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1997 Profit Announcement Highlights
Australia and New Zealand Banking Group Limited (ANZ) today reported a 17% increase in underlying profit after tax to $1,308 million. This was prior to an additional transfer to the general provision of $137 million and abnormal items of $147 million (both after tax), leading to an operating profit after tax and abnormal items of $1,024 million. The final dividend was increased to 26 cents per share fully franked, making the total dividend for the year up 14% to 48 cents per share fully franked. Despite aggressive competition domestically, underlying profit in Australia grew by 16%, and in the rest of the world by 19%. Asset growth, increased non-interest income, and buoyant market-related earnings, all offset lower interest margins. Core cost growth was 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, mainly arising from the ANZ Global program. Most of this has been treated as an abnormal item. 1Underlying profit after tax represents operating profit after tax before the additional transfer to the general provision of $137 million and abnormal items Non-accrual loans were reduced by 29% to $872 million, and specific provisions 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. This 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. ANZ Chairman, Mr Charles Goode made the following comments on the result: "ANZ is performing well. There was a sound increase in underlying profit which was well spread across the group. The abnormal restructuring charge is necessary to achieve further reductions in cost, and the decision to increase the general provision reflects our desire to be more consistent and conservative in our provisioning. "We are very pleased with the 14% lift in dividends to 48 cents per share, fully franked. Last year we foreshadowed that there would be some limit on our future franking capacity. Dividends in 1998 are not expected to be fully franked," Mr Goode concluded. Mr John McFarlane, the Chief Executive Officer, made the following comments on the outlook for the Group: "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." "ANZ is well-positioned to take advantage of the opportunities available to us and to meet our challenges head on. We are launching ‘ANZ 2000’, to ensure that we meet our customers’ expectations into the 21st century, and deliver superior performance for our shareholders", Mr McFarlane concluded. A detailed statement on "ANZ 2000" is being released separately. A full copy of the Consolidated Results and Dividend Announcement for the year ended 30 September 1997 is available as a downloadable file at ANZ’s internet address: www.anz.com With the release of Australia and New Zealand Banking Group 1997 results, CEO John McFarlane, outlined his vision for ANZ: ANZ is unique. We are well-positioned to take advantage of the opportunities available to us and to meet our challenges head on. Today we are launching "ANZ 2000", to ensure that we meet our customers’ expectations into the 21st century, and to deliver superior performance for our shareholders. ANZ 2000
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 have 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. 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. 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, although, looking to the future we will also 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. Superior Growth and 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. Notwithstanding this, our current relatively high cost-income ratio gives us scope to improve productivity substantially, and to enable us to achieve superior earnings growth. Last year, we experienced unusually favourable market conditions which resulted in high capital markets revenues. Such market conditions arise from time to time, but we cannot place reliance on them. 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, and our new performance management process which was launched this month will focus ongoing attention to achieving these objectives. Banking in the 21st century will be different. To prepare ourselves, we need to radically restructure the way we do business today, and 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, and we are investing in telephone, direct and internet banking and card technologies. We also announced our strategic alliance with Frank Russell in funds management. These and other new ventures will ensure that, for ANZ, the best is yet to come.
Rod Gerrand David Ward |
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