ANZ is a major Australian-based bank operating a retail and business banking franchise in Australia, New Zealand and throughout the South Pacific. Australian operations make up the largest part of ANZ's business with commercial & retail banking & funds management. Following the acquisition of National Bank of New Zealand, ANZ is the largest bank in New Zealand. Expansion in the Asian region in is being undertaken with a presence in 14 Asian countries. Of most significance are partnerships in China, Indonesia, Malaysia, Laos and Cambodia.

ANZ´s strategy over the past five years has focused on building up the Australian and New Zealand operations with particular attention to Personal Banking operations that embrace the consumer sector. Significant investment has been made in the branch network and distribution systems complimented with increased staff numbers. More recently there has been a controlled expansion into Asian markets with relatively small investments in China, Indonesia, Cambodia, Laos, Malaysia and Guam. Over the next five years the target is for Asian operations to contribute 20% of group earnings and match those of New Zealand. The aspirational target is a doubling of profit over the next five years - 2007-2012.ANZ reported a 13.5% fall in cash NPAT from $1.936bn to $1.674bn for the six months to March 31, 2008. Headline NPAT fell 6.6% from $2.102bn to $1.963bn. Cash EPS fell16.4% from 104.2¢ to 87.1¢. Interim dividend was steady at 62¢ per share fully franked. The payout ratio based on cash NPAT increased from 59.6% to 72.2%. Total operating revenue increased by 11.6% boosted by a 25.6% jump in non-interest income. While total lending grew by 18% the sharp fall in net interest margin (NIM) reduced growth in net interest income to a moderate 4.7%. The decline in NIM of 25 points from 2.24% to 1.99% was caused by higher growth in lower margin Institutional lending, higher funding costs - both wholesale and retail - and continuing competitive pressures. The cost-to-income ratio increased from 44.3% to 44.4% reflecting continued investment in Personal - 31 new branches opened - and substantial 34% lift in the investment in Asia Pacific which delivered a 44% increase in revenue. Expense growth has slowed to around 8% from 12%. Personal achieved an 11% lift in profit from $646m to $719m on similar revenue growth. Mortgages - 25% of Personal - were impacted by significantly higher funding costs and margin squeeze resulting in a 3% decline in profit. Institutional profit fell 47% from $762m to $405mreflecting the significant increase in impairment costs. Asia Pacific was the highlight with profit up 47% from $124m to $182m, 58% FX adjusted. New Zealand Businesses lifted profit by 6% in $NZ. In A$ terms profit rose 4% from $348m to $361m.

30/09/07

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