Australia and New Zealand Banking Group Limited
1997 Annual Report
Who we are
ANZ is Australia and New Zealand’s
international bank.
In our home markets of Australia and New Zealand, we are
a major financial institution providing the full range of
banking and other financial services. We seek to
differentiate ourselves from our competitors by the quality
of our customer service, our professionalism, and our
international capability.
Overseas, we have a significant presence in countries from
the Middle East through South and East Asia to the Pacific–
the region of greatest geographic and economic relevance
to Australia and New Zealand. These businesses are
complemented by wholesale and investment banking
operations in the world’s major financial centres.
Our values
We have a strong customer focus and build relationships
based on integrity, superior service and mutual benefit.
We strive for profit and sound growth.
We work as a team to serve the best interests of the
Group.
We are relentless in pursuit of business innovation and
improvement.
We value and respect people and make decisions about
people based on merit.
Contents
ANZ at a Glance ................................................... 2
Chairman’s Report ................................................ 4
Chief Executive Officer’s Review...................... 5
ANZ 2000 ................................................................ 6
Going Global ......................................................... 7
Review of Results ................................................ 9
Eight Year Summary........................................... 13
Personal Banking ............................................... 14
Corporate & Investment Banking .................... 16
Funds Management & Private Banking ......... 18
Risk Management .............................................. 19
Group Executive ................................................. 22
Board of Directors.............................................. 24
Corporate Governance ...................................... 26
Community Involvement.................................... 29
Business Environment....................................... 30
Events of 1997...................................................... 31
Financial Highlights in Key Currencies ......... 32
1997 Financial Statements ................................ 33
ANZ’s Worldwide Representation ................ 118
Phone Directory ................................................ 120
We base recognition and reward on performance.
Shareholder Information ....... Inside back cover
We value open and honest communication.
We are responsible, trustworthy and law-abiding in all
we do.
Key Dates
Books close for Final Dividend .......... 12 December 1997
Annual General Meeting ........................ 21 January 1998
Payment of Final Dividend ...................... 21 January 1998
Announcement of Interim Results ............. 27 May 1998*
Books close for Interim Dividend .............. 12 June 1998*
Payment of Interim Dividend ......................... 6 July 1998*
Announcement of Final Results ....... 18 November 1998*
*tentative dates only
Australia and New Zealand Banking Group Limited
ACN 005 357 522
Unless otherwise stated, all amounts are expressed in Australian dollars
ANZ Internet Home Page: www.anz.com
1997 Achievements
Underlying profit growth of 17%,
well spread across Australia and
international operations
Annual dividend increased 14%
to 48 cents, fully franked
Asset growth of 8%
Conservative provisioning
Significant restructuring
Named Australian “Bank of the Year”
New branch in Beijing and branch
in Jerusalem re-opened
Earnings* and
Dividends# per Share
78.4
48
91
92
93
94
95
96
97
Earnings*
Dividends#
*before abnormal items
#excludes preference shares
Sharemarket
Accumulation Index
306
Oct97
203
¢
90
60
30
0
-30
-60
350
300
250
200
150
100
50
Sep91
Sep92
Sep93
Sep94
Sep95
Sep96
Sep97
ANZ
All Ords
Our Commitment for the Future
ANZ 2000
Build a truly unique financial company
Make dealing with ANZ an enjoyable customer experience
Create an environment where people excel
Deliver superior growth and financial performance
Transform the way we do business
Australia and New Zealand Banking Group Limited – 1997 Annual Report
1
ANZ at a Glance
Group Profile
Australia
ANZ, with assets of A$138 billion, is amongst the world’s
top 100 banks and operates in 43 countries. The Group
originated in the United Kingdom in 1835 when the Bank of
Australasia was established by Royal Charter.
ANZ is Australia and New Zealand’s international bank. In
its home markets of Australia and New Zealand, ANZ is a
major financial institution providing the full range of banking
and other financial services.
Overseas, we have a significant presence in countries from
the Middle East through South and East Asia to the Pacific–
the region of greatest geographic and economic relevance
to Australia and New Zealand. These businesses are
complemented by wholesale and investment banking
operations in the world’s major financial centres.
ANZ is one of the “big four” Australian domestic banks
providing a full range of retail and corporate financial
services.
Within this spectrum, ANZ’s relative strengths are in
business banking, cards and international banking services.
Through wholly owned subsidiaries, ANZ offers
complementary financial services-investment and insurance
services through ANZ Funds Management; personal and
corporate stockbroking services through ANZ Stockbroking
and ANZ Securities Limited; and specialised leasing, motor
vehicle and property finance services through Esanda
Finance Corporation Limited, the largest finance company
in Australia. Town & Country provides retail banking services
in Western Australia.
Underlying profit after tax in 1997 of $1,308m
An increase of 17%
Underlying profit after tax in 1997 of $764m
An increase of 16%
Personal Banking
Corporate & Investment Banking
p14
p16
Funds Management & Private Banking
p18
2
“Bank of the Year” award
Branches - 868, down 202
EFTPOS devices - 25,167, up 7,852
Telephone banking - 875,000 registrations
Lending transformation - 60% of mortgage
applications processed within 24 hours
Strong growth in cards - to 24% market share
Interactive internet site launched
Trial of Smart Cards
PC Banking development
Strong business lending growth
Focus on risk adjusted profitability
Esanda completes major transformation
- staff numbers down 30%,
- record new business writings exceeding $5 billion
“Best Foreign Exchange Dealer” award
ANZ Investment Bank leads largest Australian
privatisation deal - Loy Yang A
Strong growth
$10 billion in funds under management
Strategic alliance with Frank Russell company
Peter Jonson appointed Managing Director of
ANZ Funds Management
New Zealand
International
ANZ is the oldest (1840) and the third largest bank in the
country.
ANZ provides a complete range of products and services
to the retail and business markets, and is known as New
Zealand’s international bank. PostBank was purchased in
1989.
The finance subsidiary (UDC Finance Limited) is New Zealand’s
largest finance company specialising in leasing and motor
vehicle finance.
ANZ Securities (NZ) Limited provides wholesale broking
services while ANZ Funds Management provides investment
management services.
ANZ has a network of specialist banking operations,
principally trading as ANZ and ANZ Grindlays (purchased in
1984), providing trade finance and commercial banking
services in 41 countries outside Australia and New Zealand,
mainly throughout Greater Asia (pages 118 & 119 list ANZ’s
worldwide representation). In the emerging markets of South
Asia and the Middle East, ANZ Grindlays has provided high
quality retail banking services since 1846.
This network is complemented by an active presence in
major global financial centres.
ANZ provides on-the-ground banking services to support the
international activity of ANZ’s customers worldwide.
Underlying profit after tax in 1997 of $165m
An increase of 20%
Underlying profit after tax in 1997 of $379m
An increase of 18%
Branches - 198, down 61
EFTPOS devices - 13,423, up 1,909
Mobile sales force expanded
Jerusalem branch re-opened
Oman operations restructured
Insurance launched in Vanuatu and PNG
Trial of supermarket and hyperstore branches
ATMs introduced in Fiji and PNG
Strong mortgage lending growth
Credit cards expanded in India
Internet site launched
Trial of “Branch of the Future”
Planning for move to new technology platform
David Airey appointed Managing Director of
ANZ New Zealand
Credit cards launched in Pakistan and
Bangladesh
Commercial Banking System trial in Vanuatu
completed
New Zealand’s international bank
Beijing branch licence approved
Specialist property lending group established
Offices opened in regional centres; Nelson and
West Auckland
UDC - strong growth in operating leases
UDC & Esanda to integrate
Indian Arbitration result announced - successful,
appeal pending
ANZ Investment Bank executes major financing
deals
Strong business growth in South Asia,
Middle East and Asia Pacific
Expand asset based finance into Asia and
Middle East
Strong growth, 17%
“Number 1” Emerging Market Debt Fund
Over $3 Billion in funds under management
Grindlays Private Bank expanded
Ranked “Number 1” on investment performance
Global Private Banking integrated
Bonus Bonds re-launched
Australia and New Zealand Banking Group Limited – 1997 Annual Report
3
Chairman’s Report
Australia and New Zealand Banking Group Limited
A.C.N. 005 357 522
Level 32, 100 Queen Street, Melbourne, V ic 3000, Australia
G.P.O Box 537E, Melbourne, Vic 3001, Australia
Charles Goode
Chairman
ANZ continues to perfor m well. In 1997 there was a 17% increase in underlying profit
which was well spread across the Group. This was prior to making an additional transfer
to the general provision and abnormal restructuring costs.
The decision to increase the general provision reflects our desire to be more consistent
and conservative in our provisioning. The abnor mal restructuring charge is necessary to
allow us to achieve further reductions in costs under the ANZ Global Program.
The annual dividend was increased by 14% to 48 cents per share, fully franked. We said
last year that there would be some limit on our franking capacity going forward as the
proportion of Group profits ear ned offshore increases. This, together with the dividend
increase and the costs associated with the restructuring underway to position ANZ for the
future, does impact on our franking capacity. As a result dividends are not expected to be
fully franked in 1998.
As well as being a year of significant achievement, 1997 has been a year of change
including at Board level. Mr Don Mercer, who was Chief Executive Officer during the
recovery in profits over the last five years retired at the end of September. An Executive
Director, Mr Alister Maitland, and the Chief Financial Officer and Company Secretary,
Mr David Craig, retired at the end of June after distinguished careers with the Bank
spanning 34 and 41 years respectively. Sir Ronald Trotter, a non-executive director, retired
in October after providing wise counsel to the Board over his ten years of service. We
thank these gentlemen for their enormous contr ibutions to the Bank and wish them all
the best in their retirement.
The new Chief Executive Officer, Mr John McFarlane, started with the Bank on 1 October.
He has 22 years of banking experience, and in particular, at senior levels in international
banking. I look forward to introducing Mr McFarlane to shareholders at the Annual
General Meeting in January.
There are many challenges ahead of us in our domestic markets and overseas, but there are
also many opportunities. ANZ is well positioned to meet these by improving efficiency
and growing the business, notably the inter national banking and funds management
activities. We are confident of our ability to continue adding to shareholder value over the
medium term.
Charles Goode
Chairman
4
Chief Executive Officer’s Review
ANZ is in good shape. We are well positioned to take
advantage of the opportunities available to us and to meet
our challenges head on. We have recently launched
“ANZ 2000” (page 6), to ensure that we meet our customers’
expectations into the 21st century, and deliver superior
performance for our shareholders.
Review of 1997
ANZ’s performance in 1997 underlines the
financial strength of the Group. We are a
‘AA’ bank, with assets of $138 billion,
shareholders’ funds of $6.9 billion and a
comfortable Tier 1 capital ratio of 6.6%. Asset
quality remains excellent and we are also
carrying conservative provisions.
During 1997 underlying profit increased
by 17%. Despite aggressive competition
domestically, underlying profit in Australia
grew by 16%, and in the rest of the world by
19%. Asset growth, increased fee income,
and buoyant market-related earnings, all
offset lower interest margins. Core cost
increases were contained at 2%, as a result of
a reduction in staff numbers in Australia and
New Zealand mainly in retail banking and
Esanda. A charge of $417 million before tax
has been made this year, to cover current
and future redundancy and related
restructuring costs, including those arising
from the ANZ Global program. Most of
this has been treated as an abnormal item.
Assets quality remains sound. Non-
accrual loans were reduced by 29% to
$872 million, and specific provision charges
fell by 26% to $86 million. Nevertheless,
the directors decided to increase the general
provision by $201 million, significantly
higher than the Reserve Bank of Australia’s
guideline of 0.5% of growth in risk-weighted
assets. This recognises that loan losses would
normally be higher than current levels across
the economic cycle. The total charge is based
on the annual average debt charge implied
in our portfolio risk management models, and
is not linked to any need to provide against
specific regions, industries or individual
borrowers.
A discussion of the financial performance
in 1997 is contained on pages 9 to 12, which
I recommend to shareholders, with full
details contained in the second half of this
Report.
Outlook
The Government has announced its
acceptance of the majority of the key
recommendations from The Report of the
Financial System Inquiry which was released
in March 1997. Legislation to facilitate the
package of reforms is now being formulated.
There will be further change in the financial
services industry arising from this legislation
and continued technological advance.
Domestic economic conditions in
Australia and New Zealand appear to be
improving, but competition in the finance
industry will remain intense.
The recent unsettling events in financial
markets in Asia will undoubtedly dampen
growth prospects in the region in the near
term. We have reviewed our exposures in
the region and are satisfied there are no
immediate concerns. We remain convinced
of the long term growth prospects for the
region, and are cautiously looking for
opportunities to expand our operations.
John McFarlane
Chief Executive Officer
Australia and New Zealand Banking Group Limited – 1997 Annual Report
5
ANZ 2000
We have developed a clear vision for ANZ
going forward which we call ANZ 2000.
Unique
Customers
People
Build a truly unique financial company
ANZ is already unique. We are strong in
our domestic markets and in the world’s
emerging markets. We are recognised as
“Australia and New Zealand’s international
bank”. Recently we expanded our funds
management and investment banking
activities. This foundation gives us the
opportunity to create a truly unique
international financial services company
through organic growth and by acquisition.
Make dealing with ANZ an enjoyable
customer experience
On those rare occasions where we experience
moments of memorable customer service
dedication, how many of them have been in
banking? This is the challenge facing all banks,
particularly in Australia. We aim to meet
this challenge. We are currently reorganising
our branches into financial retail outlets. We
are building our Private Banking, Priority
Banking and Business Banking capabilities,
to provide higher levels of service for our
best customers. We are also investing in new
marketing and customer service training for
all of our front-line staff which will be
launched early next year. We know we have
some way to go, but we aim to make a real
difference in this area.
Create an environment where
people excel
ANZ has talented people everywhere we
operate. Our challenge is to create the
environment and the opportunity for them
to enjoy their work and to reach their
potential. This is made more difficult when
we are reducing costs. We are restricting
external recruitment to ensure our people
have the opportunity to move from areas of
restructuring into growth segments. One
exception is that we will increase substantially
our recruitment of graduates. We are also
launching a programme to identify people
with high potential, and to channel them to
the best opportunities. Our incentive
programs have been changed to reward those
who do deliver. We intend also to achieve a
better balance of women and men in senior
management.
Deliver superior growth and
financial performance
In our mature markets we are facing
relatively low levels of growth, and certain
emerging markets are experiencing economic
uncertainty. At the same time, competition
is reducing margins. This more difficult
revenue environment places greater priority
on cost management. Our current relatively
high cost-income ratio gives us scope to
improve productivity substantially, and to
enable us to achieve superior earnings growth.
The overall risk of our business needs to be
controlled to ensure an acceptable level of
earnings volatility. Whilst we are comfortable
with the balance today, we will manage the
growth of higher risk segments to within
the overall growth rate of the group.
Our overall aim is to deliver superior
earnings growth and maintain a high return
on equity for shareholders. Our new
performance management process which
was launched this month will focus ongoing
attention to achieving these objectives.
Transform the way we do business
Banking in the 21st century will be different.
To prepare ourselves, we need to radically
restructure the way we do business today, to
invest in new technologies to manage our
business and to reach our customers.
Recently we announced our reorganisation
around global business lines. Under “ANZ
Global”, we are developing three major
technology platforms to improve customer
service and to lower product costs. Our
“Branch of the Future” program is changing
the face of branch banking; we are investing
in telephone, direct and internet banking and
card technologies. We also announced our
strategic alliance with Frank Russell – a
world leader in funds management. These
and other new ventures will ensure that for
ANZ, the best is yet to come.
Transform
66
Performance
Going Global
ANZ, with representation in 43 countries, is the most
international of the Australasian banks. We have a long tradition
in Australia, New Zealand, the Pacific Islands and, through
Grindlays, in South Asia and the Middle East. Our presence in
East Asia, while more recent, has been expanded significantly
over recent years. We are now radically altering our management
approach to focus on global lines of business to improve efficiency
and build a better platform for growth.
Global Rationale
With the rapid development of information technology
and the globalisation of financial markets, banking is
changing. To capture the efficiency opportunities of
our scale and establish a better platform for growth, we
have radically altered our management approach. From
October 1997 all businesses moved to global management
and reporting. Previously they operated according to
geographic areas with independent country management.
ANZ is by no means unique in facing these issues. Other
leading multinational companies, both within the finance
sector and outside it, have made or are making similar
changes.
The objective of moving to global business lines is
to improve efficiency and build a better platform to
support growth. This will achieve economies of scale
and scope, minimise duplication of effort, develop and
leverage the capabilities of our people and build common
values and culture throughout the organisation.
Inventing things once and applying them many times is
the goal.
We are pleased with the success of our investment
banking and capital markets activities which were
combined last year to form the first global business unit.
By managing activities on a functional rather than
geographic basis, ANZ Investment Bank has been able
to develop real expertise across geographic boundaries
and mobilise quickly to respond to changing client and
market needs.
Managing Director John
Sunderland, closest to TV
screens (in Melbourne),
uses video conference
facilities to meet regularly
with General Manager
United Kingdom, Dr Holger
van Paucker and Gordon
Branson, Head of
Structured and Project
Finance (in London), and
General Manager Americas,
Roy Marsden (in New York).
Australia and New Zealand Banking Group Limited – 1997 Annual Report
7
The ANZ Global Program
With the assistance of specialists from the
international finance consultancy, KPMG
Barents, teams of ANZ staff have been
working to re-design processes across almost
all of of ANZ’s activities.
To ensure line management ownership
of the changes, ANZ’s management structure
has been changed to reflect line of business
focus. There are now the principal business
activities of Personal Banking, Corporate &
Investment Banking and Funds Management
& Private Banking, and a single Operations
and Technology support unit, whereas
previously these functions were all part of
country management.
MANAGEMENT
ANZ Global Organisation
Chief Executive Officer
Finance & Risk
Human Resources
Group Office
Corporate &
Investment
Banking
Personal
Banking
Operations
&
Technology
Funds
Management
Private
Banking
Global Management
Australia New Zealand
India...
Corporate & Investment
Banking
Personal Banking
Funds Management
Private Banking
Operations & Technology
8
There are some 38 individual programs
within ANZ Global covering all aspects of
the Group’s activities. Fundamental to the
overall program is increasing the consistency
of approach across the Group and the
consolidation of technology and support
platforms.
We will be moving to a single banking
technology platform in Australia and
New Zealand (Hogan), a single global cards
system, and a single system supporting
banking outside Australia and New Zealand
(the Commercial Banking System or CBS).
New Zealand will move to the new platform
during 1998, and Australia, which already
operates on Hogan based systems, in 1999/
2000. There will be significant efficiency
savings through achieving scale operations
and having fewer systems. Also, by
standardising products and processes across
countries, development and training costs
will be reduced.
Customer service will also be enhanced
by having consistent product and processes
across all of ANZ’s operations. Central to
this is the project called “Branch of the
Future”, which is designed to improve
efficiency and facilitate the development of
a sales culture throughout the branch network.
Branch layouts are being redesigned to be
more “people friendly” for customers and
staff. Sales and enquiry areas are being
grouped together near the entrance, with
separate private areas for detailed discussions
with customers and the telling functions
located towards the rear. The trial of the
new model, which includes expanded use
of modular furniture, is underway in Australia
and New Zealand and will be implemented
simultaneously in both countries. Application
of the same model outside our domestic
markets will follow.
Implementation of ANZ Global will
involve significant restructuring. A provision
for these costs was taken in the 1997 financial
year.
Review of 1997 Results
Operating Profit*
1171
91
92
93
94
95
96
97
*before abnormal items
Underlying Profit*
764
379
165
$M
1200
1000
800
600
400
200
0
-200
-400
-600
$M
800
700
600
500
400
300
200
100
0
Summary
Australia and New Zealand Banking Group Limited recorded a 17%
increase in underlying profit after tax to $1,308 million for the year
ended 30 September 1997. This was prior to an additional transfer to
the general provision of $137 million giving an operating profit after
tax and before abnormal items of $1,171 million. Abnormal items
were $147 million (after tax) leading to an operating profit after tax and
abnormal items of $1,024 million. Dividends for the year were increased
by 14% to 48 cents per share, fully franked.
Despite aggressive competition, underlying profit in Australia grew
by 16%, and in the rest of the world by 19%. Asset growth, increased fee
income, and buoyant market-related earnings, all offset lower interest
margins.
Core cost increases were contained to 2%, as a result of a reduction
in staff numbers in Australia and New Zealand, mainly in retail banking
and Esanda. A charge of $417 million before tax has been made this
year, to cover existing and committed redundancy and related
restructuring costs, mainly arising from the ANZ Global program. Most
of this has been treated as an abnormal item.
Non-accrual loans were reduced by 29% to $872 million, and specific
provision charges fell by 26% to $86 million. Nevertheless, the directors
decided to increase the general provision by $201 million, significantly
higher than the Reserve Bank of Australia’s guideline of 0.5% of growth
in risk-weighted assets. This is in recognition that loan losses across the
economic cycle would normally be higher than current levels. The
total charge is based on the annual average debt charge implied in our
portfolio risk management models, and is not linked to any need to
provide against specific regions, industries or individual borrowers.
Australia
New Zealand
International
1995
1996
1997
*Operating profit after tax before additional
transfer to general provision of $137 million
and abnormal items
Distribution of Gross Income
Interest Payments to
Depositors &
Bondholders 51%
Personnel Costs 16%
Other 15%
Provision for Doubtful
Debts 2%
Tax 5%
Dividends to
Shareholders 6%
Reinvested
(depreciation &
retained earnings)
5%
$M
1600
1400
1200
1000
800
600
400
200
0
Change in Profit
320
-139
31
-27
-89
Higher
Costs
Lower
Specific
Provision
General
Provision
(RBA)
Increased
Tax
1,308
-137
Abnormals
1,171
-212
Additional
General
Provision
65
1,024
Restructuring NHB
Interest
1,116
-319
415
Growth in
Non-Interest
Income
Lower
Margins
Balance
Sheet
Growth
Net Interest
Income
1996
Profit
Underlying
Profit
After Tax
1997 Profit
Before
Abnormals
1997 Profit
After
Abnormals
Australia and New Zealand Banking Group Limited – 1997 Annual Report
9
Review of 1997 Results
Income
Net interest income grew by 3% as asset growth offset reduced margins
in the domestic markets.
Competitive pressures in Australia and New Zealand led to the 19
point decline in gross interest spread. Lower levels of non-accrual loans
and lower interest rates reduced the related funding costs. However,
the lower interest rates also reduced the earning rate on non-interest
bearing items, resulting in a 32 point reduction in overall margins.
The reduction in margins was more than offset by strong growth in
interest earning assets in International markets, particularly South Asia,
Asia Pacific and the Middle East, the Investment Bank and business
lending in Australia.
Non-interest income increased by 15%. Strong growth in our Cards
business together with higher transaction and corporate advisory fees
lifted fee income.
Foreign exchange continues to be a stable core business. Good
trading performances in buoyant global markets led to the significant
increase in trading, fee and other income. The Group’s earnings from
investment banking capital markets activities is sensitive to asset prices
in the global financial markets. Profits before tax from these activities
were $208 million in 1997 (1996: $100 million).
Strong growth in operating lease income and the profit on the sale
of the Omani operation also lifted other income.
Operating Expenses
Core costs increased by only 2% (this excludes restructuring costs and
Direct Income Related Costs which directly reflect the level of business
activity in our Cards and Operating Lease businesses). Staff numbers in
Australia and New Zealand declined as a result of branch closures and
increased automation and centralisation of processes particularly in retail
banking and Esanda, but there were higher overtime and temporary
staff costs relating to these major change programs. Personnel costs grew
by 8% as a result of increased salaries offsetting low staff numbers, higher
performance related bonuses in our investment banking activities and
higher overtime and temporary staff costs. The recruitment of relatively
highly paid professional staff in the Investment Bank and the impact
of high salary inflation in South Asia and Middle East also contributed
to the increase in personnel expenses.
Premises costs fell due to branch closures in Australia and New
Zealand while computer expenses were steady.
Other expenses fell reflecting a favourable non-lending loss
experience both in Australia and overseas following the resolution of
certain Indian scam related issues.
Expansion of our Cards and operating lease businesses drove the
growth in direct income-related costs.
10
Operating Income
2415
3413
91
92
93
94
95
96
97
Net Interest Income
Non-Interest Income
Operating Expenses
Personnel 51%
Premises 10%
Other 19%
Restructure
2%*
Income
Related 9%
Computer 9%
*A further $327m restructuring costs
were abnormal
Operating Expenses
as % of Net Income
64.9
91
92
93
94
95
96
97
$M
6000
5000
4000
3000
2000
1000
0
%
80
75
70
65
60
55
50
Net Non-Accrual Loans to
Shareholders’ Equity
6.1
91
92
93
94
95
96
97
Specific Provisions for
Doubtful Debts
86
91
92
93
94
95
96
97
%
80
70
60
50
40
30
20
10
0
$M
1800
1600
1400
1200
1000
800
600
400
200
0
Asset Quality
Gross non-accrual loans were reduced by $353 million to $872 million
through asset realisations and reduced new non-accrual loans. Net non-
accrual loans fell to $428 million and represent 6% of shareholders’
equity at September 1997, down from 11% in 1996.
The specific provision charge fell by 26% to $86 million, reflecting
continued good credit conditions and experience. New and increased
provisions were slightly down while releases and recoveries were also
favourable to last year. The Group remains well provided with the
coverage ratio (specific provisions to gross non-accrual loans) now above
50%.
The general provision charge was $201 million, including an
additional transfer of $137 million. The latter was in recognition that
loan losses would normally be higher than current levels across the
economic cycle. The total charge is based on the annual average provision
implied in our portfolio risk management models and is not linked to
any need to provide against specific regions, industries or individual
borrowers. The general provision now stands at 0.9% of risk-weighted
assets, well in excess of the Reserve Bank of Australia guideline of 0.5%.
Income tax
The pre-abnormal tax expense increased by $89 million reflecting the
higher earnings and an increase in the effective tax rate to 32.9%
(1996: 30.3%) owing to the impact of the increased general provision
charge more than offsetting the increased level of rebateable dividends.
Abnormal Items
The Arbitrators of the long running dispute with the National Housing
Bank of India (“NHB”) handed down their award in the Group’s favour
on 29 March 1997. The NHB has repaid the deposit together with
interest at 18% p.a. in accordance with the decision. Given its size, the
$145 million interest receipt (before tax) is disclosed as an abnormal
item. Subsequently, NHB filed documents with the relevant Court to
challenge the award. ANZ is confident that the award will stand.
Cost reduction is a major priority for the Group. We are proceeding
with the implementation of ANZ Global. The change programs resulted
in a $417 million before tax restructuring charge. This amount covers
both completed restructuring programs and those ANZ Global projects
in train to which the Group is demonstrably committed. Of this charge,
$327 million is abnormal.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
11
Review of 1997 Results
Dividends
Dividends for the year have been increased by 14% to 48 cents per
share, fully franked (from 42 cents in 1996). We foreshadowed last year
that there would be some limit on our franking capacity going forward
as the proportion of Group profits earned offshore increases. This,
together with the dividend increase and the costs associated with the
restructuring underway to position ANZ for the future, impact on our
franking capacity. As a result we do not expect dividends in 1998 to be
fully franked.
Balance Sheet & Capital Adequacy
Total assets grew by 8% to $138 billion. Good lending growth was
achieved, particularly in business lending in Australia, the Investment
Bank and international markets (South Asia, Asia Pacific and the Middle
East).
Funding for asset growth came from the wholesale market, as well
as from increased retail and corporate deposits.
Total shareholders’ equity increased to $7 billion and capital resources
increased to $10 billion, after the redemption of some subordinated
debt.
The Reserve Bank of Australia’s guideline ratio of qualifying capital
to risk-weighted assets is a minimum of 8.0%, of which Tier 1 capital
must be at least 4.0%. The Group’s capital adequacy ratio is 9.8%, with
a Tier 1 ratio of 6.6%, down 0.1% from September 1996. Retained
earnings and dividend reinvestment supported the 14% growth in risk-
weighted assets achieved over the year. The Group seeks to maintain
the Tier 1 ratio in the range of 6.5% to 7.0%.
12
¢
90
60
30
0
-30
-60
$B
140
120
100
80
60
40
20
0
%
12
10
*8
6
*4
2
0
Earnings* and
Dividends# per Share
78.4
48
91
92
93
94
95
96
97
Earnings*
Dividends#
*before abnormal items
#excludes preference shares
Group Assets
138
106
91
92
93
94
95
96
97
Total Assets
Risk-Weighted Assets
Capital Adequacy
9.8
6.6
91
92
93
94
95
96
97
Tier 1
*RBA minima
Eight Year Summary
Profit and loss
Net interest income
Other operating income
Operating expenses
Operating profit before tax, debt
provisions and abnormal items
Provisions for doubtful debts - specific
- general
Operating profit(loss) before abnormal items
Income tax (expense)benefit
Outside equity interests
Operating profit(loss) after tax
before abnormal items
Net abnormal (loss)profit
Operating profit(loss) after income
tax and outside equity interests
Balance Sheet
Assets
Net assets
Ratios (after abnormal items)
Return on average shareholders’ equity
Return on average assets
Capital adequacy - total
Share information (per fully paid share)
Dividend - declared rate
Franked portion
Earnings before abnormal items - basic
Earnings after abnormal items - basic
Net tangible assets
Share price on ordinary shares - high
- low
1997
$M
1996
$M
1995
$M
1994
$M
1993
$M
1992
$M
1991
$M
1990
$M
3,413
2,415
(3,783)
3,317
2,096
(3,644)
3,081
1,975
(3,334)
2,800
1,969
(3,183)
2,543
1,875
(3,124)
2,438
2,109
(3,329)
2,602
2,067
(3,153)
2,475
1,765
(2,848)
1,218
(1,600)
(337)
1,516
(1,037)
(16)
2,045
(86)
(201)
1,758
(579)
(8)
1,769
(117)
(37)
1,615
(490)
(9)
1,722
(63)
(111)
1,548
(505)
(10)
1,586
(368)
(13)
1,205
(395)
(7)
1,294
(629)
(5)
660
(193)
(7)
1,171
(147)
1,116
-
1,033
19
803
19
460
(213)
(719)
146
(5)
(578)
(1)
1,392
(788)
(5)
599
(186)
(1)
463
(193)
(4)
266
1
412
(191)
1,024
1,116
1,052
822
247
(579)
267
221
138,241 127,604 112,587 103,874 103,045 101,138
98,212
99,300
6,993
6,336
5,747
5,504
5,133
4,591
5,018
4,323
14.8% 18.3%
0.7%
0.9%
9.8% 10.5%
17.9%
0.9%
10.9%
5.0% -11.4%
15.6%
-0.6%
0.8%
0.2%
9.0%
11.3% 10.8%
5.8%
0.3%
9.9%
5.4%
0.2%
8.6%
48.0¢
100%
78.4¢
68.6¢
$4.59
$11.58
$7.10
42.0¢
79%
76.3¢
76.3¢
$4.24
$7.28
$5.41
33.0¢
18%
68.5¢
69.9¢
$3.94
$5.75
$3.55
25.0¢
-
54.5¢
55.9¢
$3.58
$5.68
$3.78
20.0¢
-
30.8¢
13.5¢
$3.43
$4.40
$2.53
20.0¢
50%
-60.1¢
-60.2¢
$3.40
$4.88
$2.87
20.0¢
100%
26.7¢
26.9¢
$4.31
$4.20
$2.92
38.0¢
100%
45.0¢
24.2¢
$4.45
$6.38
$3.95
Number of fully paid ordinary shares
on issue (millions)
1,508.6 1,478.1
1,446.0
1,353.6
1,308.2
1,054.5 1,019.3
971.1
Dividend reinvestment plan
Share price - interim
- final
Other information
Points of representation
Number of employees (full-time equivalents)
Number of shareholders
$9.77
-
$5.59
$7.60
$4.40
$6.27
$3.78
$3.73
$3.42
$4.44
$3.58
$2.51
$3.42
$4.46
$4.35
$2.72
1,473
2,367
2,026
35,926
46,261
39,642
132,450 121,847 114,829 121,070 115,000 112,036 101,188
1,744
39,721
1,881
39,240
2,136
40,277
2,302
43,977
2,431
48,182
92,606
Australia and New Zealand Banking Group Limited – 1997 Annual Report
13
Personal Banking
ANZ, one of the big full service banks in Australia and
New Zealand, is the dominant retail bank in several Pacific
Islands, and ANZ Grindlays is one of the leading foreign
retail banks in the emerging markets of South Asia.
Retail Banking
In Australia and New Zealand ANZ has some
3 million and 1 million customers respectively.
During 1997 ANZ was awarded Australian
‘Bank of the Year’ by Personal Investment
Magazine.
During the year there was a strong
growth in telephone banking in both markets.
The National Teleservicing Centre in
Melbourne is now handling the majority of
telephone calls from metropolitan customers
nationwide. Approximately 60% of these calls
are now being handled automatically through
telephone banking which provides 24 hour,
7 days a week service. In New Zealand it is
the bill payment feature of ‘Phone Direct’
that is growing fastest.
The centralisation of credit assessments
into the National Finance Centre has
reduced both approval times for customers
and costs. There has also been a complete re-
engineering of the sales and credit processes
for the small business customer to make
greater use of automated procedures and
focus effort more closely on the higher risk
elements of the business. This system will
be implemented in New Zealand in 1998.
The development of new delivery
channels is epitomised in ‘ANZ Direct’.
Launched in 1996, ‘ANZ Direct’ provides,
without the use of branches, very
competitively priced home and car loans, a
deposit product and a range of insurance and
investment products. It is accessing a new
market niche with up to 100% larger
mortgages.
These developments, the expansion of
the ATM and EFTPOS networks over recent
years, and the new pricing regime for
transaction accounts introduced in Australia
in January 1997, have led to a significant
reduction in branch withdrawals (30% in
Australia in 1997 and 50% in New Zealand
since 1995). With the number of customers
visiting our branches to conduct transactions
falling steadily there is no longer the need
for as many branches. 20% of branches were
closed last year in both countries. The trial
of smaller in-store branches in supermarkets
(and ‘hyperstores’ in New Zealand) reflect
the changing role of branches away from
transactions and toward sales and information.
At the same time as making these
changes we have taken initiatives to grow
the business including launching a business
mortgage product, taking the opportunity
of the official interest rate reduction in late
May to gain price leadership in the mortgage
market in Australia and launching a ‘no fees’
campaign in New Zealand.
Also to enhance our position in the
premium market, private banking has been
launched across Australia to provide premium
ANZ Phone Banking
provides customers
with flexible access to
ANZ services 24 hours
a day.
14
service to high net worth customers. Priority
banking will provide enhanced service levels
to the next tier of customers.
Mortgage and small business lending in
Australia, while slow in the first half of 1997,
have picked up considerably later in the year,
stabilising our market share. In New Zealand,
strong growth in mortgage lending has
continued with ANZ maintaining its 17.5%
market share.
The global management of personal
banking services will enable greater
coordination and joint development of retail
banking services. “Branch of the Future”
involves the total redesign of branch
procedures and layouts to drive efficiencies
and free-up staff to focus on sales. It is
currently being trialed in both New Zealand
and Australia. The full roll-out of the
concept to all branches is expected to take
place during 1998. We will also be transferring
the New Zealand core operating system to
Hogan, on which the Australian system is
based.
PC Banking is into the final stages of
development and will enable a secure
internet-based PC banking service for
individuals. This will enable customers to
use PCs to look up their account balances,
transfer funds and pay bills.
ANZ also provides retail banking in the
Pacific Islands, including Papua New Guinea,
Fiji and Samoa,where we are a major
provider of retail banking products such as
cards, transaction accounts and home
mortgages.
The rollout of the new banking platform
across the network in the next few years will
standardise products, improve efficiency and
facilitate improved customer service.
Cards
ANZ holds a strong market position in the
cards market in Australia and New Zealand.
In Australia the co-branded Telstra and
Qantas/Telstra credit cards were very well
received by customers. As a result, despite
ANZ Grindlays offers
retail banking services
in the United Arab
Emirates.
strong competition, ANZ’s market share has
increased from 18% two years ago, to 24%
today. Around 80% of customers taking these
cards had no previous relationship with ANZ,
providing an excellent opportunity to cross-
sell other ANZ products.
Outside Australia and New Zealand,
ANZ has card activities in 15 countries, all
of which are now part of one business unit.
In the near term we plan to replace the
current multiple systems with one new
system to support all activity.
During the year new cards and merchant
acquiring facilities were launched in a
number of countries including Pakistan,
Bangladesh, and Nepal, supported by systems
and infrastructure in Melbourne. Use of this
same system also allowed the expansion of
cards in India, with a doubling of cards on
issue to over 150,000. These are markets of
enormous growth potential. In 1998 we will
be growing these businesses and expanding
into new countries.
The development of Smart Card
technology is well advanced. ANZ, together
with the other major banks, has taken a
shareholding in Mondex International. With
experience in both the Visa Cash and
MasterCard Cash trials, ANZ is well positioned
for a market launch of the Mondex Electronic
Purse in 1998.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
15
Corporate & Investment Banking
The provision of banking services to the business and corporate
markets has been at the centre of the ANZ franchise in Australia and
New Zealand for 150 years, with cross border international
banking the basis of our international network. The restructuring
of our investment banking activities (financial markets, structured
and project finance on to a global basis) the first business unit to do
so, has proven to be highly effective is the forerunner for change in
other business units.
Business Banking
About 30% of all Australian and
New Zealand corporates have a relationship
with ANZ and the bank provides about
$30 billion in lending to this business
community. Growth of around 10% was
achieved during 1997. The quality of the
lending portfolio was improved through the
shedding of high risk business and net non-
accruals now amount to less than 0.5% of
corporate banking lending assets. A
management information system that
provides risk adjusted customer profitability
data to front line managers in Australia is a
key driver of customer strategies, designed
to develop medium term shareholder value.
Business Banking has conducted a major
process improvement exercise focused on
stripping out non-essential functions,
simplifying technology infrastructure,
streamlining credit processes and defining
service standards by customer size and
industry. This is allowing Relationship
Managers to spend more time on developing
new account relationships and also to extend
and deepen relationships with existing
customers. This process was assisted by the
establishment of an expanded number of
Business Centres, where Business Banking
is co-located with International, Leasing,
Treasury, Electronic Banking and Funds
Management specialists, as well as Retail
services, in geographic areas of significant
business activity.
In order to meet the particular needs
of customers, Business Banking has been
segmented into Corporate and Middle
Market, along with separate specialist
industry lending teams, such as Commercial
Property Development. This has been
received in the market as a distinctive and
professional financial service offering.
Process improvement is also being
assisted by the rapid acceptance of electronic
banking service by business customers, with
well over half of target customers now using
the ANZ service. The provision of
international banking services is also greatly
enhanced by electronic delivery. International
Services itself underwent a major
tranformation during the year to centralise
and automate back office processing – to
free up managers’ time to help existing and
new customers with their export and import
finance and other international transactions.
Asset Based Finance
Esanda is Australia’s largest asset financier
providing $9.5 billion of asset lending to
some 290,000 customers nationwide.
Esanda also, through issuing debentures,
raised $5.3 billion medium term funding for
the Group.
During 1997, Esanda underwent a major
transformation program to streamline and
automate its processes while maintaining
service levels to its customers. This greatly
improved efficiency and involved a 24%
reduction in staffing levels.
Paul Henderson,
Relationship Sales
Consultant with Esanda,
spends the majority of
his days on the road
visiting customers.
16
Notwithstanding the impact on the
business during the implementation of these
changes, new business writings exceeded $5
billion for the first time – an improvement
of 6.8% on 1996. Plans are well advanced
to make the same process changes in UDC
Finance, the largest asset financier in
New Zealand. UDC Finance’s strength and
experience in operating lease business will
be utilised to further develop the Australian
operations.
Investment Banking
ANZ Investment Bank was formed early in
1996 recognising the increasingly global
nature of our largest corporate and
institutional clients’ service and product
needs. By managing activities on a functional
rather than geographic basis, ANZ
Investment Bank is able to develop real
expertise across geographic boundaries and
to respond quickly to changing client and
market needs.
Combined, Esanda and UDC Finance
There have been a number of notable
are one of the Asia Pacific region’s largest
asset finance businesses. The expertise in
these companies will be used as the
foundation for the expansion of the Group’s
asset finance business into overseas markets,
particularly Asia, South Asia and the Pacific.
International Commercial Banking
ANZ has a commercial banking presence
in the region from the Middle East through
South and East Asia to the Pacific. This is
the region of greatest economic relevance to
Australia and New Zealand. The commercial
banking activities in these countries focus
on providing international trade and
investment services to companies from
Australia and New Zealand, elsewhere in the
international network, and local corporates.
The rollout of the new technology
platform (the Commercial Banking System)
continues. During the year it was successfully
implemented in United Arab Emirates,
Qatar and Bahrain. The Commercial Banking
System, when fully implemented will
provide the Bank with an International Core
Processing System to replace the existing
variety of systems and processes currently
in place.
The international network differentiates
ANZ from the competition. This provides
leadership in trade finance which is a
competitive advantage in the business market
and uniquely positions ANZ as Australia and
New Zealand’s international bank.
achievements during the year which have
demonstrated the strength of the integrated
approach and the quality of ANZ’s franchise
among major corporations and institutions
in Australia and Greater Asia.
ANZ Investment Bank secured major
structured finance deals including the $4.7
billion privatisation of the Loy Yang A power
station and coal mine. We led the US$300
million sovereign Eurobond issue for the
Islamic Republic of Pakistan. We have also
won a number of project finance advisory
and arrangement roles from the Cable and
Wireless telecom project in Vietnam to the
Mangalore independent power project and
Haldia petrochemicals project in India. ANZ
Investment Bank also acted as advisor,
underwrote an equity issue and provided
long term funding for Village Roadshow’s
expansion in Europe and their acquisition
of Austereo.
The quality of ANZ Investment Bank’s
operations has also been recognised in the
receipt of a number of industry awards and
rankings. These included a clean sweep of
the Australian Business Review Weekly’s
foreign exchange service awards including
Best Overall Service. Project Finance
International magazine, in citing the Top 10
Project Finance Deals in Asia, included
three deals in which ANZ Investment Bank
had a lead arranger status, the only bank to
be represented in such a way.
ANZ Investment Bank
secured major
structured finance deals
including the
privatisation of the
Loy Yang A power
station and coal mine.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
17
Funds Management & Private Banking
The Group manages $18 billion of investment funds for
customers around the world. Funds Management is one of
the fastest growing sectors of the finance industry. The focus
is on providing retail investment and insurance services.
Australia and New Zealand
In our two principal domestic markets of
Australia and New Zealand we have in excess
of $10 billion and $3 billion of funds under
management respectively. ANZ Funds
Management provides retail funds management
and insurance products through specialist
investment advisers working with the branch
network. Products include balanced and
specialist investment funds, cash management
accounts, insurance products, administration
and advice services. In New Zealand there
are also “Bonus Bonds”.
In October 1997, ANZ Funds
Management announced a strategic alliance
with Frank Russell company, one of the
world’s leading asset consulting and
investment management firms.
Under this alliance, customers will be
offered access to world-class investments
through the launch of a unique, personalised
investment program. ANZ Funds
Management will be able to focus on what
it does best – providing quality financial
planning services – while Russell will focus
on managing the investments and selecting
the appropriate fund managers.
Russell uses multi-style, multi-manager
investment approval which has an impressive
record of investment performance.
To enhance our position in the premium
market, private banking has been launched
across Australia to provide premium service to
high net worth customers.
The New Zealand operation has
recorded a very strong growth in funds under
management (17%) on the back of outstanding
investment performance. Both retail and
wholesale funds increased significantly over
the year. In New Zealand, ANZ Funds
Management was ‘Best International Equities
Manager’, and second for balanced funds,
while also achieving the best investment
performance with the balanced investment
fund. Bonus Bonds – a capital guaranteed
product where in lieu of interest, holders
participate in weekly and monthly cash prize
draws – has been relaunched and invested
funds have grown to AUD$1.5 billion.
International
Overseas, our funds management activities
draw on our presence in the emerging
economies. We have a very successful
emerging market investment operation based
in London. The success of our six managed
emerging markets funds has won us a leading
reputation in managing emerging market
debt investment funds. Micropal has rated
the ANZ flagship fund, EMLIP, the No. 1
emerging market debt fund over three years,
and in 1997 Lipper Analytical Services – the
leading fund analysts in the USA – rated
ANZ Global Emerging Market Debt Fund
as the best performing fund over a 12 month
period.
Grindlays Private Bank provides full
private banking and asset management services
to high net worth individuals primarily from
Asia and the Middle East through offices in
London, Geneva, the Channel Islands and
Singapore.
Ross Chessari,
General Manager Estate
Planning & Management
for ANZ Funds
Management, provides
advice to customer.
18
Risk Management
Good risk management is good banking. The identification
and monitoring of risk is an essential part of the Bank’s
operations. Our objective is to make risk management a
prime core competency of the organisation by continuous
improvement of our systems and procedures to ensure risks
are accurately identified and assessed.
ANZ manages risk through an approval and
delegation of limits structure that starts with
the Board of Directors and is administered
by an independent department.
The Risk Management Committee of
the Board approves and oversees the
framework of risk standards, policies and
processes for credit, market and operating
risks. Delegations pass through Executive
Committees to individual customer
controllers and risk managers. Regular
reports and compliance checks are presented
back through the Risk Management
Committee to the Board.
The Risk Management Department is
the independent group which has
responsibility for ensuring the cohesion and
effectiveness of the Group’s risk management
framework. It oversees the activities of all
areas involving risk policy and monitoring.
The work of the department is subject to
independent review and audit by both the
internal and external auditors to ensure
Sources of Risk
Illustrative
Credit Risk
Customers unable to meet contractual obligations
Market Risk
Potential loss due to fluctuations in interest or exchange
rate markets
Operating & Other Risk
compliance with policies, procedures and
industry/government regulations.
Credit Risk
Credit risk is the potential financial loss
resulting from the failure of customers to
honour fully the terms of a loan or contract.
Credit risk represents some 50% of Group
risk exposures.
The Board establishes the framework of
delegated authority limits for the approval
of credit risk transactions. The largest
transactions are approved by the Risk
Management Committee.
That Committee also receives regular
reports on asset quality issues, including
portfolio composition, large customer
exposures, and developments in credit
management policy and processes.
The Credit Approvals Committee,
involving senior executive management,
makes decisions on transactions, portfolio
strategy, policy and processes. Specialist credit
and business areas have been established for
the larger portfolios (e.g. real estate and
agriculture), whilst a specialist group handles
the effective management of problem loans.
At operational levels the loan approval
process requires independent specialist credit
officers to be involved in all major lending
decisions, in conjunction with customer
relationship managers. A sophisticated
customer credit risk grading system is
supported by objective risk measurement
tools which aids in the assessment of default
risk.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
19
Risk Management Framework
Board
Board Risk Management Committee
Group Risk Management
Department
Global Funds
Management Committee
Credit Approvals
Committee
Credit Portfolio & Policy
Committee
Operating Risks
Executive Committee
Trading
Risks
Balance
Sheet Risks
Credit
Risks
Operating
Risks
Market Risk Management
Market risk is the potential risk to earnings
resulting from changes in interest rates,
currencies, equities and commodity prices.
ANZ’s approach starts with independence
and segregation of operations, risk
measurement and control.
The activities are guided by separate sets
of policies approved by the Risk Management
Committee of the Board. At the executive
level, the Global Funds Management
Committee is the most senior market and
balance sheet management risk forum and
is responsible for maintenance of the Board
approved control framework. Its membership
includes the Chief Executive Officer and it
is chaired by the Executive Director.
The Market Risk Management Unit,
as part of the Group Risk Management
Department, has responsibility for co-
ordination of policy and compliance for
market risk and related credit and operating
risks. This includes the co-ordination of the
independent control of all market risk related
activities within the specific business units.
ANZ increasingly is integrating its approach
to the management of credit and market risk
and the monitoring of operating risk from
trading activities.
Trading Risk Management
Market risk activities include trading,
distribution and underwriting, dealing in a
wide range of financial products. Principal
portfolios consist of capital markets securities,
foreign exchange and money market products,
derivatives, equities and commodities. ANZ’s
principal trading activities are well diversified,
and now managed on a global product basis.
The key principles for control of market
risk are “Value at Risk” measurement
supplemented with volume and risk
concentration limits. The “Value at Risk”
limit framework is designed in three levels
with an aggregate global market risk limit,
global product limits and individual trading
book limits. These are supported by daily
mark to market profit accounting and advice
of loss procedures.
Supporting the risk management
framework, particularly for the Bank’s major
trading and geographically isolated business
units, are Professional Standards Reviews.
Market specialists conduct reviews of the
trading activities to ensure high standards of
professional conduct throughout all offices
of the Group world-wide.
Balance Sheet Risk Management
The balance sheet risk management process
embraces the management of balance sheet
interest rate risk, liquidity and foreign
currency capital exposures. These risks are
managed by a specialist Global Balance Sheet
Management unit and are monitored by the
Global Funds Management Committee.
Balance sheet interest rate risk management
involves minimising fluctuations in net
interest income that may occur over time as
a result of changes in market interest rates.
20
reviewing and approving key practices and
approving deviations from policy.
The Operating Risk methodology is
based on the risk management standards
issued by the Australian and New Zealand
Standards bodies.
In addition to addressing today’s risks,
such as the Year 2000 issue and disaster
recovery, there is also a forward looking
responsibility, to ensure that risks associated
with new business initiatives, delivery
channels and technology are being properly
addressed. ANZ also trains staff in operating
risk management.
Year 2000
ANZ, along with all other users of computer
systems, faces the issue of the potential
disruption to business that may eventuate with
the date change from 1999 to 2000.
ANZ has a well established process for
dealing with this threat. A project team, with
dedicated staff assisted by external consultants,
has been established to provide management
and control across all Year 2000 compliance
related work world-wide. All ANZ systems
have been analysed and work is underway
to develop, test and implement the necessary
changes. Full systems testing for internal
applications is scheduled to be completed
by December 1998, and in conjunction with
other organisations, full cross industry
integration testing will take place during
1999.
The potential risk to the Group from
vendors and customers not being adequately
prepared to manage this issue is also receiving
detailed attention.
A leading edge modelling system was
installed in 1997 and is used to simulate the
impact on earnings and market value of a
large number of market scenarios and balance
sheet structures. This enables management
to quantify the risks and formulate strategies
to manage current and future risk profiles.
The liquidity management process
ensures that funds are available at all times to
meet maturing obligations as they fall due.
ANZ policy establishes daily liquidity
management practices as well as scenario -
based guidelines to monitor future liquidity
flows under normal operating conditions and
to cater for a worst case scenario arising from
an unfounded, name-specific rumour.
Structural foreign exchange exposures
are managed with the objective of ensuring
that the ANZ capital ratio is not adversely
impacted by changes in the value of the
Group’s foreign currency capital as a result
of movements in exchange rates.
Operating Risk
Operating Risk embraces those risks arising
from day to day operational activities which
may result in direct or indirect loss.
Operating Risk may arise, for example, from
failure to comply with internal policies, laws
and regulations, from fraud and forgery or
from breakdown in the availability, integrity
and confidentiality of services, systems and
information. Some operating risks are
insurable and appropriate cover is taken. The
majority are not insurable.
The objective of Operating Risk
management is to ensure that risks are
known, assessed and managed in a structured
environment. ANZ does not expect to
eliminate all risks, but to minimise exposure
based on a sound risk/reward analysis in the
context of an international financial
institution.
Reporting to the Board’s Risk
Management Committee, the Operating Risk
Executive Committee is responsible for the
Operating Risk policy, methodology,
Australia and New Zealand Banking Group Limited – 1997 Annual Report
21
Group Executive
John McFarlane
Peter Hawkins
John Sunderland
Peter McMahon
John Ries
Peter Marriott
Peter Jonson
JOHN McFARLANE
Chief Executive Officer
John McFarlane joined ANZ in October 1997
as Chief Executive Officer. He was previously
Executive Director of Standard Chartered
plc and prior to that he spent 18 years with
Citibank where he held a number of
positions in corporate banking, treasury,
investment banking, stockbroking, strategy,
human resources and training.
JOHN RIES
Executive Director
John Ries joined ANZ in 1961 and has held
senior management positions within the
corporate banking and international banking
divisions. In June 1988 he was appointed
as Managing Director, ANZ Grindlays Bank,
London. He returned to Melbourne in
August 1990 to take up the position of Chief
General Manager International Banking. In
August 1992, John was appointed to the
ANZ Board as Executive Director with
responsibility for Australia. He currently has
responsibility for the Group’s Corporate and
Investment banking activities.
PETER HAWKINS
Global Head of Personal
Banking
Peter Hawkins joined ANZ in December
1971 and has had experience in most
aspects of banking including treasury,
corporate banking, retail banking, strategy
and international banking. He was
appointed to his present position in
November 1997 after two and a half years
as Chief General Manager Australian Retail
Division and before that he was Managing
Director ANZ Banking Group (New Zealand)
Limited. Prior to that he was General
Manager Asia Pacific.
PETER MARRIOTT
Chief Financial Officer and
Company Secretary
Peter Marriott joined ANZ in February 1993
as General Manager, Group Accounting and
was promoted to Group General Manager
Credit/Risk Management in July 1995. He
was appointed to his present position as
Chief Financial Officer and Company
Secretary in July 1997. Prior to joining ANZ,
Peter was a partner in KPMG’s Melbourne
office.
JOHN SUNDERLAND
Managing Director,
ANZ Investment Bank
John Sunderland joined ANZ in November
1996 to head the Group’s global investment
banking activities. He has responsibility for
the various business activities undertaken
by ANZ to support its large corporate and
institutional customers around the globe.
Prior to joining ANZ John held senior
investment banking positions with BZW in
London, New York and Hong Kong.
PETER JONSON
Managing Director,
ANZ Funds Management
Dr Peter Jonson was appointed to ANZ’s
Group Executive in the position of Managing
Director ANZ Funds Management in March
1997. Prior to joining ANZ he was Group
Managing Director of Norwich Australia.
He has also held senior positions with
James Capel Australia Limited and the
Reserve Bank of Australia.
PETER McMAHON
Managing Director, Esanda
Finance Corporation Limited
Peter McMahon joined ANZ in July 1992
as General Manager Special Projects. In
December 1992 he was appointed General
Manager of the Asset Management Group
and then Group General Manager Credit.
Prior to joining ANZ he was Managing
Director of Costain Australia. He was
appointed to his current position of
Managing Director Esanda Finance
Corporation Limited in July 1995.
22
Bob Edgar
David Airey
John Winders
Andrew Ward
Murray Horn
Charles Carbonaro
Grahame Miller
Dave Richardson
Peter Wilson
Elmer Funke Kupper
BOB EDGAR
Managing Director,
Business Banking
GRAHAME MILLER
Managing Director,
International Network
Dr Bob Edgar joined ANZ in December 1984
as Senior Economist and in 1986 he was
appointed Chief Economist. Since then he
held a number of executive positions before
he was appointed to his present position in
Business Banking in March 1995. Before
joining ANZ Bob held senior positions with
the Australian Bankers’ Association and the
Reserve Bank of Australia in Sydney.
CHARLES CARBONARO
Managing Director,
Global Cards Division
Charles Carbonaro joined ANZ in January
1987 as a senior consultant in the Electronic
Network Services Division. He was
appointed General Manager-Cards in 1989
and was promoted to Chief General
Manager - Australian Operations and
Payments Division in 1992. He was
appointed to his current position in Global
Cards Division in December 1996. Before
joining ANZ Charles was Chief General
Manager at Resi-Statewide Building
Society (now Bank of Melbourne).
DAVID AIREY
Managing Director, ANZ Banking
Group (New Zealand) Ltd
David Airey was appointed Managing
Director, ANZ Banking Group (New Zealand)
Limited in March 1997. Prior to this
appointment he was Chief Executive Officer
of the Bank of Melbourne from February
1993 to February 1997 and from January
1990 to December 1992 he was Managing
Director of The Rural Bank based in
Wellington.
Grahame Miller joined ANZ in 1968. He
has held a number of senior positions
including General Manager Financial
Markets, General Manager Global Treasury,
Chief Manager/General Manager Hogan for
Retail, Senior Manager Group Strategic
Planning and Assistant Vice President Los
Angeles. He was appointed to his current
position as Managing Director, International
Network in July 1997.
JOHN WINDERS
Group General Manager,
ANZ Global
John Winders joined ANZ in 1969 and
worked across a wide range of business and
support areas and spent a number of years
with ANZ overseas before leaving in 1985.
He returned to ANZ in early 1994 and was
appointed to the position of General
Manager International Services. He
currently heads the ANZ Global program in
addition to his International Services role.
DAVE RICHARDSON
Group General Manager,
Information Technology
Dave Richardson joined ANZ as General
Manager Information Technology in
Australia in March 1993. He was appointed
Group General Manager, Corporate
Development in 1996. This position was
responsible for Strategic Planning,
Economics, Public Affairs and Technology.
He was appointed to his current role as
head of global information technology in
1997. Dave Richardson has over 20 years
experience in Information Technology and
has held a variety of senior positions in
Coles Myer, Ansett Australia and overseas.
ANDREW WARD
Head of Operations and Payments
Mr Andrew Ward joined ANZ in February
1971. He has held a number of senior
management positions including Adminis-
tration Executive - Corporate Banking
Australia, Zone Chief Manager - Melbourne
North and West Zone, Assistant General
Manager - Asset Management Group,
General Manager Operations and Payment
Services - ANZ Banking Group (New
Zealand) Ltd, Acting Managing Director of
ANZ Banking Group (New Zealand) Limited.
He is responsible for the Group’s Operations
and Payments functions globally.
PETER WILSON
Group General Manager,
Human Resources and
Management Services
Peter Wilson joined ANZ in October 1990
as Group General Manager, Strategic
Planning and Economics. From 1992-95 he
was General Manager, Asia Pacific,
responsible for the Bank’s operations in
North Asia, South East Asia, Sri Lanka,
Papua New Guinea and the Pacific Islands.
Peter took up his current role as Group
General Manager, Human Resources and
Management Services in January 1996.
MURRAY HORN
Group General Manager,
Strategic Planning
Dr Murray Horn was appointed to the posi-
tion of General Manager Strategic Planning
in September 1997. His responsibilities
include overseeing the development of stra-
tegic planning as the Group strengthens its
global lines of business. Prior to joining
ANZ he had a distinguished career with the
New Zealand Treasury, where he had been
Secretary of the Treasury since 1993.
ELMER FUNKE KUPPER
Group General Manager,
Risk Management
Elmer Funke Kupper joined ANZ in 1995 as
General Manager, Portfolio Management
within Group Credit/Risk Management.
Prior to joining the Group he worked as a
consultant for McKinsey & Company and
later Mitchell Madison Group. In March
1997 he became team leader, Support and
Business Management and Organisation
Design for ANZ Global and has recently
been appointed to the role of Group General
Manager, Risk Management.
Elizabeth Proust
Elizabeth Proust will join ANZ in January 1998 as Head
of Group Human Resources. Until recently Ms Proust
was Secretary of the Victorian Department of Premier
and Cabinet. Previously she had held the positions of
Chief Executive Officer of the City of Melbourne,
Secretary of the Victorian Attorney-General’s
Department and Deputy Director General of the
Department of Industry, Technology and Resources.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
23
Board of Directors
24
MR C B GOODE (left)
B Com (Hons) (Melb), MBA (Columbia University, New York), FCPA, FSIA
Chairman
Company Director.
Director since July 1991, appointed Chairman August 1995.
Director of CSR Limited, Pacific Dunlop Ltd, Queensland Investment Corporation,
Woodside Petroleum Ltd, Mercury Asset Management Ltd and other companies.
Lives in Melbourne. Age 59.
Mr J McFARLANE OBE
MA, MBA, MSI, FHKIB, FRSA
Chief Executive Officer. Appointed Group Managing Director and Chief Executive
Officer in October 1997. Former Group Executive Director, Standard Chartered plc
(1993-1997), Head of Citibank, United Kingdom (1990-1993), Managing Director,
Citicorp Investment Bank Ltd (1987-1990).
Lives in Melbourne. Age 50.
(left to right)
DR B W SCOTT AO
B Ec, MBA, DBA
Company Director.
Director since August 1985. Chairman of Management Frontiers Pty Ltd, W.D. Scott
International Development Consultants Pty Ltd, Television Makers Pty Ltd and The
Foundation for Development Co-operation Ltd. Director of Air Liquide Australia Ltd
and the James N. Kirby Foundation Ltd. Australian member of the Board of Governors
of the Asian Institute of Management and Chairman of the Australia-Korea
Foundation. Former Chairman of the Australian Government’s Trade Development
Council (1984-1990). Former Federal President, Institute of Directors in Australia
(1982-1986)
Lives in Sydney. Age 62.
MR J K ELLIS
MA (Oxon) FAIMM FTS
Chairman, The Broken Hill Proprietary Co Ltd.
Director since October 1995. Chairman of Sandvik Australia Pty Ltd and Chairman of
the International Copper Association Ltd. Patron of the Australian-Korea Business
Council. Board Member of the Museum of Contemporary Art.
Lives in Melbourne. Age 60.
MR R B VAUGHAN AO (seated)
Company Director.
Director since January 1988. Chairman of MIM Holdings Limited and Queensland
Sugar Corporation Limited. Deputy Chairman of Commercial Union Assurance Limited
and Transgrid. Chairman of the Federal Government’s Trade Policy Advisory Council,
APEC Committee and Sugar Industry Review Working Party, and Vice-President of
the Australia Japan Business Co-operation Committee. President and Chairman of
the Research Institute for Asia and the Pacific. Former Chairman and Chief Executive
of Dalgety Farmers Limited and former Chairman of ICI Australia Limited.
Lives in Sydney. Age 69.
MR C J HARPER
CA (Scots)
Company Director.
Director since October 1976. Chairman of CSL Ltd. Former General Manager and
Chief Executive of the merchant bank Australian United Corporation Ltd (1968-1976)
and since then a professional non-executive director. Inaugural National Vice
President of The Australian Institute of Company Directors.
Lives in Melbourne. Age 66.
(left to right)
DR R S DEANE
PhD, B Com (Hons), FCA, FCIS, FNZIM
Chief Executive and Managing Director, Telecom New Zealand Limited.
Director since September 1994. Director of Fletcher Challenge Limited, IHC
Mortgages Ltd, The Centre for Independent Studies Ltd and Institute of Policy Studies,
Victoria University, Wellington. Formerly Chief Executive, Electricity Corporation of
New Zealand Ltd, Chairman State Services Commission, Alternate Executive Director,
International Monetary Fund and Deputy Governor, Reserve Bank of New Zealand.
Lives in Wellington, New Zealand. Age 56.
MR J F RIES
B Bus, FCPA, FAIB
Executive Director.
Executive Director since August 1992. Thirty-seven years experience in banking
with the Group including Managing Director, ANZ Grindlays Bank plc, London (1988-
1990) and Chief General Manager, International Banking (1990- 1992).
Lives in Melbourne. Age 53.
MS M A JACKSON
MBA, B Econ, FCA
Company Director.
Director since March 1994. Chairman of Transport Accident Commission (Victoria).
Director of The Broken Hill Proprietary Co Ltd, Pacific Dunlop Ltd, Qantas Airways
Ltd and other companies. Fund Committee Member of The Walter and Eliza Hall
Institute of Medical Research and Trustee of The Brain Imaging Research Foundation.
Lives in Melbourne. Age 44.
MR J C DAHLSEN
LLB, MBA (Melb)
Solicitor and Company Director.
Director since May 1985. Consultant to and former Partner of the legal firm Corrs
Chambers Westgarth. Chairman of Woolworths Ltd and Melbourne Business School
Ltd, Director of Southern Cross Broadcasting (Australia) Ltd, Mining Project Investors
Pty Ltd, The Smith Family, GS Private Equity Pty Limited and J. C. Dahlsen Pty Ltd
Group. Former Chairman of The Herald and Weekly Times Ltd and Deputy Chairman
Myer Emporium Ltd.
Lives in Melbourne. Age 62.
Retired Directors
Three Directors retired during
the year.
Mr Charles Goode in
farewelling them said,
“We thank these gentlemen for
their enormous contribution to
the Bank and wish them all the
best in their retirement”.
Sir Ronald Trotter
Mr D P Mercer
Mr A T L Maitland
Director
1988-1997
Chief Executive Officer &
Executive Director
1992-1997
Executive Director
1992-1997
Australia and New Zealand Banking Group Limited – 1997 Annual Report
25
Corporate Governance
Good governance is essential for ANZ to carry out its
business activities and meet the objectives of its shareholders,
employees, customers and regulators around the world.
Role of the Board of Directors
To ensure the benefit of independent
The Board of Directors is responsible to
shareholders for the corporate governance
of ANZ. The Board
charts the direction of the Group by
participating in the setting of objectives
and strategy formulation and establishing
policy guidelines
monitors management’s running of the
business to ensure implementation is in
accordance with the agreed framework.
Effective risk management is central to good
banking. The Board and the Risk Management
Committee approve and oversee the
framework of risk standards, policies and
processes. A detailed explanation of the Bank’s
Risk Management procedure is contained
on pages 19 to 21 of this Report.
The Board, and particularly, Audit &
Compliance Committee, liaises with the
external auditors on accounting policies and
practices and compliance issues.
Composition of Board
To achieve its objectives, a well structured
Board is necessary. Details of directors, their
qualifications and experience are set out on
pages 24 and 25.
The Board Nominations Committee
identifies and nominates suitable candidates
for consideration by the full Board.
Although flexible, criteria include the
individual’s background, experience, and
skills. Geographical considerations and
availability to commit sufficient time to the
Board’s program are also considered.
views, the Articles of Association of the
Company state that there must be a majority
of non-executive directors on the Board and
that the role of Chairman cannot be held
by an executive director, ensuring that the
roles of Chairman and Chief Executive
Officer are separate. Committees of the
Board are chaired by non-executive directors
and the Audit & Compliance Committee
comprises only non-executive directors.
All non-executive directors are regarded
as independent, having no substantial
supplier customer relationship and no prior
executive role in the Group. The Board has
established a code of conduct in the event
of a conflict of interest.
The Board currently has eight non-
executive directors and two executive
directors.
Both non-executive and executive
directors (other than the Managing Director)
are subject to re-appointment by shareholders
on a rolling three year basis and must retire
upon attaining the age of 70. Executive
directors retire as directors on the
termination of their employment with the
Group. Their status after that date is a matter
for the Board at the time.
In the interests of ensuring smooth
succession and a reasonable range and
turnover of skills, non-executive directors
appointed since 1993 have agreed that they
will not, in normal circumstances, serve as a
Director beyond 15 years.
26
Board Activities
To assist in the exercise of their
The Board meets ten times a year.
Committee meetings are held at regular
intervals. Details of attendance are shown
below.
The Board receives regular reports on
performance and outlook, and reviews
activities and strategies of the Bank and each
division.
Directors participate in a programme of
visits to operations and create opportunities
to meet and discuss current issues with
management and staff. The Board held its
February 1997 meeting in India which
allowed Directors to visit local banking
operations, meet staff and customers and
government representatives in India and also
in neighbouring countries in which the
Bank operates.
Whilst there is no restriction on the
number of external Board or charitable
committee appointments a director may
have, they are required to seek Board
approval before accepting appointment.
responsibilities, directors are entitled to seek
independent professional advice. With the
Chairman’s prior approval the advice can be
obtained at the Bank’s expense and is to be
made available to the whole Board.
Directors are required to hold at least
2,000 shares in the Company. Details of their
holdings are shown on page 115. They must
refrain from dealing in the Company’s shares
for their personal benefit except in three four
week periods; following the announcement
of half year and full year results, and the
Annual General Meeting, and in each case
the Chairman of the Board must be
informed prior to any trading. The same
restrictions are also imposed upon senior
management and those staff in departments
with access to market sensitive information,
with the notification being required to the
Chief Executive Officer.
The Articles of Association provide an
indemnity to directors and employees for
costs and liabilities incurred in the execution
of duty. The External Auditor is not
indemnified.
continued overleaf...
Attendance of Board and Committee meetings for the period 1/10/96–30/9/97
Board
A
10
10
10
10
10
10
7
10
10
10
10
10
B
10
10
10
10
10
9
7
10
10
10
9
10
Risk
Management
B
A
Audit &
Compliance
B
A
11
11
11
11
11
8
11
11
11
8
11
11
5
5
5
5
5
4
5
5
4
5
Personnel
Executive App.
& Remuneration
A
3
3
3
3
B
3
3
3
3
A
7
7
7
7
7
7
7
7
7
7
B
7
6
7
7
6
7
6
7
5
7
C B Goode
J C Dahlsen
R S Deane1
J K Ellis
C J Harper
M A Jackson
A T L Maitland2
D P Mercer3
J F Ries
B W Scott
Sir Ronald Trotter1,4
R B Vaughan
Donations
A
3
B
3
Board
Nominations
B
A
4
4
3
3
4
4
4
4
Column A–Indicates number of meetings held during the period the Director was a Member of the Board and/or Committee.
Column B–Indicates number of meetings attended during the period the Director was a Member of the Board and/or Committee.
The Executive Committee met three times during the year.
The Chairman is an ex officio member of all Board committees.
1Resident of New Zealand 2Mr Maitland retired 30/6/97 3Mr Mercer retired 30/9/97 4Sir Ronald Trotter retired 9/10/97
Australia and New Zealand Banking Group Limited – 1997 Annual Report
27
Committee Structure
The Board’s function is to address issues in
their broadest context. It is through the
Board’s committee structure that specific
areas of detail are examined. There are six
board committees, each with a defined
Charter. These committees are charged with
providing quality and independent advice to
the Board as a whole. Details of the role of
each committee is shown opposite.
Membership of the committees and
attendance at committee meetings during
the year is set out on page 27.
Directors have also participated in
meetings of Committees of the Board (4
meetings during 1997) to sign accounts, to
declare dividends and make allotments under
the Company’s various dividend reinvestment
and employee share schemes.
The Board has the power to nominate
Directors to form an Executive Committee
of the Board at any time and delegate to
that Committee general executive authority
to deal with any matter relating to the
company’s affairs in circumstances where it
is not possible to call a full Board meeting.
Subsidiary Boards -
Non-executive Directors
ANZ has a number of subsidiary companies,
some of which have non-executive directors.
The major subsidiaries in this regard are:
ANZ Grindlays Bank Limited
M A Jackson, B W Scott AO
ANZ Banking Group (New Zealand)
Limited
J G Todd, F H Wilde
Companies within ANZ Funds
Management Group
D P McDonald, C M William,
L J Willett AO.
B W Scott and R B Vaughan, directors on
the ANZ Board, are members of the boards
of the main Australian Staff Superannuation
and Pension companies.
The Audit & Compliance Committee
(Chairman - J C Dahlsen)
Reviews the Group’s accounting policies and practices;
financial statements; due diligence processes in relation
to capital raisings; and compliance with the Group’s
statutory responsibilities including those relating to
Consumer Credit Legislation, Trade Practices Act and
privacy issues. Monitors compliance with approved
policies and controls; liaises with internal and external
auditors. Approves audit plans and the audit fee of the
external auditor.
The Risk Management Committee
(Chairman - C J Harper)
Supervises all aspects of risk management. This includes
approving and overseeing the setting of delegation
policies, standards and reporting mechanisms for credit
risk, trading risk, balance sheet risk and operating risk.
Monitors the risks being assumed by the Group to ensure
standards are being met. A full description of the Group’s
Risk Management procedures is contained on pages 19
to 21 of this report.
Personnel Committee
(Chairman - Dr B W Scott)
Reviews and advises on executive remuneration
policies. Has the responsibility of developing and
monitoring the new senior executive remuneration
scheme, which more closely aligns management
remuneration to the generation of shareholder value.
The Executive Appointment &
Remuneration Committee
(Chairman - C B Goode)
Approves appointments and individual remuneration
packages for the senior officers of the Group. The
Committee obtains independent advice on the
appropriateness of remuneration packages.
The Board Nominations Committee
(Chairman - C B Goode)
Reviews the composition of the Board to ensure that it
has the appropriate mix of expertise and experience.
Recommends appointments to the Board where it is
considered that the Board would benefit from the service
of a new director with particular skills.
The Donations Committee
(Chairman - C B Goode)
Advises on donations policy and considers requests for
corporate contributions.
Committee members shown on page 27.
28
Community Involvement
Our responsibility to shareholders, customers and staff extends
to playing an active role in the communities in which we
operate. This involvement covers many areas of community
life from local sports activities and multicultural festivals to
community welfare and the arts.
India’s leading musicians, dancers and theatre
artists performed in the Festival, in celebration
of India’s history and independence.
ANZ has also supported the establishment
of a Chair in South Asian Economics at the
Australian National University in Canberra.
The Chair is dedicated to India’s late
Prime Minister, Rajiv Gandi and recognises
the growing economic links between
Australia and India.
ANZ Foundation
During 1997, ANZ further encouraged
staff involvement in the community through
the ANZ Foundation. Formerly known as
the ANZ Staff Foundation, the ANZ
Foundation was relaunched in November
1996 to support the Australian community
through staff donations and involvement.
The Bank provides financial support to
the Foundation, and in 1997 over $90,000
of grants were made to charities such as the
Australian Sport and Recreation Association
for Persons with an Intellectual Disability
(AUSRAPID), Youth Insearch and the
Down Syndrome Assocation of Victoria.
The ANZ Foundation aims to fund
projects which offer opportunities for staff
to become involved by giving their time.
During 1997, ANZ has contributed to a wide
range of initiatives in community welfare,
medical research, education and cultural
activities.
Fostering the talents of young people is
an important contribution to the community’s
future. ANZ has built on its long running
commitment to the arts by supporting young
artistic talent through the ANZ Visual Arts
Fellowship and the ANZ Music Fellowship.
Food Bank
In Victoria and New South Wales we have
provided support to Food Bank, a charity
which works with welfare agencies to give
assistance to more than 40,000 people in
need each week through the provision of
meals and food hampers. Our support
included providing finance for a new vehicle
to assist in delivering food.
Our focus in this area has also extended
to supporting The Salvation Army’s Family
Support Services Network in Victoria which
involves the distribution of food to people
in need in rural areas.
India’s 50th Anniversary of Independence
ANZ has had a presence in India since 1854
and ANZ Grindlays has played an active part
in supporting India’s cultural heritage. In
August 1997, India celebrated the 50th
anniversary of its independence.
As part of the celebrations, ANZ
Grindlays was involved in sponsoring the
National Centre for Performing Arts’ festival
of dance and drama in Mumbai. Some of
Pictured with the new
Food Bank truck are
Peter Bearsley, ANZ’s
General Manager
Charitable Trusts, and
Glenn Ellam, General
Manager Food Bank
Victoria.
Background -
Li Cunxin, Private Client
Adviser with ANZ
Stockbroking and one of
the six principal male
dancers with the
Australian Ballet.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
29
Business Environment
Financial System Inquiry
In March 1997 the final report of the
Australian Financial System Inquiry was
presented to the Federal Treasurer. Rapid
technological change and globalisation of the
financial services industry since the
deregulation of the first half of the 1980s
prompted the Inquiry. The Report
concluded that improvement in efficiency,
choice and quality within the financial sector
has occurred since the deregulation of the
1980s and recommended a package of 115
regulatory reforms to secure further
improvements.
In early September, the Treasurer
announced the Government’s acceptance of
the majority of the Report’s recommendations.
Implementation of the reform package to
sharpen competition and ensure Australia has
a world class regulatory structure able to
accommodate the significant change that lies
ahead, is scheduled to begin in 1998.
Key reforms are:
establishment of a new regulatory
framework.
• The Reserve Bank of Australia (RBA)
will retain responsibility for the stability
of the financial system with a new
Payments System Board within the
RBA, will be responsible for payments
system regulation.
• A new regulatory body, the Australian
Prudential Regulation Authority, will
have prudential oversight of all deposit
taking institutions, life and general
insurance offices and superannuation
funds.
• A single agency, the Corporations and
Financial Services Commission, will be
responsible for the corporations law,
market integrity and consumer
protection roles of the Australian
Securities Commission, the Insurance
and Superannuation Commission and
the Australian Payments System
Council.
Liberalisation of access to the payments
system.
While participation has until now been
limited to banks and a small number of
‘special service providers’ offering
clearing services to building societies and
credit unions, new guidelines for access
to payments clearing and settlement to
be developed by the Payments System
Board will allow access to non-banks.
Increased flexibility in corporate
structures.
Banks will be permitted to restructure
their operations under a more flexible
non-operating holding company
structure; mutual organisations will be
permitted to hold a banking licence; and
the principle of separating financial
activities from non-financial activities
within the one corporate group is to be
relaxed, subject to prudential and other
conditions being met.
Political Donations
ANZ supports a vigorous multi-party
democracy as the best guarantee of a market-
oriented economy with strong private and
commercial rights and freedoms.
Accordingly, from time to time, we provide
some level of support for the major parties
in our home markets.
In Australia we provide details to the
Australian Electoral Commission which are
published on an annual basis.
In the year to 30 September 1997 in
Australia, we donated $125,000 to the Liberal
Party, $25,000 to the National Party and
$20,000 to the Australian Labor Party.
In New Zealand, we donated NZ$10,000
to the National Party, NZ$5,000 to the Labour
Party and NZ$5,000 to the Association of
Consumers and TaxPayers.
30
Events of 1997
OCTOBER
MAY
Half Year profit of $646M
Chief Executive Officer, Mr Don Mercer,
retirement announced
Home loan interest rates reduced
CBS rolled out in United Arab Emirates
JUNE
ANZ Health Insurance launched
ANZ No. 1 in foreign
exchange
CBS rolled out in Qatar
ANZ wins Gold at
Annual Report Awards
ANZ New Zealand
Funds Management
wins industry awards
JULY
ANZ “Bank of the Year”
Emerging markets debt
fund launched
Home loan and
business interest rates
reduced
CBS rolled out in Bahrain
AUGUST
Supermarket banking launched on the
Gold Coast
Credit card interest rates reduced
Interactive Internet Web site launched
Omani operations restructured
NOVEMBER
1996 profit of $1,116M
“ANZ Money Saver Home Loan”
introduced
Home loan interest rates reduced
DECEMBER
Business index rate and business
reference rate reduced
Credit card interest rates reduced
JANUARY
Mr David Airey
appointed
Managing Director,
ANZ New Zealand
Launch of ANZ
Phone Banking
FEBRUARY
Dr Peter Jonson
appointed Managing Director, ANZ Funds
Management
$1 billion committed to small business
sector
Home loan rates reduced
MARCH
Indian arbitration ruling
ANZ Direct home loans introduced
APRIL
Jerusalem branch re-opened
Financial System Inquiry Report
Approval granted to proceed with Beijing
branch licence
SEPTEMBER
Mr John McFarlane appointed Chief
Executive Officer
Home loan rates reduced
ANZ Beijing branch opened
Supermarket
branch at
Tweed Heads,
New South Wales.
Charles Goode, Dai Ziang Long, Governor of the People’s Bank of China,
and John Howard, Prime Minister of Australia, cut the ribbon to mark
the granting of ANZ’s branch banking licence in Beijing.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
31
Financial Highlights in Key Currencies
Millions
Profit and loss
Net income
Operating expenses
Profit before tax and doubtful debts
Provisions for doubtful debts - specific
- general
Profit before tax and abnormal items
Income tax expense
Outside equity interests
Profit before abnormal items
Abnormal loss
Profit after tax and abnormal items
Profit after tax by geographic segment
Australia
New Zealand
UK & Europe
Asia Pacific
South Asia2
Americas
Middle East3
Profit after tax and before abnormal items
Abnormal items
Profit after tax and abnormal items
Balance Sheet
Assets
Liabilities
Shareholders’ equity4
Ratios
Earnings per share - after abnormal items (basic)
Dividends per share - declared rate
Net tangible assets per share
1997
AUD
5,828
(3,783)
2,045
(86)
(201)
1,758
(579)
(8)
1,171
(147)
1,024
627
165
112
95
82
36
54
1,171
(147)
1,024
138,241
131,248
6,993
68.6¢
48.0¢
$4.59
1997
USD1
4,475
(2,905)
1,570
(66)
(154)
1,350
(445)
(6)
899
(113)
786
481
127
86
73
63
28
41
899
(113)
786
99,492
94,459
5,033
52.7¢
36.9¢
$3.30
1997
GBP1
2,736
(1,776)
960
(40)
(94)
826
(272)
(4)
550
(69)
481
295
77
53
45
38
17
25
550
(69)
481
1997
NZD1
6,522
(4,234)
2,288
(96)
(225)
1,967
(648)
(9)
1,310
(165)
1,145
702
185
125
106
92
40
60
1,310
(165)
1,145
61,724
58,602
3,122
32.2p
22.5p
£2.05
155,826
147,943
7,883
76.8¢
53.7¢
$5.17
1 USD, GBP and NZD amounts - profit and loss converted at average rates for financial year ended 30 September 1997 and balance sheet items
at closing rates at 30 September 1997
2 Includes Bangladesh, India and Nepal
3 Includes Bahrain, Greece, Israel, Jordan, Oman, Pakistan, Qatar and United Arab Emirates
4 Includes outside equity interests
32
1997
Financial
Statements
33
Australia and New Zealand Banking Group Limited – 1997 Annual Report
33
Table of Contents
Page
Page
Alphabetical index ......................................... 35
Directors’ report ........................................... 36
Profit and loss accounts ................................. 40
Balance sheets .............................................. 41
Statements of changes in
shareholders’ equity ...................................... 42
Statements of cash flows ................................ 44
Notes to the financial statements
1 Accounting policies ............................................. 45
2 Income ................................................................ 48
3 Expenses .............................................................. 48
4 Remuneration of auditors .................................... 50
5 Abnormal items ................................................... 50
6 Income tax expense ............................................. 51
7 Dividends ............................................................ 51
8 Earnings per share ................................................ 53
9 Liquid assets ......................................................... 54
10 Due from other financial institutions .................... 54
11 Trading securities ................................................. 55
12 Investment securities ............................................ 56
13 Net loans and advances ........................................ 58
14 Impaired assets ..................................................... 60
15 Provisions for doubtful debts ................................ 62
16 Customers’ liabilities for acceptances..................... 63
17 Regulatory deposits ............................................. 63
18 Shares in controlled entities and associates ............ 64
19 Other assets.......................................................... 65
20 Premises and equipment ...................................... 66
21 Due to other financial institutions ........................ 66
22 Deposits and other borrowings ............................. 67
23 Income tax liability .............................................. 68
24 Creditors and other liabilities ............................... 68
25 Provisions ............................................................ 68
26 Bonds and notes ................................................... 69
27 Loan capital ......................................................... 70
28 Outside equity interests ........................................ 71
29 Average balance sheet .......................................... 71
30 Interest sensitivity gap .......................................... 73
31 Net fair value of financial instruments .................. 74
32 Segment analysis .................................................. 76
33 Notes to the statements of cash flows ................... 78
34 Controlled entities ............................................... 80
35 Associates ............................................................. 81
36 Commitments ...................................................... 82
37 Derivative financial instruments ........................... 82
38 Contingent liabilities and
credit related commitments .................................. 88
39 Superannuation commitments .............................. 90
40 Fiduciary activities ............................................... 91
41 Exchange rates ..................................................... 91
42 Employee share purchase and
share option schemes ........................................... 92
43 Related party disclosures ...................................... 94
44 Remuneration of directors ................................... 97
45 Remuneration of executives ................................ 98
46 US GAAP reconciliation...................................... 99
47 Events since the end of the financial year ........... 102
Directors’ statement .................................... 103
Auditors’ report .......................................... 104
Financial information
1 Capital adequacy ................................................ 105
2 Interest spreads and net interest
average margins ................................................ 106
3 Cross border outstandings .................................. 107
4 Certificates of deposit and term
deposit maturities ............................................... 107
5 Volume and rate analysis .................................... 108
6 Concentrations of credit risk .............................. 110
7 Doubtful debts - industry analysis ....................... 112
8 Short term borrowings ....................................... 113
Shareholder information
1 Major shareholders ............................................. 114
2 Substantial ordinary shareholders ........................ 114
3 Average size of shareholdings ............................. 114
4 Distribution of shareholdings ............................. 114
5 Voting rights of shareholders .............................. 115
6 Holders of non-marketable parcels ..................... 115
7 Employee shareholder information ..................... 115
8 Directors’ shareholding interests ......................... 115
Glossary ..................................................... 116
34
Alphabetical Index
Page
Page
Abnormal items ......................................................... 50
Accounting policies ................................................... 45
Associates .................................................................. 81
Auditors’ report ....................................................... 104
Average balance sheet ................................................ 71
Average size of shareholdings ................................... 114
Balance sheets ........................................................... 41
Bonds and notes ........................................................ 69
Capital adequacy ..................................................... 105
Certificates of deposit and term deposit maturities ... 107
Commitments ........................................................... 82
Concentrations of credit risk ................................... 110
Contingent liabilities and
credit related commitments ....................................... 88
Controlled entities ..................................................... 80
Creditors and other liabilities ..................................... 68
Cross border outstandings ........................................ 107
Customers’ liabilities for acceptances .......................... 63
Deposits and other borrowings .................................. 67
Derivative financial instruments ................................. 82
Directors’ report ........................................................ 36
Directors’ shareholding interests ............................... 115
Directors’ statement ................................................. 103
Distribution of shareholdings ................................... 114
Dividends .................................................................. 51
Doubtful debts - industry analysis ............................ 112
Due from other financial institutions ......................... 54
Due to other financial institutions .............................. 66
Earnings per share ..................................................... 53
Employee share purchase and share
option schemes .......................................................... 92
Employee shareholder information .......................... 115
Events since the end of the financial year ................. 102
Exchange rates .......................................................... 91
Expenses ................................................................... 48
Fiduciary activities ..................................................... 91
Glossary .................................................................. 116
Holders of non-marketable parcels ........................... 115
Impaired assets ........................................................... 60
Income ..................................................................... 48
Income tax expense ................................................... 51
Income tax liability.................................................... 68
Interest sensitivity gap ................................................ 73
Interest spreads and net interest average margins ....... 106
Investment securities ................................................. 56
Liquid assets .............................................................. 54
Loan capital ............................................................... 70
Major shareholders .................................................. 114
Net fair value of financial instruments ........................ 74
Net loans and advances .............................................. 58
Notes to the financial statements ............................... 45
Notes to the statements of cash flows ......................... 78
Other assets ............................................................... 65
Outside equity interests ............................................. 71
Premises and equipment ............................................ 66
Profit and loss accounts .............................................. 40
Provisions .................................................................. 68
Provisions for doubtful debts ..................................... 62
Regulatory deposits ................................................... 63
Related party disclosures ........................................... 94
Remuneration of auditors ......................................... 50
Remuneration of directors ........................................ 97
Remuneration of executives ...................................... 98
Segment analysis ........................................................ 76
Shares in controlled entities and associates .................. 64
Short term borrowings ............................................ 113
Statements of cash flows ............................................ 44
Statements of changes in shareholders’ equity ............. 42
Substantial ordinary shareholders ............................. 114
Superannuation commitments ................................... 90
Trading securities ...................................................... 55
US GAAP reconciliation ........................................... 99
Volume and rate analysis .......................................... 108
Voting rights of shareholders.................................... 115
Australia and New Zealand Banking Group Limited – 1997 Annual Report
35
Directors’ Report
The directors present their report together with the
Review of Operations
accounts of the parent entity (the Company) and the
A review of the operations of the Group during the
consolidated accounts of the Economic entity (the
financial year and the results of those operations are
Group) for the year ended 30 September 1997.
The information is provided in conformity with the
Corporations Law.
Activities
contained in the Chairman’s Report, the Chief
Executive Officer’s Review, the Review of 1997
Results and the financial statements.
State of Affairs
The principal activities of the Group during the year
were general banking, mortgage and instalment lending,
In the directors’ opinion, there have been no significant
changes in the state of affairs of the Group during the
life insurance, leasing, hire purchase and general finance,
financial year, other than:
international and investment banking, investment and
portfolio management and advisory services, nominee
and custodian services, stockbroking and executor and
trustee services.
There has been no significant change in the nature
of the principal activities of the Group during the
financial year.
At 30 September 1997, the Group had 1,473 points
of representation.
Result
Consolidated operating profit after income tax and
abnormal items attributable to members of the
Company was $1,024 million. Further details are
contained in the Chief Executive Officer’s Review and
the Review of 1997 Results on page 5 and pages 9 to
12 respectively of the 1997 Annual Report.
Dividends
The directors propose payment of a final dividend of
26 cents per ordinary fully paid share, fully franked at
Net loans and advances increased by 11% from
$75,901 million to $84,148 million, primarily from
growth in International markets, particularly South Asia,
Asia Pacific and the Middle East, and business lending in
Australia.
Deposits and other borrowings increased by 12%
from $79,709 million to $89,152 million.
The charge for provisions for doubtful debts
increased by 86% to $287 million. New and increased
specific provisions were $280 million and releases and
recoveries totalled $194 million. The charge for the
general provision increased from $37 million in 1996 to
$201 million for 1997. This included an additional
$137 million transfer. This transfer was based on the
annual average provision implied in the Group's
portfolio risk management models and is not linked to
any need to provide against specific regions, industries
or individual borrowers. Gross non-accrual loans fell to
$872 million, or 1% of net loans and advances, from
$1,225 million at 30 September 1996.
36%, to be formally declared on 15 December 1997 and
The Arbitrators of the long running dispute with
to be paid on 21 January 1998. The proposed payment
the National Housing Bank of India (“NHB”) handed
amounts to $392 million.
Since the end of the previous financial year, the
down their award in the Group's favour on 29 March
1997. The NHB has repaid the deposit together with
following fully franked dividends on fully paid ordinary
interest at 18% in accordance with the decision. Given
shares have been paid:
Type
Final
Interim
Cents per
share
Amount before
bonus option
$m
Date of
payment
24
22
355
329
15 January 1997
7 July 1997
its size, the $65 million interest receipt (after tax) is
disclosed as an abnormal item. Subsequently, NHB
filed documents with the relevant Court to challenge
the award. The Group is confident that the award will
stand.
Restructuring costs of $417 million before tax have
The final dividend paid on 15 January 1997 was
been charged of which $327 million are shown as an
detailed in the directors’ report dated 29 November
abnormal item.
1996. Neither the interim dividend paid on 7 July 1997
nor the current proposed dividend have been
mentioned in previous directors’ reports.
36
Directors’ Report
While the above matters are those considered to be
items) for the relevant one of the financial years ending
significant changes, reviews of matters affecting the
30 September 1996, 1997 or 1998 are at least 50% over
Group’s state of affairs are also contained in the
the equivalent figure for the 1993 financial year. 95,000
Chairman’s Report, the Chief Executive Officer’s
options were exercised and 95,000 shares issued since
Review, the Review of 1997 Results and the financial
the end of the financial year, in accordance with the
statements.
Rules of the Scheme.
Events since the End of the Financial Year
No matter or circumstance has arisen between
30 September 1997 and the date of this report that has
significantly affected or may significantly affect the
operations of the Group, the results of those operations
or the state of affairs of the Group in subsequent years.
Future Developments
In addition there are 1,400,837 unexercised options
issued over ordinary shares of $1 each at an exercise
price of $8.76 per share. The options held by current
employees cannot be exercised earlier than three years
or later than five years from the date of issue. 2,254
options were exercised by former employees and 2,254
shares issued since the end of the financial year, in
accordance with the Rules of the Scheme.
Details of likely developments in the operations of the
The Company is of the kind referred to in class
Group in subsequent financial years are contained in the
order 97/1011 issued by the Australian Securities
Chairman’s Report and the Chief Executive Officer’s
Commission on 9 July 1997 under which the directors
Review on pages 4 and 5 respectively of the 1997
are relieved from the need to disclose the names of
Annual Report.
In the opinion of the directors, disclosure of any
further information would be likely to result in
unreasonable prejudice to the Group.
Rounding of Amounts
The Company is a company of the kind referred to in
the Australian Securities Commission class order
97/1005, dated on 9 July 1997 pursuant to section
313(6) of the Corporations Law. As a result, amounts in
this report and the accompanying financial statements
have been rounded to the nearest million dollars except
where otherwise indicated.
Shareholdings
The directors’ interests, beneficial and non-beneficial, in
the shares of the Company are detailed on page 115 of
the Shareholder Information section of the 1997 Annual
Report.
employees and relevant details in respect of options
granted to those employees under the scheme. The
directors have availed themselves of the relief granted
under this class order.
The names of all persons who currently hold
options granted under the schemes are entered in the
register kept by the Company pursuant to section 216C
of the Corporations Law and the register may be
inspected free of charge.
No person entitled to exercise any option has or
had, by virtue of the option, a right to participate in any
share issue of any other body corporate.
Further details on the ANZ Group Share Option
Scheme are contained in note 42 to the financial
statements and form part of this report.
Directors’ Share and Option Purchase Scheme
At the date of this report, there are 50,000 unexercised
options over ordinary shares of $1 each at an exercise
The directors are not aware of any single beneficial
price of $3.44 per share with an expiry date of 1 March
interest of five per cent or more in the share capital of
1998 or 90 days after cessation of a director’s term of
the Company.
Share Options
ANZ Group Share Option Scheme
At the date of this report, there are 5,435,000
unexercised options over ordinary shares of $1 each at
an exercise price of $5.34 per share. The options held
by current employees cannot be exercised earlier than
three years from the date of issue or later than
office, whichever is the earlier. No partly paid shares or
options were issued under this Scheme since the end of
the financial year.
Further details on the Directors’ Share and Option
Purchase Scheme are contained in note 42 to the
financial statements and form part of this report. Details
of directors’ shareholdings interests are set out on page
115 of the Shareholder Information section of the 1997
30 January 1999 and may only be exercised if the basic
Annual Report.
earnings per share of the Company (before abnormal
Australia and New Zealand Banking Group Limited – 1997 Annual Report
37
Directors’ Report
Directors, their Qualifications and Experience
seeking the approval of shareholders for the issue of
The Board includes eight non-executive directors who
options, and alternative arrangements if such options
have a diversity of business and community experience
cannot be issued;
and two directors with executive responsibilities who
(e) retirement benefits paid to Sir Ronald Trotter
have extensive banking experience. The names,
pursuant to an agreement of the type referred to in
qualifications and experience of the directors who are in
Article 79(b), following his retirement on 9 October
office at the date of this report are contained on pages
1997; and
24 and 25 of the 1997 Annual Report.
(f) benefits that may be deemed to have arisen because
Special responsibilities and attendance at meetings,
legal fees have been paid or are payable to Corrs
are shown on pages 27 and 28 of the 1997 Annual
Chamber Westgarth of which J C Dahlsen is a
Report.
Directors’ Benefits
No director has, during or since the end of the financial
consultant.
Further details are set out in note 43 to the financial
statements dealing with Related Party Disclosures.
year, received or become entitled to receive a benefit
Directors’ and Officers’ Indemnity
(other than a benefit included in the aggregate amount
Article 143 provides that to the extent permitted by the
of emoluments received, or due and receivable, by
Corporations Law “every director, secretary or
directors shown in the Company’s financial statements
employee of the Company shall be entitled to be
for the financial year or the fixed salary of a full-time
indemnified by the Company against all costs, charges,
employee of the Company, or an entity controlled by
losses, expenses and liabilities incurred by him in the
the Company, or a body corporate that was related to
execution and discharge of his duties or in relation
the Company at a relevant time) because of a contract
thereto”. The Corporations Law prohibits a company
that the director, or a firm of which the director is a
from indemnifying directors, secretaries, executive
member, or an entity in which the director has a
officers and auditors for liabilities except for a liability to
substantial financial interest, has made with the
a party, other than the Company or a related body
Company or an entity that the Company controlled, or
corporate, where the liability arises out of conduct
a body corporate that was related to the Company,
involving good faith, and for costs and expenses
when the contract was made or when the director
incurred in defending proceedings in which the officer
received, or became entitled to receive the benefit, with
or auditor is successful. An indemnity for officers or
the exception of the following:
employees who are not directors, secretaries or
(a) subscription by a director and certain former
executive officers, is not expressly restricted by the
directors for options to take up unissued shares under
Corporations Law.
the ANZ Group Share Option Scheme, pursuant to
In addition to its obligations under Article 143, it is
approval by shareholders at the January 1997 Annual
the policy of the Company to:
General Meeting;
(a) indemnify, in the same terms as Article 143,
(b) variable benefits payable under the Senior Executive
directors, secretaries and executive officers of related
Remuneration Scheme to which J F Ries became
bodies corporate; and
entitled after the end of the financial year;
(c) benefits which may have arisen from an agreement
with a former executive director, A T L Maitland,
relating to consulting services;
(d) an employment agreement between the Company
and J McFarlane providing, inter alia, for a variable
component of remuneration and for the Company
(b) indemnify other employees of related bodies
corporate for all liability incurred,
where they are acting in good faith in furtherance of the
objectives of the Company and its related bodies
corporate.
38
Directors’ Report
The directors, the secretaries of the Company,
being P R Marriott, R T Jones and J E Clark, and a
former secretary D T Craig, and executive officers of
the Company have the benefit of the indemnity in
Article 143.
During the financial year, and again since the end
of the financial year, the Company has paid a
premium for an insurance policy for the benefit of the
directors, secretaries as named above and executive
officers of the Company, and directors, secretaries and
executive officers of related bodies corporate of the
Company. In accordance with common commercial
practice, the insurance policy prohibits disclosure of
the nature of the liability insured against and the
amount of the premium.
Except for the above, during the financial year
and since the end of it, no person has been
indemnified nor has the Company or a related body
corporate of the Company made an agreement for
indemnifying any person who is or has been an officer
or auditor of the Company or of a related body
corporate.
Signed in accordance with a resolution of the directors.
Charles Goode
Chairman
28 November 1997
John McFarlane
Chief Executive Officer
Australia and New Zealand Banking Group Limited – 1997 Annual Report
39
Australia and New Zealand Banking Group Limited and Controlled Entities
Profit and Loss Accounts for the year ended 30 September 1997
Interest income
Interest expense
Net interest income
Other operating income
Operating income
Operating expenses
Operating profit before
debt provisions and abnormal items
Provisions for doubtful debts
Operating profit before abnormal items
Abnormal loss
Operating profit before tax
Income tax (expense) benefit
Operating profit
Abnormal loss
Income tax expense
Operating profit after income tax
Outside equity interests
Operating profit after income tax
attributable to members of the Company
Retained profits at start of year
Total available for appropriation
Transfers (to) from reserves
Dividends provided for or paid
Ordinary shares
Preference shares
Retained profits at end of year
Earnings per share (cents)
Basic
Before abnormal items
After abnormal items
Diluted
Before abnormal items
After abnormal items
Consolidated
1996
$M
1997
$M
1995
$M
The Company
1996
$M
1997
$M
Note
2
3
2
3
3
5
6
5
6
7
8
9,431
(6,018)
9,286
(5,969)
8,310
(5,229)
6,045
(3,981)
5,974
(4,037)
3,413
2,415
3,317
2,096
3,081
1,975
2,064
1,971
1,937
1,994
5,828
(3,783)
5,413
(3,644)
5,056
(3,334)
4,035
(2,805)
3,931
(2,574)
2,045
(287)
1,758
(182)
1,576
(579)
35
(544)
1,032
(8)
1,024
1,583
2,607
(82)
(695)
-
1,769
(154)
1,615
-
1,615
(490)
-
(490)
1,125
(9)
1,116
1,106
2,222
(55)
(584)
-
1,722
(174)
1,548
-
1,548
(505)
19
(486)
1,062
(10)
1,052
585
1,637
(27)
(424)
(80)
1,830
1,583
1,106
1,230
(221)
1,009
(214)
795
(225)
77
(148)
647
-
647
781
1,428
-
(695)
-
733
78.4
68.6
78.2
68.4
76.3
76.3
76.1
76.1
68.5
69.9
68.4
69.7
n/a
n/a
n/a
n/a
1,357
(110)
1,247
-
1,247
(224)
-
(224)
1,023
-
1,023
317
1,340
15
(574)
-
781
n/a
n/a
n/a
n/a
The notes appearing on pages 45 to 102 form an integral part of these financial statements
n/a Not applicable
40
Australia and New Zealand Banking Group Limited and Controlled Entities
Balance Sheets as at 30 September 1997
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
Note
Assets
Liquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Customers’ liabilities for acceptances
Due from controlled entities
Regulatory deposits
Shares in controlled entities and associates
Other assets
Premises and equipment
Total assets
Liabilities
Due to other financial institutions
Deposits and other borrowings
Liability for acceptances
Due to controlled entities
Income tax liability
Creditors and other liabilities
Provisions
Bonds and notes
Loan capital
Total liabilities
Net assets
Shareholders’ equity
Issued and paid-up capital
Reserves
Retained profits
Share capital and reserves attributable to
members of the Company
Outside equity interests
Total shareholders’ equity and outside
equity interests
Commitments
Derivative financial instruments
Contingent liabilities and credit related
commitments
6,298
11,588
7,266
3,139
84,148
14,040
-
1,206
7
8,490
2,059
6,901
11,352
7,334
2,570
75,901
14,013
-
1,163
10
6,340
2,020
3,940
7,594
5,148
1,416
53,345
13,585
7,952
638
5,117
6,437
459
4,784
8,258
6,157
910
48,086
13,307
6,251
612
4,769
4,196
480
138,241
127,604
105,631
97,810
10,874
89,152
14,040
-
778
9,807
1,218
1,990
3,389
12,682
79,709
14,013
-
575
7,471
954
2,264
3,600
9,330
56,848
13,585
4,921
314
7,532
1,011
1,990
3,159
131,248
121,268
98,690
6,993
6,336
6,941
1,509
3,604
1,830
6,943
50
1,478
3,229
1,583
6,290
46
1,509
4,699
733
6,941
-
11,363
50,443
13,307
4,310
301
5,551
785
2,264
3,196
91,520
6,290
1,478
4,031
781
6,290
-
6,993
6,336
6,941
6,290
9
10
11
12
13
16
17
18
19
20
21
22
23
24
25
26
27
28
36
37
38
The notes appearing on pages 45 to 102 form an integral part of these financial statements
Australia and New Zealand Banking Group Limited – 1997 Annual Report
41
Australia and New Zealand Banking Group Limited and Controlled Entities
Statements of Changes in Shareholders’ Equity for the year ended 30 September 1997
Authorised capital
2,100,000,000 shares of $1 each
1,000,000,000 preference shares of $0.01 each
Total authorised capital
Issued and paid-up capital
Balance at start of year
Conversion of preference shares
Ordinary shares
Shares issued on conversion of preference shares
Share buy-back
Dividend reinvestment plan1
Employee share purchase scheme2
Bonus share option plan3
Group share option scheme4
Senior officers’ share purchase scheme5
Directors’ share and option purchase scheme6
Consolidated
1996
$M
1997
$M
1995
$M
The Company
1996
$M
1997
$M
2,100
10
2,110
1,478
-
-
-
22
4
3
2
#
#
2,100
10
2,110
1,446
-
-
-
23
3
6
-
#
#
2,100
10
2,110
2,100
10
2,110
1,360
(6)
1,478
-
129
(100)
47
2
11
-
3
#
-
-
22
4
3
2
#
#
2,100
10
2,110
1,446
-
-
-
23
3
6
-
#
#
Total issued and paid-up capital
1,509
1,478
1,446
1,509
1,478
Share premium reserve
Balance at start of year
Premium on issue of shares
Conversion of preference shares
Share buy-back
Total share premium reserve
Asset revaluation reserve
Balance at start of year
Revaluation of investments in controlled entities
Transfer to retained profits
Total asset revaluation reserve
Foreign currency translation reserve
Balance at start of year
Currency translation adjustments,
net of hedges after tax
Total foreign currency translation reserve
General reserve
Balance at start of year
Transfers from retained profits
Total general reserve
Capital reserve
Total reserves
2,637
189
-
-
2,826
2,516
121
-
-
2,637
2,905
621
(594)
(416)
2,516
-
-
-
-
-
-
-
-
(183)
(88)
104
(79)
626
82
708
149
(95)
(183)
571
55
626
149
-
-
-
-
(87)
(1)
(88)
544
27
571
149
2,637
189
-
-
2,826
1,152
441
-
1,593
187
38
225
55
-
55
-
2,516
121
-
-
2,637
1,143
24
(15)
1,152
223
(36)
187
55
-
55
-
3,604
3,229
3,148
4,699
4,031
42
Australia and New Zealand Banking Group Limited and Controlled Entities
Statements of Changes in Shareholders’ Equity for the year ended 30 September 1997
Consolidated
1996
$M
1997
$M
1995
$M
The Company
1996
$M
1997
$M
Note
Retained profits
Balance at start of year
Operating profit after income tax
1,583
1,106
585
attributable to members of the Company
1,024
1,116
1,052
781
647
Total available for appropriation
Transfers (to) from reserves
Dividends provided for or paid
Ordinary shares
Preference shares
Retained profits at end of year
7
2,607
(82)
2,222
(55)
1,637
(27)
1,428
-
(695)
-
(584)
-
(424)
(80)
1,830
1,583
1,106
(695)
-
733
317
1,023
1,340
15
(574)
-
781
Total shareholders’ equity attributable to
members of the Company
6,943
6,290
5,700
6,941
6,290
Number of issued shares
The Company
1997
1996
1995
Ordinary shares of $1 each fully paid
Ordinary shares of $1 each paid to 10 cents per share
1,508,550,854
274,500
1,478,089,641 1,446,047,877
929,500
687,500
Total number of issued shares
1,508,825,354
1,478,777,141 1,446,977,377
The notes appearing on pages 45 to 102 form an integral part of the financial statements
# Amounts less than $500,000
1 Dividend reinvestment plan issues were
6 Directors’ share and option purchase scheme
issue of shares
10,661,444 ordinary shares at $7.60 per share
10,132,948 ordinary shares at $9.77 per share
50,000 ordinary shares at $3.44 per share (on exercise of options)
issue proceeds from conversion of partly paid to fully paid
140,000 ordinary shares at $3.75 per share
100,000 ordinary shares at $4.76 per share
50,000 ordinary shares at $5.46 per share
Total uncalled capital at 30 September 1997 was $1.3 million, comprising
capital of $0.3 million and share premium of $1 million
2 Employee Share Purchase Scheme issues were
4,135,275 ordinary shares at $6.43 per share
3 Bonus option plan issues were
1,617,564 ordinary shares at $7.60 per share
1,401,371 ordinary shares at $9.77 per share
4 Group share option scheme issues were
2,040,000 ordinary shares at $5.34 per share
9,611 ordinary shares at $8.76 per share
5 Senior officers’ share purchase scheme
issue proceeds from conversion of partly paid to fully paid
3,000 ordinary shares at $3.42 per share
30,000 ordinary shares at $3.75 per share
3,000 ordinary shares at $4.55 per share
12,000 ordinary shares at $4.60 per share
3,000 ordinary shares at $4.68 per share
15,000 ordinary shares at $5.20 per share
10,000 ordinary shares at $5.26 per share
10,000 ordinary shares at $5.36 per share
10,000 ordinary shares at $5.42 per share
5,000 ordinary shares at $5.46 per share
10,000 ordinary shares at $5.56 per share
2,000 ordinary shares at $5.60 per share
10,000 ordinary shares at $5.62 per share
Australia and New Zealand Banking Group Limited – 1997 Annual Report
43
Australia and New Zealand Banking Group Limited and Controlled Entities
Statements of Cash Flows for the year ended 30 September 1997
Cash flows from operating activities
Interest received
Dividends received
Fees and other income received
Interest paid
Personnel expenses paid
Premises expenses paid
Other operating expenses paid
Income taxes paid
Net decrease (increase) in trading securities
Consolidated
1996
$M
1997
$M
1995
$M
The Company
1996
$M
1997
$M
Note
Inflows/(Outflows)
Inflows/(Outflows)
9,364
327
1,970
(5,995)
(2,155)
(315)
(1,041)
(426)
304
9,458
111
1,946
(6,136)
(1,850)
(351)
(1,134)
(353)
(1,595)
7,945
4
1,918
(4,864)
(1,618)
(362)
(1,118)
(153)
(1,222)
5,922
581
1,387
(3,867)
(1,347)
(296)
(975)
(198)
1,212
6,061
516
1,490
(4,101)
(1,309)
(333)
(755)
(79)
(1,339)
Net cash provided by operating activities
33(a)
2,033
96
530
2,419
151
Cash flows from investing activities
Net decrease (increase)
Due from other financial institutions
Regulatory deposits
Loans and advances
Shares in controlled entities and associates
Investment securities
Purchases
Proceeds from sale or maturity
Controlled entities and branches
Purchased (net of cash acquired)
Proceeds from sale (net of cash disposed)
Premises and equipment
Purchases
Proceeds from sale
Other
1,840
(14)
(7,447)
-
(171)
(28)
(8,269)
-
(1,801)
(291)
(7,487)
(6)
1,869
(26)
(4,570)
92
(562)
(61)
(6,769)
480
(3,140)
2,803
(2,166)
2,381
(6,949)
8,573
(1,060)
647
33(c)
(11)
41
(457)
110
982
13
14
(412)
104
(954)
(81)
14
(361)
69
(44)
(718)
609
(198)
-
-
-
(110)
10
392
(202)
5
(1,832)
Net cash used in investing activities
(5,293)
(9,488)
(8,364)
(2,756)
(9,248)
Cash flows from financing activities
Net (decrease) increase
Due to other financial institutions
Deposits and other borrowings
Due from/to controlled entities
Creditors and other liabilities
Bonds and notes
Issue proceeds
Redemptions
Loan capital
Issue proceeds
Redemptions
Decrease in outside equity interests
Dividends paid
Share capital issues
Share buy-back
(2,787)
7,861
-
425
973
(1,434)
323
(851)
(3)
(478)
39
-
2,094
10,109
-
879
1,427
(655)
634
(110)
(8)
(354)
18
-
520
6,080
-
(186)
655
(578)
165
-
(8)
(241)
19
(516)
(3,142)
5,330
(1,090)
296
973
(1,434)
323
(642)
-
(478)
39
-
2,395
7,959
929
653
1,427
(655)
634
-
-
(343)
18
-
Net cash provided by financing activities
4,068
14,034
5,910
175
13,017
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Foreign currency translation on opening balances
2,033
(5,293)
4,068
808
11,246
402
96
(9,488)
14,034
4,642
7,079
(475)
530
(8,364)
5,910
(1,924)
9,092
(89)
2,419
(2,756)
175
(162)
6,804
351
151
(9,248)
13,017
3,920
3,238
(354)
Cash and cash equivalents at end of year
33(b) 12,456
11,246
7,079
6,993
6,804
The notes appearing on pages 45 to 102 form an integral part of these financial statements
44
Notes to the Financial Statements
1: Accounting Policies
(iv) Goodwill
(i) Bases of preparation
This general purpose financial report complies with
the accounts provisions of the Banking Act,
applicable Australian Accounting Standards, the
accounts provisions of the Corporations Law and
Urgent Issues Group Consensus Views. The
accounting policies are consistent with those of the
previous year except for the change disclosed in
note (ii).
Disclosures required by the United States
Securities and Exchange Commission in respect of
foreign registrants have also been included in this
report.
The financial report has been prepared in
accordance with the historical cost convention as
modified by the revaluation of certain properties,
trading instruments and shares in controlled entities.
The latter are revalued annually based on the net
tangible assets of the entity.
The Company is a company of the kind
referred to in the Australian Securities Commission
class order 97/1005, dated 9 July 1997.
Consequently, amounts in the financial report have
been rounded to the nearest million dollars except
where otherwise indicated.
All amounts are expressed in Australian dollars,
unless otherwise stated. Where necessary, amounts
shown for the previous year have been reclassified
to facilitate comparison.
(ii) Change in accounting policy
Effective 1 October 1996, the Group adopted the
equity method of accounting for associates. Shares
in associates are stated in the consolidated balance
sheet at cost plus the Group's share of post
acquisition net assets. The Group's share of results
of associates is included in the profit and loss
account.
ASC Class Order 97/798 dated 5 June 1997
permitted the adoption of equity accounting.
As a result of the change in accounting policy,
the carrying value of associates has increased by
$2 million, and $2 million of profit after tax has
been recognised.
(iii) Consolidation
The financial statements consolidate the financial
statements of Australia and New Zealand Banking
Group Limited (the Company) and its controlled
entities.
Where controlled entities and associates have
been sold or acquired during the year, their
operating results have been included to the date of
disposal or from the date of acquisition.
Goodwill, representing the excess of the purchase
consideration over the fair value of the identifiable
net assets of a controlled entity at the date of
gaining control, is recognised as an asset and
amortised on a straight line basis over the period
during which the benefits are expected to arise, not
exceeding 20 years.
The unamortised balance of goodwill and the
period of amortisation are reviewed annually.
Where the balance exceeds the value of expected
future benefits, the difference is charged to the
profit and loss account.
(v) Foreign currency
Revenues and expenses of overseas branches and
controlled entities are translated at average
exchange rates for the year, while assets and
liabilities are translated at the mid-point rates of
exchange ruling at balance date.
Net translation differences arising from the
translation of overseas branches and controlled
entities considered to be self-sustaining operations
are included in the foreign currency translation
reserve, after allowing for those positions hedged by
foreign exchange contracts and related currency
borrowings.
Assets and liabilities denominated in foreign
currencies are translated into Australian dollars at
the rates of exchange ruling at balance date.
(vi) Net loans and advances
Net loans and advances include direct finance
provided to customers such as bank overdrafts,
credit cards, term loans, lease finance, hire purchase
finance and commercial bills.
Overdrafts, credit cards and term loans are
carried at principal balances outstanding. Interest
on amounts outstanding is accounted for on an
accruals basis.
Finance leases and hire purchase contracts are
accounted for using the finance method whereby
income is taken to account progressively over the
life of the lease or the contract in proportion to the
outstanding investment balance.
Investments in leveraged leases are recorded at
an amount equal to the investment participation,
and income is taken to account on an actuarial basis
over the term of each lease.
Customer financing through redeemable
preference shares is included within net loans and
advances. Dividends received on redeemable
preference shares are taken to the profit and loss
account as part of interest income.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
45
Notes to the Financial Statements
All loans are subject to regular scrutiny and
graded according to the level of credit risk. Loans
are classified as either productive or non-accrual.
The Group has adopted the Reserve Bank of
Australia Impaired Assets Guidelines in assessing
non-accrual loans. Non-accrual loans include loans
where the accrual of interest and fees has ceased due
to doubt as to full recovery, and loans that have
been restructured with an effective yield below the
Group’s average cost of funds at the date of
restructuring. A specific provision is raised to cover
the expected loss, where full recovery of principal is
doubtful.
Restructured loans are loans with an effective
yield above the Group’s cost of funds and below
the yield applicable to a customer of equal credit
standing.
Cash receipts on non-accrual loans are, in the
absence of a contrary agreement with the customer,
applied as income or fees in priority to being
applied as a reduction in principal, except where
the cash receipt relates to proceeds from the sale of
security.
(vii) Bad and doubtful debts
Specific provisions are maintained to cover
identified doubtful debts.
General provisions are maintained for losses
which, although not specifically identified, are
known from experience to be inherent in any asset
portfolio. The level of the general provision is
determined having regard to economic conditions,
the level of on and off-balance sheet assets and
other general risk factors.
Premiums and discounts are capitalised and
amortised from the date of purchase to maturity.
Interest and dividend income is accrued.
Changes in market values of securities are not
taken into account unless there is considered to be a
permanent diminution in value.
(xi) Repurchase agreements
Securities sold under repurchase agreements are
retained in the financial statements and a
counterparty liability is disclosed under the
classifications of Due to other financial institutions
or Deposits and other borrowings. The difference
between the sale price and the repurchase price is
amortised over the life of the repurchase agreement
and charged to interest expense in the profit and
loss account.
Securities purchased under agreements to resell
are recorded as Liquid assets, Net loans and
advances, or Due from other financial institutions,
depending on the term of the agreement and the
counterparty.
(xii) Derivative financial instruments
Derivative financial instruments (derivatives) are
contracts whose value is derived from one or more
underlying financial instruments or indices. They
include swaps, forward rate agreements, futures,
options and combinations of these instruments.
Trading derivatives comprising derivatives
entered into for customer-related or proprietary
reasons or for hedging the trading portfolio, are
measured at fair value and all gains and losses are
taken to the profit and loss account.
All known bad debts are written off in the year
Fair value losses arising from trading derivatives
in which they are identified.
Provisions for doubtful debts are deducted from
loans and advances in the balance sheet.
(viii) Acceptances
Commercial bills accepted but not held in portfolio
are accounted for and disclosed as a liability with a
corresponding contra asset.
The Group’s own acceptances discounted are
held as part of either the trading securities portfolio
or the loan portfolio, depending on whether, at the
time of such discount, the intention was to hold the
acceptances for resale or until maturity.
(ix) Trading securities
Securities held for trading purposes are recorded at
market value. Unrealised gains and losses on
revaluation are taken to the profit and loss account.
(x) Investment securities
Investment securities are those which the Group
purchased with the positive intent and ability to
hold until maturity. Such securities are recorded at
cost or at cost adjusted for amortisation of
premiums or discounts.
are not offset against fair value gains unless a legal
right of set-off exists.
Derivatives designated, and effective, as hedges
of underlying non-trading exposures are accounted
for on the same basis as the underlying exposures.
Gains and losses resulting from the termination
of a derivative that was designated as a hedge of
non-trading exposures are deferred and amortised
over the remaining period of the original term
covered by the terminated instrument where the
underlying exposure still exists. Where the
underlying exposure no longer exists, the gains and
losses are recognised in the profit and loss account.
Gains and losses on derivatives related to
hedging exposures arising from anticipated
transactions are deferred and recognised in the
financial statements when the anticipated
transaction occurs. These gains and losses are
deferred only to the extent that there is an offsetting
unrecognised (unrealised) gain or loss on the
exposures being hedged. Deferred gains and losses
are amortised over the expected term of the hedged
exposure.
46
Notes to the Financial Statements
(xiii) Premises and equipment
(xv) Life insurance business
Premises and equipment (including computer
equipment) are carried at cost less depreciation or
amortisation, or at valuation. Any surplus on
revaluation of a class of assets is credited directly to
the asset revaluation reserve. Where a deficit
arises, this is debited to the asset revaluation reserve
to the extent of any previous revaluation surplus
for that class, and the excess debited to the profit
and loss account. Potential capital gains tax arising
from revaluations is not taken into account as the
Group has no current intention to dispose of the
subject properties.
Profit or loss on the disposal of premises and
equipment is determined as the difference between
the carrying amount of the assets at the time of
disposal and the proceeds of disposal, and is
included in the results of the Group in the year of
disposal.
Assets other than freehold land are depreciated
at rates based upon their expected useful lives to
the Group, using the straight line method.
Leasehold improvements are amortised on a
straight line basis over the remaining period of
each lease.
The carrying values of all non-current assets
have been assessed and are not in excess of their
recoverable amounts. In assessing recoverable
amounts, the relevant cash flows have not been
discounted to their present value.
(xiv) Income tax
The Group adopts the liability method of tax effect
accounting whereby income tax expense is
calculated based on accounting profit adjusted for
permanent differences. Permanent differences are
items of revenue and expense which are
recognised in the profit and loss account but are
not part of taxable income. General provisions for
doubtful debts are treated as permanent differences
as the provisions do not relate to specific accounts
for which a tax deduction would be available in
the event of a loss.
Future tax benefits and deferred tax liabilities
relating to timing differences and tax losses are
carried forward at tax rates applicable to future
periods. Future tax benefits relating to tax losses
are only carried forward where realisation of the
benefit is considered virtually certain.
Provision for Australian income tax is made
where the earnings of overseas controlled entities
are subjected to Australian tax under the
attribution rules for the taxation of foreign sourced
income. Otherwise, no provision is made for
overseas withholding tax or Australian income tax
which may arise on repatriation of earnings from
overseas controlled entities, where it is expected
these earnings will be retained by those entities to
finance their ongoing business.
The Group conducts life insurance business
through ANZ Life Assurance Company Limited
(ANZ Life). The Group’s financial statements
include its interest in the actuarially assessed surplus
of ANZ Life’s statutory funds for the year, after
allowing for increases in policyholder reserves
determined under the margin on services
methodology. The net result for the year of
$82 million (1996: $55 million) has been included
in the profit and loss account and then transferred
to the general reserve, until available for
distribution under the requirements and restrictions
of the Life Insurance Act 1995 and statutory
accounting practices.
The Group’s interest in the accumulated
retained earnings of the life insurance statutory
funds of $436 million (1996: $354 million),
together with the net assets of the shareholders’
funds of ANZ Life, are included within the balance
sheet of the Group.
Due to the provisions of the Life Insurance Act
1995, the assets of the life insurance statutory funds
attributable to policyholders of ANZ Life do not
form part of the assets to which the Group is
entitled and are therefore not consolidated.
(xvi) Employee entitlements
The amounts expected to be paid in respect of
employees’ entitlements to annual leave are accrued
at current salary rates including on-costs. Liability
for long service leave is accrued in respect of all
applicable employees at the present value of future
amounts expected to be paid.
(xvii) Superannuation commitments
Contributions, which are determined on an
actuarial basis, to superannuation schemes are
charged to personnel expenses in the profit and loss
account.
Any aggregate deficiencies arising from the
actuarial valuations of the Group’s defined benefit
schemes have been provided for in the financial
statements.
The assets and liabilities of the schemes have
not been consolidated as the Company does not
have direct or indirect control of the schemes.
(xviii) Leasing
Leases entered into by the Group as lessee are
predominantly operating leases, and the operating
lease payments are included in the profit and loss
account in equal instalments over the lease term.
Assets relating to operating leases entered into
by the Group as lessor are included within Premises
and equipment with rental income and
depreciation separately classified in income and
expense.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
47
Notes to the Financial Statements
2: Income
Interest income
From other financial institutions
On regulatory deposits
On trading and investment securities
On loans and advances
Dividends from redeemable preference share finance
Other
From controlled entities
Total interest income
Other operating income
(i) Fee income
Lending
Other including commissions
From controlled entities
Total fee income
(ii) Other income
Foreign exchange earnings
Profit on trading instruments
Rental income
Operating lease income
Life insurance fund surplus
Development ventures
Income
Diminution in value
Profit on sale of premises and equipment
Other1
Total other income
Consolidated
1996
$M
1995
$M
1997
$M
The Company
1997
1996
$M
$M
753
13
835
7,284
8
538
9,431
-
9,431
570
964
1,534
-
1,534
245
192
35
146
94
10
-
5
154
881
766
25
754
7,320
9
412
9,286
-
9,286
550
854
1,404
-
1,404
231
113
36
116
55
6
7
10
118
692
661
43
698
6,502
2
404
8,310
-
8,310
537
801
1,338
-
1,338
226
96
33
89
52
13
14
4
110
637
535
6
501
4,286
-
374
5,702
343
6,045
458
644
1,102
284
1,386
153
142
27
-
-
-
-
-
263
585
525
14
480
4,381
-
216
5,616
358
5,974
440
571
1,011
269
1,280
140
80
28
-
-
-
6
3
457
714
Total other operating income
2,415
2,096
1,975
1,971
1,994
Abnormal items (refer note 5)
145
-
-
-
-
Total income
11,991
11,382
10,285
8,016
7,968
1 Includes dividend income of $327 million (1996: $111 million) for the Group and $581 million (1996: $516 million) for the
Company. The Company's dividends include dividends received from controlled entities of $276 million (1996: $405 million)
3: Expenses
Interest expense
To other financial institutions
On deposits
On borrowing corporations’ debt
On commercial paper
On bonds and notes
On loan capital
Other
To controlled entities
Total interest expense
48
804
3,838
512
275
25
364
200
6,018
-
6,018
862
3,826
520
247
134
245
135
5,969
-
5,969
809
3,271
490
179
114
254
112
5,229
-
5,229
648
2,464
-
102
25
322
170
3,731
250
3,981
694
2,498
-
109
134
210
107
3,752
285
4,037
Notes to the Financial Statements
3: Expenses (continued)
Provisions for doubtful debts (refer note 15)
New and increased provisions
Provision releases
Recoveries of amounts previously written off
Specific provision
General provision
Total provisions for doubtful debts
Operating expenses
(i) Personnel
Salaries and wages
Pension fund
Employee taxes
Payroll
Fringe benefits tax
Provision for employee entitlements
Other
Consolidated
1996
$M
1995
$M
1997
$M
The Company
1996
$M
1997
$M
280
(145)
135
(49)
86
201
287
292
(129)
163
(46)
117
37
154
293
(178)
115
(52)
63
111
174
161
(89)
72
(31)
41
180
221
201
(87)
114
(26)
88
22
110
1,453
114
1,387
105
1,270
93
1,084
86
1,031
10
76
46
19
241
73
53
29
158
64
48
19
116
73
40
14
184
70
48
27
122
Total personnel expenses
1,949
1,805
1,610
1,481
1,308
(ii) Premises
Rent
Depreciation of buildings and integrals
Amortisation of leasehold improvements
Other
To controlled entities
Total premises expenses
(iii) Other
Computer costs
Depreciation
Other
Non-lending losses, frauds and forgeries
Remuneration of auditors (refer note 4)
Depreciation of furniture and equipment
Depreciation of motor vehicles
Loss on disposal of premises and equipment
Other
Total other expenses
Total core operating expenses
(iv) Direct income-related expenditure
Brokerage and commissions
Interchange and card costs
Operating lease depreciation
Total direct income-related expenditure
(v) Restructuring1
Total operating expenses
Total expenses
189
31
16
126
362
-
362
98
232
2
27
49
3
7
627
204
31
13
137
385
-
385
97
231
55
8
49
3
24
635
1,045
3,356
1,102
3,292
49
197
91
337
90
61
172
62
295
57
3,783
10,088
3,644
9,767
207
31
16
147
401
-
401
86
224
79
8
49
5
5
588
1,044
3,055
67
150
49
266
13
3,334
8,737
145
6
8
91
250
60
310
63
152
1
23
31
2
2
488
762
144
4
7
92
247
87
334
64
150
44
3
31
2
15
430
739
2,553
2,381
25
158
-
183
69
22
141
-
163
30
2,805
7,007
2,574
6,721
1 In addition, restructuring costs of $327 million have been treated as abnormal for the Group (Company: $214 million) in the 1997
financial year. Refer note 5
Australia and New Zealand Banking Group Limited – 1997 Annual Report
49
Notes to the Financial Statements
4: Remuneration of Auditors
Amounts received and due and receivable
Auditing the accounts
By KPMG
By other Group auditors
Other services
By KPMG
Audit related services1
Taxation
Accounting
Consulting2
By other Group auditors
Total remuneration of auditors
1997
$'000
Consolidated
1996
$'000
1995
$'000
The Company
1996
$'000
1997
$'000
3,771
11
3,782
2,008
90
120
20,657
59
22,934
26,716
3,652
8
3,660
2,143
1,037
74
658
42
3,954
7,614
3,833
84
3,917
2,123
1,201
200
785
101
1,637
-
1,637
1,553
-
1,553
847
48
65
20,565
25
997
402
18
57
5
4,410
21,550
8,327
23,187
1,479
3,032
1 Audit related services are services other than those relating to the audit or review of the statutory financial statements of the Group.
These services include prudential supervision reviews for central banks, prospectus reviews, trust audits and other audits required for
local statutory purposes
2 Includes fees of $20,326,000 in 1997 paid to KPMG Barents (a wholly owned entity of the USA practice of KPMG) for
consultancy work in connection with the ANZ Global Project
By virtue of an Australian Securities Commission class order dated 29 June 1992, the auditors of Australia and
New Zealand Banking Group Limited and its related bodies corporate, KPMG, have been exempted from
compliance with the requirements of Section 324(2) of the Corporations Law. The class order exemption
applies in that partners and associates of KPMG not engaged on the audit of Australia and New Zealand
Banking Group Limited and its related bodies corporate may be indebted to the Company, provided that such
indebtedness arose upon ordinary commercial terms and conditions.
5: Abnormal Items
Profit before tax
Interest on National Housing Bank deposit
Loss before tax
Restructuring costs
Total abnormal loss before tax
Income tax (expense) benefit applicable to
Interest on National Housing Bank deposit
Restructuring costs
Restatement of net deferred tax balances to reflect the
increase in the Australian corporate tax rate
Total abnormal tax benefit
Total abnormal (loss) profit after tax
Consolidated
1996
$M
1995
$M
1997
$M
The Company
1996
$M
1997
$M
145
145
327
(182)
(80)
115
-
35
(147)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19
19
19
-
-
214
(214)
-
77
-
77
(137)
-
-
-
-
-
-
-
-
-
50
Notes to the Financial Statements
6: Income Tax Expense
Reconciliation of the prima facie income tax payable
on operating profit and abnormal items with the income
tax expense charged in the profit and loss account
Operating profit before income tax and
before abnormal items
Prima facie income tax at 36% (1996: 36%, 1995: 33%)
Tax effect of permanent differences
Overseas tax rate differential
Other non-assessable income
Rebateable and non-assessable dividends
Non-allowable depreciation and amortisation
General provision for doubtful debts
Other
Income tax over provided in prior years
Total income tax expense on operating profit
before abnormal items
Abnormal loss before tax
Prima facie income tax at 36% (1996: 36%, 1995: 33%)
Tax effect of permanent differences
Overseas tax rate differential
Restatement of net deferred tax balances (refer note 5)
Total income tax benefit on abnormal items
Total income tax expense
7: Dividends
Ordinary dividends
Interim dividend
Proposed final dividend
Bonus option plan adjustment (see over)
Dividends on ordinary shares
Preference dividends (13.25% per annum, unfranked)
Dividend paid in January
Dividend paid in July
Dividends on preference shares
Total dividends
Consolidated
1996
$M
1995
$M
1997
$M
The Company
1997
1996
$M
$M
1,758
1,615
1,548
1,009
1,247
632
14
(25)
(117)
3
72
10
589
(10)
579
(182)
(65)
30
-
(35)
544
581
1
(27)
(41)
4
13
(19)
512
(22)
511
18
(34)
(4)
3
37
(10)
521
(16)
490
505
-
-
-
-
-
490
-
-
-
(19)
(19)
486
363
449
7
(6)
(205)
3
64
10
236
(11)
225
(214)
(77)
-
-
(77)
148
6
(24)
(184)
3
8
(15)
243
(19)
224
-
-
-
-
-
224
Consolidated
1996
$M
1995
$M
1997
$M
The Company
1996
$M
1997
$M
329
392
(26)
695
-
-
-
264
355
(35)
584
-
-
-
208
260
(44)
424
40
40
80
329
392
(26)
695
-
-
-
254
355
(35)
574
-
-
-
695
584
504
695
574
A final dividend of 26 cents fully franked is proposed to be paid on each fully paid ordinary share (1996: final
dividend of 24 cents per fully paid share, fully franked; 1995: final dividend of 18 cents per fully paid share,
franked to 6 cents at 36%). Non-resident shareholders will be exempt from dividend withholding tax on the
full dividend.
The 1997 interim dividend of 22 cents was fully franked (1996: interim dividend of 18 cents was franked to
9 cents; 1995: unfranked interim dividend of 15 cents per fully paid ordinary share).
Australia and New Zealand Banking Group Limited – 1997 Annual Report
51
Notes to the Financial Statements
7: Dividends (continued)
Dividend Franking Account
The amount of franking credits available for the subsequent financial year is nil, after adjusting for franking
credits that will arise from the payment of tax on Australian profits for the 1997 financial year, less franking
credits which will be utilised in franking the proposed final dividend and franking credits that may be
prevented from being distributed in the subsequent year.
Restrictions which Limit the Payment of Dividends
There are presently no significant restrictions on the payment of dividends from controlled entities to the
Company. Various capital adequacy, liquidity, statutory reserve and other prudential requirements must be
observed by certain controlled entities and the impact on these requirements caused by the payment of cash
dividends is monitored. In practice however, there are significant tax considerations associated with the
receipt of dividends from controlled entities by a company. Payment of dividends from domestic controlled
entities constitutes assessable income to a recipient Australian company. The recipient company is generally
entitled to a rebate of tax otherwise payable on the assessable dividend. Should the recipient company's total
assessable income be less than the dividend income, or it be in a tax loss position, the rebate will reduce or be
eliminated. The Group therefore acts to preserve the availability of rebates by avoiding the payment of
dividends by domestic controlled entities in this situation.
Payments of dividends from overseas controlled entities may attract withholding taxes which have not
been provided for in these financial statements.
(i)
There are presently no restrictions on payment of dividends by the Company other than
the share premium reserve is not available for distribution other than in the form of bonus issues (share
dividends); and
(ii) reductions of shareholders' equity through payment of cash dividends is monitored having regard to
the regulatory requirements to maintain a specified capital adequacy ratio. In particular, the Reserve
Bank of Australia has advised Australian banks that a bank under its supervision must consult with it
before declaring a dividend if the bank has incurred a loss, or proposes to pay dividends which exceed the
level of profits earned.
Bonus option plan
Dividends paid during the year have been reduced by way of certain shareholders participating in the bonus
option plan and forgoing all or part of their right to dividends in return for the receipt of bonus shares.
Final dividend 1996
Interim dividend 1997
Declared
dividend
$M
355
329
684
Bonus options
exercised
$M
12
14
26
Amount
paid
$M
343
315
658
52
Notes to the Financial Statements
8: Earnings per Share
Before abnormal items
Basic
Operating profit after income tax
attributable to shareholders of the Company
Abnormal items after tax
Operating profit after income tax before abnormal items
Preference share dividend
Total adjusted earnings
Weighted average number of ordinary shares (millions)
Basic earnings per share (cents)
Diluted
Operating profit after income tax before abnormal items
Preference share dividend
Add: notional interest earned on capital raised from
exercise of options
Total adjusted earnings
Weighted average number of ordinary shares (millions)
Add: potential dilution of options to ordinary shares
Total adjusted number of shares
Diluted earnings per share (cents)
After abnormal items
Basic
Operating profit after income tax
attributable to shareholders of the Company
Preference share dividend
Total adjusted earnings
Weighted average number of ordinary shares (millions)
Basic earnings per share (cents)
Diluted
Operating profit after income tax
attributable to shareholders of the Company
Preference share dividend
Add: notional interest earned on capital raised from
exercise of options
Total adjusted earnings
Weighted average number of ordinary shares (millions)
Add: potential dilution of options to ordinary shares
Total adjusted number of shares
Diluted earnings per share (cents)
1997
$M
Consolidated
1996
$M
1995
$M
1,024
147
1,171
-
1,171
1,492.9
78.4
1,171
-
2
1,173
1,492.9
7.2
1,500.1
78.2
1,024
-
1,024
1,492.9
68.6
1,024
-
2
1,026
1,492.9
7.2
1,500.1
68.4
1,116
-
1,116
-
1,116
1,052
(19)
1,033
(80)
953
1,462.3
1,390.3
76.3
68.5
1,116
-
2
1,118
1,462.3
7.6
1,469.9
76.1
1,033
(80)
1
954
1,390.3
5.0
1,395.3
68.4
1,116
-
1,116
1,052
(80)
972
1,462.3
1,390.3
76.3
69.9
1,116
-
2
1,118
1,462.3
7.6
1,469.9
76.1
1,052
(80)
1
973
1,390.3
5.0
1,395.3
69.7
Australia and New Zealand Banking Group Limited – 1997 Annual Report
53
Notes to the Financial Statements
9: Liquid Assets
Australia
Coins, notes and cash at bankers
Money at call
Other banks’ certificates of deposit
Securities purchased under agreement to
resell less than 90 days
Bills receivable and remittances in transit
Overseas
Coins, notes and cash at bankers
Money at call
Other banks’ certificates of deposit
Securities purchased under agreement to
resell less than 90 days
Bills receivable and remittances in transit
Total liquid assets
Maturity analysis based on original term
to maturity at 30 September
Less than 90 days
More than 90 days
Total liquid assets
Consolidated
1997
$M
1996
$M
The Company
1997
$M
1996
$M
508
189
8
142
41
888
342
622
2,785
823
838
5,410
6,298
3,857
2,441
6,298
1,351
25
7
130
3
1,516
216
687
3,321
900
261
5,385
6,901
4,285
2,616
6,901
410
133
-
142
41
726
50
85
1,992
749
338
3,214
3,940
1,829
2,111
3,940
1,334
-
-
130
2
1,466
23
145
2,695
445
10
3,318
4,784
2,456
2,328
4,784
10: Due from Other Financial Institutions
Australia
Overseas
Total due from other financial institutions
1,480
10,108
1,607
9,745
11,588
11,352
1,480
6,114
7,594
1,507
6,751
8,258
Maturity analysis based on remaining term
to maturity at 30 September
Overdraft
Less than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years
Total due from other financial institutions
2,154
7,495
1,786
82
71
{
{
6,9611
4,3911
11,588
11,352
{
{
1,597
4,377
1,520
48
52
7,594
4,3481
3,9101
8,258
1 Maturity analysis at 30 September 1996 was based on original terms to maturity of less than 90 days and greater than 90 days
54
Notes to the Financial Statements
11: Trading Securities
Trading securities are allocated between Australia and
Overseas based on the domicile of the issuer
Listed - Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments
Listed - Overseas
Indian government securities
Other securities and equity investments
Total listed
Unlisted - Australia
Treasury notes and bills
Other government securities
ANZ accepted bills
Other securities and equity investments
Unlisted - Overseas
Treasury notes and bills
Other government securities
Other securities and equity investments
Total unlisted
Total trading securities
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
75
20
622
717
397
912
1,309
2,026
-
1,567
1,846
320
3,733
770
335
402
1,507
5,240
7,266
1,496
10
91
1,597
272
265
537
2,134
103
1,577
1,317
269
3,266
1,564
64
306
1,934
5,200
7,334
75
20
350
445
-
331
331
776
-
1,567
1,665
299
3,531
465
223
153
841
4,372
5,148
1,496
10
-
1,506
-
236
236
1,742
103
1,577
1,249
199
3,128
1,177
64
46
1,287
4,415
6,157
Australia and New Zealand Banking Group Limited – 1997 Annual Report
55
Notes to the Financial Statements
12: Investment Securities
Investment securities are allocated between Australia and
Overseas based on the domicile of the issuer
Listed - Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments
Listed - Overseas
Indian government securities
Other government securities
Other securities and equity investments
Total listed
Unlisted - Australia
Other securities and equity investments
Unlisted - Overseas
New Zealand government securities
Indian government securities
Other government securities
Other securities and equity investments
Total unlisted
Total investment securities
Market value information
Listed - Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments
Listed - Overseas
Indian government securities
Other government securities
Other securities and equity investments
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
-
58
462
520
404
99
431
934
4
46
297
347
304
147
316
767
1,454
1,114
448
476
2
646
113
1,237
1,685
3,139
-
58
462
520
424
100
431
955
139
540
32
576
169
1,317
1,456
2,570
4
46
297
347
300
149
316
765
-
58
451
509
-
84
259
343
852
412
-
-
151
1
152
564
1,416
-
58
451
509
-
84
259
343
852
412
-
-
151
1
152
564
1,416
4
46
286
336
10
83
187
280
616
134
9
-
146
5
160
294
910
4
46
286
336
10
83
187
280
616
134
9
-
145
6
160
294
910
Total market value of listed investment securities
1,475
1,112
Unlisted - Australia
Other securities and equity investments
Unlisted - Overseas
New Zealand government securities
Indian government securities
Other government securities
Other securities and equity investments
Total market value of unlisted investment securities
Total market value of investment securities
448
475
2
635
114
1,226
1,674
3,149
140
537
32
575
171
1,315
1,455
2,567
56
Notes to the Financial Statements
12: Investment Securities (continued)
Investment Securities by Maturities and Yields
Based on remaining term to
maturity at 30 September 1997
At book value
Australia
Commonwealth securities
Local and semi-
government securities
Other securities and
equity investments
Overseas
New Zealand
government securities
US treasury and
government securities
Indian government securities
Other government securities
Other securities and
equity investments
Total book value
Total market value
1,022
1,012
Weighted average yields1
Australia
Commonwealth securities
Local and semi-government securities
Other securities and equity investments
Overseas
New Zealand government securities
US treasury and government securities
Indian government securities
Other government securities
Other securities and equity investments
Between
Less than 3 months and
12 months
3 months
Between
1 year and
5 years
Between
5 years and
10 years
After No maturity
specified
10 years
$M
-
44
309
353
35
17
19
484
114
669
$M
90
18
145
253
441
14
54
53
172
734
987
988
$M
$M
$M
$M
304
11
11
326
-
-
274
144
218
636
962
977
-
-
-
-
-
-
53
25
28
106
106
108
-
-
-
-
-
7
6
1
3
17
17
17
-
-
36
36
-
-
-
-
9
9
45
47
Market
Value
$M
Total
$M
394
394
73
73
501
968
501
968
476
475
38
406
707
37
426
699
544
544
2,171 2,181
3,139
n/a
n/a 3,149
Less than
1 year
Between
1 year and
Between
5 years and
After
5 years
10 years
10 years
%
5.88
7.04
5.62
7.53
5.19
11.67
11.98
7.31
%
5.25
5.93
5.76
-
-
11.74
9.11
9.86
%
-
-
-
%
-
-
-
-
-
12.68
8.36
11.65
-
6.99
12.15
16.58
16.02
1 Based on effective yields for fixed interest and discounted securities and dividend yield for equity investments at 30 September 1997
Australia and New Zealand Banking Group Limited – 1997 Annual Report
57
Notes to the Financial Statements
13: Net Loans and Advances
Loans and advances are classified between Australia and
Overseas based on the domicile of the lending point
Australia
Overdrafts
Credit card outstandings
Term loans - owner-occupied housing
Term loans - other
Lease finance (refer below)
Hire purchase
Commercial bills
Redeemable preference share finance
Other
Overseas
Overdrafts
Credit card outstandings
Term loans - housing
Term loans - non-housing
Lease finance (refer below)
Hire purchase
Commercial bills
Redeemable preference share finance
Other
Total gross loans and advances
Provisions for doubtful debts (refer note 15)
Income yet to mature
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
2,877
1,430
15,862
26,880
3,272
5,958
16
20
377
56,692
3,070
266
7,539
17,689
74
383
786
44
376
30,227
86,919
3,358
1,156
15,001
23,026
3,282
5,803
21
20
422
52,089
2,699
231
6,878
15,590
68
458
568
9
329
26,830
78,919
2,877
1,430
15,862
24,556
700
-
-
-
370
45,795
702
3
224
7,399
32
-
184
-
54
8,598
3,352
1,156
15,001
20,583
657
-
-
-
412
41,161
587
2
187
6,868
22
-
189
-
-
7,855
54,393
49,016
(1,371)
(1,400)
(1,218)
(1,800)
(1,027)
(21)
(2,771)
(3,018)
(1,048)
(884)
(46)
(930)
Total net loans and advances
84,148
75,901
53,345
48,086
Lease finance consists of gross lease receivables
Current
Non-current
627
2,719
3,346
885
2,465
3,350
252
480
732
187
492
679
58
Notes to the Financial Statements
13: Net Loans and Advances (continued)
Maturity Distribution and Concentrations of Credit Risk
Based on remaining term
to maturity at 30 September 1997
Overdraft
$M
Less than
3 months
$M
Between
3 months and
12 months
$M
Between
1 year and
5 years
$M
Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other
Overseas
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other
Gross loans and advances
Specific provisions for doubtful debts
Income yet to mature
Loans and advances net of
specific provisions and income
yet to mature
General provision
Net loans and advances
Interest rate sensitivity
Fixed interest rates3
Variable interest rates
341
217
97
102
1
-
538
361
192
117
718
211
99
74
8
118
54
-
349
935
29
10
139
384
647
136
176
434
-
331
566
1,729
127
1,551
1,593
1,094
734
119
68
1,701
198
19
1,612
480
359
304
550
836
619
208
188
123
-
320
297
491
208
1,468
403
404
596
62
306
818
192
12
1,580
409
119
1,528
619
498
761
636
682
3,283
29
2,588
824
2,995
600
1,689
921
1,208
589
85
158
328
125
29
1,260
656
325
4,509
492
771
After
5 years
$M
348
291
249
55
38
33
221
653
89
21,270
740
481
421
6
15
224
87
13
371
372
68
3,061
51
293
Total
$M
2,716
1,488
1,392
3,997
68
3,272
2,446
6,229
1,216
26,095
4,375
3,398
2,439
346
555
3,189
656
73
5,172
2,852
900
9,412
1,851
2,782
5,094
(453)
-
(453)
15,364
11,468
25,543
29,450
86,919
-
(72)
(72)
-
(139)
-
(1,168)
(139)
(1,168)
-
(21)
(21)
(453)
(1,400)
(1,853)
4,641
15,292
11,329
24,375
29,429
85,066
4,641
15,292
11,329
24,375
28,511
84,148
(918)
(918)
196
4,898
5,094
8,150
7,214
7,636
3,832
17,969
7,574
10,122
19,328
44,073
42,846
15,364
11,468
25,543
29,450
86,919
1 Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
2 Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such properties and must
be secured by property
3 Housing loans and other loans that are capped for an initial period are treated as fixed interest rate loans and their maturities based on the principal
repayments due over the term of the loan
Australia and New Zealand Banking Group Limited – 1997 Annual Report
59
Notes to the Financial Statements
14: Impaired Assets
Summary of impaired assets
Non-accrual loans
Restructured loans
Other real estate owned
Unproductive facilities
Gross impaired assets
Specific provisions
Non-accrual loans
Unproductive facilities
Net impaired assets
Non-accrual loans
Non-accrual loans
Specific provisions
Total net non-accrual loans
Restructured loans
For these loans interest and fees are recognised as
income on an accruals basis
Other real estate owned
In the event of customer default, any loan security is held
as mortgagee in possession and therefore the Group
does not hold any other real estate owned assets
Unproductive facilities
Unproductive facilities
Specific provisions
Net unproductive facilities
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
872
13
-
75
960
(444)
(9)
507
872
(444)
428
1,225
33
-
82
1,340
(501)
(8)
831
1,225
(501)
724
13
33
-
75
(9)
66
-
82
(8)
74
545
4
-
21
570
(295)
(9)
266
545
(295)
250
4
-
21
(9)
12
835
25
-
22
882
(338)
(7)
537
835
(338)
497
25
-
22
(7)
15
Accruing loans past due 90 days or more
These amounts, comprising loans less than $100,000 or fully
secured, are not classified as impaired assets and
therefore are not included within the above summary
243
212
180
174
60
Notes to the Financial Statements
14: Impaired Assets (continued)
Further analysis of non-accrual loans at 30 September 1997 and interest and/or other income received during
the year under Reserve Bank of Australia guidelines is as follows
Consolidated
The Company
Gross
balance
outstanding
$M
Specific
provision
$M
Interest and/or
other income
received
$M
Gross
balance
Specific
outstanding provision
$M
$M
Interest and/or
other income
received
$M
Non-accrual loans
Without provisions
Australia
New Zealand
International markets
With provisions and no, or partial
performance1
Australia
New Zealand
International markets
With provisions and full performance1
Australia
New Zealand
International markets
Total non-accrual loans
89
35
39
163
404
59
113
576
132
-
1
133
872
-
-
-
-
270
20
105
395
49
-
#
49
444
# Amounts less than $500,000
1 A loan’s performance is assessed against its contractual repayment schedule
13
2
1
16
17
1
3
21
11
#
#
11
48
64
-
29
93
290
-
30
320
132
-
-
132
545
-
-
-
-
228
-
18
246
49
-
-
49
295
12
-
1
13
17
-
2
19
11
-
-
11
43
Interest and other income forgone on impaired assets
The following table shows the estimated amount of interest and other income that would have been recorded
had interest and other income on non-accrual loans been accrued to income (or, in the case of restructured
loans, had interest and other income been accrued at the original contract rate), and the amount of interest
and other income received with respect to such loans.
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
Gross interest and other income receivable on
non-accrual loans and restructured loans
Australia
New Zealand
International markets
Total gross interest and other income receivable on
non-accrual loans and restructured loans
Interest and other income received
Australia
New Zealand
International markets
Total interest and other income received
Net interest and other income forgone
Australia
New Zealand
International markets
Total net interest and other income forgone
96
10
15
121
42
3
5
50
54
7
10
71
149
13
19
181
69
4
8
81
80
9
11
100
74
-
2
76
41
-
2
43
33
-
-
33
128
-
4
132
69
-
3
72
59
-
1
60
Australia and New Zealand Banking Group Limited – 1997 Annual Report
61
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
509
8
(199)
135
-
453
709
8
201
-
918
702
(10)
(346)
163
-
509
678
(6)
37
-
709
345
#
(113)
72
-
304
539
4
180
-
723
454
(3)
(239)
114
19
345
504
(1)
22
14
539
884
%
0.5
0.8
0.5
0.7
0.4
0.1
Notes to the Financial Statements
15: Provisions for Doubtful Debts
Specific provision
Balance at start of year
Adjustment for exchange rate fluctuations
Bad debts written off
Transfer from profit and loss account (refer note 3)
Acquired
Total specific provision
General provision
Balance at start of year
Adjustment for exchange rate fluctuations
Charge to profit and loss account (refer note 3)
Acquired
Total general provision
Total provisions for doubtful debts
1,371
1,218
1,027
Ratios
Provisions1 as a % of total advances2
Specific
General
Provisions as a % of risk weighted assets
Specific
General
Bad debts written off as a % of total advances2
Specific provision charge as a % of total advances2
# Amounts less than $500,000
1 Excludes provisions for unproductive facilities
2 See definition on page 116
%
0.4
0.9
0.4
0.9
0.2
0.1
%
0.5
0.8
0.5
0.8
0.4
0.1
%
0.4
1.1
0.4
0.8
0.2
0.1
62
Notes to the Financial Statements
16: Customers’ Liabilities for Acceptances
Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Manufacturing
Personal1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other
Overseas
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Manufacturing
Personal1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other
Consolidated
1997
$M
1996
$M
The Company
1996
$M
1997
$M
757
279
1,937
791
3
2,403
204
104
4,093
1,730
984
556
228
1,629
1,054
8
2,155
343
111
4,079
1,904
890
757
279
1,937
791
3
2,403
204
104
4,093
1,730
984
556
228
1,629
1,054
8
2,155
343
111
4,079
1,904
890
13,285
12,957
13,285
12,957
11
45
14
202
-
301
7
55
-
108
12
755
24
94
1
218
-
311
28
45
6
168
161
1,056
-
12
-
187
-
19
-
38
-
39
5
300
5
51
-
163
-
42
-
13
-
33
43
350
Total customers’ liabilities for acceptances
14,040
14,013
13,585
13,307
1 Personal includes non-business acceptances to individuals through overdrafts, personal loans, credit cards and fully drawn advances
2 Real estate mortgage includes residential and commercial property exposure. Acceptances within this category are for the purchase of such properties and
must be secured by property
17: Regulatory Deposits
Reserve Bank of Australia
Overseas central banks
Total regulatory deposits
572
634
551
612
1,206
1,163
572
66
638
551
61
612
Australia and New Zealand Banking Group Limited – 1997 Annual Report
63
Notes to the Financial Statements
Consolidated
1997
$M
1996
$M
The Company
1996
$M
1997
$M
18: Shares in Controlled Entities and Associates
Refer notes 34 and 35 for details of controlled entities and associates.
Controlled entities
At directors’ valuation 1996
At directors’ valuation 1997
Total shares in controlled entities
Associates
Total shares in associates1
Total shares in controlled entities and associates
-
5,116
5,116
4,768
-
4,768
7
7
10
10
1
1
5,117
4,769
Acquisitions of controlled entities
Date
acquired
Interest
acquired
%
Consideration
Net tangible
assets on
acquisition
$M
$M
Goodwill
$M
Year ended 30 September 1997
Fleetlink Leasing Pty Ltd2
Greyloch Investments Limited
La Serigne Limited
Repair Authorisation Centre
(RAC) Pty Limited
Truck Leasing Limited3
Year ended 30 September 1996
3 Dec 1996
23 Jun 1997
12 Feb 1997
1 Dec 1996
31 Aug 1997
50
100
100
100
20
Autofleet Pty Ltd4
1 Jul 1996
50
Disposals of controlled entities
The entire interest in these entities was disposed of during the year
Year ended 30 September 1997
Valiant Heart Limited
Year ended 30 September 1996
Esanda Limited
Pukeko Holdings Limited
Pukeko Investments Limited
Pukeko Securities Limited5
5
-
4
#
2
11
#
1
#
4
#
#
5
#
4
#
-
#
2
6
-
Profit
on disposal
Net tangible
assets on
disposal
$M
$M
-
-
-
-
-
-
-
-
-
-
# Amounts less than $500,000
1 The Group has adopted equity accounting for the year ended 30 September 1997 (refer note 1(ii))
2 During 1997, the remaining 50% interest in Fleetlink Leasing Pty Ltd was acquired by Esanda Finance Corporation Limited,
bringing the total interest to 100%
3 During 1997, the remaining 20% interest in Truck Leasing Limited was acquired by UDC Finance Limited, bringing the total
interest to 100%
4 During 1996, the remaining 50% interest in Autofleet Pty Ltd was acquired by Esanda Finance Corporation Limited, bringing the
total interest to 100%
5 Formerly ANZ Securities (New Zealand) Limited
64
Notes to the Financial Statements
19: Other Assets
Property held for resale
Cost of acquisition
Development expenses capitalised
Interest, rates and taxes capitalised
Provision for diminution in value
Accrued interest/prepaid discounts
Accrued commission
Prepaid expenses
Future income tax benefits (refer below)
Treasury instruments revaluations
Security settlements
National Housing Bank deposit (refer note 38)
Life insurance reserves (refer note 1[xv])
Other
Total other assets
Future income tax benefits comprises
Provision for doubtful debts
Interest
Tax losses
Provision for employee entitlements
Provision for non-lending losses, frauds and forgeries
Provision for leased premises surplus to
current requirements
Provision for diminution in development ventures
Development venture income
Treasury instruments
Leveraged leasing
Provision for restructuring costs
Other
Consolidated
1997
$M
1996
$M
The Company
1996
$M
1997
$M
67
65
3
135
(11)
124
1,004
57
89
516
5,232
304
-
436
728
8,490
136
-
11
90
39
16
1
21
-
3
97
102
516
70
68
3
141
(16)
125
836
39
48
491
3,070
525
179
354
673
6,340
148
3
26
80
54
12
8
22
11
19
4
104
491
1
-
-
1
-
1
736
35
15
360
4,659
300
-
-
331
6,437
99
-
1
68
34
16
1
1
-
6
58
76
5
14
-
19
(12)
7
575
32
23
344
2,692
386
-
-
137
4,196
107
-
3
68
43
12
4
4
11
24
4
64
360
344
Certain potential future income tax benefits within the Group have not been recognised as assets because
recovery cannot be regarded as virtually certain. These potential benefits arise from tax losses and timing
differences (benefits could amount to $19 million, 1996: $5 million) and from realised capital losses (benefits
could amount to $141 million, 1996: $133 million).
These benefits will only be obtained if
(i)
the relevant entities derive future assessable income of a nature and amount sufficient to enable the
benefit of the taxation deductions to be realised;
(ii) the relevant entities continue to comply with the conditions for deductibility imposed by law; and
(iii) there are no changes in taxation legislation adversely affecting the benefit of the taxation deductions.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
65
Notes to the Financial Statements
20: Premises and Equipment
Freehold and leasehold land and buildings
At directors’ valuation 1996
At cost
Provision for depreciation
Leasehold improvements
At cost
Provision for amortisation
Furniture and equipment
At cost
Provision for depreciation
Computer equipment
At cost
Provision for depreciation
Motor vehicle operating lease assets
At cost
Provision for depreciation
Capital works in progress
At cost
Consolidated
1997
$M
1996
$M
The Company
1997
$M
1996
$M
942
26
(28)
940
146
(83)
63
845
(467)
378
734
(491)
243
555
(141)
414
944
26
(20)
950
121
(71)
50
811
(429)
382
668
(423)
245
430
(97)
333
21
60
91
1
(2)
90
82
(47)
35
394
(219)
175
459
(308)
151
-
-
-
8
83
1
(1)
83
61
(35)
26
374
(210)
164
416
(260)
156
-
-
-
51
480
Total premises and equipment
2,059
2,020
459
Valuations of premises are assessed annually by officers of the Group. All premises over a specific value are
also subject to external valuation at least once every three years by independent valuers. Valuations are based
on the estimated open market value and assume that the premises concerned continue to be used in their
existing manner by the Group.
An officers’ valuation undertaken during the financial year indicated that the estimated market value of
premises exceeded the book value by $81 million. The excess has not been booked in the financial
statements.
21: Due to Other Financial Institutions
Australia
Overseas
Total due to other financial institutions
Maturity analysis based on remaining
term to maturity at 30 September
At call
Less than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
Total due to other financial institutions
910
9,964
10,874
717
11,965
12,682
910
8,420
9,330
717
10,646
11,363
1,041
8,031
1,786
16
8931
7,9171
3,8721
-
{
10,874
12,682
878
6,714
1,722
16
9,330
{
7451
6,9981
3,6201
-
11,363
1 Maturity analysis at 30 September 1996 was based on original term to maturity and comprised at call, less than 90 days and greater than 90 days
66
Notes to the Financial Statements
22: Deposits and Other Borrowings
Deposits and other borrowings are classified between Australia
and Overseas based on the location of the deposit taking point
Australia
Certificates of deposit
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Borrowing corporations’ debt
Securities sold under agreement to repurchase
Other unsecured borrowings
Overseas
Certificates of deposit
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Borrowing corporations’ debt
Securities sold under agreement to repurchase
Other secured borrowings
Total deposits and other borrowings
Maturity analysis based on remaining term
to maturity at 30 September 1
At call
Less than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years
Total deposits and other borrowings
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
927
17,256
21,175
2,865
3,023
5,350
-
196
1,135
17,366
17,612
2,751
2,341
5,286
394
20
927
17,219
21,175
2,865
1,942
-
-
196
1,135
17,313
17,612
2,751
1,394
-
394
20
50,792
46,905
44,324
40,619
5,934
18,741
6,994
2,909
1,808
1,158
722
94
38,360
89,152
33,262
38,911
12,049
4,335
595
89,152
4,218
16,880
5,837
2,459
946
1,199
1,171
94
32,804
79,709
n/a
n/a
n/a
n/a
n/a
n/a
4,025
6,461
869
363
-
-
716
90
12,524
56,848
25,025
25,122
5,743
958
-
56,848
2,203
5,583
547
257
-
-
1,142
92
9,824
50,443
n/a
n/a
n/a
n/a
n/a
n/a
1 Disclosure of comparative information not required in first year of adoption of Australian Accounting Standard AASB 1032
“Specific Disclosures by Financial Institutions”
Australia and New Zealand Banking Group Limited – 1997 Annual Report
67
Notes to the Financial Statements
23: Income Tax Liability
Australia
Provision for income tax
Provision for deferred income tax (refer below)
Overseas
Provision for income tax
Provision for deferred income tax (refer below)
Total income tax liability
Provision for deferred income tax comprises
Lease finance
Depreciation
Investment income
Treasury instruments
Other
24: Creditors and Other Liabilities
Australia
Creditors
Accrued interest and unearned discounts
Treasury instruments revaluations
Accrued charges
Security settlements
Other liabilities
Overseas
Creditors
Accrued interest and unearned discounts
Treasury instruments revaluations
Accrued charges
Security settlements
Other liabilities
Total creditors and other liabilities
25: Provisions
Employee entitlements
Dividends (refer note 7)
Non-lending losses, frauds and forgeries
Leased premises surplus to current requirements
Restructuring costs
Other
Total provisions
68
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
93
415
508
116
154
270
778
201
38
6
23
301
569
228
700
1,828
92
-
700
3,548
456
752
4,285
182
308
276
6,259
9,807
262
392
130
44
275
115
1,218
116
384
500
14
61
75
575
204
33
8
-
200
445
306
748
1,648
93
170
436
3,401
164
647
2,249
134
594
282
4,070
7,471
272
355
171
32
-
124
954
3
176
179
107
28
135
314
29
9
2
23
141
204
224
501
1,828
80
-
207
2,840
90
452
3,640
80
255
175
4,692
7,532
197
392
96
31
160
135
1,011
95
154
249
25
27
52
301
33
8
1
-
139
181
228
497
1,648
88
170
183
2,814
13
312
1,890
49
376
97
2,737
5,551
211
355
120
21
-
78
785
Notes to the Financial Statements
26: Bonds and Notes
USD medium term notes
GBP medium term notes
AUD medium term notes
JPY medium term notes
GBP 78m floating rate notes due 1997
USD 250m floating rate notes due 1998
USD 300m floating rate note due 1998
Total bonds and notes
Bonds and notes by currency
USD United States dollars
GBP Great British pounds
JPY Japanese yen
AUD Australian dollars
Bonds and notes by maturity
Maturity analysis based on remaining
term to maturity at 30 September
Less than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years
Consolidated
1997
$M
1996
$M
The Company
1996
$M
1997
$M
1,016
22
176
184
175
-
417
1,990
1,433
197
184
176
1,990
834
89
235
257
154
316
379
2,264
1,529
243
257
235
2,264
1,016
22
176
184
175
-
417
1,990
1,433
197
184
176
1,990
834
89
235
257
154
316
379
2,264
1,529
243
257
235
2,264
449
974
539
28
1,990
{
8311
1,3711
62 1
2,264
449
974
539
28
1,990
{
8311
1,3711
62 1
2,264
1 Maturity analysis at 30 September 1996 was based on remaining term to maturity of less than 1 year, between 1 and 5 years and
after 5 years
Australia and New Zealand Banking Group Limited – 1997 Annual Report
69
Notes to the Financial Statements
27: Loan Capital
Perpetual subordinated notes
USD 300m
USD 258.7m fixed rate notes
USD 120m
USD 30m
floating rate notes
floating rate notes
floating rate notes
Subordinated notes
LUX 1,000m fixed notes due 1998
fixed notes due 1999
AUD 48.8m
10,000m fixed notes due 19992
JPY
USD 30m
USD 70m
USD 200m
22.7m
GBP
AUD 65m
AUD 55.3m
USD 140m
USD 70m
AUD 58.2m
GBP
60m
USD 200m
USD 250m
USD 125m
USD 500m
USD 12.5m
JPY
482m
USD 250m
JPY
USD 14.3m
USD 79m
floating rate notes due 1999
floating rate notes due 1999
floating rate notes due 1999
fixed notes due 2000
floating rate notes due 2000
floating rate notes due 20004
floating rate notes due 2000
floating rate notes due 2000
floating rate notes due 20015
fixed notes due 2001
floating rate notes due 2002
fixed rate notes due 2004
floating rate notes due 2005
fixed notes due 2006
floating rate notes due 2007
floating rate notes due 2007
floating rate notes due 20076
568.8m floating rate notes due 2008
floating rate notes due 2008
floating rate notes due 20087
Total loan capital
Loan capital by currency
USD United States dollars
AUD Australian dollars
GBP Great British pounds
JPY
Japanese yen
LUX Luxembourg francs
Loan capital by maturity
Maturity analysis based on remaining
term to maturity at 30 September
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years
Perpetual
Interest
Rate
%
Consolidated
1997
$M
1996
$M
The Company
1996
$M
1997
$M
LIBOR1 + 0.15
9.125
LIBOR + 0.80
LIBOR + 0.80
9.375
7.720
7.430, 5.800
LIBOR + 0.46
LIBOR + 0.46
LIBOR + 0.50
7.050
BB3 + 0.40
BB + 0.40
LIBOR + 0.50
LIBOR + 0.625
BB + 0.40
12.625
LIBOR + 0.70
6.25
LIBOR + 0.45
7.55
LIBOR + 0.50
LIBOR + 0.50
LIBOR + 0.25
LIBOR + 0.55
LIBOR + 0.50
LIBOR + 1.03
417
359
-
-
776
38
48
115
42
-
-
56
65
55
-
-
58
134
278
348
174
695
17
6
347
7
20
110
2,613
3,389
2,807
226
190
128
38
3,389
38
573
2,002
776
3,389
379
327
152
38
896
40
49
114
38
88
253
57
65
55
177
88
58
119
253
316
157
632
16
5
-
6
18
100
2,704
3,600
3,032
227
176
125
40
3,600
-
1,025
1,679
896
3,600
417
359
-
-
776
38
48
115
42
-
-
-
65
55
-
-
58
134
278
348
-
695
17
6
347
7
20
110
2,383
3,159
2,633
226
134
128
38
3,159
38
517
1,828
776
3,159
379
327
-
-
706
40
49
114
38
88
253
-
65
55
177
88
58
119
253
316
-
632
16
5
-
6
18
100
2,490
3,196
2,685
227
119
125
40
3,196
-
968
1,522
706
3,196
1 LIBOR is an average of rates offered on loans to leading banks in
the London inter-bank market
2 Two equal tranches of notes were issued with different interest rates
3 BB is the stated average of Bank Bill rates
4 Prior to March 1995 the interest rate was 12.5% p.a.
5 Prior to July 1996 the interest rate was 12.5% p.a.
6 After February 2002 the interest rate is LIBOR+ 0.75%
7 After January 2002 the interest rate is LIBOR+ 0.53%
Loan capital is subordinated in right of payment to the claims of depositors and all other creditors of the Company and its controlled
entities which have issued the notes, and constitutes tier 2 capital as defined by the Reserve Bank of Australia for capital adequacy
purposes
70
Notes to the Financial Statements
28: Outside Equity Interests
Issued and paid-up capital
Reserves
Retained profits
Total outside equity interests
Consolidated
1997
$M
1996
$M
22
16
12
50
22
14
10
46
29: Average Balance Sheet and Related Interest
Averages used in the following table are predominantly daily averages. Interest income figures are presented
on a tax-equivalent basis. Non-accrual loans are included under the interest earning asset category
“Loans, advances and bills discounted”.
Average
balance
$M
1997
Interest
$M
Average
rate
%
Average
balance
$M
1996
Interest
$M
Average
rate
%
Average
balance
$M
1995
Interest
$M
Average
rate
%
Interest earning assets
Due from other financial institutions
Australia
New Zealand
International markets
Regulatory deposits with
Reserve Bank of Australia
Investments in public securities
Australia
New Zealand
International markets
Loans, advances and
bills discounted
Australia
New Zealand
International markets
Other assets
Australia
New Zealand
International markets
480
359
10,380
556
4,770
1,603
5,094
32
21
700
5
301
107
427
52,827
14,089
14,578
4,657
1,384
1,258
1,655
831
5,920
105
80
361
113,142
9,438
6.7
5.8
6.7
0.9
6.3
6.7
8.4
8.8
9.8
8.6
6.3
9.6
6.1
8.3
Non-interest earning assets
Acceptances
Australia
New Zealand
International markets
Premises and equipment
Other assets
Provisions for doubtful debts
Australia
New Zealand
International markets
Total assets
Total assets
Australia
New Zealand
International markets
% of total assets attributable
to overseas activities
13,248
244
556
1,975
9,740
(917)
(118)
(217)
24,511
137,653
77,604
18,395
41,654
137,653
43.6%
630
346
10,209
535
4,897
1,090
2,973
41
27
699
13
380
88
289
48,399
12,619
11,770
4,939
1,315
1,084
618
760
4,825
53
77
293
6.5
7.8
6.8
2.4
7.8
8.1
9.7
10.2
10.4
9.2
8.6
10.1
6.1
390
339
8,940
25
28
607
6.4
8.3
6.8
491
30
6.1
4,464
1,116
3,195
332
81
290
7.4
7.3
9.1
44,783
11,134
10,313
861
800
4,086
4,471
1,143
922
10.0
10.3
8.9
61
70
278
7.1
8.8
6.8
9.2
99,671
9,298
9.3
90,912
8,338
12,581
597
462
2,027
6,842
(1,002)
(118)
(238)
21,151
120,822
70,917
16,212
33,693
120,822
41.3%
11,521
672
586
1,982
7,714
(1,163)
(96)
(300)
20,916
111,828
66,095
14,924
30,809
111,828
40.9%
Australia and New Zealand Banking Group Limited – 1997 Annual Report
71
Notes to the Financial Statements
29: Average Balance Sheet and Related Interest (continued)
1996
1997
Average
balance
$M
Interest
$M
Average
rate
%
Average
balance
$M
Average
rate
%
Interest
$M
Average
balance
$M
1995
Interest
$M
Average
rate
%
Interest bearing liabilities
Time deposits
Australia
New Zealand
International markets
Savings deposits
Australia
New Zealand
International markets
Other demand deposits
Australia
New Zealand
International markets
Due to other financial institutions
Australia
New Zealand
International markets
Commercial paper
Australia
International markets
Borrowing corporations’ debt
Australia
New Zealand
International markets
Loan capital, bonds and notes
Australia
New Zealand
International markets
Other liabilities1
Australia
New Zealand
International markets
18,495
8,304
15,904
1,097
658
1,015
8,216
2,462
1,266
11,237
1,789
1,009
300
843
11,549
3,081
1,731
5,326
1,237
-
4,998
530
653
425
199
2,010
222
96
69
518
122
41
15
73
716
181
94
409
103
-
313
35
41
49
33
118
5.9
7.9
6.4
2.7
3.9
5.5
4.6
6.8
4.1
5.0
8.7
6.2
5.9
5.4
7.7
8.3
-
6.3
6.6
6.3
n/a
n/a
n/a
18,542
7,313
11,722
1,340
622
785
7,530
2,183
1,142
8,683
1,534
810
397
732
11,501
2,469
1,087
5,081
1,167
-
4,246
186
621
676
-
698
264
83
57
520
121
35
27
72
763
186
61
420
99
-
322
19
37
76
7
53
101,564
6,018
5.9
88,320
5,969
Non-interest bearing liabilities
Deposits
7.2
8.5
6.7
3.5
3.8
5.0
6.0
7.9
4.3
6.8
9.8
6.6
7.5
5.6
8.3
8.5
-
7.6
10.2
6.0
n/a
n/a
n/a
6.8
17,605
6,175
9,885
1,251
491
644
7,408
1,959
1,158
7,207
1,395
628
213
863
10,902
1,601
1,173
4,915
1,137
2
4,060
120
605
727
-
406
239
52
55
408
103
30
15
69
722
110
68
402
87
-
314
17
38
78
9
27
80,144
5,229
7.1
8.0
6.5
3.2
2.7
4.7
5.7
7.4
4.8
7.0
8.0
6.6
6.9
5.8
8.2
7.7
-
7.7
14.2
6.3
n/a
n/a
n/a
6.5
Australia
New Zealand
International markets
Acceptances
Australia
New Zealand
International markets
Other liabilities
Total liabilities
Total liabilities
Australia
New Zealand
International markets
Shareholders’ equity
Total liabilities and
shareholders’ equity
2,817
1,288
1,529
13,248
244
556
9,444
29,126
130,690
72,063
17,548
41,079
130,690
6,963
137,653
% of total liabilities attributable
to overseas activities
44.9%
1 Includes foreign exchange swap costs
72
2,736
1,139
1,249
12,581
597
462
7,586
26,350
114,670
66,679
15,352
32,639
114,670
6,152
120,822
41.9%
3,340
1,075
1,139
11,521
672
586
7,420
25,753
105,897
62,193
14,022
29,682
105,897
5,931
111,828
41.3%
Notes to the Financial Statements
30: Interest Sensitivity Gap
The following table represents the interest rate sensitivity as at 30 September 1997 of the Group’s assets,
liabilities and off-balance sheet instruments repricing (that is, when interest rates applicable to each asset or
liability can be changed) in the periods shown.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the
corresponding liability funding. These mismatches are managed within policy guidelines for gap positions.
Major changes in gap positions can be made to adjust the profile as market outlooks change.
Liquid assets and due from
other financial institutions
Trading and investment securities
Net loans and advances
Other assets
Total assets
Certificates of deposit
and term deposits
Other deposits
Other borrowings and due to
other financial institutions
Other liabilities
Bond, notes and loan capital
Total liabilities
Shareholders’ equity and
outside equity interests
Off-balance sheet items affecting
interest rate sensitivity
Interest sensitivity gap
- net
- cumulative
Less than
3 months
$M
14,085
6,533
53,015
2,674
76,307
34,611
26,207
13,151
1,953
2,991
78,913
Between
3 months and
6 months
$M
Between
6 months and
12 months
$M
Between
1 year and
5 years
$M
1,402
1,073
7,602
148
1,071
587
8,285
2
361
1,172
14,726
16
After
5 years
$M
14
539
1,019
2
Not
bearing
interest
$M
Total
$M
953
501
(499)
22,960
17,886
10,405
84,148
25,802
10,225
9,945
16,275
1,574
23,915 138,241
3,409
523
4,023
55
688
8,698
3,368
212
2,962
9
-
1,454
1,223
2,196
16
298
15
5
-
5,774
42,857
33,944
-
-
1,402
893
23,810
-
23,225
25,843
5,379
6,551
5,187
1,422
30,477 131,248
-
-
-
-
-
6,993
6,993
3,382
(1,447)
275
(1,035)
(1,175)
-
776
776
80
856
3,669
4,525
10,053 (1,023)
14,578 13,555
(13,555)
-
-
-
-
Australia and New Zealand Banking Group Limited – 1997 Annual Report
73
Notes to the Financial Statements
31: Net Fair Value of Financial Instruments
Australian Accounting Standard AASB 1033: Presentation and Disclosure of Financial Instruments
(AASB 1033) requires disclosure of the net fair value of on and off-balance sheet financial instruments. The
disclosures exclude all non-financial instruments, such as income taxes and regulatory deposits, and specified
financial instruments, such as interests in controlled entities. Accordingly, the aggregate net fair value
amounts do not represent the underlying value of the Group.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s-length transaction. Net fair value is the fair value adjusted for
transaction costs.
Quoted market prices, where available, are adjusted for material transaction costs and used as the measure
of net fair value. In cases where quoted market values are not available, net fair values are based on present
value estimates or other valuation techniques. For the majority of short term financial instruments, defined as
those which reprice or mature in 90 days or less, with no significant change in credit risk, the net fair value
was assumed to equate to the carrying amount in the Group’s balance sheet.
The fair values are based on relevant information available as at 30 September 1997. While judgement is
used in obtaining the net fair value of financial instruments, there are inherent weaknesses in any estimation
technique. Many of the estimates involve uncertainties and matters of significant judgement, and changes in
underlying assumptions could significantly affect these estimates. Furthermore, market prices or rates of
discount are not available for many of the financial instruments valued and surrogates have been used which
may not reflect the price that would apply in an actual sale.
The net fair value amounts have not been updated for the purposes of these financial statements since
30 September 1997, and therefore the net fair value of the financial instruments subsequent to 30 September 1997
may be different from the amounts reported.
Financial Assets
Liquid assets
Due from other financial institutions
Trading securities
Investment securities and shares in associates
Loans and advances
Customers’ liabilities for acceptances
Other financial assets
Net fair value
1996
$M
1997
$M
Carrying value
1996
$M
1997
$M
6,298
11,588
7,266
3,156
85,537
14,040
7,665
6,906
11,356
7,334
2,577
76,958
14,006
5,731
6,298
11,588
7,266
3,146
84,148
14,040
7,761
6,901
11,353
7,334
2,580
75,901
14,013
5,609
Liquid assets and Due from other financial institutions
The carrying values of these financial instruments are considered to approximate their net fair values as they
are short term in nature or are receivable on demand.
Trading securities
Trading securities are carried at market value. Market value is generally based on quoted market prices,
broker or dealer price quotations, or prices for securities with similar credit risk, maturity and yield
characteristics.
Investment securities and shares in associates
Net fair value is based on quoted market prices or broker or dealer price quotations. If this information is not
available, net fair value has been estimated using quoted market prices for securities with similar credit,
maturity and yield characteristics, or by reference to the net tangible asset backing of the investee.
Loans, advances and customers’ liabilities for acceptances
The carrying value of loans, advances and acceptances is net of specific and general provisions for doubtful
debts and income yet to mature. The estimated net fair value of loans, advances and acceptances is based on
the discounted amount of estimated future cash flows and accordingly has not been adjusted for either specific
or general provisions for doubtful debts.
Estimated contractual cash flows for performing loans are discounted at estimated current market rates to
determine fair value. For loans with doubt as to collection, expected cash flows (inclusive of the value of
security) are discounted using a rate which includes a premium for the uncertainty of the flows.
The difference between estimated net fair values of loans, advances and acceptances and carrying value
reflects changes in interest rates and the credit worthiness of borrowers since loan origination. The excess of
net fair value of loans and advances over the carrying value is primarily a result of offsetting the general
provision for doubtful debts against the carrying value and the effect of declining interest rates.
Finance lease receivables, with a carrying value of $2,694 million (1996: $2,880 million) and a net fair
value of $2,722 million (1996: $2,864 million), are included in loans and advances.
74
Notes to the Financial Statements
31: Net Fair Value of Financial Instruments (continued)
Other financial assets
Included in this category are accrued interest, fees receivable and derivative financial instruments. The
carrying values of accrued interest and fees receivable are considered to approximate their net fair values as
they are short term in nature or are receivable on demand.
The fair values of derivative financial instruments such as interest rate swaps and currency swaps were
calculated using discounted cash flow models based on current market yields for similar types of instruments
and the maturity of each instrument. Foreign exchange contracts and interest rate option contracts were
valued using market prices and option valuation models as appropriate.
Properties held for resale, future income tax benefits and prepaid expenses are not considered financial
assets.
Financial Liabilities
Due to other financial institutions
Deposits and other borrowings
Liability for acceptances
Bonds and notes
Loan capital
Other financial liabilities
Net fair value
Carrying value
1997
$M
10,872
89,277
14,040
1,984
3,413
9,457
1996
$M
12,697
79,724
14,006
2,277
3,586
7,160
1997
$M
10,874
89,152
14,040
1,990
3,389
9,471
1996
$M
12,682
79,709
14,013
2,264
3,600
7,115
Due to other financial institutions
The carrying value of amounts due from other financial institutions is considered to approximate the net fair
value.
Deposits and other borrowings
The net fair value of a deposit liability without a specified maturity or at call is deemed by AASB 1033 to be
the amount payable on demand at the reporting date. The fair value is not adjusted for any value expected to
be derived from retaining the deposit for a future period of time.
For interest bearing fixed maturity deposits and other borrowings and acceptances without quoted market
prices, market borrowing rates of interest for debt with a similar maturity are used to discount contractual
cash flows.
The net fair value of interest bearing deposits and other liabilities reflects declining interest rates during
the year ended 30 September 1997.
Bonds and notes and loan capital
The aggregate net fair value of bonds and notes and loan capital at 30 September 1997 was calculated based
on quoted market prices. For those debt issues where quoted market prices were not available, a discounted
cash flow model using a yield curve appropriate for the remaining term to maturity of the instrument was
used.
Other financial liabilities
This category includes accrued interest and fees payable for which the carrying amount is considered to
approximate the fair value. Also included are derivative financial instruments, where fair value is determined
on the basis described under “other financial assets”.
Income tax liabilities, other provisions and accrued charges are not considered financial instruments.
Commitments and contingencies
As outlined in note 38, the Group has various credit-related commitments. Based upon the level of fees
currently charged for granting such commitments, taking into account maturity and interest rates, together
with any changes in the creditworthiness of counterparties since origination of the commitments, their
estimated replacement or net fair value is not material.
Transaction costs
The fair value of financial instruments required to be disclosed under US accounting standard, Statement of
Financial Accounting Standards No. 107 “Disclosures about Fair Value of Financial Instruments” (SFAS 107)
is calculated without regard to estimated transaction costs. Such transaction costs are not material, and
accordingly the fair values shown above would not differ materially from fair values calculated in accordance
with SFAS 107.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
75
Notes to the Financial Statements
32: Segment Analysis
The following analysis shows income, operating profit, total assets and risk weighted assets based on
geographical locations and income, operating profit and total assets by industry segments.
Geographical
Income1
Australia
New Zealand
UK and Europe
Asia Pacific
South Asia
Americas
Middle East
Operating profit before income tax
Australia
New Zealand
UK and Europe
Asia Pacific
South Asia
Americas
Middle East
Abnormal items
Australia
New Zealand
UK and Europe
Asia Pacific
South Asia
America
Middle East
Operating profit after income tax
Australia
New Zealand
UK and Europe
Asia Pacific
South Asia
Americas
Middle East
Abnormal items
Australia
New Zealand
UK and Europe
South Asia
Middle East
1997
Consolidated
1996
1995
$M
6,534
2,020
1,191
865
657
364
360
%
55
17
10
7
5
3
3
$M
6,623
1,886
1,000
826
435
325
287
%
58
16
9
7
4
3
3
$M
6,145
1,657
861
680
339
317
286
%
60
16
8
7
3
3
3
11,991
100
11,382
100
10,285
100
892
233
160
141
166
63
103
51
13
9
8
9
4
6
886
203
155
147
81
64
79
55
13
9
9
5
4
5
903
204
116
124
57
60
84
58
13
8
8
4
4
5
1,758
100
1,615
100
1,548
100
(240)
(61)
(13)
(1)
136
(1)
(2)
(182)
1,576
627
165
112
95
82
36
54
-
-
-
-
-
-
-
-
-
54
14
9
8
7
3
5
-
-
-
-
-
-
-
-
1,615
657
138
106
99
36
38
42
-
-
-
-
-
-
-
-
-
59
12
10
9
3
3
4
-
-
-
-
-
-
-
-
1,548
612
146
83
79
27
39
47
-
-
-
-
-
-
-
-
-
59
14
8
8
3
4
4
1,171
100
1,116
100
1,033
100
(155)
(41)
(9)
59
(1)
(147)
1,024
-
-
-
-
-
-
-
-
-
-
-
-
-
1,116
-
-
-
-
-
-
-
19
-
-
-
-
19
1,052
-
-
-
-
-
-
-
76
Notes to the Financial Statements
32: Segment Analysis (continued)
Total assets
Australia
New Zealand
UK and Europe
Asia Pacific
South Asia
Americas
Middle East
Risk weighted assets
Australia
New Zealand
UK and Europe
Asia Pacific
South Asia
Americas
Middle East
Industry
Income1
General banking
Investment banking capital markets
Finance
Insurance and funds management
Operating profit before income tax
General banking
Investment banking capital markets
Finance
Insurance and funds management
Abnormal items
Operating profit after income tax
General banking
Investment banking capital markets
Finance
Insurance and funds management
Abnormal items
Total assets
General banking
Investment banking capital markets
Finance
Insurance and funds management
1 Includes abnormal items
n/a Not applicable
1997
Consolidated
1996
1995
$M
%
$M
%
$M
%
80,321
18,831
16,886
9,844
3,959
4,611
3,789
58
14
12
7
3
3
3
75,110
17,463
15,008
9,163
3,333
4,723
2,804
59
13
12
7
3
4
2
67,594
15,310
12,001
7,874
3,306
3,666
2,836
60
13
11
7
3
3
3
138,241
100
127,604
100
112,587
100
66,687
14,332
8,471
6,489
2,897
4,505
2,766
63
14
8
6
3
4
2
59,681
13,492
6,220
5,358
2,244
4,527
1,995
64
14
7
6
2
5
2
53,531
11,748
5,238
4,766
2,213
3,535
2,045
65
14
6
6
3
4
2
106,147
100
93,517
100
83,076
100
9,797
708
1,293
193
82
6
11
1
9,496
480
1,253
153
84
4
11
1
8,955
n/a
1,154
176
11,991
100
11,382
100
10,285
1,272
208
203
75
1,758
(182)
1,576
832
144
130
65
1,171
(147)
1,024
120,319
6,353
11,258
311
138,241
72
12
12
4
100
-
1,257
100
201
57
1,615
-
78
6
12
4
100
-
1,217
n/a
234
97
1,548
-
-
1,615
-
1,548
71
12
11
6
100
-
-
860
72
133
51
1,116
-
1,116
87
5
8
-
112,169
4,549
10,639
247
77
6
12
5
100
-
793
n/a
158
82
1,033
19
-
1,052
88
4
8
-
102,120
n/a
9,997
470
100
127,604
100
112,587
87
n/a
11
2
100
79
n/a
15
6
100
-
-
77
n/a
15
8
100
-
-
91
n/a
9
-
100
Australia and New Zealand Banking Group Limited – 1997 Annual Report
77
Notes to the Financial Statements
33: Notes to the Statements of Cash Flows
a) Reconciliation of operating profit after income
tax to net cash provided by operating activities
Consolidated
1996
$M
1997
$M
1995
$M
The Company
1996
$M
1997
$M
Inflows
(Outflows)
Inflows
(Outflows)
Operating profit after income tax
1,024
1,116
1,052
647
1,023
287
288
560
(362)
2
29
(10)
(2)
304
(127)
(18)
162
154
255
189
(194)
14
(7)
2
-
174
236
201
(190)
1
2
-
-
221
110
386
(207)
1
10
-
(1)
110
108
81
(49)
12
(8)
-
-
(1,595)
230
8
137
(1,222)
(282)
6
333
1,212
(126)
(3)
28
(1,339)
101
8
145
(85)
(58)
(83)
(167)
62
-
(50)
364
(2)
1
(61)
(1,020)
(522)
1,772
96
530
2,419
3
114
23
-
1
(14)
(64)
44
-
(7)
(872)
151
23
47
-
(89)
1,009
2,033
Adjustments to reconcile operating profit after
income tax to net cash provided by operating activities
Provisions for doubtful debts
Depreciation and amortisation
Provisions for employee entitlements and other
Payments from provisions
Loss on sale of premises and equipment
Provision for surplus lease space
(Profit) loss on sale of controlled entities and associates
Profit on sale of investment securities
Net decrease (increase)
Trading securities
Interest receivable
Accrued income
Net debit tax balances
Amortisation of discounts/premiums included
in interest income
Net increase (decrease)
Interest payable
Accrued expenses
Amortisation of discounts/premiums included
in interest expense
Other
Total adjustments
Net cash provided by operating activities
b) Reconciliation of cash and cash equivalents
Cash and cash equivalents include liquid assets and
amounts due from other financial institutions with
original term to maturity of less than 90 days.
Cash and cash equivalents at the end of the financial
year as shown in the statements of cash flows are
reconciled to the related items in the balance sheets
as follows
Liquid assets - less than 90 days
Due from other financial institutions - less than 90 days
3,857
8,599
4,285
6,961
12,456
11,246
2,824
4,255
7,079
1,829
5,164
6,993
2,456
4,348
6,804
78
Notes to the Financial Statements
Consolidated
1996
$M
1995
$M
1997
$M
The Company
1997
$M
1996
$M
33: Notes to the Statements of Cash Flows (continued)
c) Acquisitions and disposals
Details of aggregate assets and liabilities of controlled
entities and branches acquired, and disposed of, by
the Group are as follows
Fair value of net assets acquired
Liquid assets
Due from other financial institutions
Net loans and advances
Other assets
Premises and equipment
Due to other financial institutions
Creditors and other liabilities
Deposits and other borrowings
Due to controlled entities
Income tax liability
Provisions
Fair value of net assets acquired
Goodwill on acquisition
Consideration paid
Cash acquired
Cash consideration paid (received)
Fair value of net assets disposed
Liquid assets
Due from other financial institutions
Net loans and advances
Other assets
Premises and equipment
Due to other financial institutions
Creditors and other liabilities
Deposits and other borrowings
Provisions
Fair value of net assets disposed
Net profit on disposal
Consideration received/receivable
Deferred settlements
Cash consideration received
2
-
-
2
4
-
(3)
-
-
-
-
5
6
11
-
11
4
35
72
20
1
(2)
(13)
(104)
1
14
10
24
17
41
13
-
2
1
-
-
(1)
-
-
(5)
(10)
-
-
-
(13)
(13)
-
-
-
-
-
-
-
-
-
-
-
-
14
14
-
-
-
81
-
-
-
-
-
-
-
81
-
81
-
81
-
-
-
-
-
-
-
-
-
-
-
-
14
14
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10
1,672
42
83
4
(39)
(16)
(1,596)
(7)
(9)
-
144
64
208
(10)
198
-
-
-
-
-
-
-
-
-
-
-
-
-
-
d) Non-cash financing and investing activities
Share capital issues
Dividend reinvestment plan
Bonus option plan
e) Financing arrangements
Financing arrangements which are available
under normal financial arrangements
Credit standby arrangements
Commercial bills acceptance discount lines
Standby lines
Other financing arrangements
Overdrafts and other financing arrangements
Total finance available
180
3
135
6
192
11
180
3
135
6
1997
1996
Available
Unused
Available
Unused
$M
$M
$M
$M
100
2,719
1,065
3,884
100
2,057
100
1,955
100
1,854
452
457
449
2,609
2,512
2,403
Australia and New Zealand Banking Group Limited – 1997 Annual Report
79
Notes to the Financial Statements
Notes to the Financial Statements
Incorporated
in
Book value
1996
$M
1997
$M
Contribution to
the consolidated
result
1997
$M
1996
$M
Nature of Business
34: Controlled Entities
All controlled entities are 100% owned unless otherwise noted.
The material controlled entities of the Group are
Australia and New Zealand Banking Group Limited
371
557
Banking
La Serigne Limited *
ANZ Grindlays International Limited *
ANZ Asia Pacific Holdings Ltd *
ANZ Bank (Vanuatu) Limited *
A.F.T. Investors Services Limited
ANZ Adelaide Group Limited 3
ANZ Bank (Guernsey) Limited *
ANZ Capital Hedging Limited
ANZ (Delaware) Inc.*
ANZ Executors & Trustee Company Limited
ANZ Finance (Far East) Limited
ANZ Funds Pty Ltd
Australia
Australia
Guernsey
Australia
USA
Australia
Australia
Australia
Hong Kong
Hong Kong
Vanuatu
Vanuatu
Singapore
Singapore
New Zealand
ANZ Banking Group (New Zealand) Limited * New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
National Mutual Permanent Building Society* New Zealand
ANZ International Private Limited *
ANZCOVER Insurance Pte Ltd *
ANZ Holdings (New Zealand) Limited *
Mutual Leasing Limited *
Truck Leasing Limited *
UDC Leasing Limited *
Bage Investments Limited *
Endeavour Investments (NZ) Limited *
Greyloch Investments Limited *
UDC Group Holdings Limited *
UDC Finance Limited *
ANZ Singapore Limited *
4
Bank of Western Samoa *
LFD Limited
GNPL Limited
RFDL Limited
Minerva Holdings Limited *
ANZ Grindlays Export Finance Limited *
Town & Country Land Holdings Limited
ANZ Lenders Mortgage Insurance Pty Limited
Town & Country Housing Trust
ANZ General Insurance Pty Limited
ANZ Grindlays Jersey Holdings Limited *
ANZ Grindlays Bank (Jersey) Limited *
ANZ Grindlays Holdings Limited
ANZ Grindlays Bank Limited
Grindlays Bahrain Bank B.S.C. 5
Grindlays Modaraba Management (Private) Limited
Nepal Grindlays Bank Limited *
A.N.Z. Holdings Limited
ANZ Investment Holdings Limited
530 Collins Street Property Trust
A.N.Z. Investments Limited
ANZ Life Assurance Company Limited
ANZ Managed Investments Limited
A.N.Z. Properties (Australia) Limited
ANZ Securities (Holdings) Limited
ANZ Securities (Corporate) Limited
ANZ Securities Limited
Australia and New Zealand Banking Group
(PNG) Limited *
Bellinz Pty Ltd
Singapore
Samoa
Australia
Australia
Australia
England
England
Australia
Australia
Australia
Australia
Jersey
Jersey
Australia
Australia
Bahrain
Pakistan
Nepal
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Papua New
Guinea
Australia
80
6
52
33
7
-
54
22
3,765
#
78
#
4
715
75
202
356
222
847
106
66
54
16
4
16
12
12
18
204
11
1
82
49
115
9
43
3
164
58
1,101
204
16
#
12
128
54
397
17
436
85
21
33
1
6
6
63
27
52
-
41
22
3,327
#
71
#
-
715
75
203
355
221
843
-
66
54
16
2
16
12
11
18
204
11
1
82
43
115
9
46
3
130
51
841
204
14
#
10
128
44
397
16
354
70
21
47
1
6
#
(11)
3
(6)
-
13
#
2
(3)
1
3
-
1
9
(11)
59
12
47
1
-
18
(3)
(1)
2
#
6
3
21
-
(6)
5
1
2
5
#
#
-
15
-
204
2
-
3
#
1
7
1
82
15
#
1
(12)
3
Holding Company
Property Owner
Banking
Capital Hedging
Finance
Trustee/Nominee
Property Owner
#
3
3
8
-
9
#
21 Holding Company
#
Holding Company
1 Holding Company
3
-
(2) Holding Company
15
Insurance
(12) Holding Company
Banking
60
13
Investment
47 Holding Company
Banking
Property Owner
Finance
Holding Company
Finance
Lease Finance
Leasing
Lease Finance
Building Society
-
-
22
5
#
2
#
6 Merchant Banking
Banking
3
23
Finance
# Non-operative
Finance
8
Holding Company
#
Export Finance
2
(1)
Property Development
2 Mortgage Insurance
Property Investment
#
General Insurance
#
Holding Company
-
Banking
17
Banking
Banking
Fund Management
Banking
Property owner
Investment
Investment Activities
Investment
Life Assurance
Investment Services
Property Owner
1 Holding Company
94
2
-
3
#
#
18
#
55
11
(1)
(1) Holding Company
Corporate Advisory
#
Administration
6
33
25
27
-
17
#
13
-
Banking
Investment
80
80
Notes to the Financial Statements
Notes to the Financial Statements
Incorporated
in
Book value
1996
$M
1997
$M
Contribution to
the consolidated
result
1997
$M
1996
$M
Nature of Business
34: Controlled Entities (continued)
Esanda Finance Corporation Limited
Finance Corporation of Australia Limited
Mercantile Credits Limited
Alliance Holdings Limited
6
Fleet Partners Pty Limited
Australia
Australia
Australia
Australia
Australia
Repair Authorisation Centre (RAC) Pty Limited Australia
Australia
Australia
Australia
Australia
Indonesia
ANZ Capel Court Limited
NMRSB Limited
Fleetlink Leasing Pty Limited
PT ANZ Panin Bank *
NMRB Limited
865
75
9
119
#
#
5
445
57
132
40
937
75
9
119
#
-
1
420
57
132
41
86
(2)
(1)
-
2
-
-
#
21
#
8
General Finance
95
3 Real Estate Finance
(2) General Finance
1 Holding Company
Fleet Management
-
Fleet Maintenance
-
Lease Finance
-
Holding Company
2
5
Investment Banking
# Holding Company
8
Banking
Contributions of above entities to the Group result after
income tax and abnormal items
Adjustment for controlled entities sold/liquidated
Adjustments on consolidation
Contribution of non-material controlled entities
Equity accounting profit (notes 1(ii) and 35)
Consolidated operating profit after income tax
997 1,128
#
#
#
#
25 (12)
2
-
1,024 1,116
*
#
1
2
3
4
5
6
7
Audited by overseas KPMG firms
Amounts less than $500,000
The above controlled entities are 100% owned with the exception of Australia and New Zealand Banking Group (PNG) Limited
(93%), Grindlays Bahrain Bank B.S.C. (40%), Nepal Grindlays Bank Limited (50%), PT ANZ Panin Bank (85%) and
Town & Country Housing Trust (93%)
Outside equity interests hold ordinary shares or units in the controlled entities listed above as follows:
Australia and New Zealand Banking Group (PNG) Limited - 371,507 PGK1 shares (7%)
Grindlays Bahrain Bank B.S.C. - 3,600,000 BHD1 shares (60%)
Nepal Grindlays Bank Limited - 750,000 NPR 100 shares (50%)
PT ANZ Panin Bank - 7,500 IDR1m shares (15%)
Town & Country Housing Trust - 2,435,931 $1 units (7%)
ANZ Adelaide Group Limited owns 100% of the issued ordinary shares of Penplaza Investments Pty Limited but does not control that company as
it does not have substantially all the risks and benefits incidental to ownership or control
Subsequent to 30 September 1997, Bank of Western Samoa was renamed ANZ Bank (Samoa) Limited
ANZ Grindlays Bank Limited controls Grindlays Bahrain Bank B.S.C. due to the existence of an agreement whereby ANZ Grindlays Bank
Limited provides management and other technical services giving the capacity to dominate decision making
Formerly Autofleet Pty Limited
The following controlled entities were audited by firms other than KPMG
Clive Street Nominees Private Limited
Grindlays Bahrain Bank B.S.C.
Grindlays International (Cayman Islands) Limited
Grindlays Modaraba Management (Private) Limited
Grindlays Services of Pakistan (Private) Limited
81
Incorporated
in
Interest
%
1997
$M
1996
$M
Balance
date
Book value
Contribution to
the consolidated
result
1997
$M
Principal
activity
35: Associates
Significant associates of the Group are
Sime Merchant Bankers Berhad1
Malaysia
26.5
Other associates
Associates disposed of or reclassified as
controlled entities during the current year 2
Total shares in associates
Merchant Bank
31 Jan
6
1
-
7
4
-
6
10
2
-
-
2
1 Formerly Asian International Merchant Bankers Berhad. The investment is held by ANZ Grindlays Bank Limited
2 The investment held by UDC Finance Limited in Amalgamated Finance Limited was disposed of during the year
81
Australia and New Zealand Banking Group Limited – 1997 Annual Report
81
Notes to the Financial Statements
36: Commitments
Capital expenditure
Contracts for outstanding capital expenditure
Not later than 1 year
Total capital expenditure commitments
Lease rentals
Future rentals in respect of leases
Land and buildings
Not later than 1 year
Later than 1 year but not later than 2 years
Later than 2 years but not later than 5 years
Later than 5 years
Furniture and equipment
Not later than 1 year
Later than 1 year but not later than 2 years
Later than 2 years but not later than 5 years
Total lease rental commitments
Total commitments
37: Derivative Financial Instruments
Consolidated
The Company
1997
$M
1996
$M
1997
$M
1996
$M
56
56
139
130
219
444
932
5
3
3
11
943
999
43
43
143
131
251
475
1,000
4
3
1
8
1,008
1,051
27
27
110
106
168
398
782
1
1
-
2
784
811
9
9
114
107
204
472
897
-
-
1
1
898
907
Derivatives
Derivative instruments are contracts whose value is derived from one or more underlying financial
instruments or indices. They include swaps, forward rate agreements, futures, options and combinations 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 and market risk as other financial instruments, and the
Group manages these risks in a consistent manner.
The principal exchange rate contracts used by the Group are forward foreign exchange contracts, currency
swaps and currency options. Forward foreign exchange contracts are agreements to buy or sell a specified
quantity of foreign currency on a specified future date at an agreed rate. A currency swap generally involves
the exchange, or notional exchange, of equivalent amounts of two currencies and a commitment to exchange
interest periodically until the principal amounts are re-exchanged on a future date. Currency options provide
the buyer with the right, but not the obligation, either to purchase or sell a fixed amount of a currency at a
specified rate on or before a future date. As compensation for assuming the option risk, the option writer
generally receives a premium at the start of the option period.
The principal interest rate contracts used by the Group are forward rate agreements, interest rate futures,
interest rate swaps and options. Forward rate agreements are contracts for the payment of the difference
between a specified interest rate and a reference rate on a notional deposit at a future settlement date. There is
no exchange of principal. An interest rate future is an exchange traded contract for the delivery of a
standardised amount of a fixed income security or time deposit at a future date. Interest rate swap transactions
generally involve the exchange of fixed and floating interest payment obligations without the exchange of the
underlying principal amounts.
Derivative transactions generate income for the Group from buy-sell spreads and from trading positions
taken by the Group. Income from these transactions is taken to net interest income, foreign exchange earnings
or profit on trading instruments. Income or expense on derivatives entered into for balance sheet hedging
purposes is accrued and recorded as an adjustment to the interest income or expense of the related hedged
item.
82
Notes to the Financial Statements
37: Derivative Financial Instruments (continued)
Credit risk
The credit risk of derivative financial instruments arises from the potential for a counterparty to default on its
contractual obligation. Credit risk arises when market movements are such that the derivative has a positive
value to the Group. It is the cost of replacing the contract in the event of counterparty default. The Group
limits its credit risk within a conservative framework by dealing with creditworthy counterparties, setting credit
limits on exposures to counterparties, and obtaining collateral where appropriate.
The following table provides an overview of the Group’s exchange rate and interest rate derivatives. It
includes all trading and non trading contracts. Notional principal amounts measure the amount of the
underlying physical or financial commodity and represent the volume of outstanding transactions. They are not
a measure of the risk associated with a derivative.
The gross replacement cost is the cost of replacing those financial instruments with a positive market value
to the Group. It represents the potential credit loss had all counterparties defaulted on the reporting date and
any collateral become worthless. There is no allowance for netting arrangements.
The credit equivalent amount is calculated in accordance with the Reserve Bank of Australia’s Capital
Adequacy guidelines. It combines the aggregate gross replacement cost with an allowance for the potential
increase in value over the remaining term of the transaction should market conditions change.
Consolidated
Foreign exchange contracts
Spot and forward contracts
Swap agreements
Options purchased
Options sold1
Interest rate contracts
Forward rate agreements
Swap agreements
Futures contracts2
Options purchased
Options sold1
Other contracts
Notional
principal
amount
1997
$M
Gross
replacement
cost
1997
Credit
equivalent
amount
1997
$M
$M
Notional
principal
amount
1996
$M
Gross
replacement
cost
1996
Credit
equivalent
amount
1996
$M
$M
202,885
10,810
11,537
11,033
236,265
66,719
193,092
125,942
13,548
20,899
944
421,144
657,409
3,547
321
182
n/a
4,050
37
2,030
n/a
27
n/a
3
2,097
6,147
5,404
678
325
n/a
6,407
122
2,465
n/a
38
n/a
13
2,638
9,045
159,243
5,872
5,637
5,385
176,137
95,994
148,495
87,864
4,001
3,632
248
340,234
516,371
1,487
127
47
n/a
1,661
65
1,256
n/a
8
n/a
3
1,332
2,993
2,916
355
111
n/a
3,382
137
1,567
n/a
15
n/a
4
1,723
5,105
1 Options sold have no credit exposure, as they represent obligations rather than assets
2 Replacement costs have not been included as there is minimal credit risk associated with exchange traded futures where the clearing
house is the counterparty
Australia and New Zealand Banking Group Limited – 1997 Annual Report
83
Notes to the Financial Statements
37: Derivative Financial Instruments (continued)
The maturity structure of derivative activity is a primary component of potential credit exposure. The table
below shows the remaining maturity profile by class of derivatives based on notional principal amounts.
Consolidated
At 30 September 1997
Foreign exchange contracts
Spot and forward contracts
Swap agreements
Options purchased
Options sold
Interest rate contracts
Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options sold
Other contracts
Total
At 30 September 1996
Foreign exchange contracts
Spot and forward contracts
Swap agreements
Options purchased
Options sold
Interest rate contracts
Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options sold
Other contracts
Total
Less than
1 year
$M
200,173
4,575
11,195
10,492
226,435
49,731
105,900
97,043
9,613
14,413
918
277,618
504,053
157,429
1,645
5,454
5,239
169,767
81,573
86,096
64,403
2,576
2,269
228
237,145
406,912
Remaining life
1 to 5 years
Greater than
5 years
$M
$M
2,680
4,757
342
541
8,320
16,988
75,440
27,479
2,034
2,202
26
124,169
132,489
1,800
3,921
183
146
6,050
14,421
58,518
22,926
1,293
1,230
19
98,407
104,457
32
1,478
-
-
1,510
-
11,752
1,420
1,901
4,284
-
19,357
20,867
14
306
-
-
320
-
3,881
535
132
133
1
4,682
5,002
Total
$M
202,885
10,810
11,537
11,033
236,265
66,719
193,092
125,942
13,548
20,899
944
421,144
657,409
159,243
5,872
5,637
5,385
176,137
95,994
148,495
87,864
4,001
3,632
248
340,234
516,371
84
Notes to the Financial Statements
37: Derivative Financial Instruments (continued)
Concentrations of credit risk exist for groups of counterparties when they have similar economic
characteristics. Major concentrations of credit risk arise by location and type of customer.
The following table shows the concentrations of credit risk, by class of counterparty and by geographic
location, measured by credit equivalent amount. In excess of 78% of the Group’s exposures are with
counterparties which are either Australian banks or banks based in other OECD countries.
Consolidated
Class of Counterparty
Commonwealth and OECD governments
Australian and OECD banks
Corporations, non-OECD banks and others
Geographic location
Australia
New Zealand
International markets
Credit equivalent
1997
$M
55
7,062
1,928
9,045
1996
$M
60
4,200
845
5,105
Credit equivalent
1997
$M
4,007
601
4,437
9,045
1996
$M
1,959
486
2,660
5,105
Market risk
The market risk of derivatives arises from the potential for changes in value due to movements in interest and
foreign exchange rates.
The Group calculates value at risk based on historical models of movements in interest rates and exchange
rates, and using a 97.5% confidence level that the adverse movements will not exceed the value at risk. If
value at risk is estimated to be $1 million, then based on historical analysis over 500 working days there is
approximately one chance in 40 of seeing an adverse movement in excess of $1 million within the current
trading day, on the basis of the opening position. Reflecting the nature of its trading activities, the Group
monitors its value at risk by reference to close-to-close (overnight) risk levels.
Below are the Group’s aggregate value at risk figures covering both physical and derivatives trading
positions for its principal treasury trading centres. The increase in value at risk is due to the inclusion of the
Group's Capital Markets activities within the value at risk regime. Previously, the risks associated with these
activities were managed as credit risks within the Group's credit systems and controls.
As at Maximum Average
1997
1997
30 Sep 97
Consolidated
Value at risk at 97.5% confidence
Foreign exchange
Interest rate
$M
4
19
$M
$M
4
23
3
18
As at
30 Sep 96
Maximum Average
1996
1996
$M
2
10
$M
$M
5
13
2
6
Australia and New Zealand Banking Group Limited – 1997 Annual Report
85
Notes to the Financial Statements
37: Derivative Financial Instruments (continued)
The next table shows the fair values of the Group’s derivatives by product type, disaggregated into gross
unrealised gains and gross unrealised losses. The fair value of a derivative represents the aggregate net present
value of the cash inflows and outflows required to extinguish the rights and obligations arising from the
derivative in an orderly market as at the reporting date. Fair value does not indicate future gains or losses, but
rather the unrealised gains and losses from marking to market all derivatives at a particular point in time.
Consolidated
Foreign exchange contracts
Spot and forward contracts
Gross unrealised gains
Gross unrealised losses
Swap agreements
Gross unrealised gains
Gross unrealised losses
Options purchased
Options sold
Interest rate contracts
Forward rate agreements
Gross unrealised gains
Gross unrealised losses
Swap agreements
Gross unrealised gains
Gross unrealised losses
Futures contracts
Gross unrealised gains
Gross unrealised losses
Options purchased
Options sold
Other contracts
Gross unrealised gains
Gross unrealised losses
Total
Fair value
as at
30 Sep 1997
$M
Average
fair value
1997
$M
Fair value
as at
30 Sep 1996
$M
Average
fair value
1996
$M
3,579
(3,503)
321
(274)
182
(138)
167
37
(46)
2,030
(2,741)
8
(9)
37
(30)
3
(11)
(722)
(555)
2,301
(2,450)
198
(273)
102
(31)
(153)
48
(48)
1,558
(2,111)
28
(46)
25
(10)
-
(1)
(557)
(710)
1,510
(1,778)
127
(343)
47
(73)
(510)
65
(71)
1,256
(1,579)
6
(26)
8
-
3
-
(338)
(848)
1,515
(1,736)
88
(325)
66
(104)
(496)
5
(23)
1,174
(1,385)
12
(30)
7
(7)
2
-
(245)
(741)
The fair values of derivatives vary over time depending on movements in interest and exchange rates and the
trading or hedging strategies used. The negative fair value as at 30 September 1997 does not represent the
profitability from such transactions. It arises from contracts that have generated net positive cash flows (on
which interest is being earned) since their inception but which are expected to generate negative cash flows
over their remaining term.
86
Notes to the Financial Statements
37: Derivative Financial Instruments (continued)
In addition to customer and trading activities, the Group uses, inter alia, derivatives to manage the risk
associated with its balance sheet. The principal objectives of asset and liability management are to hedge the
market value of the Group’s capital and to manage and control the sensitivity of the Group’s income while
maintaining acceptable levels of interest rate and liquidity risk. The Group also uses a variety of foreign
exchange derivatives to hedge against adverse movements in the value of foreign currency denominated assets
and liabilities.
The table below shows the notional principal amount, gross replacement cost and fair value of derivatives
held by the Group, split between those entered into for customer-related and trading purposes, and those
entered into for balance sheet hedging purposes.
Consolidated
Notional
principal
amount
1997
$M
Gross
replacement
cost
1997
$M
Foreign exchange contracts
Customer-related and trading purposes 220,761
15,504
Balance sheet hedging purposes
236,265
Interest rate contracts
Customer-related and trading purposes 400,942
20,202
Balance sheet hedging purposes
Total
421,144
657,409
3,864
186
4,050
1,801
296
2,097
6,147
Notional
principal
amount
1996
$M
Gross
replacement
cost
1996
$M
Fair
value
1997
$M
214
(47)
167
165,861
10,276
176,137
Fair
value
1996
$M
(323)
(187)
(510)
(396)
58
(338)
(848)
1,587
74
1,661
1,102
230
1,332
2,993
(790)
68
(722)
(555)
317,122
23,112
340,234
516,371
Detailed below are the net deferred realised and unrealised gains and losses arising from hedging contracts
used to manage interest rate exposure or used to hedge anticipated transactions. These gains and losses are
deferred only to the extent that there is an offsetting unrecognised gain or loss on the exposure being hedged.
Deferred gains or losses are generally amortised over the expected term of the hedged exposure.
Consolidated
Expected recognition in income
Within one year
One to two years
Two to five years
Greater than five years
Balance sheet
hedging
contracts
at 30 Sep 1997
Balance sheet
hedging
contracts
at 30 Sep 1996
$M
39
(24)
45
22
82
$M
19
(16)
39
(20)
22
Australia and New Zealand Banking Group Limited – 1997 Annual Report
87
Notes to the Financial Statements
38: Contingent Liabilities and Credit Related Commitments
Credit related commitments
The credit risk of the following facilities may be less than the contract amount, but as it cannot be accurately
determined, the credit risk has been taken to be the contract amount.
Undrawn facilities
Underwriting facilities
Securities lending
Consolidated
1997
Contract
amount
$M
1996
Contract
amount
$M
38,614
679
-
30,014
361
590
The Company
1997
Contract
amount
$M
1996
Contract
amount
$M
Controlled Entities
1996
Contract
amount
$M
1997
Contract
amount
$M
27,555
408
-
21,592
82
590
11,059
271
-
8,422
279
-
8,701
39,293
30,965
27,963
22,264
11,330
Contingent liabilities
The Group guarantees the performance of customers by issuing standby letters of credit and guarantees to
third parties. The risk involved is essentially the same as the credit risk involved in extending loan facilities to
customers, therefore these transactions are subjected to the same credit origination, portfolio maintenance and
collateral requirements for customers applying for loans. As the facilities may expire without being drawn
upon, the notional amounts do not necessarily reflect future cash requirements.
The credit risk of these facilities may be less than the contract amount, but as it cannot be accurately
determined, the credit risk has been taken to be the contract amount.
Consolidated
1997
Contract
amount
$M
1996
Contract
amount
$M
The Company
1997
Contract
amount
$M
1996
Contract
amount
$M
Controlled Entities
1996
Contract
amount
$M
1997
Contract
amount
$M
Guarantees
Standby letters of credit
Bill endorsements
Documentary letters of credit
Performance related contingents
Other
2,776
917
18
1,927
7,761
1,069
2,149
355
29
1,349
6,614
828
2,250
867
10
1,123
6,368
797
Total contingent liabilities
14,468
11,324
11,415
1,431
319
25
608
5,328
631
8,342
526
50
8
804
1,393
272
3,053
718
36
4
741
1,286
197
2,982
The details and estimated maximum amount of contingent liabilities classified according to the party from
whom the contingent liability could arise are set out below.
The Company
In accordance with the clearing arrangements set out in the Australian Payments Clearing Association Limited
(APCA) Regulations for the Australian Paper Clearing System, the Bulk Electronic Clearing System and the
High Value Clearing System, the Company has a commitment to provide liquidity support to these clearing
streams in the event of a failure to settle by a member institution; for the latter clearing stream, the obligation
arises only in limited circumstances.
Controlled entities
(i) The Group will indemnify each customer of controlled entities engaged in nominee activities against loss
suffered by reason of such entities failing to perform any obligation undertaken by them to a customer.
(ii) Pursuant to class order 95/1530 dated 10 November 1995, relief was granted during the year to a
number of wholly owned controlled entities from the Corporations Law requirements for preparation,
audit, and publication of financial statements. The entities to which relief was granted are
A.F.T. Investors Services Limited
A.N.Z. Holdings Limited
A.N.Z. Properties (Australia) Limited
ANZ Adelaide Group Limited
ANZ Capital Hedging Limited
ANZ Finance (Far East) Limited
ANZ Funds Pty Ltd
ANZ Grindlays Holdings Limited
ANZ Investment Holdings Limited
A.N.Z. Nominees Limited
Australian Fixed Trusts Limited
E.S.&A. Holdings Limited
E.S.&A. Properties (Australia) Limited
NMRB Limited
NMRSB Limited
It is the condition of the class order that the Company and each of the above controlled entities enter
into a Deed of Cross Guarantee.
88
Notes to the Financial Statements
38: Contingent Liabilities and Credit Related Commitments (continued)
A Deed of Cross Guarantee under the class order was lodged and approved by the Australian Securities
Commission. The effect of the Deed is that the Company guarantees to each creditor payment in full of
any debt in the event of winding up any of the controlled entities under certain provisions of the
Corporations Law. The Company will only be liable in the event that after six months any creditor has
not been paid in full. The controlled entities have also given similar guarantees in the event that the
Company is wound up. At 30 September 1997 the controlled entities which are parties to the Deed had
external aggregate assets of $2,393 million (1996: $2,721 million); external aggregate liabilities of $473
million (1996: $747 million); and their operating (loss) profit after tax and abnormal items for the year
was $(9) million (1996: $418 million). A Deed of Revocation was executed during the year for the
following companies which were party to the Deed of Cross Guarantee. These companies are small
proprietary companies which are not required by the Corporations Law to prepare accounts.
Ecomel Pty Limited
Elgeba Pty Limited
NMRB Insurance (Agents) Pty Limited
Dinias Pty Limited
Weelya Pty Limited
A.F.T. Property Management Pty Limited
A.F.T. Property Services Pty Limited
Analed Pty Limited
ANZ Business Licensing Pty Limited
ANZ Leasing (ACT) Pty Limited
ANZ Leasing (NSW) Pty Limited
ANZ Leasing (NT) Pty Limited
ANZ Leasing (VIC) Pty Limited
ANZ Leasing Pty Limited
ANZ Payment Services Pty Limited
Eriel Pty Limited
FCA Finance Pty Limited
(iii) Pursuant to class order 95/1530 dated 10 November 1995, relief was granted during the year to Capel
Court Management Limited, a wholly owned controlled entity, from the Corporations Law requirements
for preparation, audit and publication of accounts. It is the condition of the class order that ANZ Capel
Court Limited and its controlled entity enter into a Deed of Cross Guarantee.
A Deed of Cross Guarantee under the class orders was lodged and approved by the Australian
Securities Commission. The effect of the Deed is that ANZ Capel Court Limited guarantees to each
creditor payment in full of any debt in the event of winding up its controlled entity under certain
provisions of the Corporations Law. ANZ Capel Court Limited will only be liable in the event that after
six months any creditor has not been paid in full. The controlled entity has also given a similar guarantee
in the event that ANZ Capel Court Limited is wound up. At 30 September 1997 ANZ Capel Court
Limited and its controlled entity which is party to the Deed had external aggregate assets of $348 million
(1996: $358 million); external aggregate liabilities of $151 million (1996: $163 million); and their
operating profit after tax and abnormal items for the year was $21 million (1996: $6 million). A Deed of
Revocation was executed during the year for Capel Court International Investments Pty Limited which
was a party to the Deed of Cross Guarantee. This company is a small proprietary company which is not
required by the Corporations Law to prepare accounts.
(iv) The Company has guaranteed payment on maturity of the principal and accrued interest of commercial
paper notes issued by ANZ (Delaware) Inc. of $1,822 million (1996: $956 million).
(v) The Company is party to an underpinning agreement with ANZ Grindlays Bank Limited whereby the
Company undertakes to assume risk in relation to credit facilities extended by ANZ Grindlays Bank
Limited to certain individual customers which exceed 25% of ANZ Grindlays Bank Limited’s capital
base.
(vi) The Company is party to an underpinning agreement with ANZ Banking Group (New Zealand) Ltd
whereby the Company undertakes to assume risk in relation to credit facilities extended by ANZ
Banking Group (New Zealand) Ltd to individual customers which exceed 35% of ANZ Banking Group
(New Zealand) Ltd's capital base.
(vii)The Company has guaranteed, on a subordinated basis, the issue of $174 million Subordinated Floating
Rate Notes issued by ANZ Banking Group (New Zealand) Ltd.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
89
Notes to the Financial Statements
38: Contingent Liabilities and Credit Related Commitments (continued)
General
There are outstanding court proceedings, claims and possible claims against the Group, the aggregate amount
of which cannot readily be quantified. Where considered appropriate, legal advice has been obtained and, in
the light of such advice, provisions as deemed necessary have been made.
India - National Housing Bank
In 1992 the branch of ANZ Grindlays Bank Limited in India (the Bank) received a claim, aggregating
approximately Indian Rupees 5.06 billion ($194 million) from the National Housing Bank (NHB) in that
country. The claim arose out of certain cheques drawn by NHB in favour of the Bank, the proceeds of
which were credited into the account of one of the customers of the Bank.
On 29 March 1997, pursuant to an Arbitration Agreement entered into on 4 November 1992, the
Arbitrators made an award on this dispute in favour of the Bank. NHB has paid to the Bank the principal and
interest due under the award. Subsequently, NHB filed documents with the relevant Court to challenge the
award. ANZ is confident that the award will stand.
India - Foreign Exchange Regulation Act
In 1991 certain amounts were transferred from non-convertible Indian Rupee accounts to convertible Rupee
accounts maintained with the Bank in India. In making these transactions it would appear that the provisions
of the Foreign Exchange Regulation Act 1973 were inadvertently not complied with. The Bank, on its own
initiative, brought these transactions to the attention of the Reserve Bank of India.
The Indian authorities have served preliminary notices on the Bank and certain of its officers in India
which could lead to proceedings and possible penalties. The Group’s lawyers in India have prepared responses
to these notices, and the Group considers that the outcome will have no material adverse effect on the
financial statements.
39: Superannuation Commitments
A number of pension/superannuation schemes have been established by the Group worldwide. The Group is
obliged to contribute to the schemes as a consequence of legislation and provisions of trust deeds. Legal
enforceability is dependent on the terms of the legislation and trust deeds. The major schemes with assets in
excess of $25 million are
Country
Australia
Australia
Scheme
ANZGROUP (Australia)
Staff Pension Scheme1
ANZ Australian Staff
Superannuation Scheme2
New Zealand
ANZGROUP (New Zealand)
Staff Superannuation Scheme1, 2
England
ANZ UK Staff Pension
Scheme1
Scheme type
Defined
Benefit Scheme
Defined
Contribution Scheme
Contributory
or
Section A
Defined
Benefit Scheme
or
Defined
Contribution Scheme
Defined
Benefit Scheme
Contribution levels
Employee
Employer
nil
Balance of cost
2.5% min
Balance of cost3
optional
7% of salary
5.5%
Balance of cost
2.5% min
Balance of cost4
nil
Balance of cost
Balance of cost: the Group's contribution is assessed by the actuary after taking account of members’ contributions and the value of the
schemes’ assets
1 These schemes provide for pension benefits
2 These schemes provide for lump sum benefits
3 As recommended by the actuary, not to exceed 7.25% of members’ superannuation salaries for the financial year ended
30 September 1998
4 7.5% of superannuation salaries
90
Notes to the Financial Statements
39: Superannuation Commitments (continued)
The details of major defined benefit schemes with assets in excess of $25 million are as follows
Employer’s
contribution
$M
1997
Scheme
ANZGROUP (Australia)
Staff Pension Scheme1
ANZ UK Staff Pension Scheme1
Employer’s
contribution
$M
1996
Scheme
ANZGROUP (Australia)
Staff Pension Scheme2
ANZ UK Staff Pension Scheme3
4
-
5
-
Accrued
benefits
Net market value of
assets held by scheme
(Deficiency)excess of
net market value
of assets over
accrued benefits
$M
59
558
$M
46
715
$M
(13)
157
Accrued
benefits
Net market value of
assets held by scheme
(Deficiency)excess of
net market value
of assets over
accrued benefits
$M
64
459
$M
44
584
$M
(20)
125
Vested
benefits
$M
59
522
Vested
benefits
$M
64
429
1 Amounts were measured at 31 December 1996
2 Amounts were measured at 30 September 1996
3 Amounts were measured at 31 December 1995
40: Fiduciary Activities
The Group conducts investment management and other fiduciary activities as trustee or manager for
investment funds and trusts, including superannuation and approved deposit funds, equity trusts, property
trusts and deceased estates. These funds have not been consolidated as the Company does not have direct or
indirect control of the funds.
Where the Company or its controlled entities incur liabilities in respect of these operations as trustee, a
right of indemnity exists against the assets of the applicable funds or trusts. As these assets are sufficient to
cover the liabilities and it is therefore not probable that the Company or its controlled entities will be
required to settle the liabilities, the liabilities are not included in the financial statements.
The aggregate amounts of funds concerned are as follows
Funds managed
Trusteeships
1997
$M
13,478
4,411
17,889
1996
$M
11,312
2,142
13,454
41: Exchange Rates
The exchange rates used in the translation of the results and the assets and liabilities of major overseas
branches and controlled entities are
Great British pound
United States dollar
New Zealand dollar
1997
1996
1995
Closing
Average
Closing
Average
Closing
Average
0.4465
0.7197
1.1272
0.4694
0.7679
1.1191
0.5062
0.7914
1.1314
0.4963
0.7685
1.1340
0.4764
0.7520
1.1498
0.4659
0.7406
1.1407
Australia and New Zealand Banking Group Limited – 1997 Annual Report
91
Notes to the Financial Statements
42: Employee Share Purchase and Share Option Schemes
The Company has four share purchase and share option schemes available for employees and directors of the
Group: the ANZ Group Employee Share Purchase Scheme; the ANZ Group Senior Officers’ Share Purchase
Scheme; the ANZ Group Share Option Scheme; and the Directors’ Share and Option Purchase Scheme.
Shareholders of the Company have approved the Rules of each of the schemes. Fully paid ordinary shares
issued under these schemes rank equally with other existing fully paid ordinary shares, except for fully paid
ordinary shares issued on conversion from partly paid shares which are not entitled to the first dividend paid.
Partly paid ordinary shares, paid to 10 cents, issued under the ANZ Group Senior Officers’ Share Purchase
Scheme and the Directors’ Share and Option Purchase Scheme are not entitled to dividends payable by the
Company, but are entitled to one vote for every ten partly paid shares. They are also entitled to participate in
rights and bonus issues.
Each option granted under the ANZ Group Share Option Scheme and the Directors’ Share and Option
Purchase Scheme entitles a holder to purchase one ordinary share subject to any attached terms and
conditions.
An offer to employees and non-executive directors cannot be made under any of the schemes if an issue
pursuant to that offer will result in the aggregate of shares issued, and those liable to be issued pursuant to
exercisable options granted under any of the schemes, and bonus shares issued in respect of shares issued
under these schemes, exceeding 7% of the issued capital of the Company.
During the financial year, loans at concessional interest rates were available for financing shares purchased
under the ANZ Group Employee Share Purchase Scheme. Shares issued under these schemes are free of
brokerage and stamp duty costs.
The market price of one ordinary share at 30 September 1997 was $11.28.
Amounts received from employee share purchase and share option schemes are accounted for as follows
the par value of fully paid shares and amounts received on partly paid shares are recognised as issued and
paid-up capital;
- the difference between par value and issue price is credited to the share premium reserve; and
amounts received for options are credited to the general reserve.
Amounts received from employee share purchase and share option schemes during the financial year,
excluding calls on partly paid shares issued in prior financial years, were recognised as follows
Issued and paid-up capital
Share premium reserve
General reserve
The Company
1997
$
1996
$
6,175,275
31,382,725
(7,469)
3,200,483
12,679,869
-
ANZ Group Employee Share Purchase Scheme
All employees, excluding part-time service employees, who have had continuous service for one year with
the Company or any of its controlled entities are eligible to participate in this scheme. Each eligible
employee’s entitlement depends on the employment level of the employee, and the maximum entitlement is
5,000 ordinary shares.
During the financial year, 4,135,275 fully paid ordinary shares were issued at a 20% discount to the
market price at 28 February 1997 to 2,777 eligible employees for a total consideration of $26,589,818.
32,780 employees were eligible to participate in this offer. The total market value of the shares at issue date,
which was 25 March 1997, was $33,785,198. At 30 September 1997, 43,798,610 ordinary shares had been
issued since the commencement of this scheme.
ANZ Group Senior Officers’ Share Purchase Scheme
Senior officers eligible to participate in this scheme may be offered fully paid or partly paid ordinary shares.
During the financial year, no ordinary shares were issued under the scheme.
At 30 September 1997, 11,035,400 fully paid ordinary shares and 7,805,000 partly paid ordinary shares
had been issued since the commencement of this scheme. The partly paid ordinary shares were paid to
10 cents on application and the balance payable either at the request of the employee or upon cessation of
employment, except in the event of death, retirement or illness, in which case, the balance is payable three
months after the event.
92
-
-
Notes to the Financial Statements
42: Employee Share Purchase and Share Option Schemes (continued)
ANZ Group Share Option Scheme
Executive directors and executive officers may be invited to purchase options at one cent each under this
scheme. These options do not entitle the holder to participate in a share issue of any other body corporate
apart from the Company.
1,412,850 options were issued during the financial year. 60,148 options granted under the scheme
lapsed during the financial year.
At 30 September 1997, 6,933,091 options were outstanding under this scheme. Options which may be
exercised no later than 30 January 1999 may only be exercised if the basic earnings per share of the Group
(before abnormal items) for one of the financial years ending 30 September 1996, 1997 or 1998 is at least
50% over the equivalent figure for the 1993 financial year.
Options issued during the financial year were issued pursuant to the Senior Executive Remuneration
Scheme which requires that part of an executive's remuneration relative to performance against target must
be taken in the form of options. These options cannot be exercised until the expiration of three years after
the date of issue or after the expiration of five years after the date of issue.
No. of options outstanding
at 30 September 1997
Exercise price
Exercisable period
300,000
1,110,000
4,120,000
366,753
36,338
100,000
900,000
$5.34
$5.34
$5.34
$8.76
$8.76
$8.76
$8.76
1Not exercisable before
31 Jan 1997, or later than 30 Jan 1999
1Not exercisable before
22 Dec 1997, or later than 30 Jan 1999
1Not exercisable before
23 Mar 1998, or later than 30 Jan 1999
Not exercisable before
31 Jan 2000, or later than 30 Jan 2002
Not exercisable before
14 Feb 2000, or later than 13 Feb 2002
Not exercisable before
24 Mar 2000, or later than 23 Mar 2002
Not exercisable before
2 Jun 2000, or later than 1 Jun 2002
1 subject to performance condition
These options will expire immediately on termination of employment, except in the event of retirement,
death or where agreed by the directors of the Company, in which case, the directors may allow the options
to be exercised. 2,049,611 options were exercised by former employees during the financial year with the
consent of the directors where required. In the event of a takeover offer or takeover announcement, the
directors of the Company may allow the options to be exercised within thirty days from the date of
notification.
If there is a bonus issue prior to the expiry or exercise of the options, option holders are entitled to those
shares as if the options have been exercised prior to that issue. Those shares will be allotted to the option
holder when the options are exercised.
Directors’ Share and Option Purchase Scheme
This Scheme was approved by shareholders in January 1988. During the financial year, no director was
eligible to subscribe for shares under the scheme and no shares were issued and no options were offered.
There will be no further issues of shares or options under this Scheme and following the expiration of the
remaining options on issue on 1 March 1998 or earlier exercise, the Scheme will be discontinued.
Under the Scheme each non-executive director was entitled to subscribe for up to 50,000 partly paid
ordinary shares at market price, paid to 10 cents, with the balance payable any time at the request of the
director or upon ceasing to be a director, except in the event of retirement, death or illness, in which case the
balance is payable 90 days after such date.
Each director was, subject to the Board’s approval, eligible to subscribe for an equivalent number of
options at one cent each under this scheme. Options granted under this scheme were exercisable within five
years after issuance or within 90 days after ceasing to be a director, if earlier. The exercise price of an option
is based on the market price of an ordinary share when the option is granted, less one cent, which is payable
on issue of the option.
During the financial year 290,000 partly paid shares were paid up and 50,000 options were exercised.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
93
Notes to the Financial Statements
42: Employee Share Purchase and Share Option Scheme (continued)
At 30 September 1997, 950,000 partly paid shares, paid to 10 cents and 1,100,000 options had been issued
since the commencement of this scheme.
No. of options outstanding
at 30 September 1997
50,000
Exercise Price
Expiry date
$3.44
1 March 1998
43: Related Party Disclosures
The directors during the year were
C B Goode (Chairman)
Dr R S Deane
J K Ellis
J C Dahlsen
C J Harper
M A Jackson
A T L Maitland (retired 30 June 1997)
D P Mercer (retired 30 September 1997)
J F Ries
Dr B W Scott
Sir R R Trotter (retired 9 October 1997)
R B Vaughan
Australian banks, parent entities of Australian banks and controlled entities of Australian banks have been
exempted, subject to certain conditions, by an Australian Securities Commission class order,
97/1016 dated 9 July 1997, from making disclosures of loans made, guaranteed or secured by a bank to
related parties (other than specified categories of directors) and financial instrument transactions (other than
shares and share options) of a bank where a director of the relevant entity is not a party to the transaction
and where the loan or financial instrument transaction is lawfully made and occurs in the course of ordinary
banking business either at arm’s length or with the approval of a general meeting of the relevant entity and
its ultimate chief entity (if any).
The class order does not apply to a loan or financial instrument transaction of which any director of the
relevant entity should reasonably be aware that, if not disclosed, would have the potential to adversely affect
the decisions made by users of the financial statements about the allocation of scarce resources.
A condition of the class order is that for each financial year to which it applies, the Company must
provide evidence to the Commission that the Company has systems of internal controls and procedures
which
(i)
in the case of any material financial instrument transaction, ensure that; and
(ii) in any other case, are designed to provide a reasonable degree of assurance that,
any financial instrument transaction of a bank which may be required to be disclosed in the Company’s
financial statements and which is not entered into regularly, is drawn to the attention of the directors.
(a) Transactions with directors and director-related entities
Shares and Share Options
Aggregate number of shares and share options issued to directors of the Company and their director-related
entities by the Company were as follows
Fully paid ordinary shares in the Company
Partly paid ordinary shares in the Company
Options issued under the ANZ Group Share Option Scheme
The Company
1996
1997
No.
No.
886,050
-
40,944
224,229
50,000
-
Certain executive directors have acquired fully paid ordinary shares under the ANZ Group Senior Officers’
Share Purchase Scheme on conditions no more favourable than those offered to other employees. All other
fully paid ordinary shares were acquired on terms and conditions no more favourable than those offered to
other shareholders.
Certain non-executive directors paid up partly paid ordinary shares issued to them in prior years under
the Directors’ Share and Option Purchase Scheme, approved by shareholders in January 1988. No partly
paid ordinary shares or options have been issued to directors under this scheme during the financial year.
The reduction in the number of partly paid shares held by directors of the Company and their director-
related entities during the financial year was 290,000 (1996: 100,000).
94
Notes to the Financial Statements
43: Related Party Disclosures (continued)
Aggregate number of shares and share options held directly, indirectly or beneficially by directors of the
Company and their director-related entities, as at balance date, were as follows
Fully paid ordinary shares in the Company
Partly paid ordinary shares, paid to 10 cents per share, in the Company
Share options over ordinary shares in the Company
1997
No.
1996
No.
1,039,536
-
380,234
872,544
290,000
1,200,000
Directors of the Company and their director-related entities received normal dividends on these shares, with
the exception of partly paid ordinary shares, paid to 10 cents per share, which qualify for dividends only
when fully paid.
Loans made to Directors
Loans made to non-executive directors of the Company and controlled entities are made in the course of
ordinary business on normal commercial terms and conditions. Loans to executive directors of the Company
and controlled entities are made pursuant to the Executive Directors' Loan Scheme authorised by
shareholders on 18 January 1982, on the same terms and conditions applicable to other employees within the
Group in accordance with established policy.
Under the Australian Securities Commission class order referred to above, disclosure is limited to the
the Company to its directors;
aggregate amount of loans made, guaranteed or secured by
(i)
(ii) any controlled entity to the directors of the Company;
(iii) banking corporation controlled entities to their directors; and
(iv) non-banking corporation controlled entities to directors of controlled entities and to parties related to
any one of them or the directors of the Company.
The directors involved are
S Armstrong 1,2
I W A Brandon 1,2,3,4
D J Brunskill 1,3,4
A H Buhindi 3
G J Camm 3
K Chan 1,2
G M Collinson 2
P J Conway 1,4
J C Dahlsen 3
R M Evans 1,2
1 Repayments made during the year
2 Loans made during the year
3 Repayments made during the prior year
4 Loans made during the prior year
J L Roach 1,3
J G Todd 1,3,4
R R Trotter 1,4
A E Ward 1,3
D F Wicks 3
C J Harper 1,2,3
P F Horsfall 1,3,4
B J Joliffe 1,3,4
R G Jones 3
W J C Laird 1,2
A T L Maitland1,3
D W Manoa 1,4
D P Mercer1,3,4
I F Peterkin 1,3
J F Ries 1,2,3,4
The aggregate amount of such loans outstanding at 30 September was
Consolidated The Company
1996
$’000
1997
$’000
1997
$’000
1996
$’000
Balance outstanding at 30 September
Total interest received
The aggregate amount of repayments received
from directors and their director-related
entities during the financial year was
Normal terms and conditions
Employee terms and conditions
The aggregate amount of loans made during
the financial year was
Normal terms and conditions
Employee terms and conditions
1,599
185
2,176
173
743
103
1,198
89
413
657
73
413
1,012
1,689
273
238
102
565
73
139
305
1,460
13
187
Australia and New Zealand Banking Group Limited – 1997 Annual Report
95
Notes to the Financial Statements
43: Related Party Disclosures (continued)
Other transactions of Directors and Director-Related Entities
(i) Financial instrument transactions
Under the Australian Securities Commission class order referred to above, disclosure of financial instrument
transactions regularly made by a bank is limited to disclosure of such transactions with a director of the entity
concerned. Financial instrument transactions which have occurred on arm’s length terms and conditions, and
are deemed trivial or domestic in nature are required to be disclosed by general description.
Financial instrument transactions between the directors and the banks during the financial year were in
the nature of normal personal banking, investment and deposit transactions. These transactions occurred on
an arm’s length basis and on normal commercial terms and conditions no more favourable than those given
to other employees or customers.
(ii) Transactions other than financial instrument transactions of banks
All other transactions with directors and their director-related entities are conducted on arm’s length terms
and conditions, and are deemed trivial or domestic in nature. These transactions are in the nature of deposits,
debentures, or investment transactions conducted with non-bank controlled entities.
(b) Transactions with associated entities
During the course of the financial year the Company and the Group conducted transactions with associated
entities on normal commercial terms and conditions, other than a loan of nil (1996: $2,390,000) to Valuta
Group Pty Ltd at an interest rate of 5%. Transactions with associated entities on normal commercial terms
and conditions are detailed below.
Aggregate
Amounts receivable from associated entities
Interest revenue
Dividend revenue
Interest expense
Other revenue
Consolidated
The Company
1997
$’000
1996
$’000
1997
$’000
1996
$’000
336
171
790
-
13
2,290
630
2,581
105
186
300
77
-
-
27
300
24
-
-
-
96
Notes to the Financial Statements
44: Remuneration of Directors
Remuneration includes income from salaries, bonuses, other benefits (including non-cash benefits),
retirement benefits and superannuation contributions. The maximum total remuneration for non-executive
directors of the Company was set at the Annual General Meeting of 20 January 1995 at $0.85 million.
Total fees paid to non-executive directors by the Company for the year was $0.8 million
(1996: $0.7 million).
The number of directors of the Company with total income in each of the following bands was
$60,001 to $70,000
$70,001 to $80,000
$80,001 to $90,000
$160,001 to $170,000
$170,001 to $180,000
Total number of directors
The Company
1997
1996
1
5
2
-
1
4
4
-
1
-
$580,001 to $590,000
$630,001 to $640,000
$1,000,001 to $1,010,000
$1,940,001 to $1,950,000
$4,210,001 to $4,220,000
The Company
1997
1996
-
1
-
11
12
12
2
-
1
-
-
12
1 A T L Maitland - comprises fixed remuneration ($355,274), 1995/96 bonus ($114,481), 1996/97 bonus ($330,178), annual
leave and long service leave payout ($353,839), retirement allowance under pre-existing arrangements ($319,797) and payment
under contract ($475,000)
2 D P Mercer - comprises fixed remuneration ($770,000), 1995/96 bonus ($187,782), 1996/97 bonus ($659,033), annual leave
and long service leave payout ($352,140), additional superannuation contribution and retirement allowance under pre-existing
arrangements ($589,925) and payment relating to unexpired period of contract ($1,656,027)
Total income paid or payable to
directors of the Company and controlled
entities from the Company or related entity3
Consolidated
The Company
1997
$’000
1996
$’000
1997
$’000
1996
$’000
13,127
7,555
7,587
2,911
3 Including the total income of executive directors, excluding executive directors of wholly owned controlled entities who are executives
of the Company
Australia and New Zealand Banking Group Limited – 1997 Annual Report
97
Notes to the Financial Statements
45: Remuneration of Executives
Remuneration includes salaries, bonuses, other benefits (including non-cash benefits), and superannuation
contributions. The remuneration of executives who work wholly or mainly outside Australia are excluded
from this disclosure.
The number of executives with total remuneration exceeding $100,000 in each of the following bands was
Consolidated
The
Company
1997
1996
1997
1996
Consolidated
The
Company
1997
1996
1997
1996
$100,001 to $110,000
$110,001 to $120,000
$120,001 to $130,000
$130,001 to $140,000
$140,001 to $150,000
$150,001 to $160,000
$160,001 to $170,000
$170,001 to $180,000
$180,001 to $190,000
$190,001 to $200,000
$200,001 to $210,000
$210,001 to $220,000
$220,001 to $230,000
$230,001 to $240,000
$240,001 to $250,000
$250,001 to $260,000
$260,001 to $270,000
$270,001 to $280,000
$280,001 to $290,000
$290,001 to $300,000
$300,001 to $310,000
$310,001 to $320,000
$320,000 to $330,000
$330,001 to $340,000
$340,001 to $350,000
1
-
2
-
11
1
-
3
1
1
61
51
1
1
1
4
2
2
3
-
51
31
21
-
-
-
2
-
11
-
21
3
2
4
2
51
1
4
2
1
1
1
3
4
1
-
-
21
11
1
-
-
-
-
11
-
-
1
-
-
1
1
-
1
-
1
1
-
2
-
2
1
11
-
-
-
1
-
-
-
-
-
-
1
1
1
-
2
1
1
1
1
1
3
1
-
-
21
-
1
$350,001 to $360,000
$360,001 to $370,000
$370,001 to $380,000
$380,001 to $390,000
$390,001 to $400,000
$400,001 to $410,000
$410,001 to $420,000
$420,001 to $430,000
$430,001 to $440,000
$440,001 to $450,000
$460,001 to $470,000
$470,001 to $480,000
$520,001 to $530,000
$530,001 to $540,000
$580,001 to $590,000
$590,001 to $600,000
$630,001 to $640,000
$650,001 to $660,000
$720,001 to $730,000
$760,001 to $770,000
$1,000,001 to $1,010,000
$1,280,001 to $1,290,000
$1,550,001 to $1,560,000
$1,940,001 to $1,950,000
$4,210,001 to $4,220,000
1
-
31
1
11
1
1
-
2
1
21
2
-
31
1
1
31
-
-
-
-
1
1
12
13
1
21
-
31
1
1
-
1
2
1
-
-
2
-
2
-
-
11
1
1
1
-
-
-
-
1
-
2
1
11
1
1
-
2
1
-
2
-
2
1
1
31
-
-
-
-
1
1
1
1
1
1
-
31
1
1
-
1
2
1
-
-
2
-
2
-
-
11
1
-
1
-
-
-
-
Total number of executives
72
63
36
36
Total remuneration received or due and receivable directly
or indirectly by executives of the Company and controlled entities ($’000)
30,651 19,778 21,265 13,621
1 The executives whose remuneration is recorded in these bands include fixed term employees with contracts which recognise their
particular expertise and that they have been recruited by the Group for specialised activities. These bands also include employees in
the sharebroking industry whose income includes bonuses in accordance with the practice of that industry
2 A T L Maitland - comprises fixed remuneration ($355,274), 1995/96 bonus ($114,481), 1996/97 bonus ($330,178), annual
leave and long service leave payout ($353,839), retirement allowance under pre-existing arrangements ($319,797) and payment
under contract ($475,000)
3 D P Mercer - comprises fixed remuneration ($770,000), 1995/96 bonus ($187,782), 1996/97 bonus ($659,033), annual leave
and long service leave payout ($352,140), additional superannuation contribution and retirement allowance under pre-existing
arrangements ($589,925) and payment relating to unexpired period of contract ($1,656,027)
98
Notes to the Financial Statements
46: US GAAP Reconciliation
The consolidated financial statements of the Group are prepared in accordance with Generally Accepted
Accounting Principles applicable in Australia (“Australian GAAP”) which differ in some respects from
Generally Accepted Accounting Principles in the United States (“US GAAP”).
The following are reconciliations of the financial statements, applying US GAAP instead of Australian
GAAP.
Operating profit after income tax using
Australian GAAP1
Items having the effect of increasing (decreasing)
reported income:
Depreciation charged on the difference between revaluation
amount and historical cost of buildings
Difference in gain or loss on disposal of properties revalued
under historical cost
Amortisation of goodwill
Write-off of goodwill
Amortisation of sale-leaseback gain over lease term
Pension expense adjustment
Net income according to US GAAP
Shareholders’ equity according to Australian GAAP2
Elimination of gross asset revaluation reserves
Adjustment to provision for depreciation on buildings revalued
Restoration of previously deducted goodwill
Accumulated amortisation and write-off of goodwill
Provision for final dividend
Pension expense adjustment
Restoration of deferred gain on sale-leaseback transactions
less amortisation
Shareholders’ equity according to US GAAP
Total assets according to Australian GAAP
Elimination of gross asset revaluation reserves
Adjustment to provision for depreciation on buildings revalued
Restoration of previously deducted goodwill
Accumulated amortisation and write-off of goodwill
Prepaid pension adjustment
Reclassification of deferred tax assets against deferred
tax liabilities
Total assets according to US GAAP
1 After abnormal items
2 Excluding outside equity interests
Note
1997
$M
1996
$M
1995
$M
1,024
1,116
1,052
(i)
(i)
(ii)
(ii)
(iii)
(vi)
(i)
(i)
(ii)
(ii)
(iv)
(vi)
(iii)
(i)
(i)
(ii)
(ii)
(vi)
(v)
3
17
(36)
-
-
10
1
4
(36)
(7)
4
5
2
2
(36)
(5)
5
2
1,018
1,087
1,022
6,943
(349)
36
807
(472)
392
44
6,290
(366)
33
807
(436)
355
34
5,700
(370)
32
807
(393)
260
30
-
-
(4)
7,401
6,717
6,062
138,241
(349)
36
807
(472)
33
127,604
(366)
33
807
(436)
26
112,587
(370)
32
807
(393)
26
(392)
(388)
(350)
137,904
127,280
112,339
Australia and New Zealand Banking Group Limited – 1997 Annual Report
99
Notes to the Financial Statements
46: US GAAP Reconciliation (continued)
Premises and equipment
(i)
Properties have been revalued by the Group at
various times, increasing the book value of these
assets (refer note 1(xiii)). Under Australian GAAP,
any increments on revaluation are credited directly
to the Asset Revaluation Reserve (“ARR”), and
decrements are debited to the ARR to the extent
of any previous revaluation increments.
Decrements in excess of any previous
revaluation increments are charged to the Profit
and Loss Account. The ARR forms part of
Shareholders’ equity.
Under US GAAP, revaluation of properties is
not permitted except for decrements which are
regarded as permanent.
Accordingly, under Australian GAAP,
depreciation charges are generally higher and
profits on disposal are lower than those required
under US GAAP. The depreciation charges,
together with the profits and losses on revalued
assets sold have been adjusted to historical cost in
the US GAAP reconciliation.
(ii) Goodwill
The Group changed its accounting policy in
respect of goodwill in the financial year ended
30 September 1993. Previously, goodwill on
acquisition was charged in full to the Group’s
Profit and Loss Account in the year of acquisition.
Under US GAAP, goodwill is capitalised and
amortised over the period of time during which
the benefits are expected to arise, such period not
exceeding 40 years generally or 25 years in respect
of bank acquisitions.
Adjustments have been made in the US GAAP
reconciliation statement to writeback goodwill
written-off in full and to amortise such goodwill
over the period of the expected benefits.
Additionally, to the extent that periodic
reviews of the carrying amount of goodwill lead to
a write-down of goodwill previously capitalised for
US purposes, this is adjusted in the US GAAP
reconciliation.
Sale-leaseback transactions
(iii)
Under Australian GAAP for operating leases, gains
on disposal under sale-leaseback transactions can be
recognised in the period of sale. Under US
GAAP, the gain is amortised over the remaining
lease term. This difference in treatment has been
adjusted in the US GAAP reconciliation.
(iv) Dividends
Under Australian GAAP, dividends are shown in
the Profit and Loss Account in the period to which
they relate rather than in the period when they are
declared as required by US GAAP. This difference
in treatment has been adjusted in the US GAAP
shareholders’ equity reconciliation.
Income taxes
(v)
Under Australian GAAP, tax benefits relating to
carry forward tax losses must be “virtually certain”
of being realised before being booked.
Realisations of benefits relating to other timing
differences must be “beyond reasonable doubt”
before they may be booked. These tests are as
stringent as those applied under US GAAP and
hence no write-down of future tax benefits is
required.
Australian GAAP allows offsetting of future
income tax benefits and liabilities to the extent
they will reverse in the same period. US GAAP
requires an offset of these two items where reversal
will occur within twelve months and in the period
exceeding twelve months. This has been adjusted
in the US GAAP reconciliation.
Pension commitments
(vi)
Under Australian GAAP, contributions in respect
of defined benefit schemes are made at levels
necessary to ensure that these schemes are
maintained with sufficient assets to meet their
actuarially assessed liabilities. Any net deficiency
arising from the aggregation of assets and liabilities
of the Group’s defined benefit schemes is provided
for in the Group’s financial statements (refer
note 39 in the Financial Statements). Under US
SFAS 87 “Employer’s Accounting for Pensions”,
pension expense is a function of an employee’s
service period, interest costs, actuarial return on the
schemes’ assets, amortisation of unrecognised prior
service costs and unrecognised net gains or losses.
(vii) Post retirement benefits
Post retirement benefits other than pension
payments are not material and no adjustment is
required in the US GAAP reconciliation.
(viii) Trading securities
US GAAP requires that in instances where trading
securities are not bought and held principally for
the purpose of selling them in the near term, they
should be classified as available for sale and
recorded at market value with unrealised profits
and losses in respect of market value adjustments
recognised in Shareholders’ equity.
No adjustment is required to be made in the
US GAAP reconciliation as the effect of
reclassifying certain trading securities as available
for sale is not material.
(ix) Accounting for the impairment of loans
SFAS 114 “Accounting by Creditors for
Impairment of a Loan”, as amended by SFAS 118
“Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures”,
requires the value of an impaired loan to be
measured as the present value of future cash flows
discounted at the loan's effective interest rate, the
loan's observable market price or the fair value of
the collateral, if the loan is collateral dependent.
100
The issue of SFAS 127 “Deferral of the
Effective Date of Certain Provisions of FASB
Statement No. 125” has deferred the application of
certain provisions of SFAS 125 until
1 January 1998.
The adoption of the provisions of SFAS 125
by the Group during the year ending
30 September 1997 did not result in a material
adjustment to the US GAAP reconciliation.
The adoption of certain provisions of
SFAS 125 applicable from 1 January 1998 is not
expected to have a material impact on the US
GAAP reconciliation.
(xiii) Statements of comprehensive income
and disclosures about segments
The Group has not adopted the disclosure
provisions of SFAS 130 “Reporting
Comprehensive Income” and SFAS 131
“Disclosures about Segments of an Enterprise and
Related Information”, which are not effective until
financial years commencing on or after
15 December 1997. The adoption of these
standards would not have resulted in a material
impact on the Group’s net income, total assets or
shareholders’ equity.
Notes to the Financial Statements
46: US GAAP Reconciliation (continued)
There is no requirement under Australian
GAAP to discount the expected future cash flows
attributable to impaired loans in assessing the level
of specific provision for doubtful debts.
No adjustment is required in the US GAAP
reconciliation as the estimated fair value of
impaired loans is not materially different from the
carrying value as at 30 September 1997.
(x) Accounting for the impairment of long
lived assets and for long-lived assets to be
disposed of
SFAS 121 “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be
Disposed Of ”, requires that where an event or a
change in circumstance indicates that the carrying
value of an asset that is expected to be held and
used may not be recoverable, an impairment loss
should be recognised. The standard also requires
that where there is a committed plan to dispose of
an asset, the asset should be reported at the lower
of the carrying value or fair value less selling costs.
SFAS 121 was adopted by the Group effective
for the year ending 30 September 1997. The
Group has assessed the carrying values of all non-
current assets and determined that they are not in
excess of their recoverable amounts.
(xi) Accounting for stock-compensation
plans
Under Australian GAAP, an expense is not
recognised for share options issued to employees or
for shares issued at a discount. SFAS 123
“Accounting for Stock-Based Compensation”,
requires share options and shares issued to
employees to be recognised using either the fair
value based method or the intrinsic value based
method as prescribed by APB No 25. No
adjustment is made for the impact of the intrinsic
value based method in the US GAAP
reconciliation as the impact is not material.
(xii) Accounting for transfers and
servicing of financial assets and
extinguishments of liabilities
The Group has adopted certain provisions of
SFAS 125 “Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of
Liabilities”. SFAS 125 prescribes the accounting
and reporting requirements for transfers of financial
assets and extinguishments of liabilities occurring
after 31 December 1996. Under certain
circumstances, the statement also requires a
transferor of financial assets that are pledged as
collateral to reclassify those assets, and the
transferee to recognise those assets and their
obligation to return them.
Australia and New Zealand Banking Group Limited – 1997 Annual Report
101
Notes to the Financial Statements
46: US GAAP Reconciliation (continued)
(xiv) Details of Pension Schemes and Pension Expense
Reconciliations of the funded status of major defined benefit schemes as at 30 September 1997 are
summarised below. Details of the funding of the schemes are set out in note 39.
Accumulated benefit obligation - vested
Projected benefit obligation
Fair value of plan assets
(Deficiency)excess of assets over projected benefit obligation
Unrecognised net transition loss(gain)
Unrecognised net loss(gain)
Unrecognised prior service cost
Adjustment required to recognise minimum unfunded
projected benefit obligation
(Pension liability)prepaid pension cost
The assumptions used in the actuarial calculations are as follows
Australian Scheme
accumulated
benefits exceed
assets
$M
UK Scheme
assets exceed
accumulated
benefits
$M
59
59
47
(12)
7
6
-
(13)
(12)
544
596
748
152
(46)
(103)
30
-
33
Australian
Scheme
UK Scheme
Discount rate used in determining present values
- active members
- pensioners
Annual increase in future compensation levels
- salary
- pensions
Expected long-term rate of return on assets
9%
8%
5%
3%
8%
The elements of the net periodic pension cost of the above schemes are as follows
Service cost
Interest cost
Actual return on schemes’ assets
Net amortisation and deferral
Net periodic pension cost
7.5%
7.5%
6%
6%
8.5%
1997
$M
13
49
(95)
34
1
The Group also sponsors defined contribution schemes. The Group’s contributions to major defined
contribution schemes amounted to $75 million for the year.
47: Events Since the End of the Financial Year
There have been no significant events since 30 September 1997 to the date of this Report.
102
Directors’ Statement
In the opinion of the directors of Australia and New
Zealand Banking Group Limited, the accompanying
financial statements of the Company and the
Economic entity are properly drawn up in
accordance with the provisions of the Corporations
Law in the manner authorised for a prescribed
corporation being a bank and on this basis
(i)
the financial statements set out on pages 40 to
102 are drawn up so as to give a true and fair
view of the results and cash flows for the
financial year ended 30 September 1997, and
the state of affairs at 30 September 1997, of the
Company and the Economic entity;
the consolidated accounts have been made out
in accordance with Divisions 4A and 4B of Part
3.6 of the Corporations Law; and
(ii)
(iii) at the date of this statement there are reasonable
grounds to believe that the Company will be
able to pay its debts as and when they fall due.
The directors have elected to adopt early
AASB 1014: Set-off and Extinguishment of Debt,
AASB 1016: Accounting for Investments in
Associates, AASB 1032: Specific Disclosures by
Financial Institutions, and AASB 1033: Presentation
and Disclosure of Financial Instruments.
Signed in accordance with a resolution of the directors
The financial statements have been prepared in
accordance with applicable Australian Accounting
Standards and Urgent Issues Group Consensus
Views.
The Company and some of its wholly owned
controlled entities listed in note 38 executed a
Deed of Cross Guarantee enabling them to take
advantage of the accounting and audit relief
offered by the class order 95/1530, dated
10 November 1995 issued by the Australian
Securities Commission.
The nature of the Deed of Cross Guarantee is to
guarantee each creditor payment in full of any debt
in accordance with the terms of the Deed of Cross
Guarantee.
At the date of this statement, there are reasonable
grounds to believe that the Company and its
controlled entities to which the class order applies,
are able, as an Economic entity, to meet any
obligations or liabilities to which they are, or may
become, subject by virtue of the Deed of Cross
Guarantee.
Charles Goode
Chairman
28 November 1997
John McFarlane
Chief Executive Officer
Australia and New Zealand Banking Group Limited – 1997 Annual Report
103
Audit Opinion
In our opinion, the financial statements of
Australia and New Zealand Banking Group
Limited, and the financial statements of the
Economic entity, are properly drawn up:
so as to give a true and fair view of:
(a)
(i) the state of affairs of the Economic entity
at 30 September 1997 and 1996 and the
results and cash flows of the Economic
entity for the financial years ended on
30 September 1997, 1996 and 1995;
(ii) the state of affairs of the Company at
30 September 1997 and 1996 and of the
results and cash flows of the Company for
the financial years ended 30 September
1997 and 1996; and
(iii) the other matters required by Divisions 4,
4A and 4B of Part 3.6 of the Corporations
Law to be dealt with in the financial
statements;
(c)
(b)
in accordance with the provisions of the
Corporations Law in the manner
authorised for a prescribed corporation
being a banking corporation; and
in accordance with applicable Australian
Accounting Standards and other mandatory
professional reporting requirements.
Accounting principles generally accepted in
Australia vary in certain respects from accounting
principles generally accepted in the United States
of America. An explanation of the major
differences between the two sets of principles is
presented in note 46 to the financial statements.
The application of the United States principles
would have affected the determination of
consolidated net profit for each of the three years
in the period ended 30 September 1997 and the
determination of the consolidated financial
position as of 30 September 1997, 1996 and 1995
to the extent summarised in note 46 to the
financial statements.
Auditors’ Report
To the Members of Australia and
New Zealand Banking Group Limited
Scope
We have audited the financial statements of
Australia and New Zealand Banking Group
Limited for the financial year ended
30 September 1997, consisting of the profit and
loss accounts, balance sheets, statements of changes
in shareholders’ equity, statements of cash flows,
accompanying notes and the directors’ statement
set out on pages 40 to 103. The financial
statements comprise the accounts of the Company
and the consolidated accounts of the Economic
entity being the Company and its controlled
entities. The Company’s directors are responsible
for the financial statements. We have conducted
an independent audit of these financial statements
in order to express an opinion on them to the
members of the Company.
Our audit has been conducted in accordance
with Australian Auditing Standards (which are
substantially the same as auditing standards
generally accepted in the United States of
America) to provide reasonable assurance whether
the financial statements are free of material
misstatement. Our procedures included
examination, on a test basis, of evidence
supporting the amounts and other disclosures in
the financial statements, and the evaluation of
accounting policies and significant accounting
estimates. These procedures have been
undertaken to form an opinion whether, in all
material respects, the financial statements are
presented fairly in accordance with accounting
standards and other mandatory professional
reporting requirements (Urgent Issues Group
Consensus Views) and statutory requirements in
the manner authorised for a prescribed
corporation being a banking corporation so as to
present a view which is consistent with our
understanding of the Company’s and the
Economic entity’s financial position, the results of
their operations and their cash flows.
The names of the controlled entities of which
we have not acted as auditors are set out in
note 34. We have received sufficient information
and explanations concerning these controlled
entities to enable us to form an opinion on the
consolidated accounts.
The audit opinion expressed in this report has
been formed on the above basis.
KPMG
Chartered Accountants
Melbourne
28 November 1997
104
P M Burroughs
Partner
P S Nash
Partner
Financial Information
1: Capital Adequacy
The Reserve Bank of Australia (RBA) adopts a risk-based capital assessment framework for Australian banks
based on internationally accepted capital measurement standards. This risk-based approach requires eligible
capital to be divided by total risk weighted assets, with the resultant ratio being used as a measure of a bank’s
capital adequacy in relation to its credit risk.
Capital is divided into tier 1, or ‘core’ capital, and tier 2, or ‘supplementary’ capital. For capital
adequacy purposes, eligible tier 2 capital cannot exceed the level of tier 1 capital. Banks are required to
deduct from total capital any strategic holdings of other banks' capital instruments and investments in entities
engaged in life insurance, funds management and securitisation activities. Under RBA guidelines, banks
must maintain a ratio of qualifying capital to risk weighted assets of at least 8 per cent.
Risk weightings are applied to balance sheet assets and to credit converted off-balance sheet exposures
to determine total risk weighted assets. Categories of risk weights are assigned based upon the nature of the
counterparty and the relative liquidity of the assets concerned.
Qualifying capital
Tier 1
Total shareholders’ equity and outside
equity interests
Unamortised goodwill
Net future income tax benefit
Tier 1 capital
Tier 2
Perpetual notes - subordinated
General provision for doubtful debts
Subordinated notes1
Tier 2 capital
Investment in ANZ Life
Investments in funds management
and securitisation activities
Total qualifying capital
Balance sheet assets
Liquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Customers’ liabilities for acceptances
Regulatory deposits
Shares in associates
Other assets
Premises and equipment
Off-balance sheet exposures
Direct credit substitutes
Trade and performance related items
Commitments
Foreign exchange, interest rate and
other market related transactions
Total risk weighted assets and
off-balance sheet exposures
Capital adequacy ratios
Tier 1
Tier 2
Deductions
1997
$M
1996
$M
1997
$M
1996
$M
1997
$M
1996
$M
6,993
(21)
-
6,972
776
918
1,694
2,336
4,030
(436)
(151)
6,336
(17)
(46)
6,273
896
709
1,605
2,418
4,023
(354)
(122)
10,415
9,820
Assets
Risk weighted assets
6,298
11,588
7,266
3,139
84,148
14,040
1,206
7
8,490
2,059
6,901
11,352
7,334
2,570
75,901
14,013
1,163
10
6,340
2,020
138,241
127,604
Credit
equivalent
4,779
4,266
4,574
9,045
3,360
3,577
4,085
5,105
Contract/
notional amount
4,779
9,689
39,293
3,360
7,964
30,965
657,409
516,371
1,878
2,387
4,191
769
66,182
13,563
189
7
1,464
2,059
92,689
3,506
3,715
3,911
2,326
1,715
2,403
2,681
630
59,142
12,948
178
10
1,538
2,020
83,265
2,369
3,202
3,431
1,250
13,458
10,252
106,147
93,517
%
6.6
3.8
(0.6)
9.8
%
6.7
4.3
(0.5)
10.5
Total
1 Subordinated note issues are reduced each year by 20% of the original amount during the last five years to maturity
Australia and New Zealand Banking Group Limited – 1997 Annual Report
105
Financial Information
2: Interest Spreads and Net Interest Average Margins
Net interest income
Australia
New Zealand
International markets
Average interest earning assets
Australia
New Zealand
International markets
Gross earnings rate1
Australia
New Zealand
International markets
Total Group
Interest spreads and net interest average margins may be analysed as follows
Australia
Gross interest spread
Interest forgone on impaired assets2
Net interest spread
Interest attributable to net non-interest bearing items
Net interest average margin - Australia
New Zealand
Gross interest spread
Interest forgone on impaired assets2
Net interest spread
Interest attributable to net non-interest bearing items
Net interest average margin - New Zealand
International markets
Gross interest spread
Interest forgone on impaired assets2
Net interest spread
Interest attributable to net non-interest bearing items
Net interest average margin - International markets
Group
Gross interest spread
Interest forgone on impaired assets2
Net interest spread
Interest attributable to net non-interest bearing items
Net interest average margin - Group
1 Average interest rate received on interest earning assets
2 Refer note 14 to the financial statements
106
1997
$M
2,296
472
652
3,420
1996
$M
2,271
484
574
3,329
1995
$M
2,102
494
513
3,109
60,288
16,882
35,972
55,079
14,815
29,777
50,989
13,389
26,534
113,142
99,671
90,912
%
%
%
8.46
9.43
7.63
8.34
9.85
10.17
7.94
9.33
9.65
9.87
7.90
9.17
3.16
(0.09)
3.07
0.74
3.81
2.18
(0.04)
2.14
0.66
2.80
1.53
(0.03)
1.50
0.32
1.82
2.48
(0.06)
2.42
0.60
3.02
3.37
(0.15)
3.22
0.90
4.12
2.43
(0.06)
2.37
0.90
3.27
1.49
(0.04)
1.45
0.48
1.93
2.67
(0.10)
2.57
0.77
3.34
3.46
(0.25)
3.21
0.91
4.12
2.77
(0.01)
2.76
0.93
3.69
1.48
0.02
1.50
0.43
1.93
2.79
(0.14)
2.65
0.77
3.42
Financial Information
3: Cross Border Outstandings
Cross border outstandings of the Group to countries which individually represented in excess of 0.75% of
the Group’s total assets are shown below. There were no cross border outstandings to any other country
exceeding 0.75% of total assets.
Cross border foreign outstandings are based on the country of domicile of the borrower or guarantor of
the ultimate risk and comprise loans (including accrued interest), placements with banks, acceptances and
other monetary assets denominated in currencies other than the borrower’s local currency.
At 30 September 1997
New Zealand
USA
Japan
United Kingdom
Singapore
Hong Kong
South Korea
India
France
Indonesia
At 30 September 1996
New Zealand
USA
Japan
United Kingdom
Singapore
Hong Kong
France
Governments
and other
official institutions
$M
Banks and
other financial
institutions
$M
Other
commercial
and industrial
$M
10
462
12
94
12
1
16
-
12
2
13
922
84
97
26
1
92
1,462
1,803
1,033
772
1,371
1,288
918
661
577
559
788
683
1,675
1,367
1,180
904
1,019
4,498
937
1,084
894
324
356
600
531
574
542
3,998
881
623
786
336
537
73
% of
Economic
entity
assets
4.3
2.3
1.5
1.3
1.2
1.2
1.1
0.9
0.8
0.8
3.8
2.0
1.9
1.8
1.2
1.1
0.9
Total
$M
5,970
3,202
2,129
1,760
1,707
1,645
1,534
1,192
1,163
1,103
4,799
2,486
2,382
2,250
1,542
1,442
1,184
4: Certificates of Deposit and Term Deposit Maturities
The following table shows the maturity profile of the Group’s certificates of deposit and term deposits in
excess of $100,000 issued at 30 September 1997
Australia
Certificates of deposit
Term deposits
Overseas
Certificates of deposit
Term deposits
Total
Less than
3 months
$M
883
7,391
8,274
2,919
10,711
13,630
21,904
Between
3 months
and 6 months
$M
Between
6 months
and 12 months
$M
-
892
892
1,436
1,323
2,759
3,651
-
730
730
1,297
1,275
2,572
3,302
After
1 year
$M
44
632
676
271
363
634
Total
$M
927
9,645
10,572
5,923
13,672
19,595
1,310
30,167
Australia and New Zealand Banking Group Limited – 1997 Annual Report
107
Financial Information
5: Volume and Rate Analysis
The following table allocates changes in interest income and interest expense between changes in volume and
changes in rate for the past two years. Volume and rate variances have been calculated on the movement in
average balances and the change in the interest rates on average interest earning assets and average interest
bearing liabilities. The variance caused by the change of both volume and rate has been allocated in
proportion to the relationship of the absolute dollar amounts of each change to the total.
1997 over 1996
Change due to
Rate
$M
Volume
$M
Total
$M
Volume
$M
Interest earning assets
Due from other financial institutions
Australia
New Zealand
International markets
Regulatory deposits with
Reserve Bank of Australia
Investments in public securities
Australia
New Zealand
International markets
Loans, advances and bills discounted
Australia
New Zealand
International markets
Other assets
Australia
New Zealand
International markets
(10)
1
12
-
(10)
36
182
427
147
246
69
7
67
1
(7)
(11)
(8)
(69)
(17)
(44)
(709)
(78)
(72)
(17)
(4)
1
Change in interest income
1,174
(1,034)
(9)
(6)
1
(8)
(79)
19
138
(282)
69
174
52
3
68
140
16
1
87
2
33
(2)
(21)
367
155
133
(19)
(4)
47
795
1996 over 1995
Change due to
Rate
$M
-
(2)
5
Total
$M
16
(1)
92
(19)
(17)
15
9
20
101
17
29
11
11
(32)
165
48
7
(1)
468
172
162
(8)
7
15
960
108
Financial Information
5: Volume and Rate Analysis (continued)
1997 over 1996
Change due to
Rate
$M
Volume
$M
Total
$M
Volume
$M
1996 over 1995
Change due to
Rate
$M
Interest bearing liabilities
Time deposits
Australia
New Zealand
International markets
Savings deposits
Australia
New Zealand
International markets
Other demand deposits
Australia
New Zealand
International markets
Due to other financial institutions
Australia
New Zealand
International markets
Commercial paper
Australia
New Zealand
International markets
Borrowing corporations’ debt
Australia
New Zealand
International markets
Loan capital, bonds and notes
Australia
New Zealand
International markets
Other liabilities
Australia
New Zealand
International markets
Change in interest expense
Change in net interest income
(3)
80
268
22
11
6
133
19
8
(6)
10
3
41
-
35
20
6
-
52
25
2
(29)
26
79
808
366
(240)
(44)
(38)
(64)
2
6
(135)
(18)
(2)
(6)
(9)
(50)
(46)
-
(2)
(31)
(2)
-
(61)
(9)
2
2
-
(14)
(759)
(275)
(243)
36
230
(42)
13
12
(2)
1
6
(12)
1
(47)
(5)
-
33
(11)
4
-
(9)
16
4
(27)
26
65
49
91
67
95
123
4
6
(1)
87
11
8
13
(11)
40
65
-
(5)
14
2
-
14
8
1
(6)
-
22
557
238
Total
$M
89
131
141
25
31
2
112
18
5
12
3
41
76
-
(7)
18
12
-
8
2
(1)
(2)
(2)
26
22
36
18
21
25
3
25
7
(3)
(1)
14
1
11
-
(2)
4
10
-
(6)
(6)
(2)
4
(2)
4
183
(18)
740
220
Australia and New Zealand Banking Group Limited – 1997 Annual Report
109
Financial Information
6: Concentrations of Credit Risk
Concentrations of credit risk exist if a number of counterparties are engaged in similar activities and have
similar economic characteristics that would cause their ability to meet contractual obligations to be similarly
affected by changes in economic or other conditions. Off-balance sheet transactions of the Group are
substantially with other banks.
1997
1996
1995
Loans and
advances1
$M
Specific
provision
$M
Loans and
advances1
$M
Specific
provision
$M
Loans and
advances1
$M
Specific
provision
$M
Australia
Agriculture, forestry, fishing
and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate - construction
Real estate - mortgage3
Retail and wholesale trade
Other
Overseas
Agriculture, forestry, fishing
and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate - construction
Real estate - mortgage3
Retail and wholesale trade
Other
2,716
1,488
1,392
3,997
68
3,272
2,446
6,229
1,216
26,095
4,375
3,398
56,692
2,439
346
555
3,189
656
73
5,172
2,852
900
9,412
1,851
2,782
12
5
28
6
-
5
29
90
8
54
14
64
315
4
6
-
4
-
-
53
12
8
2
15
34
2,038
950
1,302
2,472
70
3,282
2,998
7,384
857
23,518
4,210
3,008
52,089
1,471
439
393
4,493
377
68
3,722
3,115
753
8,034
1,711
2,254
21
27
18
22
-
8
17
35
12
82
51
53
346
4
6
3
23
3
-
55
15
16
8
28
2
1,721
1,053
1,079
2,106
104
3,138
2,639
7,109
817
22,734
3,615
2,157
48,272
1,309
501
319
2,066
320
51
3,973
3,221
602
7,488
1,554
1,618
25
36
23
32
-
14
62
40
15
126
75
57
505
11
9
7
26
3
-
54
11
16
10
27
23
Total portfolio
30,227
86,919
138
453
26,830
78,919
163
509
23,022
71,294
197
702
1 Loans and advances exclude acceptances
2 Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
3 Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such
properties and must be secured by property
110
Financial Information
6: Concentrations of Credit Risk (continued)
Australia
Agriculture, forestry, fishing
and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate - construction
Real estate - mortgage3
Retail and wholesale trade
Other
Overseas
Agriculture, forestry, fishing
and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal2
Real estate - construction
Real estate - mortgage3
Retail and wholesale trade
Other
Total portfolio
1994
1993
Loans and
advances1
$M
Specific
provision
$M
Loans and
advances1
$M
Specific
provision
$M
1,884
851
827
2,359
345
3,179
1,752
6,379
704
21,674
3,362
1,451
44,767
750
481
237
1,607
595
52
2,598
2,388
373
6,245
1,485
1,486
42
48
88
36
-
21
65
69
14
221
107
96
807
20
5
10
31
17
-
52
17
38
23
27
38
1,802
759
894
1,638
205
3,212
1,948
6,252
774
19,676
3,497
2,042
42,699
901
449
227
1,776
409
63
2,821
2,366
865
4,958
1,524
1,991
18,297
63,064
278
1,085
18,350
61,049
98
91
34
44
-
32
93
78
45
712
132
22
1,381
24
12
32
20
1
2
58
49
61
29
33
423
744
2,125
Australia and New Zealand Banking Group Limited – 1997 Annual Report
111
Financial Information
7: Doubtful Debts - Industry Analysis
Balance at start of year
Adjustment for exchange rate fluctuations
Bad debts written off (refer (i) below)
Transfer from profit and loss account
Provisions acquired(disposed)
Tax (liability) realised on rescheduled debt
Recognition of provisions previously netted
against tax benefits
Other
1997
$M
1,218
16
(199)
336
-
-
-
-
1996
$M
1,380
(16)
(346)
200
-
-
-
-
1995
$M
1,652
(2)
(497)
226
-
-
-
1
1994
$M
2,690
(84)
(1,427)
469
3
-
1993
$M
3,338
56
(1,440)
718
(22)
(2)
-
1
35
7
Total provisions for doubtful debts
1,371
1,218
1,380
1,652
2,690
(i) Total write-offs by industry
Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other
Overseas
Rescheduled country debt
Other
Total write-offs
(ii) Total recoveries by industry
Australia
Agriculture, forestry, fishing and mining
Business service
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Lease finance
Manufacturing
Personal1
Real estate - construction
Real estate - mortgage2
Retail and wholesale trade
Other
Overseas
Rescheduled country debt
Other
Total recoveries
Net write-offs
Ratio of net write-offs to average
loans and acceptances
(5)
(3)
(11)
(8)
-
(5)
(10)
(55)
(6)
(26)
(11)
(4)
n/a
(55)
(199)
4
1
1
2
-
2
4
9
-
7
2
7
(11)
(17)
(19)
(8)
-
(12)
(49)
(46)
(6)
(77)
(33)
(23)
n/a
(45)
(346)
3
1
2
3
-
3
2
9
1
9
2
2
n/a
10
49
n/a
9
46
(19)
(11)
(29)
(11)
(75)
(52)
(95)
(34)
- (#)
(26)
(79)
(42)
(36)
(382)
(127)
(21)
(45)
(41)
(47)
(6)
(102)
(50)
(55)
n/a
(81)
(321)
(137)
(55)
(75)
(22)
(49)
-
(53)
(46)
(91)
(22)
(576)
(93)
(18)
(82)
(258)
(497)
(1,427)
(1,440)
1
1
3
2
-
3
1
10
-
3
4
3
n/a
21
52
4
1
3
4
-
4
1
11
1
5
6
3
12
33
88
1
2
1
5
-
5
#
8
#
7
2
1
30
9
71
(150)
(300)
(445)
(1,339)
(1,369)
0.1%
0.3%
0.6%
1.9%
1.9%
# Amounts less than $500,000
n/a Not applicable
1 Personal includes non-business loans to individuals through overdrafts, personal loans, credit cards and fully drawn advances
2 Real estate mortgage includes residential and commercial property exposure. Loans within this category are for the purchase of such properties
and must be secured by property
112
Financial Information
8: Short Term Borrowings
The Group’s short term borrowings comprise commercial paper, as well as unsecured notes issued by
subsidiary borrowing corporations with an original term to maturity of less than one year. The Group has
commercial paper programmes in the United States, where it issues paper through ANZ (Delaware) Inc.,
and in Europe and Asia, where the Group issues paper direct.
Balance at end of year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - other
Unsecured notes
Weighted average interest rate at end of year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - other
Unsecured notes
Maximum amount outstanding at any month
end during year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - other
Unsecured notes
Average amount outstanding during year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - other
Unsecured notes
Weighted average interest rate during year
Commercial paper - ANZ (Delaware) Inc.
Commercial paper - other
Unsecured notes
1997
$M
1,808
3,023
552
5.55%
5.39%
6.35%
2,094
3,395
564
1,731
3,081
427
5.41%
5.87%
6.64%
1996
$M
946
2,341
490
5.58%
7.22%
6.93%
1,841
3,021
506
1,087
2,469
478
5.58%
7.53%
6.48%
1995
$M
1,164
2,046
382
5.76%
5.71%
7.40%
1,860
2,396
419
1,173
1,601
379
5.80%
6.90%
7.40%
Australia and New Zealand Banking Group Limited – 1997 Annual Report
113
Shareholder Information
1: Major Shareholders
Ordinary shares
At 31 October 1997 the twenty largest holders of ordinary shares held 817,497,668 ordinary shares, equal to
54.1 per cent of the total issued ordinary capital.
Westpac Custodian Nominees Limited
Chase Manhattan Nominees Ltd
National Nominees Limited
ANZ Nominees Ltd
Australian Mutual Provident Society
Citicorp Nominees Pty Limited
Queensland Investment Corporation
MLC Limited
Pendal Nominees Pty Limited
SAS Trustee Corporation
Permanent Trustee Australia Limited
Perpetual Trustees Victoria Limited
Perpetual Trustees Company Limited
Mercantile Mutual Life Insurance Company Limited
HKBA Nominees Pty Limited
Commonwealth Custodial Services Limited
Permanent Trustee Company Limited
Perpetual Trustees Nominees Limited
The National Mutual Life Association of Australasia Limited
Commonwealth Superannuation Board of Trustees
Number of shares
168,798,501
148,354,109
89,662,708
58,440,942
38,821,349
31,654,043
30,377,728
29,749,298
29,057,731
27,304,960
25,864,240
17,934,743
17,350,265
16,764,357
15,909,044
15,685,776
15,584,947
15,450,963
13,166,460
11,565,504
817,497,668
%
11.2
9.8
5.9
3.9
2.6
2.1
2.0
2.0
1.9
1.8
1.7
1.2
1.2
1.1
1.0
1.0
1.0
1.0
0.9
0.8
54.1
2: Substantial Ordinary Shareholders
At 31 October 1997, there were no entries in the Register of Substantial Shareholdings.
During the year to 31 October 1997 notices were received from The Capital Group Companies Inc
regarding shares held by that company. On 29 October 1997 they advised that they held 75,317,646 shares
(being 4.99% of the ordinary voting shares). This holding is held by several of the companies listed in
Item 1 above.
3: Average Size of Shareholdings
At 31 October 1997 the average size of holding of ordinary shareholdings was 11,432 (1996: 12,119) shares.
4: Distribution of Shareholdings
Ordinary shares - fully paid
At 31 October 1997
Range
1 to 1,000 shares
1,001 to 5,000 shares
5,001 to 10,000 shares
10,001 to 100,000 shares
Over 100,001 shares
114
Number of
holders
% of
holders
52,207
59,618
11,903
7,698
552
39.6
45.2
9.0
5.8
0.4
Number of
shares
’000
25,397
140,247
84,200
167,045
1,091,933
% of
shares
1.7
9.3
5.6
11.0
72.4
131,978
100.0
1,508,822
100.0
Shareholder Information
5: Voting Rights of Shareholders
Ordinary shares - fully paid
The Articles provide for
(i) on show of hands 1 vote;
(ii) on a poll 1 vote for each ordinary share held; and
(iii) 1 vote for every 10, 10 cent paid shares issued pursuant to the Company’s Senior Officers’ Share
Purchase Scheme and the Directors’ Share and Option Purchase Scheme.
6: Holders of Non-Marketable Parcels
Ordinary shares
At 31 October 1997, shareholdings of less than a marketable parcel (1 to 99 shares) were 6,519
(1996: 5,370), which is 4.9% of the total holdings of ordinary shares.
7: Employee Shareholder Information
At the January 1994 Annual General Meeting, shareholders approved a limit of 7% of the issued share capital
of the Company on the number of shares which may be issued under the Employee and Senior Officers’
Share Purchase Schemes and the unissued shares to which options may be granted under any incentive
schemes for employees and directors of the Group.
At 31 October 1997, participants in the Employee and Senior Officers’ Share Purchase Schemes held 1.6%
(1996: 1.8%) of the issued share capital. At 31 October 1997, 6,983,091 options to purchase ordinary shares
which have been granted under the Directors’ Share and Option Purchase and the ANZ Group Share
Option Schemes, had not been exercised.
8: Directors’ Shareholding Interests
C B Goode
J C Dahlsen
Dr R S Deane
J K Ellis
C J Harper
M A Jackson
J McFarlane
J F Ries
Dr B W Scott
R B Vaughan
A
B
C
D
267,075
83,400
75,000
52,471
55,500
71,123
2,000
102,000
84,053
88,512
881,134
-
-
-
-
-
-
-
50,000
-
-
50,000
-
-
-
-
-
-
-
310,710
-
-
310,710
-
12,000
-
-
-
-
-
-
-
-
12,000
A Beneficially held - fully paid ordinary shares of $1.00 each
B Beneficially held - options issued pursuant to the Directors’ Share and Option Purchase Scheme to take up shares in the Company during
the period of 5 years after issue at market prices fixed as at the time of issue less one cent, which was paid on issue of the option
C Beneficially held - options issued pursuant to the ANZ Group Share Option Scheme to take up shares in the Company no earlier than
3 years or later than 5 years after issue at market prices fixed as at the time of issue less one cent, which was paid on issue of the option,
provided certain performance criteria are met
D Non-beneficially held - fully paid ordinary shares of $1.00 each
Australia and New Zealand Banking Group Limited – 1997 Annual Report
115
Glossary
Core Operating Expenses
Core operating expenses represents total operating expenses excluding direct income-related
expenditure and restructuring expenses.
Geographic segmentation
UK and Europe includes France, Germany, Guernsey, Jersey, Italy, Switzerland and United
Kingdom.
Asia Pacific includes Cook Islands, Fiji, Hong Kong, Indonesia, Japan, Korea, Malaysia,
Papua New Guinea, Philippines, Samoa, Singapore, Solomon Islands, Sri Lanka, Taiwan, Thailand,
The People’s Republic of China, Tonga, Vanuatu and Vietnam.
South Asia includes Bangladesh, India and Nepal.
Americas includes Argentina, Brazil, Chile, Mexico and United States of America.
Middle East includes Bahrain, Greece, Israel, Jordan, Oman, Pakistan, Qatar and United Arab
Emirates.
Impaired assets
Impaired assets are loans or other credit facilities where there is reasonable doubt about the
collectability of interest, fees (past and future) or principal outstanding, or where concessional terms
have been provided because of the financial difficulties of the customer.
Net advances
Net advances include gross loans and advances, acceptances and ANZ accepted bills held as part of
trading securities less income yet to mature and specific provisions (for both as at and average
volumes).
Net interest average margin
Net interest average margin is net interest income as a percentage of average interest earning assets.
Non-assessable interest income is grossed up to the equivalent before tax amount for the purpose
of these calculations.
Net interest spread
Net interest spread is 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 amount for the purpose of these calculations.
Net non-interest bearing items
Net non-interest bearing items, referred to in the analysis of interest spread and net interest average
margin, includes shareholders’ equity, provisions for doubtful debts, and deposits not bearing
interest and other liabilities not bearing interest, offset by premises and equipment and other non-
interest earning assets. Non-accrual loans are included within interest bearing loans, advances and
bills discounted.
Operating expenses
Operating expenses exclude charges for doubtful debts and abnormal items.
Total advances
Total advances include gross loans and advances, acceptances and ANZ accepted bills held as part
of trading securities less income yet to mature (for both as at and average volumes).
Unproductive facilities
Unproductive facilities comprise standby letters of credit, bill endorsements, documentary letters of
credit and guarantees to third parties.
116
Australia and New Zealand Banking Group Limited – 1997 Annual Report
117
Worldwide Representation
Australia
Group Headquarters
Australia and New Zealand Banking
Group Limited,
100 Queen Street,
Melbourne,
Victoria 3000
GPO Box 537E,
Melbourne 3001
Telephone: (61-3) 9273 5555
Telex: AA 68210 (International)
AA 139920 (Domestic)
Esanda Finance Corporation Limited,
85 Spring Street,
Melbourne 3000
Telephone: (61-3) 9666 9100
Fax: (61-3) 9666 9626
Town & Country Bank
(a division of Australia and New
Zealand Banking Group Limited)
297 Murray Street,
Perth W.A. 6000
Telephone: (61-8) 9267 3333
Fax: (61-8) 9267 3435
Principal State Offices
New South Wales
20 Martin Place,
Sydney 2000
GPO Box 495,
Sydney 2001
Telephone: (61-2) 9227 1911
Queensland
324 Queen Street,
Brisbane 4000
GPO Box 1051,
Brisbane 4001
Telephone: (61-7) 3228 3228
South Australia
13 Grenfell Street,
Adelaide 5000
GPO Box 1819,
Adelaide 5001
Telephone: (61-8) 8218 8122
Tasmania
ANZ Centre
2nd Floor,
22 Elizabeth Street,
Hobart 7000
GPO Box 504E,
Hobart 7001
Telephone: (61-03) 6221 2601
Western Australia
77 St. George’s Terrace,
Perth 6000
GPO Box L905, Perth 6001
Telephone: (61-8) 9323 8111
Australian Capital Territory
25 Petrie Plaza,
Canberra City 2601
GPO Box 371,
Canberra City 2601
Telephone: (61-2) 6276 4100
Northern Territory
Smith Street, 43 The Mall,
Darwin 0800
GPO Box 1, Darwin 0800
Telephone: (61-8) 89 823510
Subsidiary Companies
ANZ Funds Management,
(ANZ Managed Investments
Limited/ANZ Life Assurance Company
Limited/ANZ Executors and Trustee
Company
Limited)
68 Pitt Street, Sydney 2000
Telephone: (61-2) 9216 2345
Fax: (61-2) 9216 2350
ANZ Securities Limited,
10th Floor, 530 Collins Street,
Melbourne 3000
Telephone: (61-3) 9205 1400
Fax: (61-3) 9649 7023
New Zealand
Headquarters
ANZ Banking Group
(New Zealand) Limited,
215-229 Lambton Quay, Wellington
PO Box 1492, Wellington
Telephone: (64-4) 496 7000
Telex: NZ 3385
Fax: (64-4) 473 6919
Subsidiary Companies
ANZ Securities (NZ) Limited,
21st Floor, ASB Building,
135 Albert Street, Auckland
PO Box 6243,
Wellesley Street, Auckland
Telephone: (64-9) 356 3450
Freephone: 0800 800 611
Telex: 63372
Fax: (64-9) 309 9410
UDC Group Holdings Limited,
113-119 The Terrace, Wellington
PO Box 1616, Wellington
Telephone: (64-4) 471 4500
Fax: (64-4) 471 4592
International
Headquarters
Australia and New Zealand Banking
Group Limited,
100 Queen Street
Melbourne
Victoria 3000
Australia
Tel: (61-3) 9273 5555
Fax: (61-3) 9273 4909
ARGENTINA
Australia and New Zealand Banking
Group Limited
Bouchard 547, 10th Floor
1106 Buenos Aires
Argentina
Tel: (54-1) 315 2330
Fax: (54-1) 313 3967
BAHRAIN
Grindlays Bahrain Bank B.S.C. (c)
P O Box 793
Manama Centre, Entrance No 3
Government Road
Manama
Bahrain
Tel: (973) 225 999
Fax: (973) 224 482
ANZ Grindlays Bank Limited
Offshore Banking Unit
P O Box 5793
1st Floor, Manama Centre
Bahrain
Tel: (973) 224 210
Fax: (973) 224 478
BANGLADESH
ANZ Grindlays Bank Limited
P O Box 502
2 Dilkusha Commercial Area
Dhaka 1000
Bangladesh
Tel: (880-2) 955 0181
Fax: (880-2) 956 2329/956 2332
BRAZIL
Australia and New Zealand Banking
Group Limited
Av. Nilo Pecanha, 50 Grupo 810
20044 Rio de Janeiro - RJ
Brazil
Tel: (55-21) 240 2294
Fax: (55-21) 220 0840
CHILE
Australia and New Zealand Banking
Group Limited
Edificio Atlantis
Av. El Bosque Norte 0440, Of. 604
Las Condes
Santiago
Chile
Tel: (56-2) 203 5217
Fax: (56-2) 203 5226
CHINA
Australia and New Zealand Banking
Group Limited
10th Floor, Novel Plaza
116-128 Nanjing Road West
Shanghai 200003
Peoples Republic of China
Tel: (86-21) 6350 9599
Fax: (86-21) 6350 9590
COOK ISLANDS
Australia and New Zealand Banking
Group Limited
1st Floor, Development Bank Building
P O Box 907
Avarua, Rarotonga
Cook Islands
Tel: (682) 21 750
Fax: (682) 21 760
FIJI
Australia and New Zealand Banking
Group Limited
ANZ House, 25 Victoria Parade
P O Box 179
Suva
Fiji
Tel: (679) 302 144
Fax: (679) 300 267
FRANCE
Australia and New Zealand Banking
Group Limited
6 rue de Berri
75008 Paris
France
Tel: (33-1) 40 75 05 37
Fax: (33-1) 40 75 05 46
GERMANY
Australia and New Zealand Banking
Group Limited
Mainzer Landstrasse 46
60325 Frankfurt am Main
Germany
Tel: (49-69) 710 0080
Fax: (49-69) 710 00821
GREECE
ANZ Grindlays Bank Limited
7 Merlin Street
P O Box 30391
Athens 10671
Greece
Tel: (30-1) 362 4601/5
Fax: (30-1) 360 3811
GUERNSEY
ANZ Bank (Guernsey) Ltd
P O Box 153
Frances House, Sir William Place
St Peter Port
Guernsey
Channel Islands
Tel: (44-1481) 726 771
Fax: (44-1482) 727 851
HONG KONG
Australia and New Zealand Banking
Group Limited
27th Floor, One Exchange Square
8 Connaught Place Central
Hong Kong
Tel: (852) 2843 7111
Fax: (852) 2525 2475/2868 0089
INDIA
ANZ Grindlays Bank Limited
90 Mahatma Gandhi Road
P O Box 725
Mumbai 400 001
India
Tel: (91-22) 267 0162/267 1495
Fax: (91-22) 261 9903
INDONESIA
PT ANZ Panin Bank
17th Floor, BNI Building
Jl Jend, Sudirman Kav. 1
Jakarta Pusat 10220
Indonesia
Tel: (62-21) 251 0530
Fax: (62-21) 251 0536
Australia and New Zealand Banking
Group Limited
Representative Office
17th Floor, BNI Building
Jl Jend, Sudirman Kav. 1
Jakarta Pusat 10220
Indonesia
Tel: (62-21) 570 1204
Fax: (62-21) 570 5138
IRAN
Australia and New Zealand Banking
Group Limited
3rd Floor, No 14, 4th Alley
Shahid Ahmad Ghasir
(Ex Bucharest Avenue)
Tehran 15146
Iran
Tel: (98-21) 873 3554
Fax: (98-21) 873 3559
118
SWITZERLAND
ANZ Grindlays Bank Limited
Case Postale 1560
7 Quai du Mont Blanc
CH-1211 Geneva
Switzerland
Tel: (41-22) 906 0111
Fax: (41-22) 906 0122
TAIWAN
Australia and New Zealand Banking
Group Limited
P O Box 9-595
8F, 44 Chung Shan North Road
Section 2
Taipei
Taiwan
Tel: (886-2) 568 3353
Fax: (886-2) 511 1232
THAILAND
Australia and New Zealand Banking
Group Limited
9th Floor, Tower A, Diethelm Towers
93/1 Wireless Road
Bangkok 10330
Thailand
Tel: (66-2) 256 6350
Fax: (66-2) 256 6347
TONGA
Australia and New Zealand Banking
Group Limited
Cnr Salote & Railway Roads
P O Box 910
Nuku’alofa
Tonga
Tel: (676) 24 944
Fax: (676) 23 870
UNITED ARAB EMIRATES
ANZ Grindlays Bank Limited
P O Box 4166
Al Maktoum Street
Near Deira Clock Tower
Deira, Dubai
United Arab Emirates
Tel: (971-4) 508 8111
Fax: (971-4) 508 8222
UNITED KINGDOM
Australia and New Zealand Banking
Group Limited
P O Box 7
Minerva House
Montague Close
London SE1 9DH
United Kingdom
Tel: (44-171) 378 2656
Fax: (44-171) 378 2257
Grindlays Private Banking
13 St James’s Square
London SW1Y 4LF
United Kingdom
Tel: (44-171) 451 3500
Fax: (44-171) 451 3652
UNITED STATES OF AMERICA
Australia and New Zealand Banking
Group Limited
1177 Avenue of the Americas
New York, NY 10036
USA
Tel: (1-212) 801 9800
Fax: (1-212) 801 9859
VANUATU
ANZ Bank (Vanuatu) Ltd
ANZ House, Kumul Highway
Port Vila
Vanuatu
Tel: (678) 22 536
Fax: (678) 22 814
VIETNAM
Australia and New Zealand Banking
Group Limited
14 Le Thai To Street
Hanoi
Vietnam
Tel: (84-4) 825 8190
Fax: (84-4) 825 8188
ANZ Grindlays, Mumbai, India.
ISRAEL
Australia and New Zealand Banking
Group Limited
1 Salahadin Street
P O Box 19390
Jerusalem 91133
Israel
Tel: (972-2) 626 3444
Fax: (972-2) 626 3311
JAPAN
Australia and New Zealand Banking
Group Limited
8th Floor, Yanmar Tokyo Building
1-1 Yaesu 2-Chome, Chuo Ku
Tokyo 104
Japan
Tel: (81-3) 3271 1151
Fax: (81-3) 3281 8417
JERSEY
ANZ Grindlays Bank (Jersey) Ltd
P O Box 80
West House, Wests Centre
Peter Street
St Helier
Jersey
Channel Islands
Tel: (44-1534) 874 248
Fax: (44-1534) 877 695
ANZ Grindlays Trust Corporation
(Jersey) Ltd
West House, Wests Centre
Peter Street
St Helier
Jersey
Channel Islands
Tel: (44-1534) 607 351
Fax: (44-1534) 37 600
JORDAN
ANZ Grindlays Bank Limited
P O Box 9997
Shmeissani
Amman 11191
Jordan
Tel: (962-6) 660 201/7
Fax: (962-6) 679 115
KOREA
Australia and New Zealand Banking
Group Limited
18th Floor, Kyobo Building
1 Chongro 1, Chongro-ku
KPO 1065
Seoul
Korea
Tel: (82-2) 730 3151
Fax: (82-2) 737 6325
MALAYSIA
Australia and New Zealand Banking
Group Limited
Wisma Genting
4th Floor, Jalan Sultan Ismail
50250 Kuala Lumpur
Malaysia
Tel: (60-3) 261 6088
Fax: (60-3) 261 3210
MEXICO
Australia and New Zealand Banking
Group Limited
Ejercito Nacional No 926 - 2o Piso
11510 Mexico D.F.
Tel: (52-5) 580 1036
Fax: (52-5) 580 1031
NEPAL
Nepal Grindlays Bank Ltd
Grindlays Bhawan
P O Box 3990
Kathmandu
Nepal
Tel: (977-1) 247 304
Fax: (977-1) 247 314
PAKISTAN
ANZ Grindlays Bank Limited
I.I. Chundrigar Road
P O Box 5556
Karachi
Pakistan
Tel: (92-21) 241 4131
Fax: (92-21) 241 4914
PAPUA NEW GUINEA
Australia and New Zealand Banking
Group (PNG) Ltd
3rd Floor, Defens Haus
Cnr Champion Parade & Hunter Street
Port Moresby
Papua New Guinea
Tel: (675) 322 3333
Fax: (675) 322 3306
PHILIPPINES
Australia and New Zealand Banking
Group Limited
Tower One, Ayala Triangle, Ayala
Avenue
Makati City
Philippines
Tel: (632) 848 5091
Fax: (632) 848 5086
QATAR
ANZ Grindlays Bank Limited
Rayyan Road
P O Box 2001
Doha
Qatar
Tel: (974) 418 222
Fax: (974) 428 077
SAMOA
ANZ Bank (Samoa) Limited
P O Box L 1855
Apia
Western Samoa
Tel: (685) 22 422
Fax: (685) 24 595
SINGAPORE
Australia and New Zealand Banking
Group Limited
10 Collyer Quay
17-01/07 Ocean Building
Singapore 0104
Tel: (65) 535 8355
Fax: (65) 539 6111
SOLOMON ISLANDS
Australia and New Zealand Banking
Group Limited
Mendana Avenue
Honiara
Solomon Islands
Tel: (677) 21 835
Fax: (677) 22 957
SRI LANKA
ANZ Grindlays Bank Limited
P O Box 112
37 York Street
Colombo 1
Sri Lanka
Tel: (94-1) 446 150/7
Fax: (94-1) 446 158
Australia and New Zealand Banking Group Limited – 1997 Annual Report
119
Phone Directory
Customer Banking
Enquiries
13 13 14
8.00am-8.00pm, Monday to Friday
ANZ Phone
Banking
13 13 14
24 Hours, 7 days a week
• Account balances & enquiries
• Account balances
• Periodical payment information
• Statement information
• Transaction history
• Order statements
• Cheque/Deposit book ordering
• Funds transfer
• Account maintenance
• Product information
Credit Card
Enquiries
13 22 73
8.00am - 6.00pm, Monday to Friday
ANZ Gold Card
13 17 24
Qantas/Telstra Gold Card
13 27 24
• Stop payments
• Fee information
• Cheque/Deposit book ordering
• Bill payments
Qantas/Telstra Card
13 19 51
Business/Purchasing Card
1800 032 481
Lost or Stolen Cards
1800 033 844
24 Hours, 7 days a week
EFTPOS &
Fast Track Help Centre
1800 035 315
24 Hours, 7 days a week
Merchant Enquiries
1800 039 025
8.00am-6.00pm, Monday to Friday
ANZ product and service
information is also available
on ANZ’s internet site:
www.anz.com
Home Buyers Line
1800 035 500
8am-11pm, 7 days a week
Small Business Hotline
1800 035 500
8am-11pm, 7 days a week
• Arrange a callback from an ANZ
Business Manager
• Arrange an appointment to see an
ANZ Business Manager
Customer Compliments
& Concerns
1800 805 154
International Services
1800 678 273
ANZ Securities
ANZ Stockbroking
13 13 70
ANZ Margin Lending
1800 639 330 (Australia wide)
1800 243 554 (NSW)
07 3228 3283 (QLD)
ANZ Futures
02 9322 6514 (Australia wide)
03 9205 1450 (VIC)
ANZ Direct
Home Loans & Investment
Loans
13 14 09
Car Loans
13 22 07
Superannuation, Insurance &
Investments
13 11 95
Esanda
Esanda Finance
13 23 73
Esanda Investments
13 12 15
ANZ Funds Management
Unit Trusts
1800 022 893
Life Insurance &
Superannuation
1800 021 052
Rollovers/Approved Deposits/
Superannuation Savings
1800 036 190
D.I.Y. Super
1800 655 431
Charitable Trusts Information
Line
1800 808 910
Estate Planning &
Management
(ANZ Trustees)
1800 011 047
V2 Plus General Enquiries
13 28 33
V2 Plus Rate Recorded
Message
1800 033 043
120
Shareholder Information
Dividends
The final dividend of 26 cents per share will be paid
on 21 January 1998 bringing the full year dividend to
48 cents per share. The interim dividend paid in July
1997 was fully franked and the final dividend is fully
franked at 36% for Australian taxation purposes.
Dividends may be paid directly to a bank account in
Australia, New Zealand or United Kingdom.
Shareholders who want their dividends paid this way
should advise the relevant share registry in writing
prior to books closing date. Dividend Reinvestment
and Bonus Option plans are available to shareholders.
The plans are detailed in a booklet called “Shareholder
Alternatives”, copies of which are available from the
share registries at the addresses shown.
Stock Exchange Listings
The Group’s ordinary shares are listed on the Australian
Stock Exchange, the London Stock Exchange and the
New Zealand Stock Exchange. The Capital Securities
offered in February 1993 are listed on the New York
Stock Exchange.
American Depositary Receipts
The Bank of New York sponsors an American
Depositary Receipt (ADR) program in the United
States of Amer ica. The ADRs were listed on the New
York Stock Exchange on 6 December 1994. ADR
holders should deal directly with the Depositary, Bank
of New York, New York, Telephone (212) 815-2729,
Fax (212) 571-3050 on all matters relating to their
ADRs.
Enquiries
Shareholders who wish to contact the Company on
any matter related to their shareholding are invited to
telephone or write to the most convenient share
registry.
Change of Address
It is important that shareholders notify the share registry
in writing if there is a change to their address. For
added protection shareholders should quote their
Shareholder Number.
Removal from Annual Report Mailing List
Shareholders who do not want the Annual Report or
who are receiving more than one copy should advise
the share registry in writing. These shareholders
will continue to receive all other shareholder
information.
To Consolidate Shareholdings
Shareholders who wish to consolidate their separate
holdings should advise the share registry in writing.
Annual General Meeting
The Annual General Meeting
will be held at the
Melbourne Concert Hall,
100 St Kilda Road, Melbourne
on Wednesday, 21 January 1998.
Chairman’s Address
A summary of the Chairman’s
address to the AGM will be published
in the “Shareholder Contact”
magazine issued in February 1998.
Credit Ratings (December 1996)
Short Term Debt
Moody’s Investors Service
Standard & Poor’s Ratings Group
P-1
A-1+
Long Term Debt
Moody’s Investors Service
Standard & Poor’s Ratings Group
Aa3
AA-
Registered Office
Level 2, 100 Queen Street, Melbourne,
Victoria 3000 Australia
Phone: (03) 9273-6141
Fax: (03) 9273-6142
Secretary: R T Jones
General Manager Investor Relations: D H Ward
Share Registry
Australia
Coopers & Lybrand
Level 12, 333 Collins Street,
Melbourne, Victoria 3000
Phone: (03) 9205 4999
Toll Free: 1800 331 721 (outside Melbourne metropolitan area)
Fax: (03) 9205 4900
New Zealand
C/- ANZ Banking Group (New Zealand) Limited
8th Floor, 215-229 Lambton Quay, Wellington
Phone: (04) 496 7000
Fax: (04) 496 8872
United Kingdom
7th Floor, Jupiter House
Triton Court
14 Finsbury Square
London EC2A IBR UK
Phone: (0171) 920 0010
Fax: (0171) 920 0120
Australia New Zealand Argentina Bahrain Bangladesh
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Guernsey Hong Kong India Indonesia Iran Israel
Japan Jersey Jordan Korea Malaysia Mexico Nepal Pakistan
Papua New Guinea Philippines Qatar Samoa
Singapore Solomon Islands Sri Lanka Switzerland Taiwan
Thailand Tonga United Arab Emirates
United Kingdom United States of America Vanuatu Vietnam
Australia and New Zealand Banking Group Limited
ACN 005 357 522
Registered Office: Level 2, 100 Queen Street, Melbourne, Victoria 3000, Australia.
Telephone: (03) 9273 6141 Facsimile: (03) 9273 6142