3,319

191

5.8%

1,935

127

6.6%

9,473

330

3.5%

10,670225

2.1%

257,777

17,782

222,823

14,373Intragroup assets
Overseas markets
Intragroup elimination(9,473)(330)

248,304

17,452

7.0%(10,670)(225)

212,153

14,148Non-interest earning assets
Acceptances
Australia
Overseas markets
Premises and equipment
Other assets

13,166

13,398

74

54

1,507

1,460

18,784

18,224(1,823)(1,762)

(608)

(481)

Provisions for doubtful debts
Australia
New ZealandOverseas markets
Total average assets

(15)

(66)

31,085279,389

30,827
242,980

83

6.7%

NOTES TO FINANCIAL STATEMENTS (continued)
13. Average Balance Sheet and related interest, cont’d
Full year Sep 05
Ave bal
Int
Rate
$M
$M
%
Interest bearing liabilities
Tim e deposits
Australia
New ZealandOverseas m arkets
Savings deposits
Australia
New ZealandOverseas m arkets
Other dem and deposits
Australia
New ZealandOverseas m arkets
Due to other financial institutions
Australia
New ZealandOverseas m arkets
Comm ercial paper
Australia
New ZealandOverseas m arkets
Borrowing corporations' debt
Australia
New Zealand
Loan capital, bonds and notes
Australia
New ZealandOverseas m arkets
1
Other liabilities
Australia
New ZealandOverseas m arkets
Intragroup liabilities
Australia
New Zealand
Intragroup elim ination

Non-interest bearing liabilities
Deposits
Australia
New ZealandOverseas m arkets
Acceptances
Australia
Overseas m arkets
Other liabilities
Total average liabilities
1.

Full year Sep 04
Ave bal
Int
Rate
$M
$M
%

39,38825,582
11,075

2,126
1,597
383

5.4%
6.2%
3.5%

30,83920,91012,772

1,589
1,138
296

5.2%
5.4%
2.3%

13,896
7,210
417

413
291
3

3.0%
4.0%
0.7%

13,017
6,463
386

352
212
3

2.7%
3.3%
0.8%

33,950
7,992
794

1,432
412
13

4.2%
5.2%
1.6%

29,737
6,428
662

1,182
256
9

4.0%
4.0%
1.4%

1,456
1,680
4,642

86
93
166

5.9%
5.5%
3.6%

1,452
1,608
3,736

85
76
77

5.9%
4.7%
2.1%

5,355
7,717
5,915

299
521
160

5.6%
6.8%
2.7%

5,824
6,764
6,485

313
383
74

5.4%
5.7%
1.1%

7,344
1,954

403
125

5.5%
6.4%

7,092
1,925

371
110

5.2%
5.7%

38,305
4,757
137

2,144
335
4

5.6%
7.0%
2.9%

29,631
2,009
150

1,575
121
3

5.3%
6.0%
2.0%

4,593
106
90

443
163
17

n/a
n/a
n/a

4,232
40
82

538
83
17

n/a
n/a
n/a

3,648
5,825
233,828(9,473)
224,355(13)
343
11,959(330)
11,629

-0.4%
5.9%

5,644
5,026
202,914(10,670)
192,244

(19)
244
9,088
(225)
8,863

-0.3%
4.9%

5.2%

4,147
3,535
976

3,958
2,619
867

13,16673
14,45336,350260,705

13,39854
13,611
34,507
226,751

Includes foreign exchange swap costs

84

4.6%

NOTES TO FINANCIAL STATEMENTS (continued)
13. Average Balance Sheet and related interest, cont’d
Half year Sep 05
Ave bal
Int
Rate
$M
$M
%

Half year Mar 05
Ave bal
Int
Rate
$M
$M
%

Interest earning assets
Due from other financial institutions
880

23

5.2%

733

19

5.2%

New ZealandAustralia

2,092

63

6.0%

2,392

63

5.3%

Overseas markets

3,108

58

3.7%

2,218

32

2.9%

Investments in public securities
Australia

8,567

234

5.4%

7,835

210

5.4%

New Zealand

2,052

63

6.1%

2,401

70

5.8%

Overseas markets

2,474

43

3.5%

2,821

45

3.2%
6.9%

Loans, advances and bills discounted
Australia
New ZealandOverseas markets

156,035

5,529

7.1%

146,069

5,014

62,829

2,679

8.5%

59,230

2,453

8.3%

8,770

244

5.5%

9,352

217

4.6%

Other assets
Australia

2,448

54

4.4%

1,803

47

5.2%

New Zealand

3,339

60

3.6%

2,481

41

3.3%

Overseas markets

4,010

109

5.4%

2,624

82

6.3%

9,242

179

3.9%

9,706

151

3.1%

265,846

9,338

249,665

8,444

Intragroup assets
Overseas markets
Intragroup elimination(9,242)(179)

256,604

9,159

7.1%

(9,706)(151)

239,959

8,293

Non-interest earning assets
Acceptances
Australia
Overseas markets
Premises and equipment
Other assets

13,25813,073

86

61

1,553

1,527

20,18517,307(1,852)(1,792)

(620)

(594)

Provisions for doubtful debts
Australia
New ZealandOverseas markets
Total average assets

2

(32)

32,612289,216

29,550269,50985

6.9%

NOTES TO FINANCIAL STATEMENTS (continued)
13. Average Balance Sheet and related interest, cont’d
Half year Sep 05
Ave bal
Int
Rate
$M
$M
%
Interest bearing liabilities
Tim e deposits
Australia
New ZealandOverseas markets
Savings deposits
Australia
New ZealandOverseas markets
Other demand deposits
Australia
New ZealandOverseas markets
Due to other financial institutions
Australia
New ZealandOverseas markets
Com m ercial paper
Australia
New ZealandOverseas markets
Borrowing corporations' debt
Australia
New Zealand
Loan capital, bonds and notes
Australia
New ZealandOverseas markets
1
Other liabilities
Australia
New ZealandOverseas markets
Intragroup liabilities
Australia
New Zealand
Intragroup elim ination

Non-interest bearing liabilities
Deposits
Australia
New ZealandOverseas markets
Acceptances
Australia
Overseas markets
Other liabilities
Total average liabilities
1.

Half year Mar 05
Ave bal
Int
Rate
$M
$M
%

40,122
25,537
11,185

1,106
815
210

5.5%
6.4%
3.7%

38,65025,626
10,965

1,020
782
173

5.3%
6.1%
3.2%

14,092
7,264
419

214
151
2

3.0%
4.1%
1.0%

13,699
7,155
415

199
140
1

2.9%
3.9%
0.5%

35,443
8,165
805

766
219
7

4.3%
5.3%
1.7%

32,448
7,818
783

666
193
6

4.1%
4.9%
1.5%

1,515
1,567
5,073

47
48
102

6.2%
6.1%
4.0%

1,397
1,793
4,209

39
45
64

5.6%
5.0%
3.0%

5,150
7,769
6,088

147
268
97

5.7%
6.9%
3.2%

5,561
7,664
5,740

152
253
63

5.5%
6.6%
2.2%

7,448
1,927

207
63

5.5%
6.6%

7,239
1,981

196
62

5.4%
6.3%

41,281
5,906
136

1,179
211
2

5.7%
7.1%
2.9%

35,312
3,601
139

965
124
2

5.5%
6.9%
2.9%

4,729
150
95

239
98
7

n/a
n/a
n/a

4,458
65
86

204
65
10

n/a
n/a
n/a

3,111
6,131
241,108(9,242)
231,866

(5)
184
6,384
(179)
6,205

-0.3%
6.0%

4,189
5,517
226,510(9,706)
216,804

(8)
159
5,575
(151)
5,424

-0.4%
5.8%

5.3%

4,174
3,771
1,071

4,121
3,298
881

13,25886
15,92438,284
270,150

13,073
61
12,972
34,406251,210

Includes foreign exchange swap costs

86

5.0%

NOTES TO FINANCIAL STATEMENTS (continued)
13. Average Balance Sheet and related interest, cont’d
Half
year
Sep 05
$M

Half
year
Mar 05
$M

Full
year
Sep 05
$M

Full
year
Sep 04$M

Australia

193,130

178,814

185,990

162,944

New Zealand

76,32372,41374,37461,027

Overseas markets

29,00527,98828,49829,679(9,242)(9,706)(9,473)(10,670)289,216

269,509279,389

242,980

33.2%

33.7%

33.4%

32.9%

Australia

167,930

156,440

162,199

138,991

New Zealand

70,312

66,504

68,41555,920Overseas markets

27,604

26,721

27,163

27,912

Total average assets

less intragroup elimination% of total average assets attributable
to overseas activities
Average interest earning assets

less intragroup elimination(9,242)(9,706)(9,473)(10,670)

256,604

239,959

248,304

212,153

Australia

182,537

168,808

175,691

153,927

New Zealand

71,89968,16370,03757,550Overseas markets

24,95623,94524,45025,944

Total average liabilities

less intragroup elimination(9,242)(9,706)(9,473)(10,670)

270,150251,210260,705

226,751

Ordinary share capital

17,208

16,79017,00015,000Preference share capital

1,858

1,509

1,684

1,229

19,066

18,29918,684

16,229289,216

269,509279,389

242,980

33.6%

34.5%

34.0%

34.6%

Total average shareholders' equity

Total average liabilities andshareholders' equity% of total average liabilities attributable
to overseas activities

87

NOTES TO FINANCIAL STATEMENTS (continued)
14. Interest spreads and net interest average margins
Intragroup interest earning assets and interest bearing liabilities are treated as external assets and liabilities for thegeographic segments.
Half
year
Sep 05%Halfyear
Mar 05%

Fullyear
Sep 05%

Fullyear
Sep 04%Gross earnings rate1
Australia

6.94

6.78

6.86

6.79

New Zealand

8.13

7.92

8.03

7.20

Overseas markets

4.58

3.94

4.27

3.27

Total Group

7.12

6.93

7.03

6.67

Gross interest spread

1.86

1.98

1.92

2.11

Interest forgone on impaired assets(0.01)(0.01)(0.01)(0.02)

Interest spread and net interest average margin may be analysed as follows:

Australia

Net interest spread

1.85

1.97

1.91

2.09

Interest attributable to net non-interest bearing items

0.45

0.41

0.43

0.39

Net interest average margin - Australia

2.30

2.38

2.34

2.48

New ZealandGross interest spread

1.76

1.96

1.86

2.08

Interest forgone on impaired assets(0.00)(0.01)(0.01)(0.01)Net interest spread

1.76

1.95

1.85

2.07

Interest attributable to net non-interest bearing items

0.53

0.48

0.51

0.43

Net interest average margin - New Zealand

2.29

2.43

2.36

2.50

Overseas markets
Gross interest spread

1.01

1.11

1.05

1.34

Interest forgone on impaired assets(0.01)(0.04)(0.02)(0.04)Net interest spread

1.00

1.07

1.03

1.30

Interest attributable to net non-interest bearing items

0.50

0.47

0.49

0.25

Net interest average margin - Overseas markets

1.50

1.54

1.52

1.55

Gross interest spread

1.79

1.93

1.86

2.08

Interest forgone on impaired assets(0.01)(0.01)(0.01)(0.02)Net interest spread

1.78

1.92

1.85

2.06

Group

Interest attributable to net non-interest bearing items

0.52

0.48

0.50

0.43

Net interest average margin

2.30

2.40

2.35

2.49

1.

Average interest rate received on interest earning assets

88

NOTES TO FINANCIAL STATEMENTS (continued)
15. Derivative financial instruments
Derivatives

Derivative instruments are contracts whose value is derived from one or more underlying financial instruments orindices. They include swaps, forward rate agreements, futures, options and combinations of these instruments. The
use of derivatives and their sale to customers as risk management products is an integral part of the Group’s trading
activities. Derivatives are also used to manage the Group’s own exposure to fluctuations in exchange and interest
rates as part of its asset and liability management activities. Derivatives are subject to the same types of credit andmarket risk as other financial instruments, and the Group manages these risks in a consistent manner.
The following table provides an overview of the Group’s exchange rate and interest rate derivatives. It includes all
contracts, both trading and other than trading.
30 September 2005
Notional

CreditPrincipal

Equivalent

Amount$M

30 September 2004
Notional

CreditFair

Principal

Equivalent

Fair

AmountValue

AmountAmount

Value

$M

$M

$M

$M

$M

Foreign exchange and commodities contracts4
Spot and forward contracts

184,958

3,082

(178)

183,825

3,216(1,411)

Swap agreements

68,892

3,638

(561)

51,437

3,095

(25)

Futures contracts1

256

n/a

4

251

n/a

2

Options purchased

9,340

315

186

13,288398

224

Options sold2

14,925n/a(174)

18,852n/a(226)

Other contracts

4,963

573

(2)

2,690

437

115

283,334

7,608

(725)

270,343

7,146(1,321)

Interest rate agreements
Forward rate agreements

47,7348

139,572

9

5

Swap agreements

405,152

3,443

431

321,581

3,681

424

Futures contracts1

35,111n/a

8

38,270n/a

4

Options purchased

12,81096

62

12,810111

64

Options sold2

16,715n/a(42)

15,214n/a(35)

517,522

3,547

460

427,447

3,801

462

15,4372,929(1)

11,7433,381

31816,293

14,084(266)

709,533

14,328(828)

Credit contracts
Credit default swaps3
Total
1.
2.
3.
4.

Credit equivalent amounts have not been included as there is minimal credit risk associated with exchange traded futures where the clearing house is thecounterparty
Options sold have no credit exposures as they represent obligations rather than assets
Credit default swaps include structured transactions that expose the Group to the performance of certain assets. The total investment of the Group in thesetransactions is USD 500 million (Sep 2004:USD 750 million)
The fair value of foreign exchange contracts includes an increase of $586 million (Sep 2004: $519 million reduction) in respect of cash collateral paid (Sep 2004:
received) under credit support agreements

Notional principal amount is the face value of the contract and represents the volume of outstanding transactions.
Credit equivalent amount is calculated in accordance with the APRA capital adequacy guidelines and combines theaggregate value of all contracts in a positive market position plus an allowance for the potential increase in value over
the remaining term of the transaction. Fair value is the net position of contracts with positive market values andnegative market values.

89

NOTES TO FINANCIAL STATEMENTS (continued)
15. Derivative financial instruments, cont’d
Hedging

In addition to customer and trading activities, the Group uses derivatives to manage the risk associated with its
balance sheet and future revenue streams. Revenue related hedges are separately listed in the table below.
The table below shows the notional principal amount, credit equivalent amount and fair value of derivatives held by
the Group, split between those entered into for customer-related and trading purposes and those entered into forother than trading purposes.
30 September 2005
Notional

CreditPrincipal

Equivalent

AmountAmount$M$M

Customer-related and trading purposes

211,169

Balance sheet hedging purposes

68,208

Revenue related hedging

30 September 2004
Notional

CreditFair

Principal

Equivalent

Fair

Value

AmountAmount

Value

$M

$M

$M

$M

4,676

2,138

210,818

4,512

94

2,852

(2,904)56,0392,585(1,371)

3,957

80

41

3,486

49

(44)

283,334

7,608

(725)

270,343

7,146(1,321)

Customer-related and trading purposes

408,901

2,902

188

340,104

3,162

166

Balance sheet hedging purposes

108,621645

272

87,343639

296

517,522

3,547

460

427,447

3,801

462

Customer-related and trading purposes

13,159

1,154

(4)

8,775

745

(5)

Balance sheet hedging purposes

2,278

1,775

3

2,968

2,636

36

Foreign exchange and commodities contracts

Interest rate contracts

Credit contracts

Total

15,4372,929(1)

11,7433,381

31816,293

14,084(266)

709,533

14,328(828)

90

NOTES TO FINANCIAL STATEMENTS (continued)
16. Contingent liabilities and contingent assets
Contingent liabilities!

GeneralThere are outstanding court proceedings, claims and possible claims against the Group, the aggregate amount of
which cannot readily be quantified. Appropriate legal advice has been obtained and, in the light of such advice,provisions as deemed necessary have been made. We have in some instances not disclosed the estimatedfinancial impact as this may prejudice the interests of the Group.
!

Sale of Grindlays businesses

On 31 July 2000, ANZ completed the sale to Standard Chartered Bank (SCB) of ANZ Grindlays Bank Limited andthe private banking business of ANZ in the United Kingdom and Jersey, together with ANZ Grindlays (Jersey)
Holdings Limited and its subsidiaries, for USD1.3 billion in cash. ANZ provided warranties and certain indemnities
relating to those businesses and, where it anticipated that payments would be likely under the warranties orindemnities, made provisions to cover the anticipated liability. The issues below have not impacted our reported
results. All settlements and costs have been covered within the provisions established at the time. ANZ may beheld liable in relation to the following:-

FERA

In 1991 certain amounts were transferred from non-convertible Indian Rupee accounts maintained with
Grindlays in India. These transactions may not have complied with the provisions of the Foreign Exchange
Regulation Act, 1973. Grindlays, on its own initiative, brought these transactions to the attention of theReserve Bank of India. The Indian authorities have served notices on Grindlays and certain of its officers inIndia that could lead to possible penalties. Criminal prosecutions have also been foreshadowed and, in the caseof two former officers, commenced. Grindlays has commenced proceedings in the court contesting the validityof these notices and prosecutions, which are currently stayed pending the outcome of the court proceedings.
-

Differential Cheques

In June 2003, Grindlays was successful in its appeal against orders to repay, with interest, two payments it
received from a stockbroker in 1991 in connection with securities transactions. These orders had directed
repayment of Indian Rupees 24 million (plus interest accruing at 24% since 1991). Since the appeal decision
was handed down, no further action has been taken against Grindlays in relation to a further twelve payments
received by it in 1991 in similar circumstances totalling Indian Rupees 277 million.
In addition, ANZ provided an indemnity relating to tax liabilities of Grindlays (and its subsidiaries) and the Jersey
Sub-Group to the extent to which such liabilities were not provided for in the Grindlays accounts as at 31 July
2000. Claims have been made under this indemnity also, with no material impact on the Group expected.
!

Noga Claim

On 10 March 2005, leave was given by the High Court in London to certain parties to make a claim against ANZover its role in 1996 as arranger and escrow agent in respect of a buyback of Nigerian Government bills of
exchange (“the Noga claim”). The claim was disclosed by ANZ in view of its potential size (DEM 973 million[$833 million at 31 March 2005 exchange rates] plus interest). ANZ considered the Noga claim to be opportunistic
and that the chances of it being successful were very remote. As announced on 29 April 2005, ANZ took theopportunity to settle the proceedings at an early stage at a level which is not material to the bank.
!

Contingent tax liability

The Group in Australia was during the year subjected to client risk reviews by the Australian Taxation Office (ATO)
across a broad spectrum of matters, as part of normal ATO procedures. The reviews mainly covered years up to
2003. Some matters have been listed by the ATO for further investigation.
The ATO is also reviewing the taxation treatment of certain other transactions undertaken by the Group in thecourse of normal business activities.
In addition, at the Company’s request the ATO is reviewing the taxation treatment of the sale of Grindlays in 2000.
It is also reviewing the transfer of the life and funds management businesses into the joint venture with ING in
2002.
During the year the Company and the ATO settled the remaining outstanding issues from the large case tax audit
which commenced in 1995. The settlement was within existing provisions.
The Group in New Zealand is being audited by the Inland Revenue Department (IRD) as part of normal revenue
authority procedures, with a particular focus on certain kinds of structured finance transactions. The IRD has
issued Notices of Proposed Adjustment (the ‘Notices’) in respect of some of those structured finance transactions.
The Notices are not tax assessments and do not establish a tax liability, but are the first step in a formal disputes
process. In addition, some tax assessments have been received. Should the same position be adopted by the IRD
on the remaining transactions of that kind as reflected in the Notices and tax assessments received, the maximum
potential tax liability would be approximately NZD432 million (including interest tax effected) for the period to
30 September 2005. Of that maximum potential liability, approximately NZD124 million is subject to tax
indemnities provided by Lloyds TSB Bank PLC under the agreement by which ANZ acquired the National Bank of
New Zealand and which relate to transactions undertaken by the National Bank of New Zealand before December
2003.

91

NOTES TO FINANCIAL STATEMENTS (continued)
16. Contingent liabilities and contingent assets, cont’d!

Contingent tax liability, cont’dGeneral or issue-specific audits and other investigations are being undertaken by revenue authorities in the UnitedStates, the United Kingdom and in other jurisdictions as part of normal revenue authority activity in thosecountries.
The Company has assessed these and other taxation claims arising in Australia, New Zealand and elsewhere,
including seeking independent advice where appropriate, and believes that it holds appropriate provisions.
!

Interbank Deposit Agreement

ANZ has entered into an Interbank Deposit Agreement with the major banks in the payments system. Thisagreement is a payment system support facility certified by the Australian Prudential Regulation Authority, where
the terms are such that if any bank is experiencing liquidity problems, the other participants are required todeposit equal amounts of up to $2 billion for a period of 30 days. At the end of 30 days the deposit holder has theoption to repay the deposit in cash or by way of assignment of mortgages to the value of the deposit.

!

Clearing and Settlement Obligations

In accordance with the clearing and settlement arrangements set out:
- in the Australian Payments Clearing Association Limited (APCA) Regulations for the Australian Paper Clearing
System, the Bulk Electronic Clearing System, the Consumer Electronic Clearing System and the High Value
Clearing System (HVCS), the Company has a commitment to rules which could result in a bilateral exposure andloss in the event of a failure to settle by a member institution; and- in the Austraclear System Regulations, the Company has a commitment to participate in loss-sharing
arrangements in the event of a failure to settle by a member institution.
For both the APCA HVCS and Austraclear, the obligation arises only in limited circumstances.
Contingent asset matters!

National Housing Bank

In 1992, Grindlays received a claim aggregating approximately Indian Rupees 5.06 billion from the National
Housing Bank (NHB) in India. The claim arose out of cheques drawn by NHB in favour of Grindlays, the proceedsof which were credited to the account of a Grindlays customer.
Grindlays won an arbitration award in March 1997, under which NHB paid Grindlays an award of Indian Rupees
9.12 billion. NHB subsequently won an appeal to the Special Court of Mumbai, after which Grindlays filed an
appeal with the Supreme Court of India. Grindlays paid the disputed money including interest into court.
Ultimately, the parties settled the matter and agreed to share the moneys paid into court which by then totalled
Indian Rupees 16.45 billion (AUD 661 million at 19 January 2002 exchange rates), with Grindlays receiving Indian
Rupees 6.20 billion (AUD 248 million at 19 January 2002 exchange rates) of the disputed monies. ANZ in turn
received a payment of USD124 million (USD equivalent of the Indian Rupees received by Grindlays) from Standard
Chartered Bank under the terms of an indemnity given in connection with the sale of Grindlays to Standard
Chartered Bank.
ANZ Claims
ANZ is pursuing two separate actions arising from the above.
(a) A $130 million plus compound interest claim against its insurers. $130 million is the balance of the limit ofindemnity under ANZs insurance arrangements for the 1991-92 policy year.
The proceedings, in the Supreme Court of Victoria, are against ANZs captive insurance company ANZcoverInsurance Pty Ltd (ANZcover). ANZcover is an authorised general insurer restricted to insuring the interestsof ANZ and its subsidiaries. ANZcover in turn purchases reinsurance from global reinsurers, primarily in the
London reinsurance market. ANZcover has no retained exposure to the NHB claim, which is fully reinsured,
save for a small exposure arising from the insolvency of some reinsurers in the London market.
The insurers contest liability and the proceedings remain on foot. The trial before the Supreme Court ofVictoria is scheduled to be heard in early 2006.
(b) ANZ is entitled to share with NHB in the proceeds of any recovery from the estate of the customer whose
account was credited with the cheques drawn by NHB. However, the Indian Taxation Department is claiming
a statutory priority to all of the funds available for distribution to creditors of that customer.
No amounts receivable under either of these actions have been recognised in these accounts, except for$0.9 million which has been received from insurers, by way of settlement or distributions from schemes ofarrangement, representing, in aggregate, $1.1 million of indemnity.

92

NOTES TO FINANCIAL STATEMENTS (continued)
17. Note to the Statement of Cash Flows(a)

Reconciliation of profit after income tax to net cash provided by operating activities
Half
year
Sep 05
Inflows(Outflows)$M

Profit after income tax

1,543

Half
Full
Full
year
year
year
Mar 05
Sep 05
Sep 04
Inflows
Inflows
Inflows(Outflows) (Outflows) (Outflows)
$M
$M
$M
1,475

3,018

2,815

Adjustments to reconcile to net cash provided by operating activities
Provision for doubtful debts

296

284

580

632

Depreciation and amortisation

244

240

484

455

Expense provisions

261

295

556

429

Payments from provisions

(218)

(280)

(498)

(395)
7

Provision for surplus lease space

-

-

-

(Profit) loss on property disposals

5

17

22

5

Decrease (increase) in interest receivable

67

21

88

(478)

(Decrease) increase in interest payable

202

12

214

605

(Increase) decrease in trading securities

(183)

(638)

(821)

514

(Increase) decrease in net tax assets

38

124

162

921

Unrealised (gain) loss on revaluation of treasury instruments

(88)

(635)

(723)

(169)

3

(55)

(52)

(91)

2,170

860

3,030

5,250

9,600

7,180

9,600

4,998

Other
Net cash provided by operating activities
Reconciliation of cash and cash equivalents
Cash at the end of the period as shown in the statement of cash flows
is reconciled to the related items in the balance sheet as follows
Liquid assets - less than 3 months
Due from other financial institutions - less than 3 months

4,102

4,516

4,102

2,856

13,702

11,696

13,702

7,854

75

78

153

135

Non-cash financing and investment activities
Share capital issues
Dividend reinvestment plan93

NOTES TO FINANCIAL STATEMENTS (continued)
17. Note to the Statement of Cash Flows, cont’d(b)Acquisition of National Bank of New Zealand
Sep 04$M

Consideration paid
Cash paid at 1 December 2003

4,842

Foreign exchange movement

270

Consideration including acquisition costs at 30 September 2004 rates

5,112

Fair value of net assets acquired
AssetsLiquid assets

842

Due from other financial institutions

2,737

Trading securities

1,742

Investment securities

225

Net loans and advances

32,215

Other assets

1,815

Premises and equipment

169

Total assets

39,745

Liabilities
Due to other financial institutions

1,151

Deposits and borrowings

32,352

Provisions

115

Creditor and other liabilities

2,588

Unsubordinated Debt

1,179

Loan capital

514

Total liabilities

37,899Net assets acquired at fair value

1,846

Goodwill on acquisition

3,266

Cash paid

4,842

Cash acquired

1,618

Cash outflow on acquisition

3,224

94

NOTES TO FINANCIAL STATEMENTS (continued)
18. Changes in composition of the GroupAcquisition of controlled entities

There were no material controlled entities acquired during the year to 30 September 2005. On 1 December 2003, theCompany acquired NBNZ Holdings Limited and its controlled entities (NBNZ). The contribution of these entities(excluding integration costs) to the Group's profit after tax for the 10 months to 30 September 2004 was
NZD422 million (AUD375 million). Legal amalgamation of NBNZ into ANZ Banking Group (New Zealand) Limited wascompleted on 26 June 2004. ANZ Banking Group (New Zealand) Limited changed its name to ANZ National Bank
Limited on 28 June 2004.
Disposal of controlled entities

On 30 September 2005, the controlled entities NBNZ Life Insurance Limited and NBNZ Investment Services Limited
were sold. The profit before tax on disposal was $14 million ($14 million after tax). The after-tax contribution prior
to disposal was $18 million (2004: $12 million).
No material controlled entities were disposed of during the year to 30 September 2004.

19. Associates, joint venture entities and investments
Full
year
Sep 05
$M

Full
year
Sep 04$M

Movt
Sep 05v. Sep 04
%

Half
year
Sep 05
$M

Half
year
Mar 05$M

Movt
Sep 05v. Mar 05%

Operating profit

72

85

-15%

157

145

8%

Profit after income tax

72

85

-15%

157

145

8%

Aggregate associates and joint venture entities

Material contributions to profit
Contribution toGroup pre-tax profit

Ownership interest
held by Group
As at
As at
As at
Sep 04
Mar 05
Sep 05

Halfyear
Sep 05
$M

Half
year
Mar 05
$M

Full
year
Sep 05
$M

Full
year
Sep 04$M

PT Panin Indonesia Bank

16

21

37

43

29

29

29

E*Trade

2

2

4

2

34

35

35

48

59

107

97

49

49

49

%

%

%

Associates

Joint ventures
ING Australia Limited1
1.

After charging notional goodwill of $43 million (2004 full year: $41 million; Sep 2005 half: $22 million; Mar 2005 half: $21 million).

95

NOTES TO FINANCIAL STATEMENTS (continued)
20. Exchange rates
Major exchange rates used in translation of results of offshore controlled entities and branches into the Groupaccounts for each reporting period were as follows:
Balance Sheet
As at
As at
Sep 05
Mar 05As at
Sep 04

Profit and Loss Average
Full
Half
Half
year
year
year
Sep 05
Mar 05
Sep 05

Fullyear
Sep 04Euro

0.63250.59700.58140.6164

0.58830.6024

0.5968Great British pound

0.43250.41070.39830.41990.40850.41420.4054

New Zealand dollar

1.09981.08991.07001.0862

1.0832

1.08471.1254

United States dollar

0.76230.77190.71650.76430.76710.76570.7263

21. Significant events since balance date
There have been no significant events from 30 September 2005 to the date of this report.

96

APPENDIX 4E STATEMENT

The directors of Australia and New Zealand Banking Group Limited confirm that the financial statements and notes of
the consolidated entity set out on pages 57 to 96 are in the process of being audited.

David Meiklejohn
Director

John McFarlane
Director

24 October 2005

97

DEFINITIONS
Adjusted common equity is Tier 1 capital less preference shares and other Hybrid Capital at current rates andregulatory deductions from total capital.
Business Unit description:
Personal Banking Australia-

Banking Products manufactures deposit, transaction account and margin lending products.

-

Consumer Finance provides consumer and commercial credit cards, ePayment products, personal loans, andmerchant payment and ATM facilities.

-

Mortgages provides mortgage finance secured by residential real estate in Australia.

-

Regional Commercial and Agribusiness Products provides a full range of banking services to personalcustomers across Australia, and to small business and agricultural customers in rural Australia.

-

Wealth Management comprises the equity accounted earnings from INGA's core business operations (excludes
investment earnings) and the Financial Planning distribution business.

-

Other includes the branch network, whose costs are fully recovered from product business units, Private Banking
and marketing and support costs

Institutional-

Corporate and Structured Financing provides complex financing and advisory services, structured financial
products, leasing, private equity, project and leveraged finance and infrastructure investment to ANZ’s
Institutional, Corporate and Small Business customers.

-

Client Relationship Group manages customer relationships and develops financial services solutions andstrategies for large businesses with a turnover greater than $100 million in Australia and New Zealand and,through corporate clients where the Group has an existing customer relationship, in the United Kingdom, UnitedStates and Asia.

-

Markets provides origination, underwriting, structuring, risk management, advice and sale of credit and derivative
products, foreign exchange and commodity trading and sales-related services globally.

-

Trade and Transaction Services provides cash management, trade finance, international payments, clearing
and custodian services principally to institutional and corporate customers.

-

Non Continuing Businesses comprises the London headquartered project finance business and certain
structured finance transactions that ANZ has exited as part of its de-risking strategy. Certain legacy assets willremain on balance sheet until maturity or sale.

New Zealand Businesses-

ANZ Retail operating under the ANZ brand in New Zealand, provides a full range of banking service to personaland business banking customers.

-

NBNZ Retail operating under the National Bank brand in New Zealand, provides a full range of banking services
to personal customers from youth through to private banking, and business banking customers with turnover up to
NZD5 million.

-

Corporate Banking in New Zealand incorporates the ANZ and NBNZ brands, and provides financial solutions
through a relationship management model for medium-sized businesses with a turnover up to NZD100 million.

-

Rural Banking in New Zealand provides a full range of banking services to rural and agribusiness customers.

-

NBNZ refers to the operations of the National Bank of New Zealand Limited purchased on 1 December 2003.
These operations were amalgamated with ANZ Banking Group (New Zealand) Limited on 26 June 2004 to form
ANZ National Bank Limited. NBNZ was reported as a separate business unit until 30 September 2004.

Corporate Australia-

Business Banking in Australia provides a full range of banking services to metropolitan-based small to medium
businesses, with turnover up to $10 million and business banking funds under management of more than $50,000.

-

Corporate Banking Australia manages customer relationships and develops financial solutions for medium-sizedbusinesses with a turnover of $10 million to $150 million.

-

Small Business Banking in Australia provides business banking services to metropolitan-based small businesses,with business banking funds under management of up to $50,000.

Group Centre-

Treasury is the banker to all ANZ businesses charged with providing cashflow support, ensuring liquidity,
managing interest rate risk and providing capital to the businesses.

Economic loss provisioning (ELP) charge is determined based on the expected average annual loss of principal
over the economic cycle for the current risk profile of the lending portfolio.

98

DEFINITIONS (continued)
Equity standardisation Economic Value Added (EVATM) principles are in use throughout the Group, whereby risk
adjusted capital is allocated and charged against business units. Equity standardised profit is determined byeliminating the impact of earnings on each business unit’s book capital and attributing earnings on the business unit’s
risk adjusted capital. This enhances comparability of business unit performance. Geographic results are not equity
standardised.
Impaired assets are loans or other credit facilities where there is reasonable doubt about the collectability ofinterest, fees (past and future) or principal outstanding, or where concessional terms have been provided because of
the financial difficulties of the customer.
Income includes external interest income, other external operating income, and if positive, net inter business unit fee
and net intersegment interest income.
Liquid assets are cash and cash equivalent assets. Cash equivalent assets are highly liquid investments with shortperiods to maturity, are readily convertible to cash at ANZ’s option and are subject to an insignificant risk of changes
in value.
Net advances include gross loans and advances and acceptances less income yet to mature and provisions (for bothas at and average volumes).
Net interest average margin is net interest income as a percentage of average interest earning assets.
Non-assessable interest income is grossed up to the equivalent before tax amount for the purpose of thesecalculations.
Net interest spread is the average interest rate received on interest earning assets less the average interest rate
paid on interest bearing liabilities. Non-assessable interest income is grossed up to the equivalent before tax amountfor the purpose of these calculations.
Net non-interest bearing items, referred to in the analysis of interest spread and net interest average margin,
includes shareholders’ equity, provisions for doubtful debts, and deposits not bearing interest and other liabilities notbearing interest, offset by premises and equipment and other non-interest earning assets. Non-accrual loans areincluded within interest bearing loans, advances and bills discounted.
Net specific provision is the transfer from the general provision to the specific provision (representing new andincreased specific provisions less specific provision releases) less recoveries.
Net tangible assets equals share capital and reserves attributable to shareholders of the company less preference
share capital and unamortised goodwill.
Operating expenses exclude the provision for doubtful debts charge.
Overseas Markets includes all operations outside of Australia and New Zealand. The Group’s geographic segments
are Australia, New Zealand and Overseas Markets.
Service Transfer Pricing is used to allocate services that are provided by central areas to each of its business units.
The objective of service transfer pricing is to remove cross-subsidies between business units, and ensure eachbusiness accounts for the costs of the services it uses.
Service transfer pricing charges are reported in the profit and loss statement of each business unit as:▪ Net inter business unit fees - includes intra-group receipts or payments for sales commissions and branchservice fees. A product business will pay a distribution channel for product sales. Both the payment and receipt
are shown as net inter business unit fees.
▪ Net inter business unit expenses - consists of the charges made to business units for the provision of support
services. Both payments by business units and receipts by service providers are shown as net inter business unit
expenses.
Return on asset ratios include net intra group assets which are risk weighted at 0% for return on risk weighted
assets calculations.
Revenue in business segments includes equity standardised net interest, other operating income and net interbusiness unit fees.
Significant items are items that have a material impact (typically > $10 million) on profit after tax, or the earnings
used in the earnings per share calculation. Significant items also do not arise in the normal course of business andare infrequent in nature. Divestments are typically defined as significant items.
Total advances include gross loans and advances and acceptances less income yet to mature (for both as at andaverage volumes).
Unproductive facilities comprise facilities (such as standby letters of credit, bill endorsements, documentary lettersof credit, guarantees to third parties, undrawn facilities to which the Group is irrevocably committed and market
related exposures) where the customer status is non-accrual.
99

ALPHABETICAL INDEX
PAGE
Accounting policies ..................................................................................................................................................61
Appendix 4E statement ............................................................................................................................................97
Associates, joint venture entities and investments.......................................................................................................95
Average balance sheet and related interest ................................................................................................................83
Business Performance Review ...................................................................................................................................35
Capital adequacy.....................................................................................................................................................81
Changes in the composition of the Group ...................................................................................................................95
Contingent liabilities and contingent assets.................................................................................................................91
Consolidated Statement of Cash Flows .......................................................................................................................60
Consolidated Statement of Changes in Equity .............................................................................................................59
Consolidated Statement of Financial Performance........................................................................................................57
Consolidated Statement of Financial Position ..............................................................................................................58
Definitions..............................................................................................................................................................98
Derivative financial instruments ................................................................................................................................89
Dividends ...............................................................................................................................................................73
Earnings per share ..................................................................................................................................................74
Exchange rates .......................................................................................................................................................96
Financial Highlights .................................................................................................................................................. 5
Five year summary..................................................................................................................................................53
Geographic Segment Performance.............................................................................................................................47
Highlights................................................................................................................................................................ 1
Impaired assets ......................................................................................................................................................76
Income ..................................................................................................................................................................70
Income tax expense ................................................................................................................................................72
Interest spreads and net interest average margins ......................................................................................................88
Key impacts of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS) .............................61
Loan capital............................................................................................................................................................80
Net loans and advances ...........................................................................................................................................75
Note to the Statement of Cash Flows .........................................................................................................................93
Operating expenses .................................................................................................................................................71
Provisions for doubtful debts.....................................................................................................................................79
Results Commentary ...............................................................................................................................................11
Share Capital..........................................................................................................................................................80
Significant events since balance date .........................................................................................................................96100