Australia and New Zealand Banking Group Ltd. - Annual Report 2011

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Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

Full Year 30 September 2011

Consolidated Financial Report Dividend Announcement and Appendix 4E

The Consolidated Results and Dividend Announcement constitutes the preliminary final report and contains the information required by Appendix 4E of the Australian Securities Exchange Listing Rules. It should be read in conjunction with ANZ’s 2011 Annual Report, and is lodged with the Australian Securities Exchange under listing rule 4.3A.

RESULTS FOR ANNOUNCEMENT TO THE MARKET

APPENDIX 4E

Name of Company: Australia and New Zealand Banking Group Limited ABN 11 005 357 522

Report for the full year ended 30 September 2011

Operating Results1				A$ million
Operating income		8%	to	16,932
Net statutory profit attributable to shareholders		19%	to	5,355
Underlying profit2		12%	to	5,652
Dividends	Cents			Franked
	Per			amount3
	Share			per share
Proposed final dividend		76		100%
Interim dividend		64		100%
Record date for determining entitlements to the proposed final dividend			16	November 2011
Payment date for the proposed final dividend			16	December 2011

Dividend Reinvestment Plan and Bonus Option Plan

Australia and New Zealand Banking Group Limited (ANZ) has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the 2011 final dividend. For the 2011 final dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares. The 'Acquisition Price' to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume weighted average sale price of fully paid ANZ ordinary shares sold on the ASX during the seven trading days commencing on 18 November 2011 less a 1.5% discount, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for the 2011 final dividend must be received by ANZ's Share Registrar by 5.00 pm (Australian Eastern Daylight Time) on 16 November 2011. Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in Great Britain (including the Channel Islands and the Isle of Man) or New Zealand will be converted to pounds sterling and New Zealand dollars respectively at an exchange rate calculated at 5.00 pm (Australian Eastern Daylight Time) on 18 November 2011. There is no foreign conduit income attributed to the dividend.

1 Compared to 30 September 2010

2 Adjusted to exclude non-core items and to reflect the result for the ongoing business activities of the Group. Refer pages 80 to 82 of the ANZ Condensed Consolidated Financial Report, Dividend Announcement and Appendix 4E for the full year 30 September 2011 for further details.

3 30% tax rate

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT and APPENDIX 4E

Full year ended 30 September 2011

*CONTENTS*	*PAGE*
Section 1 – Media release	1
Section 2 – Financial highlights	7
Section 3 – Review of operating results	13
Section 4 – Segment review	45
Section 5 – Geographic region review	73
Section 6 – Profit reconciliation	79
Section 7 - Condensed consolidated financial statements	95
Section 8 - Supplementary information	119
Definitions	125
Alphabetical Index	128

This Results Announcement has been prepared for Australia and New Zealand Banking Group Limited (the “Company”) together with its subsidiaries which are variously described as “ANZ”, “Group”, “ANZ Group”, “us”, “we” or “our”.

All amounts are in Australian dollars unless otherwise stated. The information on which the Condensed Consolidated Financial Statements are based has been audited by the Group’s auditors, KPMG. The Company has a formally constituted Audit Committee of the Board of Directors. The signing of this preliminary report was approved by resolution of a Committee of the Board of Directors on 2 November 2011.

When used in this Results Announcement the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

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Media Release

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For Release: 3 November 2011

ANZ 2011 Full Year Result Result driven by solid underlying business performance; accelerating execution of the super regional strategy

ANZ today announced statutory profit of $5.36 billion and underlying profit of $5.65 billion for the financial year ended 30 September 2011 up 19% and 12% respectively on the previous year (YOY).

The proposed final dividend of 76 cents per share fully franked brings the total dividend for the year to $1.40 per share, 11% higher than for 2010.

Group Balance Sheet & Profit Key Points[1]

Underlying profit increased 12% with income up 7% despite a 31% decline in second half Institutional Global Markets income. Profit before provisions (PBP) excluding Global Markets increased 8%.
The Group net interest margin excluding Global Markets grew 7 bps with asset re-pricing and funding mix changes largely offset by increases in the cost of funding in particular for deposits.
ANZ has continued to invest for growth, pacing investment to market conditions. This approach was reflected in modest cost growth in the second half (up 2%).
Loans and advances increased 8% and customer deposits grew 16%.
ANZ has steadily improved the diversity of its funding base, reducing reliance on offshore wholesale funding by $12 billion during the past three years. Customer funding now sits at 61%.
The Group is strongly capitalised with Tier 1 capital at 10.9%.
Return on Equity increased to 16%.
Gross impaired assets reduced 15% with new impaired loans down 30%. The provision charge reduced 33% however total provision coverage[2] remains strong at 1.96% of credit risk weighted assets (CRWA) and the collective provision ratio at 1.28% of CRWA.

ANZ Chief Executive Officer Mike Smith said: “This result is in line with the key trends that we outlined at our August trading update.

“Our key customer franchises in Australia, New Zealand and Asia Pacific have produced solid performances; we have continued to make progress with our super regional strategy; and we have delivered value for our customers.

“We have a strong financial and capital position. Our focus on the growth markets of Asia and their connectivity with our key domestic franchises means we are in the right place, with the right strategy at the right time.

“In the second half though, the global economic situation saw trading conditions for our Markets business deteriorate significantly. This more difficult operating environment - characterised by ongoing economic volatility, cautious consumer and business behaviour, and higher funding and capital costs for banks globally - is likely to be with us for some time.

“With the changed game in global banking, our strategy and our financial strength will give us even more choices - choices which are open to very few banks in the world right now.

“This is providing another window for us to take advantage of growth opportunities, to expand the support we provide to customers, to build scale and create value for our shareholders.

1 All figures are on an underlying basis, refers to the ongoing operations of the Group, unless otherwise stated. Reported profit is adjusted to exclude non-cash and significant items to arrive at underlying profit.

2 Total provision coverage ratio is the individual provision plus the collective provision as a proportion of credit risk weighted assets. Collective provision ratio is the CP as a proportion of CRWA.

MEDIA RELEASE

“We will continue to focus on the four consistent themes of our super regional strategy: investing in our super regional footprint and capability to deliver differentiated revenue growth over the medium term; building our customer franchises in Australia and Asia while maintaining our strong position in New Zealand; leveraging our capital position for organic and strategic growth; and continuing to transform our productivity performance.

“We can’t take this for granted though. We will continue to step up the pace in executing our strategy but we will also respond to the environment with a stronger emphasis on generating on-going efficiencies given the more constrained domestic conditions.

“The bottom line is that we see 2012 as a year of opportunity and I am confident we can continue delivering on our promises to shareholders, customers and the community,” Mr Smith said.

Divisional and Business Overview[3]

Australia Division increased profit 2% for the year. Pre-provision profit grew 5% with strong cost management delivering positive revenue/expense jaws for both the year and the second half. A stronger second half for Commercial saw profit for the year up 5%. Retail continues to perform well up 6%, while tough financial market conditions coupled with increased insurance costs arising from extreme weather events saw Wealth PAT down 16%.
Asia Pacific Europe & America (APEA) Division USD profit increased 20% despite more challenging market conditions in the second half for the Global Markets business. PBP grew 17% with Retail improving its contribution and completing a well-managed transition of the businesses acquired from RBS. The Partnerships contribution rose 4%.
New Zealand Division NZD profit increased 55% driven by good performances by all business lines, strong cost management and much lower provisions. Retail profit increased 44% YOY while Commercial was up 61% YOY but declined slightly HOH impacted by lower credit demand.
Institutional profit increased 9% with strong results delivered by Transaction Banking (+10%) and Global Loans (+67%). Global Markets profit declined 28%. While Global Markets customer sales income grew to record levels, up 13%, volatile market conditions coupled with ANZ’s decision to minimise risk positions in a highly unpredictable market, saw both Trading and Balance Sheet incomes decline significantly HOH.

PERFORMANCE BY DIVISION[4]

AUSTRALIA (all figures pro forma)

Strategic Focus and Progress

The Australia Division is focused on delivering a service-based customer proposition through more efficient business processes and platforms, and improved products and customer-facing technology including offerings like the “GoMoney” iPhone application which now represents almost a third of all online transactions.

We have tailored customer segment propositions which include offers aligned with the Group’s super regional strategy, such as Asia Pacific arrivals to Australia.
All priority segments have improved customer satisfaction ratings.
We are delivering growth through a better customer experience in Commercial driven by more efficient customer coverage and better leverage of our Asian footprint.
We are improving our Wealth proposition and enabling greater presence for the Wealth Management and Insurance offerings within bank branches and online (e.g. EasyProtect, 50+ Life).
The Division’s balance sheet strategy is focused on continual funding base improvement - loan to deposit ratio has reduced from 180% to 156% in three years.

3 All comparisons are YOY and pro forma unless otherwise stated. 4 All comparisons use pro forma profit.

MEDIA RELEASE

Divisional Results

Profit grew 2% YOY (+8% HOH) with PBP growth of 5% YOY (+2% HOH) reflecting good cost control, particularly in the second half despite tougher revenue conditions.
Lending increased 6% YOY (+3% HOH) with customer deposits up 14% YOY (1.5 x system) and 6% HOH. Retail lending rose 7% YOY (Mortgages up 7%, 1.2 x system[5] )) and deposits increased 13%. Commercial lending grew 5% with Business Bank up 10% and Small Business Banking up (‘SME’) up 12%. Regional Commercial lending was flat YOY reflecting strong seasonal cash flows and subsequent loan pay down. Deposits increased 18% YOY with good growth across Business Bank, SME and Regional Commercial.
Retail performed well once again with profit up 6% YOY and HOH and income up 6% YOY (+2% HOH) with 2% positive revenue/expense jaws YOY (neutral HOH).
A significantly improved performance from the Commercial business with profit up 5% YOY (+22% HOH) reflecting good income growth +6% YOY (+4% HOH), tighter expense control in the second half (-2% HOH) and a 44% HOH reduction in provisions.
Profit after tax in Wealth was 16% lower YOY (-15% HOH) reflecting volatile market conditions, negative investor sentiment due to volatile equity markets and increased insurance costs caused by catastrophic weather events coupled with higher levels of investment in strategic projects. Strong new business growth in the insurance business was somewhat offset by adverse general insurance claims and life lapse rate experience.
Credit quality continues to be carefully managed. The 90-day delinquencies in the mortgage book were lower at the end of the second half than for the first half with 30 day mortgage delinquency numbers improving significantly, down 50 bps HOH.

ASIA PACIFIC EUROPE & AMERICA (all figures pro forma and USD)

Strategic Focus and Progress

The APEA division is building a leading Asia Pacific regional bank with connectivity as a key competitive differentiator. The primarily organic strategy seeks to deliver an integrated, sustainable franchise supporting the Group aspiration for APEA derived revenue to drive 25-30% of Group NPAT by 2017.

After several years of rapid expansion across geographies, segments and products, APEA is now deepening its reach in key franchise markets and within target customer segments as well as building a more balanced asset portfolio between our Institutional, Commercial and Retail and Wealth segments. In Asia, ‘active’ customers in the Institutional and Commercial business grew 25% YOY.
Connectivity is a key competitive differentiator for ANZ. Over and above revenue booked in APEA, 4% of Australia and New Zealand revenue was APEA derived.
The Division continued to pace investment in the franchise with $50 million of investment spend in 2011. The Mumbai branch was opened in June and the Chongqing branch in March deepening access to our core strategic markets and customers. New investment for IT and operations infrastructure focused on major programs such as Transactive Asia (cash management), the core banking system and Global Markets sale distribution platforms. The extension of the ANZ brand campaign into Asia for the first time has generated strong awareness in our target markets and segments.
The successful integration of the businesses acquired from RBS has supported the strong performance of Retail and Wealth. The repositioning of the businesses toward the affluent and emerging affluent segments is also now complete. The business has expanded its product capability, customer numbers and revenues (+18% YOY) through focused management, including strong control on costs, through the year.
The total investment value of ANZ’s share of our Asian Partnerships continues to grow with ANZ continuing to add value through the infusion of ANZ talent and skills.
The Division has taken a rigorous and conservative approach to balance sheet management and has a loan to deposit ratio of 60%. The quality of our deposit base continues to improve and we are managing our assets to maintain flexibility during periods of market uncertainty.

5 Mortgages relative to system number based on APRA Banks data and RBA data.

MEDIA RELEASE

Divisional Results

Underlying momentum was strong despite the volatile macro environment with profit up 20% YOY (-9% HOH) with solid growth YOY in Retail. The Institutional business grew profit 18% YOY but was significantly impacted in the second half (-25%) by challenging Global Markets trading conditions.
Expenses grew 26% YOY (+9% HOH) as ANZ continued to build out the business. Greater scale and focused investment will drive greater cost-efficiency over time. Employee numbers (including contractors) have reduced by circa 250 from November last year as various enablement projects reached completion including the successful integration of the RBS businesses.
Lending grew 44% YOY (+18% HOH) and customer deposits increased 40% YOY (+16% HOH) with growth strong in both Retail and Institutional. While volumes were strong margins were impacted in the second half by pricing competition.
Institutional revenues increased 29% YOY but were down 2% HOH. Despite more challenging market conditions Global Markets sales income increased 41% YOY and trading income grew 10% YOY. Institutional expenses increased 38% YOY (+20% HOH) reflecting investment in people, products and systems.
Retail and Wealth revenue grew 18% YOY with the Wealth contribution to Retail growing from 14% to 22%. Expenditure up 15% YOY (+6% HOH) with savings from the RBS transition being reinvested to grow revenue. The cost to income ratio for this business will continue to improve having declined from 81% to 79% during 2011.
Partnerships profit grew 4% YOY (+18% HOH) with the largest contributions from AMMB and SRCB.
Provision charges decreased 35% YOY. The APEA business has, over the past year, improved the general quality of the loan portfolio in particular within the old RBS loan book.

NEW ZEALAND (all figures in NZD pro forma)

Strategic Focus and Progress

The New Zealand business is focused on delivering a lower cost structure through a simplification and efficiency program which is progressing well.

The management structure has been changed, costs have reduced and process and product simplification is in train as is the move to one IT system.
The new regional management approach simplifies decision-making across all businesses and increased frontline time with customers is being delivered through re-engineered processes.
Customer satisfaction and staff engagement scores have improved reflecting the careful management of the comprehensive change program.
Core system testing is progressing with migration to a single platform in late 2012 expected to assist productivity gains in 2013.
The product portfolio continues to be simplified and to date products in the Retail business have been reduced from 140 to under 100.
The management of the New Zealand business reflects the muted revenue environment – the productivity focus aims to deliver the lowest cost to income ratio in the market, our margin focus will deliver profitable growth albeit we expect continued low levels of credit demand and revenue, and our risk settings have been adjusted to prudently manage the changed economic outlook.

Divisional Results

Profit increased 55% YOY (flat HOH). PBP growth of 13% YOY (+2% HOH) reflecting muted HOH income trends and strong cost control (expenses down 2% YOY, flat HOH).

MEDIA RELEASE

Lending decreased 2% YOY and HOH largely reflecting customer deleveraging in both Retail and Commercial. Deposits grew 4% YOY with Commercial deposits up 6%.
Retail profit increased 44% YOY (+14% HOH) driven by income growth of 4% YOY and HOH, cost management (flat YOY, -2% HOH) and much lower provisions YOY.
Commercial profit increased 61% for the year but was slightly down in the second half (-1% HOH). Income grew 6% however a tougher second half operating environment saw income flat HOH. Expenses were well controlled (-3% YOY and HOH). Provisions declined 62% YOY.
Wealth profit grew 38% YOY (+23% HOH) with strong income results (+15% YOY +17% HOH) coupled with good expense control (down 2% YOY).
The provision charge decreased 58% YOY.

INSTITUTIONAL (all figures pro forma and FX adjusted)

Strategic Focus and Progress

The Institutional business is focused on executing to a clearly articulated strategy to build the world’s best bank for customers driven by trade and capital flows in the Asia Pacific region, particularly in resources, agribusiness and infrastructure.

The Divisional strategy aims to drive more diversified earnings by product, customer and geography, and growth in our client base. At the same time we are improving the risk profile of the business.
Institutional is managed as a global business providing the opportunity to focus its efforts on geographies, products and capabilities that can deliver growth at any given point in time.
The super regional focus is driving a changing geographic distribution of profit with APEA revenues up 30% to represent 26% of Institutional revenue compared to 20% in 2010. Trade finance revenue increased 29% YOY with 58% growth in Asia. Customer driven revenues have steadily increased, particularly in our key competency areas of resources, agribusiness and infrastructure where revenues grew 19%.
1,300 new relationships were acquired during the year with client numbers up 8% (Asia Pacific client base up 15% YOY).
Investment in the Transactive cash management platform is delivering growth with payments and cash management revenue up 13% YOY. The system is in place in Australia and New Zealand with Hong Kong and Singapore to be implemented in November 2011 and the remaining nine key Asian markets online by the end of 2012.
Revenues continue to grow in our priority products including trade, cash, foreign exchange and commodities. Investment in improved FX capability has been reflected in increased sales with FX revenues up 22% to represent just over half of total Global Markets sales revenues .
Productivity initiatives, which are ongoing, kept the cost run rate in the mid single digits through FY11 and a flatter run rate continued into FY12. Customer service is being improved through centralising, standardising and automating back office processes.

Divisional Results

Profit increased YOY up 9% however a significant second half fall in Trading and Balance Sheet Income in the Global Markets business drove a 15% HOH decline in PAT.
Customer deposits grew 20% YOY with lending up 16% YOY. APEA lending, which is weighted toward trade lending, grew 23% and now represents 34% of the loan portfolio.
Operating expense growth while 17% YOY was 5% HOH with 2011 cost growth in large part reflecting the full year impact of investment in people and in systems in 2010. Cost growth slowed in the second half to reflect the changed revenue environment and there are a series of productivity initiatives in place to maintain a lower cost run rate into FY12.
Transaction Banking performed well with profit up 10% YOY (+22% HOH) and Global Loans profit increased 67% YOY (+11% HOH).

MEDIA RELEASE

Global Markets profit declined 28% YOY. While customer sales revenues grew to record levels, up 13% YOY, total Global Markets revenues declined 11% YOY. Volatile market conditions in the second half coupled with ANZ’s decision to minimise risk positions in a highly unpredictable market, saw both Trading and Balance Sheet incomes decline significantly. Notwithstanding this trend, the Global Markets business was profitable in each quarter.
There is an improving trend in impaired assets with net impaired assets down 27% YOY. The individual provision charge has declined materially (down 72% YOY) and weighted average credit scores have continued to improve.

BALANCE SHEET, CAPITAL AND FUNDING

ANZ remains strongly capitalised with a Tier 1 ratio as at 30 September 2011 of 10.9% and a Common Equity Tier 1 ratio of 8.5% (equating to 9.5% on a Basel III fully harmonised basis).

The Group has continued to strengthen its funding profile with an increasing weighting to customer funding which now represent 61% of total funding. Since 2008, customer deposit growth has exceeded loan growth by circa $49 billion, significantly reducing ANZ’s reliance on wholesale debt.

The term debt issuance for FY11, including pre-funding, was $18 billion; in addition to which ANZ raised $1.34 billion in hybrid capital. A similar target will apply in FY12. This will include issuance under Australia's recently implemented covered bond legislation which will further diversify ANZ's debt investor base. Despite challenging global funding market conditions our New Zealand business, ANZ National, successfully executed its first covered bond transaction in October.

Reliance on offshore short-term wholesale debt remains low and ANZ’s liquidity position has been further strengthened. Notably, the liquidity portfolio and supplementary assets exceed total offshore wholesale debt (short and long-term) placing ANZ in a strong position in the current volatile global environment.

CREDIT QUALITY

Credit quality has improved throughout the year. Total gross impaired assets declined 15% largely reflecting a 23% decrease in impaired loans (-11% HOH). New impaired loans and NPCCDs[6] decreased 32% (-3% HOH) while new impaired assets declined 21% (-24% HOH).

The total provision charge declined HOH as the first half charge included an amount for natural disasters which was partially released in the second half, along with higher recoveries in the Institutional business. The collective provision balance has remained stable HOH.

ANZ has continued to take a prudent approach to provisioning throughout the global financial crisis and remains appropriately provided for at this point of the economic cycle. The Group’s coverage ratios reflect this, with the total provision coverage ratio at 1.96%[7] and the collective provision ratio 1.28%.

For media enquiries contact:

Paul Edwards Group GM, Corporate Communications Tel: +61-3-8654 9999 or +61-434-070101 Email: [email protected]

Stephen Ries

Senior Manager, Media Relations Tel: +61-3-8654 3659 or +61-409-655551 Email: [email protected]

For investor and analyst enquiries contact:

Jill Craig Group GM, Investor Relations Tel: +61-3-8654 7749 or +61-412-047448 Email: [email protected]

Ben Heath

Senior Manager, Investor Relations Tel: +61-3-8654 7793 or +61-435-655033 Email: [email protected]

6 NPCCDs – non performing commitments, contingencies and derivatives.

7 Total provision coverage is the individual provision plus the collective provision as a percentage of credit risk weighted assets (CRWA). Collective Provision ratio is the collective provisions as a percentage of CRWA.

FINANCIAL HIGHLIGHTS

Section 2 – Financial highlights

Profit

Underlying profit

Pro forma excluding exchange rate movements

Key financial indicators

Earnings per share Share dividends Profitability ratios Efficiency ratios Credit impairment provisioning Capital adequacy ratio Balance sheet – Key items Impaired assets Net tangible assets Other information

Divisional performance

FINANCIAL HIGHLIGHTS

Profit
	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Net interest income	5,837 5,646 3% 11,483 10,869 6%
Other operating income	2,490 2,959 -16% 5,449 4,823 13%
Operating income	8,327 8,605 -3% 16,932 15,692 8%
Operating expenses	(3,997) (4,026) -1% (8,023) (7,304) 10%
Profit before credit impairment and income tax	4,330 4,579 -5% 8,909 8,388 6%
Provision for credit impairment	(562) (675) -17% (1,237) (1,787) -31%
Profit before income tax	3,768 3,904 -3% 7,672 6,601 16%
Income tax expense	(1,074) (1,235) -13% (2,309) (2,096) 10%
Non-controlling interests	(3) (5) -40% (8) (4) 100%
Profit attributable to shareholders of the Company	2,691 2,664 1% 5,355 4,501 19%

Underlying profit

Profit has been adjusted to exclude non-core items to arrive at underlying profit, the result for the ongoing business activities of the Group. These adjustments have been determined on a consistent basis with those made in prior periods. The adjustments made in arriving at underlying earnings are included in statutory profit, and are therefore subject to audit within the context of the Group statutory audit opinion. The external auditor has informed the Audit Committee that the adjustments are based on the guidelines released by the Australian Institute of Company Directors (AICD) and the Financial Services Institute of Australasia (FINSIA), and consistent with prior period adjustments. Refer pages 80 to 82 for further details regarding the definition of underlying profit and an explanation of adjustments. Throughout this document, figures and ratios that are calculated on an ‘underlying’ basis have been shaded to distinguish them from figures calculated on a statutory basis. Pro forma results (refer page 9) have also been provided and have been shaded in a lighter colour.

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Statutory profit attributable to shareholders of the Company	2,691 2,664 1% 5,355 4,501 19%
Adjustments between statutory profit and underlying profit	143 154 -7% 297 524 -43%
Underlying profit	2,834 2,818 1% 5,652 5,025 12%

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Net interest income	5,839 5,642 3% 11,481 10,862 6%
Other operating income	2,543 2,788 -9% 5,331 4,920 8%
Operating income	8,382 8,430 -1% 16,812 15,782 7%
Operating expenses	(3,897) (3,821) 2% (7,718) (6,971) 11%
Profit before credit impairment and income tax	4,485 4,609 -3% 9,094 8,811 3%
Provision for credit impairment	(551) (660) -17% (1,211) (1,820) -33%
Profit before income tax	3,934 3,949 0% 7,883 6,991 13%
Income tax expense	(1,096) (1,126) -3% (2,222) (1,960) 13%
Non-controlling interests	(4) (5) -20% (9) (6) 50%
Underlying profit	2,834 2,818 1% 5,652 5,025 12%

FINANCIAL HIGHLIGHTS

Pro forma profit excluding exchange rate movements

Pro forma results have been prepared on the assumption that the acquisitions which occurred during 2010 took effect from 1 October 2009, effectively restating the Group’s underlying profit for the 2010 year. The pro forma results have also been adjusted for exchange rate movements which have impacted the current year results. This analysis enables readers to understand the estimated growth rates of the ongoing business performance of the Group, adjusted for the financial impact of exchange rates and acquisitions.

For numbers expressed in Australian Dollars, the September 2011 half year and the March 2011 half year do not sum to the September 2011 full year total due to:

The March 2011 half year results are restated at the September 2011 half year average exchange rates; and
The September 2010 full year results are restated at the September 2011 full year average exchange rates.

Refer pages 80 to 83 for further details of pro forma adjustments and exchange rate movements.

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt


Underlying profit	2,834 2,818 1% 5,652 5,025 12%
Foreign exchange adjustments	n/a 20 n/a n/a (52) n/a
Pro forma adjustments	- - n/a - 41 -100%
Pro forma profit	2,834 2,838 0% 5,652 5,014 13%

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt

	$M $M $M $M
Net interest income	5,839 5,638 4% 11,481 10,869 6%
Other operating income	2,543 2,811 -10% 5,331 5,105 4%
Operating income	8,382 8,449 -1% 16,812 15,974 5%
Operating expenses	(3,897) (3,807) 2% (7,718) (7,132) 8%
Profit before credit impairment and income tax	4,485 4,642 -3% 9,094 8,842 3%
Provision for credit impairment	(551) (659) -16% (1,211) (1,845) -34%
Profit before income tax	3,934 3,983 -1% 7,883 6,997 13%
Income tax expense	(1,096) (1,140) -4% (2,222) (1,977) 12%
Non-controlling interests	(4) (5) -20% (9) (6) 50%
Pro forma profit	2,834 2,838 0% 5,652 5,014 13%

FINANCIAL HIGHLIGHTS

Financial ratios - Profit and Loss

Financial ratios - Profit and Loss
Earnings per ordinary share (cents)	Half Year Full Year
Reference	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Page
Basic 110	104.0 104.2 0% 208.2 178.9 16%
Diluted 110	99.3 101.2 -2% 198.8 174.6 14%
Underlying1 29	108.8 109.6 -1% 218.4 198.7 10%
		Half Year Full Year Sep 11 Mar 11 Sep 11 Sep 10 n/a 64 64 52 76 n/a 76 74 76 64 140 126 74.5% 62.5% 68.5% 71.6% 70.7% 59.1% 64.9% 64.1% 6 6 12 11 14.9% 15.8% 15.3% 13.9% 15.7% 16.7% 16.2% 15.5% 0.93% 0.97% 0.95% 0.86% 0.98% 1.02% 1.00% 0.96% 15.0% 14.8% 14.9% 14.3% 2.44% 2.47% 2.46% 2.47% 2.80% 2.81% 2.81% 2.74% 59,307 60,930 120,204 116,999 48.0% 46.8% 47.4% 46.5% 1.38% 1.45% 1.42% 1.39% 46.5% 45.3% 45.9% 44.2% 1.35% 1.38% 1.37% 1.33% 46.5% 45.1% 45.9% 44.6% (58) 65 7 (4) 620 610 1,230 1,791 562 675 1,237 1,787 0.32% 0.32% 0.32% 0.51% 0.29% 0.35% 0.32% 0.50% (58) 66 8 (4) 609 594 1,203 1,824 551 660 1,211 1,820 0.31% 0.32% 0.31% 0.52% 0.28% 0.35% 0.32% 0.50% (51) 55 4 69

	Reference
Ordinary share dividends (cents)	Page
Interim - 100% franked (Mar 2010: 100% franked)	30
Final - 100% franked (Sep 2010: 100% franked)	30
Total - 100% franked	30
Ordinary share dividend payout ratio2	30
Underlying ordinary share dividend payout ratio1,2	30

Preference share dividend ($M)
Dividend paid3

Profitability ratios
Return on:
Average ordinary shareholders' equity4
Average ordinary shareholders' equity
(underlying)1,4
Average assets
Average assets (underlying)1
Total income
Net interest margin	16
Net interest margin (excluding Global Markets)	16
Underlying profit per average FTE ($)

Efficiency ratios
Operating expenses to operating income
Operating expenses to average assets
Operating expenses to operating income (underlying)1
Operating expenses to average assets (underlying)1
Operating expenses to operating income (pro forma)5

Credit impairment provisioning
Collective provision charge ($M)	23
Individual provision charge ($M)	22
Total provision charge ($M)	22
Individual provision charge as a % of average
net advances6
Total provision charge as a % of average net advances6
Underlying collective provision charge ($M)	23
Underlying individual provision charge ($M)	22
Total underlying provision charge ($M)	22
Individual provision charge as a % of average
net advances6
Total provision charge as a % of average net advances6
Credit risk on derivatives - credit intermediation trade	24
related (loss) / gain ($M)

1. Adjusted to reflect results for the ongoing business activities of the Group. Refer pages 80 to 82 for an explanation of adjustments

2. Dividend payout ratio is calculated using the 31 March 2010 interim, 30 September 2010 final and the 31 March 2011 interim dividends, and the proposed 30 September 2011 final dividend

3. Represents dividends paid on Euro Trust Securities issued on 13 December 2004

4. Average ordinary shareholders’ equity excludes non-controlling interests and preference shares

Adjusted for the impact of acquisitions and exchange rate movements. Refer page 83 for explanation of adjustments

6. 2010 has been adjusted to include average bill acceptances ($5.4 billion), previously included as trading securities

FINANCIAL HIGHLIGHTS


Financial ratios - Balance Sheet
	As at Movement
Reference	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Page

Capital adequacy ratio (%)
Common Equity Tier 1 36	8.5% 8.5% 8.0%
Tier 1 36	10.9% 10.5% 10.1%
Tier 2 36	1.2% 1.6% 1.8%
Total capital ratio 36	12.1% 12.1% 11.9%
Credit risk weighted assets ($B) 41	248.8 233.2 233.5 7% 7%
Total risk weighted assets ($B) 41	280.0 264.2 264.2 6% 6%


Balance Sheet: Key Items
Net loans and advances including acceptances ($B)1	397.3 379.4 369.4 5% 8%
Total assets ($B)	594.5 537.4 531.7 11% 12%
Customer deposits ($B)	296.8 267.1 256.9 11% 16%
Total equity ($B)	38.0 35.1 34.2 8% 11%


Impaired assets
Individual provision ($M) 112	1,697 1,717 1,875 -1% -9%
Individual provision as a % of gross impaired assets	30.4% 27.6% 28.6% 10% 6%
Collective provision ($M) 112	3,176 3,177 3,153 0% 1%
Collective provision as a % of credit risk weighted assets	1.28% 1.36% 1.35% -6% -5%

Gross impaired assets ($M) 26	5,581 6,221 6,561 -10% -15%
Net impaired assets ($M) 26	3,884 4,504 4,686 -14% -17%
Net impaired assets as a % of net advances	0.98% 1.19% 1.27% -18% -23%
Net impaired assets as a % of shareholders' equity2	10.2% 12.8% 13.7% -20% -26%


Net Assets
Net tangible assets per ordinary share ($)3	11.44 10.61 10.38 8% 10%
Net tangible assets attributable to ordinary shareholders ($B)3	30.1 27.6 26.6 9% 13%

Other information
Full time equivalent staff (FTE)	48,938 48,460 47,099 1% 4%
Assets per FTE ($M)	12.1 11.1 11.3 9% 7%
Share price
- high	$25.96 $25.96 $26.23
- low	$17.63 $22.05 $19.95
- closing	$19.52 $23.81 $23.68
Market capitalisation of ordinary shares ($B)4	51.3 61.8 60.6 -17% -15%

1. 2010 comparative has been adjusted to include bill acceptances (Sep 2010: $6.0 billion) previously included as trading securities

2. Includes non-controlling interests 3.

Equals shareholders’ equity less preference share capital, non-controlling interests, goodwill and other intangibles 4. As at period end

FINANCIAL HIGHLIGHTS

Divisional performance

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Profit after tax	$M $M $M $M
Australia	1,445 1,332 8% 2,777 2,717 2%
Asia Pacific, Europe & America	334 374 -11% 721 623 16%
Institutional	867 1,024 -15% 1,895 1,733 9%
New Zealand	348 350 -1% 692 449 54%
Group Centre	3 (14) large (36) (164) -78%
Less: Institutional Asia Pacific, Europe & America	(163) (228) -29% (397) (344) 15%
Pro forma profit after tax	2,834 2,838 0% 5,652 5,014 13%
Foreign exchange adjustments	n/a (20) n/a n/a 52 n/a
Pro forma adjustments	- - n/a - (41) -100%
Underlying profit after tax	2,834 2,818 1% 5,652 5,025 12%
Adjustments between statutory profit and underlying profit	(143) (154) -7% (297) (524) -43%
Profit attributable to shareholders of the Company	2,691 2,664 1% 5,355 4,501 19%

	As at ($B) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Net loans & advances including acceptances
Australia	231.2 224.9 217.9 3% 6%
Asia Pacific, Europe & America	38.8 30.9 27.1 25% 43%
Institutional	91.2 83.7 78.7 9% 16%
New Zealand	68.2 65.1 67.2 5% 1%
Less: Institutional Asia Pacific, Europe & America	(32.1) (25.2) (21.5) 28% 49%
Net loans & advances including acceptances by division	397.3 379.4 369.4 5% 8%


Customer deposits
Australia	128.5 120.9 112.2 6% 14%
Asia Pacific, Europe & America	64.8 52.8 46.6 23% 39%
Institutional	117.4 98.7 97.7 19% 20%
New Zealand	39.5 37.6 36.8 5% 7%
Group Centre1	(3.2) (2.6) (2.4) 25% 35%
Less: Institutional Asia Pacific, Europe & America	(50.2) (40.3) (34.0) 25% 48%
Customer deposits by division	296.8 267.1 256.9 11% 16%

Adjusted for foreign exchange movements

Net loans & advances including acceptances
Australia	231.2 224.9 217.9 3% 6%
Asia Pacific, Europe & America	38.8 32.8 27.2 18% 42%
Institutional	91.2 85.6 78.9 7% 16%
New Zealand	68.2 69.5 69.4 -2% -2%
Less: Institutional Asia Pacific, Europe & America	(32.1) (26.8) (21.5) 20% 49%
Net loans & advances including acceptances by division	397.3 386.0 371.9 3% 7%

Customer deposits
Australia	128.5 120.9 112.2 6% 14%
Asia Pacific, Europe & America	64.8 56.6 47.2 14% 37%
Institutional	117.4 102.1 98.2 15% 20%
New Zealand	39.5 40.1 38.1 -2% 4%
Group Centre1	(3.2) (2.4) (2.5) 33% 30%
Less: Institutional Asia Pacific, Europe & America	(50.2) (43.2) (34.1) 16% 47%
Customer deposits by division	296.8 274.1 259.1 8% 15%

1. Includes elimination of OnePath Australia investments in ANZ deposit products

REVIEW OF OPERATING RESULTS

Section 3 – Review of Operating Results

Review of Group results

Income and expenses

Credit risk Income tax expense Impact of exchange rate movements/revenue hedges Earnings per share Dividends Economic Profit Condensed balance sheet Liquidity risk Capital management Deferred acquisition costs and deferred income Software capitalisation

REVIEW OF OPERATING RESULTS

Review of Group results

Profit
	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Net interest income	5,837 5,646 3% 11,483 10,869 6%
Other operating income	2,490 2,959 -16% 5,449 4,823 13%
Operating income	8,327 8,605 -3% 16,932 15,692 8%
Operating expenses	(3,997) (4,026) -1% (8,023) (7,304) 10%
Profit before credit impairment and income tax	4,330 4,579 -5% 8,909 8,388 6%
Provision for credit impairment	(562) (675) -17% (1,237) (1,787) -31%
Profit before income tax	3,768 3,904 -3% 7,672 6,601 16%
Income tax expense	(1,074) (1,235) -13% (2,309) (2,096) 10%
Non-controlling interests	(3) (5) -40% (8) (4) 100%
Profit attributable to shareholders of the Company	2,691 2,664 1% 5,355 4,501 19%

Underlying profit

This result includes a number of non-core items which sit outside the ongoing business activities of the Group and has been provided to assist readers to understand the Group’s underlying performance. The adjustments made in arriving at underlying earnings are included in statutory profit, and are therefore subject to audit within the context of the Group statutory audit opinion. The external auditor has informed the Audit Committee that the adjustments are based on the guidelines released by the AICD and FINSIA, and consistent with prior period adjustments. Refer pages 80 to 82 for further details regarding the definition of underlying profit and an explanation of adjustments.

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Statutory profit attributable to shareholders of the Company	2,691 2,664 1% 5,355 4,501 19%
Adjustments between statutory profit and underlying profit	143 154 -7% 297 524 -43%
Underlying profit	2,834 2,818 1% 5,652 5,025 12%

Refer pages 84 to 87 within Profit Reconciliation for a detailed reconciliation of statutory profit to underlying profit.

Underlying profit

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Net interest income	5,839 5,642 3% 11,481 10,862 6%
Other operating income	2,543 2,788 -9% 5,331 4,920 8%
Operating income	8,382 8,430 -1% 16,812 15,782 7%
Operating expenses	(3,897) (3,821) 2% (7,718) (6,971) 11%
Profit before credit impairment and income tax	4,485 4,609 -3% 9,094 8,811 3%
Provision for credit impairment	(551) (660) -17% (1,211) (1,820) -33%
Profit before income tax	3,934 3,949 0% 7,883 6,991 13%
Income tax expense	(1,096) (1,126) -3% (2,222) (1,960) 13%
Non-controlling interests	(4) (5) -20% (9) (6) 50%
Underlying profit	2,834 2,818 1% 5,652 5,025 12%

REVIEW OF OPERATING RESULTS

Pro forma profit excluding exchange rate movements

To enhance the understanding and comparability of financial information between reporting periods, ‘Pro forma’ information is presented below. The pro forma adjustments are based on underlying profit and assume the increase in ownership in OnePath Australia and New Zealand acquisitions from 49% to 100% and the Landmark and RBS acquisitions took effect from 1 October 2009, effectively restating the Group’s underlying profit for the 2010 full year. This analysis provides the estimated growth rates of the ongoing business performance of the Group including recent acquisitions. The pro forma results below are also adjusted to exclude the impact of exchange rate movements. Details of the impact of exchange rate movements are on page 28 and details on the pro forma adjustments are on page 83.

Pro forma adjustments

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt


Underlying profit	2,834 2,818 1% 5,652 5,025 12%
Foreign exchange adjustments	n/a 20 n/a n/a (52) n/a
Pro forma adjustments	- - n/a - 41 -100%
Pro forma profit	2,834 2,838 0% 5,652 5,014 13%


Pro forma profit
	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt


Net interest income	5,839 5,638 4% 11,481 10,869 6%
Other operating income	2,543 2,811 -10% 5,331 5,105 4%
Operating income	8,382 8,449 -1% 16,812 15,974 5%
Operating expenses	(3,897) (3,807) 2% (7,718) (7,132) 8%
Profit before credit impairment and income tax	4,485 4,642 -3% 9,094 8,842 3%
Provision for credit impairment	(551) (659) -16% (1,211) (1,845) -34%
Profit before income tax	3,934 3,983 -1% 7,883 6,997 13%
Income tax expense	(1,096) (1,140) -4% (2,222) (1,977) 12%
Non-controlling interests	(4) (5) -20% (9) (6) 50%
Pro forma profit	2,834 2,838 0% 5,652 5,014 13%

 September 2011 v September 2010

An increase in net interest margin (excluding Global Markets) of 7 basis points reflecting the re-pricing of the asset books in Australia, New Zealand and Institutional, and growth in average interest earning assets and average deposits and other borrowings of 7% and 11% respectively drove most of the growth in the Group’s income. However the growth in income was negatively impacted by lower trading and balance sheet revenue in Global Markets reflecting difficult market conditions in the September 2011 half.

Operating expenses increased 8% principally from 17% growth in Institutional, and 22% growth in Asia Pacific, Europe & America (APEA) driven by investment in capability build and a new cash management platform. Costs in Australia Division were more constrained at 4%. Costs reduced in New Zealand reflecting the productivity gains from simplifying the business. Jaws were negative for the Group due to the income performance in Global Markets.

The provision for credit impairment decreased 34% with improvements across the New Zealand, Institutional and APEA portfolios. New Zealand provisions would have improved further had it not been for the impact of the Christchurch earthquake. An increase in the Australian Retail and Commercial books reflects provisioning for the impact of flooding in Queensland and Victoria and the impact of a higher Australian dollar.

 September 2011 v March 2011

A reduction of 1% in Operating income reflected a $283 million reduction in Global Markets income. A 3% growth in average interest earning assets and an increase in average deposits of 7% was partly offset by a 1 basis point reduction in margins (excluding Global Markets).

Operating expenses increased 2% with growth primarily in Institutional business in APEA as a result of ongoing investment in key strategic initiatives, infrastructure and system enhancements to support future growth coupled with central technology and hubs projects.

The decrease in provision for credit impairment was mainly due to the first half including provisions for Queensland and Victorian floods, and higher recoveries and writebacks in Institutional.

REVIEW OF OPERATING RESULTS

Income and expenses

Net interest income

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Net interest income reconciliation
Pro forma net interest income	5,839 5,638 4% 11,481 10,869 6%
Foreign exchange adjustments	n/a 4 n/a n/a 166 n/a
Pro forma adjustments	- - n/a - (173) -100%
Underlying net interest income	5,839 5,642 3% 11,481 10,862 6%
Adjustments between statutory and underlying net interest income	(2) 4 large 2 7 -71%
Net interest income	5,837 5,646 3% 11,483 10,869 6%

Group
Net interest income	5,837 5,646 3% 11,483 10,869 6%
Average interest earning assets	476,814 458,029 4% 467,447 439,277 6%
Net interest margin (%)	2.44 2.47 -1% 2.46 2.47 0%

Group (excluding Global Markets)
Net interest income	5,546 5,377 3% 10,923 10,012 9%
Average interest earning assets	394,582 383,832 3% 389,222 365,441 7%
Net interest margin (%)	2.80 2.81 0% 2.81 2.74 3%

 September 2011 v September 2010

The major contributors to the growth in average interest earnings assets and average deposits and other borrowings include:

Average interest earning assets

Movement	Movement
+$21.3b +$15.5b +$5.8b +$15.8b +$3.8b +$5.8b +$2.2b +$4.0b -$0.4b -$8.4b	7% 10% 4% 33% 38% 90% 86% 14% -1% -2%	Australia geography Mortgages – growth in net advances reflecting continuing customer demand for variable rate lending Other including Global Markets due to an increase in reverse repo balances and short term AFS assets in the Liquidity Portfolio and Commercial following growth in customer lending Asia Pacific, Europe & America geography Singapore – increase in trade loans, as well as launch of the mortgage lending business in Retail Hong Kong / Taiwan – growth in net advances from RBS business acquisition and organic growth China – higher lending and investment of surplus cash Other including India – with the launch of the India branch, onshore lending business grew New Zealand geography– decline in Agri and Institutional lending Foreign exchange rate movements
+$28.2b	6%	Movement in total average interest earning assets( incl. exchange rate movement)

Average deposits and other borrowings

Movement	Movement
+$27.8b +$8.6b +$8.2b +$7.8b +$3.2b +$14.1b +$13.7b +$0.4b -$2.0b -$7.3b	14% 14% 20% 16% 10% 30% 29% -4% -2%	Australia geography Deposits - uplift from core customer deposits Treasury - higher Certificates of Deposit due to change in funding mix following decision to stop re-discounting customer acceptances Markets & Transaction Banking – higher customer deposits in part reflecting system growth Other including Commercial due to growth in customer deposits Asia Pacific, Europe & America geography Higher deposits in Asia through business expansion and RBS acquisition, as well as deposit raising strategies in UK/Europe. Other New Zealand geography– decline in Commercial Paper issuance due to reduced funding requirements Foreign exchange rate movements
+$32.6b	11%	Movement in total average deposits and other borrowings ( incl. exchange rate movement)

REVIEW OF OPERATING RESULTS

Income and expenses, cont’d

Net interest income, cont’d

 September 2011 v September 2010, cont’d

The main drivers of the movement in net interest margin include:

Movement
+16bps +3bps -8bps -3bps -1bp	Asset margin – flow through of pricing decisions in retail and commercial businesses in Australia and New Zealand, increase in fee income in Institutional and benefit from a change in the lending mix Funding & Asset mix – benefit from lower reliance on wholesale funding as growth in customer deposits meets ongoing funding requirements Deposit costs – effects of strong competition (-5bps), continued customer migration to lower margin deposits (-2bps) and lower returns from the replicating portfolio (-1bp) Funding costs – increase in wholesale funding costs Other – various minor impacts
+7bps -8bps	Group excluding Global Markets Global Markets – lower earnings from managing balance sheet risk (-4bps), lower earnings from other lending and investment activities (-2bps), higher funding costs associated with unrealised gains on derivatives (-1bp) and the balance sheet dilution impact (-1bp)
-1bp	Movement in Group

 September 2011 v March 2011

The major contributors to the growth in average interest earning assets and average deposits and other borrowings include

Average interest earning assets

Movement	Movement
+$7.7b +$4.8b +$2.4b +$0.5b +$12.5b +$3.1b +$2.4b +$2.1b +$1.7b +$3.2b -$0.3b -$1.1b	2% 3% 6% 22% 26% 40% 32% 46% 11% 0% 0%	Australia geography Mortgages – growth in net advances reflecting continuing customer demand for variable rate lending Markets – growth in trading securities and reverse repo balances Other Asia Pacific, Europe & America geography Singapore – higher short term assets from surplus funds generated during deposits campaign America – increase in deposits placed with Federal Reserve due to higher available liquidity Hong Kong – growth in lending assets with Institutional customers China – growth in lending and investment of surplus funds Other New Zealand geography –growth in small business lending offset by decline in Agri lending Foreign exchange rate movements
+$18.8b	4%	Movement in total average interest earning assets( incl. exchange rate movement)

Average deposits and other borrowings

Average deposits and	Average deposits and	other borrowings
Movement
+$14.9b +$4.4b +$3.8b +$2.7b +$2.7b +$1.2b +$9.1b +$7.6b +$2.3b -$0.6b -$1.7b	7% 6% 8% 8% 8% 6% 17% 34% 12% -1% -1%	Australia geography Deposits - uplift in customer deposits Treasury - shift in funding mix to Commercial Paper away from longer term loan capital Transaction Banking - growth in customer deposits Commercial - growth in customer deposits Markets – continuous customer deposit growth Asia Pacific, Europe & America geography Institutional - customer deposits increased in Singapore, Japan and Hong Kong Other including America due to continued growth in customer deposits New Zealand geography– reduction in Treasury offset by increase in Retail Foreign exchange rate movements
+$21.7b	7%	Movement in total average deposits and other borrowings ( incl. exchange rate movement)

-$1.7b -1% Foreign exchange rate movements +$21.7b 7% Movement in total average deposits and other borrowings ( incl. exchange rate movement)	-$1.7b -1% Foreign exchange rate movements +$21.7b 7% Movement in total average deposits and other borrowings ( incl. exchange rate movement)
The main drivers of the movement in net interest margin include:
Movement
+4bps +2bps -4bps -3bps 0bps	Funding & Asset mix – benefit from lower reliance on wholesale funding as growth in customer deposits and other lower cost items meet ongoing funding requirements Asset margin – flow through of pricing decisions in retail and commercial businesses in Australia and New Zealand and benefit from a change in the lending mix to higher margin products Funding costs – increase in wholesale funding costs and lower earnings on capital Deposit costs – effects of strong competition to attract customer deposits (-2bps) and lower returns from the replicating portfolio (-1bp) Other – various minor impacts
-1bp -2bps	Group excluding Global Markets Global Markets –higher funding costs associated with unrealised gains on derivatives (-1bp), higher earnings from managing balance sheet risk and other lending activities (+2 bps) and the balance sheet dilution impact (-3bps)
-3bps	Movement in Group

REVIEW OF OPERATING RESULTS

Income and expenses, cont’d

Other operating income
	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Fee income1	1,180 1,129 5% 2,314 2,285 1%
Foreign exchange earnings1	180 159 13% 299 254 18%
Net income from wealth management	554 592 -6% 1,146 1,102 4%
Other1	283 279 2% 569 544 5%
Global Markets pro forma other operating income	346 652 -47% 1,003 920 9%
Pro forma other operating income	2,543 2,811 -10% 5,331 5,105 4%
Foreign exchange adjustments	n/a (23) n/a n/a 52 n/a
Pro forma adjustments	- - n/a - (237) -100%
Underlying other operating income	2,543 2,788 -9% 5,331 4,920 8%
Adjustments between statutory and underlying results	(53) 171 large 118 (97) large
Other operating income	2,490 2,959 -16% 5,449 4,823 13%

1. Excluding Global Markets

Global Markets pro forma income
Net interest income	291 267 9% 560 832 -33%
Other operating income	346 652 -47% 1,003 920 9%
Pro forma Global Markets income	637 919 -31% 1,563 1,752 -11%

 September 2011 v September 2010

The following explanations relate to pro forma underlying other operating income:

Fee Income

Fee Income	Fee Income
Movement
+$66m +$26m -$26m -$12m -$12m -$9m -$9m +$5m	+17% +7% -10% -5% -6% -9% -5%	Transaction Banking – driven mainly by volume growth Cards and Unsecured Lending Australia – driven by volume growth Deposits Australia – due to lower exception fees and reduction in volumes New Zealand – due to lower exception fees and reduction in volumes Other Retail Products – reflecting a reduction in fee income from the Merchants business Mortgages Australia – driven mainly by lower exception fees Global Loans – reflecting tighter pricing Other
+$29m	+1%	Movement in fee income

Foreign Exchange

Foreign Exchange	Foreign Exchange
Movement
+$25m +$13m +$7m	+24% Large	Transaction Banking – due to higher volumes and pricing initiatives Retail & Wealth Asia – driven by higher volumes Other
+$45m	+18%	Movement in foreign exchange income

Net income from wealth management

Movement	Movement
+$23m +$18m +$3m	+2% +14%	Wealth Australia – increased capital investment earnings largely due to the recovery from the impacts of the Global Financial Crisis. This was partially offset by a reduction in funds management net income due to a combination of margin squeeze and lower average funds under management. New Zealand Wealth – mainly driven by an increase in insurance income from OnePath New Zealand Other
+$44m	+4%	Movement in net income from wealth management

REVIEW OF OPERATING RESULTS

Income and expenses, cont’d

Other operating income, cont’d

September 2011 v September 2010, cont’d

Other income

Other income	Other income
Movement
+$25m +$21m +$16m -$14m -$9m -$8m -$6m	large large +4% -17% -48% -72%	Retail & Wealth Asia – 2011 includes a $19 million gain on sale of the Taiwan credit card portfolio Global Services & Operations – due to the $19 million profit on sale of 20 Martin Place in Sydney Asia Partnerships – equity accounted earnings increased $88 million due to higher earnings in Shanghai Rural Commercial Bank (SRCB) offset by lower earnings in Bank of Tianjin (BoT) and Saigon Securities Inc (SSI). This was further offset by the $35 million impairment charge relating to the carrying value of our investment in Sacombank in 2011 compared to a separate $25 million gain in 2010, reversing an earlier writedown of the investment in SSI E*Trade – driven mainly by lower brokerage income and impairment of an investment in associate New Zealand – due mainly to the de-consolidation of a previously owned controlled entity Global Loans – reduction in income from loan restructuring activities Other
+$25m	+5%	Movement in other income

Total Global Markets income is affected by mix impacts between the categories within other operating income and net interest income. Total Global Markets income decreased $189 million or 11%. Trading and balance sheet income within Global Markets businesses has fallen 36% reflecting the impact of a number of significant global events that have impacted the stability of financial markets. Despite the difficult trading conditions Global Markets continues to diversify the product and geographic mix of its revenue streams and client base. Markets sales were up 13% and FX revenues increased 3% with FX sales revenues now representing 52% of total Global Markets sales revenues (2010: 48%). Refer page 65 for further information.

September 2011 v March 2011

The following explanations relate to pro forma underlying other operating income:

Fee Income

Fee Income	Fee Income	Fee Income
Movement
+$27m +$22m +$2m	+13% +30%		Transaction Banking – driven mainly by volume growth Other Retail Products – reflecting an increase in fee income from the Merchants business largely driven by higher volumes and pricing initiatives and a GST charge in the March 2011 half as a result of a change in the GST recovery rate Other
+$51m	+5%		Movement in fee income
Foreign Exchange
Movement
+$10m +$6m +$5m	+17% +35%		Transaction Banking – driven by higher volumes and pricing initiatives Cards and Unsecured Lending Australia – driven by seasonality of the ANZ Travel Card Other
+$21m	+13%		Movement in foreign exchange income
Net income from wealth management
Movement
-$31m -$7m		-6%	Wealth Australia – primarily due to lower net insurance income from adverse claims and lapse experience partially offset by strong new business growth. Other
-$38m		-6%	Movement in net income from wealth management
Other income
Movement
+$20m +$8m +$5m -$19m -$8m -$2m	Large +27% +3% -77% -21%		Global Services & Operations – due to the $19 million profit on sale of 20 Martin Place in Sydney Mortgages – driven mainly by increased insurance premium income Asia Partnerships – March 2011 half included the $35 million write-down of the investment in Sacombank. Equity accounted earnings decreased $31 million in the second half of 2011 mainly due to lower earnings from SRCB Retail & Wealth Asia – March 2011 included a $19 million gain on sale of the Taiwan credit card portfolio E*Trade – due mainly to impairment of an investment in associate Other
+$4m	+2%		Movement in other income

Total Global Markets income is affected by mix impacts between the categories within other operating income and net interest income. Total Global Markets income decreased $282 million. Trading and balance sheet income within Global Markets businesses has fallen 70% reflecting the impact of a number of significant global events that have impacted the stability of financial markets. Despite the difficult trading conditions Global Markets continues to diversify the product and geographic mix of its revenue streams and client base. Markets sales revenues were up 3% (or 11% excluding Capital Markets where securitisation portfolio volumes and margins were down in line with the market), reflecting our investment in FX capabilities. Refer page 65 for further information.

REVIEW OF OPERATING RESULTS

Income and expenses, cont’d


Expenses
	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Personnel expenses	2,365 2,340 1% 4,720 4,275 10%
Premises expenses	340 339 0% 681 658 3%
Computer expenses	524 496 6% 1,022 865 18%
Other expenses	668 632 6% 1,295 1,334 -3%
Pro forma operating expenses	3,897 3,807 2% 7,718 7,132 8%
Foreign exchange adjustments	n/a 14 n/a n/a 139 n/a
Pro forma adjustments	- - n/a - (300) -100%
Underlying operating expenses	3,897 3,821 2% 7,718 6,971 11%
Adjustments between statutory and underlying results	100 205 -51% 305 333 -8%
Total operating expenses	3,997 4,026 -1% 8,023 7,304 10%
Total employees	48,938 48,460 1% 48,938 47,099 4%

September 2011 v September 2010

The following explanations relate to pro forma underlying operating expenses:

Pro forma operating expenses

Movement	Movement
+$145m -$20m +$264m +$284m +$86m +$173m	4% -2% 22% 17% 28% 34%	Australia New Zealand Asia Pacific, Europe & America Institutional Group Centre Less: Institutional Asia Pacific, Europe & America
+$586m	8%	Movement in total operating expenses

APEA cost growth was up 22% from the build out of the franchise, largely in Institutional, and compared with 18% revenue growth. Institutional cost growth was up 17% driven by higher personnel costs from investment to build out capabilities in APEA and investment in cash management and FX capability. The Australia division cost growth of 4% was largely due to annual salary increases and a 2% increase in staff numbers. New Zealand costs were down 2%, reflecting productivity gains from simplifying the business. Group Centre cost growth was up 28% largely from increased investment in our Chengdu and Manila Hubs and increased technology investment.

Personnel expenses increased $445 million (10%) as a result of annual salary increases and the continued build out of the Institutional franchise in APEA. Inflationary increases in New Zealand were partly offset by a 2% reduction in staff numbers from simplifying the business. Staff numbers increased in Group Centre as a result of the build out of the offshore Hubs and investment in technology.
Premises expenses increased $23 million (3%) reflecting higher staff numbers, inflationary increases and an increased cost associated with reducing our carbon footprint.
Computer expenses increased $157 million (18%) due to a $51 million increase in depreciation and amortisation and an increase in computer contractors’ costs from our significant investment in technology.
Other expenses reduced $39 million (-3%) due to a strong focus on constraining discretionary costs, lower non-lending losses in 2011 and lower project related expenses which are offset by increases in personnel and computer expenses.

 September 2011 v March 2011

The following explanations relate to pro forma underlying operating expenses:

Pro forma operating expenses

Movement	Movement
+$14m +$2m +$42m +$51m +$39m +$58m	1% 0 6% 5% 22% 19%	Australia New Zealand Asia Pacific, Europe & America Institutional Group Centre Less: Institutional Asia Pacific, Europe & America
+$90m	2%	Movement in total operating expenses

REVIEW OF OPERATING RESULTS

Income and expenses, cont’d

Expenses, cont’d

September 2011 v March 2011, cont’d

APEA costs were up 6% due to continued investment expanding distribution and building front line capability. Institutional cost growth was up 5% driven by continued investment in strategic capabilities. Australia division was up 1% and New Zealand division flat. Group Centre costs increased 22% due to project related technology expenditure and investment in offshore Hubs.

Personnel expenses were up $25 million (1%) mainly due to continued investment in the Institutional franchise in APEA. Group Centre costs increased as a result of the build out of the offshore Hubs and investment in technology.
Premises expenses increased $1 million with a $5 million reduction in Australia division offset by small increases across the other divisions.
Computer expenses increased $28 million with an increase in project related expenses in Institutional and Group Centre.
Other expenses increased $36 million mainly due to a GST credit received by Australia division in March half and increased marketing spend in APEA.

REVIEW OF OPERATING RESULTS

Credit risk (including credit risk on derivatives)

Provision for credit impairment charge

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Australia	297 414 -28% 711 598 19%
Asia Pacific, Europe & America1	67 41 63% 110 177 -38%
Institutional1	104 152 -32% 258 742 -65%
New Zealand	92 75 23% 166 395 -58%
Group Centre	38 2 large 40 10 large
Less: Institutional Asia Pacific, Europe & America1	(47) (25) 88% (74) (77) -4%
Pro forma provision for credit impairment charge	551 659 -16% 1,211 1,845 -34%
Foreign exchange adjustments	n/a 1 n/a n/a 25 n/a
Pro forma adjustments	- - n/a - (50) -100%
Underlying provision for credit impairment charge	551 660 -17% 1,211 1,820 -33%
Adjustments between statutory and underlying results	11 15 -27% 26 (33) large
Provision for credit impairment charge	562 675 -17% 1,237 1,787 -31%

Includes impairment on AFS assets

Individual provision charge

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt


Australia	371 298 24% 669 594 13%
Asia Pacific, Europe & America1	76 50 52% 128 166 -23%
Institutional1	75 148 -49% 224 797 -72%
New Zealand	134 123 9% 255 348 -27%
Group Centre	- - n/a - 10 -100%
Less: Institutional Asia Pacific, Europe & America1	(47) (25) 88% (73) (76) -4%
Pro forma individual provision charge	609 594 3% 1,203 1,839 -35%
Foreign exchange adjustments	n/a - n/a n/a 26 n/a
Pro forma adjustments	- - n/a - (41) -100%
Total underlying individual provision charge	609 594 3% 1,203 1,824 -34%
Adjustments between statutory and underlying results	11 16 -31% 27 (33) large
Total individual provision charge	620 610 2% 1,230 1,791 -31%

1. Includes impairment on AFS assets of $37 million (Sep 10 full year: $21 million; Sep 11 half: $21 million; Mar 11 half: $16 million)

The pro forma individual provision charge decreased $636 million over the year, due mainly to reductions in Institutional. The decrease in Institutional of $573 million reflects improved portfolio quality, recoveries and a reduction in new impaired assets. The decreases in New Zealand and APEA of $93 million and $38 million respectively reflects slowly improving economies in New Zealand and Asia. Australia saw a $75 million increase reflecting the impact of the natural disasters, and weakness in the rural sector.

REVIEW OF OPERATING RESULTS

Credit risk (including credit risk on derivatives), cont’d

Individual Provision Charge, cont’d

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Underlying new and increased provisions
Australia	503 437 15% 940 844 11%
Asia Pacific, Europe & America	144 107 35% 251 191 31%
Institutional	254 252 1% 506 921 -45%
New Zealand	237 221 7% 458 533 -14%
Group Centre	- - n/a - - n/a
Less: Institutional Asia Pacific, Europe & America	(77) (38) large (115) (94) 22%
New and increased provisions for loans and advances	1,061 979 8% 2,040 2,395 -15%

Underlying recoveries and writebacks
Australia	(132) (139) -5% (271) (267) 1%
Asia Pacific, Europe & America	(68) (55) 24% (123) (38) large
Institutional	(179) (103) 74% (282) (121) large
New Zealand	(103) (100) 3% (203) (172) 18%
Group Centre	- - n/a - 10 -100%
Less: Institutional Asia Pacific, Europe & America	30 12 large 42 17 large
Recoveries and writebacks	(452) (385) 17% (837) (571) 47%

Collective provision charge

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Collective provision charge by source
Lending growth	74 56 32% 130 61 large
Risk profile	(56) (35) 60% (91) (68) 34%
Portfolio mix	(4) (16) -75% (20) (26) -23%
Economic cycle and concentration risk adjustment	(72) 60 large (12) 29 large
Collective provision charge	(58) 65 large 7 (4) large


Pro Forma collective provision charge by division
Australia	(74) 116 large 42 4 large
Asia Pacific, Europe & America	(9) (9) 0% (18) 11 large
Institutional	29 4 large 34 (55) large
New Zealand	(42) (48) -13% (89) 47 large
Group Centre	38 2 large 40 - n/a
Less: Institutional Asia Pacific, Europe & America	- - n/a (1) (1) 0%
Pro forma collective provision charge	(58) 65 large 8 6 33%
Foreign exchange adjustments	n/a 1 n/a n/a (1) n/a
Pro forma adjustments	- - n/a - (9) -100%
Underlying collective provision charge	(58) 66 large 8 (4) large
Non continuing businesses	- (1) -100% (1) - n/a
Collective provision charge	(58) 65 large 7 (4) large

The pro forma collective provision charge increased by $2 million during the year with increases in Australia, Institutional and Group Centre offset by decreases in New Zealand and APEA. The $38 million increase in Australia is primarily driven by growth and an upward trend in delinquencies in the retail portfolio, floods and writebacks in the prior year. The APEA decrease reflects underlying credit improvement offset partially by growth driven by Asia. The Institutional division charge of $34 million is mainly driven by growth in Global Loans. The New Zealand reduction was driven by releases to the economic cycle adjustment as a result of the earthquake impacted exposures migrating to impaired, coupled with some improvement in credit quality. Part of the flood provision release was used to fund an additional central economic cycle adjustment of $40 million due to ongoing global uncertainty.

REVIEW OF OPERATING RESULTS

Credit risk (including credit risk on derivatives), cont’d

Expected loss

Management believe that disclosure of modelled expected loss data for individual provisions will assist in assessing the longer term expected loss rates on the lending portfolio as it removes the volatility in reported earnings created by the use of IFRS credit loss provisioning. The expected loss methodology is used internally for return on equity analysis and economic profit reporting. The expected loss on the current portfolio as at the end of the period was $1,789 million, an increase of $69 million over 2010.

	% of Group		As at
	exposure a~~t~~
Expected loss as a percentage of exposure at default	default	Sep 11	Mar 11	Sep 10
Australia	44%	0.31%	0.33%	0.31%
Asia Pacific, Europe & America	17%	0.28%	0.33%	0.36%
Institutional	40%	0.22%	0.24%	0.25%
New Zealand	13%	0.25%	0.28%	0.30%
Less: Institutional Asia Pacific, Europe & America	-14%	-0.16%	-0.19%	-0.21%
Total	100%	0.29%	0.31%	0.31%
Annual expected loss ($million)		1,789	1,752	1,720
	% of		As at
	Group
	gross lending
Expected loss as a percentage of gross lending assets	assets	Sep 11	Mar 11	Sep 10
Australia	58%	0.37%	0.39%	0.37%
Asia Pacific, Europe & America	10%	0.75%	0.82%	0.99%
Institutional	23%	0.59%	0.58%	0.67%
New Zealand	17%	0.29%	0.33%	0.34%
Less: Institutional Asia Pacific, Europe & America	-8%	-0.44%	-0.48%	-0.59%
Total	100%	0.44%	0.45%	0.46%

Credit risk (gain)/loss on derivatives

ANZ recognised a gain of $21 million on credit risk on structured credit intermediation trades and impaired derivatives transacted with corporate customers during the year ended 30 September 2011.

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Credit risk on derivatives
Credit intermediation trade related1	51 (55) large (4) (69) -94%
Credit risk on impaired derivatives	(2) (15) -87% (17) 34 large
Credit risk on derivatives (gain)/loss	49 (70) large (21) (35) -40%

1. ANZ hedges, in part, the foreign currency exposure relating to structured credit intermediation trades. The 2010 full year result includes a $14 million loss on foreign currency hedges

REVIEW OF OPERATING RESULTS

Credit risk (including credit risk on derivatives), cont’d

Structured credit intermediation trades

ANZ entered into a series of structured credit intermediation trades from 2004 to 2007. The underlying structures involve credit default swaps (CDS) over synthetic collateralised debt obligations (CDOs), portfolios of external collateralised loan obligations (CLOs) or specific bonds/floating rate notes (FRNs). ANZ sold protection using credit default swaps over these structures and then to mitigate risk, purchased protection via credit default swaps over the same structures from eight US financial guarantors.

Being derivatives, both the sold protection and purchased protection are marked-to-market. Prior to the commencement of the global credit crisis, movements in valuations of these positions were not significant and largely offset each other in income. Following the onset of the credit crisis, the purchased protection has provided only a partial offset against movements in valuation of the sold protection because:

one of the counterparties to the purchased protection defaulted and many of the remaining were downgraded; and
a credit valuation adjustment is applied to the remaining counterparties to the purchased protection counterparties reflective of changes to their credit worthiness.

ANZ is actively monitoring this portfolio with a view to reducing the exposure via termination and restructuring of both the bought and sold protection if and when ANZ deems it cost effective relative to the perceived risk associated with a specific trade or counterparty. Costs were incurred in prior periods managing these positions. The notional amount on the outstanding sold trades at September 2011 was US$8.3 billion (Mar 2011: US$8.4 billion; Sep 2010: US$8.4 billion).

	As at ($M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Financial impacts on credit intermediation trades
Mark-to-market exposure to financial guarantors	803 443 641 81% 25%
Cumulative costs relating to
financial guarantors
Credit valuation adjustment for outstanding transactions	197 143 195 38% 1%
Realised close out and hedge costs	314 317 320 -1% -2%
Cumulative life to date costs	511 460 515 11% -1%

The cumulative costs include realised losses relating to restructuring of trades in order to reduce risks and realised losses on termination of sold protection trades. It also includes foreign exchange hedging losses.

The credit risk expense on structured credit derivatives remains volatile reflecting the impact of market movements in credit spreads and AUD/USD rates. It is likely there will continue to be volatility in this market value.

REVIEW OF OPERATING RESULTS

Credit risk (including credit risk on derivatives), cont’d

Gross impaired assets

Gross impaired assets at $5,581 million represent a 15% decrease since 30 September 2010, driven by portfolio improvement and asset realisations within the Institutional portfolio.

Net impaired assets

Net impaired assets at $3,884 million represent a 17% decrease since 30 September 2010. The Group has an individual provision coverage ratio of 30%, reflecting a prevalence of well secured exposures within impaired assets.

	As at ($M) Movement
	Sep 11 Sep 11
Gross impaired assets	Sep 11 Mar 11 Sep 10 v. Mar 11 v. Sep 10
Impaired loans	4,650 5,203 6,075 -11% -23%
Restructured items	700 704 141 -1% large
Non-performing commitments and contingencies	231 314 345 -26% -33%

Gross impaired assets	5,581 6,221 6,561 -10% -15%
Individual provisions
Impaired loans	(1,687) (1,700) (1,849) -1% -9%
Non-performing commitments and contingencies	(10) (17) (26) -41% -62%
Net impaired assets	3,884 4,504 4,686 -14% -17%

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
New impaired assets1	$M $M $M $M
Impaired loans	1,755 1,814 -3% 3,569 5,063 -30%
Restructured items	75 613 -88% 688 171 large
Non-performing commitments and contingencies	12 10 20% 22 211 -90%
Total new impaired assets	1,842 2,437 -24% 4,279 5,445 -21%

1 . 2010 excludes impaired assets from acquisitions of $423 million

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
New impaired assets by division
Australia	857 797 8% 1,654 1,396 18%
Asia Pacific, Europe & America	162 146 11% 308 505 -39%
Institutional	358 925 -61% 1,283 2,263 -43%
New Zealand	511 657 -22% 1,168 1,651 -29%
Less: Institutional Asia Pacific, Europe & America	(64) (89) -28% (153) (381) -60%
Underlying new impaired assets	1,824 2,436 -25% 4,260 5,434 -22%
Adjustments between statutory and underlying	18 1 large 19 11 73%
Total new impaired assets	1,842 2,437 -24% 4,279 5,445 -21%

		As at ($M)	Movement
		Mar 11 Sep 10
Impaired and Restructured Items			Sep 11 Sep 11
by size of exposure	Sep 11		v. Mar 11 v. Sep 10
Less than $10 million	2,490	2,407 2,461	3% 1%
$10 million to $100 million	2,123	2,561 2,365	-17% -10%
Greater than $100 million	968	1,253 1,735	-23% -44%
Gross impaired assets1	5,581	6,221 6,561	-10% -15%
Less: Individually assessed provisions for impairment	(1,697) (1,717) (1,875)		-1% -9%
Net impaired assets	3,884 4,504 4,686		-14% -17%

1. Includes $700 million restructured items (Mar 2011: $704 million; Sep 2010: $141 million)

REVIEW OF OPERATING RESULTS

Credit risk (including credit risk on derivatives), cont’d

		As at ($M)	Movement

		Mar 11 Sep 10
Ageing analysis of net advances			Sep 11 Sep 11
that are past due but not impaired	Sep 11		v. Mar 11 v. Sep 10
1-5 days	3,028	2,868 2,547	6% 19%
6-29 days	4,540	6,222 5,494	-27% -17%
30-59 days	1,584	2,509 1,669	-37% -5%
60-89 days	865	1,309 878	-34% -1%
>90 days	1,834	1,955 1,555	-6% 18%
Total	11,851	14,863 12,143	-20% -2%

Income tax expense

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Income tax expense charged in the income statement	1,074 1,235 -13% 2,309 2,096 10%
Effective tax rate	28.5% 31.6% 30.1% 31.8%
Income tax expense on pro forma underlying profit1	1,096 1,140 -4% 2,222 1,977 12%
Effective tax rate (pro forma underlying profit)	27.9% 28.6% 28.2% 28.3%
Income tax expense on underlying profit1	1,096 1,126 -3% 2,222 1,960 13%
Effective tax rate (underlying profit)	27.9% 28.5% 28.2% 28.0%

1. Refer pages 80 to 82 for explanation of adjustments between statutory profit and underlying profit

 September 2011 v September 2010

The pro forma underlying effective tax rate decreased 0.1%.

 September 2011 v March 2011

The pro forma underlying effective tax rate decreased 0.7% due to a release of withholding tax provisions no longer required.

REVIEW OF OPERATING RESULTS

Impact of exchange rate movements/revenue hedges

The Group uses derivative instruments to economically hedge against the adverse impact on future offshore revenue streams from exchange rate movements.

Movements in average exchange rates, net of associated revenue hedges, resulted in a decrease of $52 million in the Group’s underlying profit after tax for the full year, principally due to losses in translation from foreign currencies in the Asia Pacific and New Zealand regions partly offset by gains from the associated USD and NZD revenue hedges which are booked in Australia as foreign exchange earnings. NZD earnings were translated at effective exchange rates of 1.2681 (September 2011) and 1.2214 (September 2010). USD earnings were translated at effective exchange rates of 0.9902 (September 2011) and 0.8990 (September 2010). This included the impact on earnings (underlying basis) from associated revenue hedges, which increased by $60 million (before tax) over the full year (September 2011 half: increase of $43 million). Hedge revenue is booked in the Group Centre.

	Half Year Sep 2011 v. Half Year Mar 2011 Full Year Sep 2011 v. Full Year Sep 2010

	FX FX

	unadjusted FX adjusted FX Impact unadjusted FX adjusted FX Impact
	% growth % growth $M % growth % growth $M
Net interest income	3% 4% (4) 6% 7% (166)
Other operating income	-9% -10% 23 8% 10% (52)
Operating income	-1% -1% 19 7% 8% (218)
Operating expenses	2% 2% 14 11% 13% 139
Profit before credit impairment and income tax	-3% -3% 33 3% 4% (79)
Provision for credit impairment	-17% -16% 1 -33% -33% 25
Profit before income tax	0% -1% 34 13% 14% (54)
Income tax expense	-3% -4% (14) 13% 13% 2
Non-controlling interests	-20% -20% - 50% 50% -
Underlying profit	1% 0% 20 12% 14% (52)

Revenue related hedges

The Group has taken out economic hedges against New Zealand Dollar and US Dollar revenue streams. New Zealand Dollar exposure is the most significant, covering the New Zealand geography (refer page 77) and the debt component of New Zealand Dollar intragroup funding of this business, which amounted to NZD1.77 billion at 30 September 2011. Details of revenue hedges are set out below.

	Half Year Full Year
	Sep 11 $M Mar 11 $M Sep 11 $M Sep 10 $M
NZD Economic hedges
Net open NZD position (notional principal)1	788 302 788 369
Amount taken to income (pre tax)2	(20) 17 (3) 53
Amount taken to income (pre tax underlying basis)3	20 20 40 31
USD Economic hedges
Net open USD position (notional principal)1	1,068 1,022 1,068 100
Amount taken to income (pre tax)2	(29) 48 19 13
Amount taken to income (pre tax underlying basis)3	47 4 51 -

1. Value in AUD at original contract rate 2.

Unrealised valuation movement plus realised revenue from closed out hedges
3. Realised revenue from closed out hedges

In the September 2011 full year:

NZD0.6 billion of economic hedges matured and a realised gain of $40 million (pre-tax) was booked to the income statement.
NZD1.0 billion of economic hedges are in place at a forward rate of approximately NZD1.28/AUD partially hedging 2012 & 2013 earnings.
USD0.3 billion of economic hedges matured and a realised gain of $51 million (pre-tax) was booked to the income statement.
USD1.0 billion of economic hedges are in place at a forward rate of approximately USD0.96/AUD partially hedging 2012 & 2013 earnings.
An unrealised loss of $27 million (pre-tax) on the outstanding NZD1.0 billion and USD1.0 billion of economic hedges was booked to the income statement and has been treated as an adjustment to statutory profit as these are hedges of future years’ NZD and USD revenues.

REVIEW OF OPERATING RESULTS

Earnings per share (cents)1
	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt

Basic	104.0 104.2 0% 208.2 178.9 16%
Diluted	99.3 101.2 -2% 198.8 174.6 14%
Number of fully paid ordinary shares on issue (M)	2,629.0 2,596.4 1% 2,629.0 2,559.7 3%
Weighted average number of ordinary shares (M)2
Statutory	2,581.5 2,550.1 1% 2,565.9 2,509.3 2%
Underlying2	2,598.8 2,566.7 1% 2,582.8 2,523.2 2%
Adjusted weighted average number of shares - diluted (M)	2,824.8 2,748.3 3% 2,809.6 2,697.0 4%
Underlying earnings per share
Profit attributable to shareholders of the Company ($M)	2,691 2,664 1% 5,355 4,501 19%
Less: Adjustments between statutory profit
	(143) (154) -7% (297) (524) -43%
and underlying profit ($M)

Underlying profit ($M)	2,834 2,818 1% 5,652 5,025 12%
Preference share dividends ($M)3	(6) (6) 0% (12) (11) 9%
Underlying profit less preference share dividends ($M)	2,828 2,812 1% 5,640 5,014 12%
Underlying earnings per share (cents)	108.8 109.6 -1% 218.4 198.7 10%

1. Refer page 110 for full calculation

2. Includes Treasury shares held in OnePath Australia 3.

The earnings per share calculation excludes the Euro Hybrid preference shares

 September 2011 v September 2010

Basic earnings per share (EPS) were up 16% (29.3 cents) on full year September 2010. Underlying EPS for the Group increased 10% (19.7 cents) on the September 2010 full year. The main drivers of the increase in Underlying EPS on the September 2010 year were an increase in profit before credit impairment (after tax) which contributed 4%, an after tax decrease in credit impairment charge which contributed 8% and a dilution from an increase in the weighted average number of shares (3%).

 September 2011 v March 2011

September 2011 half year Basic earnings per share (EPS) decreased slightly (0.2 cents) to 104.0 cents. Underlying EPS for the Group decreased 1% (0.8 cents). The main drivers of the decrease in Underlying EPS on the September 2011 half were a decrease in profit before credit impairment (after tax) which contributed (4%), an after tax decrease in credit impairment charge which contributed 4% and a dilution from an increase in the weighted average number of shares (1%).

REVIEW OF OPERATING RESULTS

Dividends

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Dividend per ordinary share (cents)
Interim (fully franked)	n/a 64 n/a 64 52 23%
Final (fully franked)	76 n/a n/a 76 74 3%

Ordinary share dividend payout ratio (%)1	74.5% 62.5% 68.5% 71.6%
Ordinary share dividends used in payout ratio ($M)1	1,999 1,662 20% 3,661 3,213 14%
Profit after tax ($M)	2,691 2,664 1% 5,355 4,501 19%
Less: Adjustments between statutory profit
	(143) (154) -7% (297) (524) -43%
and underlying profit ($M)

Underlying profit ($M)	2,834 2,818 1% 5,652 5,025 12%
Less: Preference share dividends paid	(6) (6) 0% (12) (11) 9%
Ordinary share dividend payout ratio (underlying basis)1	70.7% 59.1% 64.9% 64.1%

1. Dividend payout ratio calculated using proposed 2011 final dividend of $1,999 million, which is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the March 2011 half year and September 2010 year calculated using gross dividend of $1,662 million and $1,895 million respectively. Dividend payout ratio calculated by adjusting profit attributable to shareholders of the company by the amount of preference shares dividends paid.

The Directors propose that a final dividend of 76 cents be paid on 16 December 2011 on each eligible fully paid ANZ ordinary share. The proposed 2011 final dividend will be fully franked for Australian tax purposes.

ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the 2011 final dividend and ANZ intends to provide shares under the DRP and BOP through the issue of new shares. The “Acquisition Price” to be used in determining the number of shares to be provided under the DRP and BOP will be calculated in accordance with the DRP and BOP Terms and Conditions using a 1.5% discount. Refer Note 6 of the Notes to the Condensed Financial Statements for further details regarding the calculation of the “Acquisition Price” and the operation of the DRP and BOP.

Economic profit

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Profit attributable to shareholders of the company	2,691 2,664 1% 5,355 4,501 19%
Less: Adjustments between statutory profit and underlying profit	(143) (154) -7% (297) (524) -43%
Underlying profit	2,834 2,818 1% 5,652 5,025 12%
Economic credit cost adjustment	(261) (167) 56% (428) 59 large
Imputation credits	515 575 -10% 1,090 1,132 -4%
Economic return	3,088 3,226 -4% 6,314 6,216 2%
Cost of capital	(1,998) (1,857) 8% (3,855) (3,565) 8%
Economic profit	1,090 1,369 -20% 2,459 2,651 -7%

Economic profit is a risk adjusted profit measure used to evaluate business unit performance.

Economic profit is calculated via a series of adjustments to underlying profit. The Economic credit cost adjustment replaces the actual credit loss charge with expected loss based on the average loss per annum on the portfolio over an economic cycle. The benefit of imputation credits is recognised, measured at 70% of Australian tax. The cost of capital is a major component of Economic profit. At an ANZ Group level, this is calculated using ordinary shareholders’ equity, multiplied by the cost of capital rate (currently 11%) plus the dividend on preference shares. At a business unit level, capital is allocated based on economic capital, whereby higher risk businesses attract higher levels of capital. This method is designed to help drive appropriate risk management and ensure business returns align with the relevant risk. Key risks covered include credit risk, operating risk, market risk and various other risks.

Economic profit declined half on half primarily due to weak trading income in Global Markets, compared to flat underlying profit. This difference was driven by:

Negative economic credit cost adjustment impact, as actual credit losses were below the average expected loss on the portfolio;
Lower imputation credits as a greater proportion of credit adjusted profit is generated from non-Australian sources; and
Higher cost of capital charge in line with growth in shareholder’s equity.

REVIEW OF OPERATING RESULTS

Condensed balance sheet

Condensed balance sheet
		As at ($B) Movement
		Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10

Assets
Liquid assets		24.9 19.3 18.9 29% 31%
Due from other financial institutions		8.8 7.5 5.5 18% 61%
Trading and available-for-sale assets1		58.3 47.3 48.2 23% 21%
Derivative financial instruments		54.1 29.6 37.8 83% 43%
Net loans and advances including acceptances1		397.3 379.4 369.4 5% 8%
Investments relating to insurance business		29.9 32.9 32.2 -9% -7%
Other		21.2 21.4 19.7 -1% 8%
Total assets		594.5 537.4 531.7 11% 12%
Liabilities
Due to other financial institutions		23.0 22.0 21.6 5% 6%
Customer deposits		296.8 267.1 256.9 11% 16%
Other deposits and other borrowings		72.0 64.7 53.5 11% 35%
Deposits and other borrowings		368.7 331.8 310.4 11% 19%
Derivative financial instruments		50.1 29.8 37.2 68% 35%
Liability for acceptances		1.0 0.6 11.5 68% -92%
Bonds and notes		56.6 58.5 59.7 -3% -5%
Insurance policy liabilities/external unitholder liabilities		32.5 35.2 34.4 -8% -6%
Other		24.6 24.4 22.7 1% 8%
Total liabilities		556.5 502.3 497.5 11% 12%
Total equity		38.0 35.1 34.2 8% 11%

1. 2010 comparatives have been adjusted to include bill acceptances (Sep 2010: $6.0 billion) as net loans and advances rather than trading securities

September 2011 v September 2010

Major movements in the balance sheet categories include:

Assets	Movement	Movement	FX impact	Comments excluding FX impact
Liquid assets Trading & available- for-sale assets Derivative financial instruments Net loans and advances including acceptances Liabilities	$6.0b $10.1b $16.3b $27.9b	31% 21% 43% 8%	Nil Nil $0.3b $2.5b	Driven primarily from an increase of central bank deposits in Japan and America of $9.0 billion partially offset by a reduction in bank certificate of deposits of $1.3 billion in Singapore and a reduction in repurchase agreements of $1.8 billion. Driven by increase of $5.9 billion in investment in government securities by Singapore and New Zealand and an increase of $4.1 billion in Institutional Australia due to increased commodity holdings and government securities. Growth was attributable to a depreciation in the AUD against other currencies late in the second half of 2011 and volatility in the foreign exchange and interest rate markets. Primarily driven by above system Australian housing lending growth of $10.9 billion (7%) and APEA growth of $11.1 billion (40%) across all business lines.
Deposits and other borrowings Derivative financial instruments Liability for acceptances	$58.3b $12.9b ($10.5b)	19% 35% -92%	$2.2b $0.3 b Nil	Growth in customer deposits of $39.4 billion (15%) was concentrated in the second half, and reflected growth in Retail, Commercial and Institutional in Australia of $18.9 billion (12%) as consumers and corporates deleverage and growth in APEA of $17.7 billion (37%) driven by strong momentum across the region. Other deposits and borrowings increased $16.7 billion (30%) mainly due to an increase in Certificate of Deposits issued by Treasury in Australia, following a switch in products used for funding purposes from liability for acceptances to certificate of deposits. Growth was attributable to a depreciation in the AUD against other currencies late in the second half of 2011 and volatility in the foreign exchange and interest rate markets. Cessation of re-discounting of commercial bills.

REVIEW OF OPERATING RESULTS

Condensed balance sheet, cont’d

September 2011 v March 2011[1]

Assets	Movement	Movement	FX impact	Comments excluding FX impact
Net loans and advances including acceptances Liabilities	$17.9b	5%	$6.7b	Primarily driven by above system, albeit slower than first half, Australian housing lending growth of $4.8 billion (3%) and APEA growth of $5.7 billion (17%) across all business lines.
Deposits and other borrowings	$36.9b	11%	$7.6b	Customer deposits increased $24.2 billion (9%) due to growth Australia of $15.4 billion (9%) and APEA of $8.2 billion (14%). Other deposits and borrowings increased by $5.1 billion mainly in Australia.

1. Where movement and explanation is the same as the September 2011 v September 2010, balance sheet item is not repeated

REVIEW OF OPERATING RESULTS

Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due, including repaying depositors or maturing wholesale debt, or that the Group has insufficient capacity to fund increases in assets. The timing mismatch of cash flows and the related liquidity risk is inherent in all banking operations and is closely monitored by the Group. The Group maintains a portfolio of liquid assets to manage potential stresses in funding sources. The minimum level of liquidity portfolio assets to hold is based on a range of ANZ specific and general market liquidity stress scenarios such that potential cash flow obligations can be met over the short to medium term.

The Group’s approach to liquidity risk management incorporates the following key components:

Scenario Modelling of funding sources
The Global financial crisis highlighted the importance of differentiating between stressed and normal market conditions in a namespecific crisis and the different behaviour that offshore and domestic wholesale funding markets can exhibit during market stress events. ANZ’s liquidity scenario modelling stresses site and total bank cash flow projections against multiple ‘survival horizons’ over which period the Group is required to remain cash flow positive. Scenarios modelled are either prudential requirements, i.e. a ‘going-concern’ scenario, or ‘name crisis’ scenario; or Board mandated scenarios including ‘Name-specific’ stresses and ‘Funding Market’ events. Under these scenarios, customer and wholesale balance sheet asset/liability flows are stressed.
Liquidity portfolio
The Group holds a diversified portfolio of cash and high credit quality securities that may be sold or pledged to provide same-day liquidity. This portfolio helps protect the Group’s liquidity position by providing cash in a severely stressed environment. All assets held in this portfolio are securities eligible for repurchase under agreements with the applicable central bank (i.e. ‘repo eligible’).
The liquidity portfolio is well diversified by counterparty, currency, and tenor. Under the liquidity policy framework, securities purchased for ANZ’s liquidity portfolio must be of a similar or better credit quality to ANZ’s external long-term or short-term credit ratings and continue to be repo eligible.

Supplementing the prime liquid asset portfolio, the Group held:

additional central bank deposits with the US Federal Reserve and Bank of Japan of $10.3 billion,
secondary sources of liquidity including Australian Government securities, Australian State Government securities and gold of $9.6 billion, and,
additional cash and other securities to satisfy local country regulatory liquidity requirements.

These other assets are not included in the prime liquidity portfolio outlined below:

	As at

	Sep 11 Mar 11 Sep 10
Prime liquidity portfolio (Market Values)1	AUD $B AUD $B AUD $B
Australia	20.8 24.9 21.0
New Zealand	9.1 8.5 7.5
United States	1.4 1.2 1.3
United Kingdom	2.7 2.2 2.2
Asia	6.7 2.0 4.2
Internal Residential Mortgage Backed Securities (Australia)	26.8 24.6 26.7
Internal Residential Mortgage Backed Securities (New Zealand)	3.9 3.7 3.8
Total	71.4 67.1 66.7
Long term counterparty/security Credit Rating2 Market Value AUD $B1 AAA 52.7 AA+ 10.0 AA 7.3 AA- 0.9 A+ 0.3 A 0.2 Total 71.4

1. Market value is post the repo discount applied by the applicable central bank

2. Where available, based on Standard & Poor’s long-term credit ratings

REVIEW OF OPERATING RESULTS

Liquidity risk, cont’d

Regulatory Change

Following the publication of earlier discussion papers relating to liquidity prudential requirements, APRA and the Basel Committee on Banking Supervision have both made further announcements on this topic. These proposals include enhancements to governance and other qualitative requirements, including the requirement for a clear risk appetite statement on liquidity risk from the Board. Many of these aspects have been integrated into ANZ's liquidity management framework for some time. The proposed changes to the quantitative requirements, including changes to scenario stress tests and structural liquidity metrics, are more significant. While ANZ has an existing stress scenario framework and structural liquidity risk metrics and limits in place, the requirements proposed are in general more onerous. These changes will impact the future composition and size of ANZ’s liquidity portfolio as well as the size and composition of the Bank’s funding base. APRA is expected to release details on the prudential changes shortly, with compliance against the new liquidity coverage ratio commencing in 2015.

Funding

ANZ manages its funding profile using a range of funding metrics and balance sheet disciplines. This approach is designed to ensure that an appropriate proportion of the Group’s assets are funded by stable funding sources including core customer deposits, longerdated wholesale funding (with a remaining term exceeding one year) and equity. This includes targeting a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency.

Customer deposits and other funding liabilities increased by 16% to $308.2 billion and now represents 61% of all funding, an increase of 3% from 30 September 2010.

$18.0 billion of term wholesale debt (with a remaining term greater than one year), including $2.4 billion of pre-funding executed during full year 2010, was issued during the 2011 financial year. In addition, ANZ raised $1.34 billion in hybrid capital, taking the total term debt and hybrid issuance for the 2011 financial year to $19.4 billion. As at 30 September 2011, term wholesale funding represented 12% of total funding, a decrease from 16% as at 30 September 2010 (partly due to 2011 financial year pre-funding completed during 2010 financial year as funding was replaced with customer deposits and Tier 1 capital).

ANZ maintained access to all major global wholesale funding markets during 2011.
Over 70% of term funding requirements were completed during the first half, before market conditions began to deteriorate. Benchmark term debt issues were completed in AUD, USD, JPY, CHF, CAD and NZD.
All short-term wholesale funding needs were comfortably met, despite an increase in volatility in offshore markets and a general shortening of tenor preference from US money market investors.
The weighted average tenor of new term debt issuance was 4.7 years (unchanged year-on-year).
The weighted average cost of new term debt issuance during 2011 declined marginally (4 bps) relative to 2010. Average portfolio costs remain substantially above pre-crisis levels and continue to increase as maturing term wholesale funding is replaced at higher spreads.

Over the past year strong customer deposit growth and stable term debt issuance has allowed ANZ to maintain a low reliance on short-term wholesale funding markets. The proportion of total funding sourced from short-term wholesale funding markets was unchanged at 12% between 30 September 2010 and 30 September 2011.

The tables on the following page show the Group’s funding composition.

REVIEW OF OPERATING RESULTS

Liquidity risk, cont’d

	As at ($M) Movement
	Sep 11 Sep 11
	Sep 11 Mar 11 Sep 10 v. Mar 11 v. Sep 10
Customer deposits and other liabilities1
Australia	128,490 120,907 112,248 6% 14%
Asia Pacific, Europe & America	64,824 52,795 46,604 23% 39%
Institutional	117,434 98,747 97,681 19% 20%
New Zealand	39,471 37,572 36,797 5% 7%
Group Centre	(3,241) (2,595) (2,500) 25% 30%
Less: Institutional Asia Pacific, Europe & America	(50,224) (40,322) (33,958) 25% 48%
Underlying customer deposits	296,753 267,102 256,872 11% 16%
Adjustments between statutory and underlying	1 4 3 -75% -67%
Total customer deposits	296,754 267,106 256,875 11% 16%
Other2	11,450 11,755 9,113 -3% 26%
Total customer deposits and other liabilities (funding)	308,204 278,861 265,988 11% 16%

Wholesale funding
Bonds and notes	56,551 58,526 59,714 -3% -5%
Loan capital	11,993 11,634 12,280 3% -2%
Certificates of deposit	55,554 51,513 39,530 8% 41%
Liability for acceptances3	970 577 11,495 68% -92%
Commercial paper issued	14,333 10,769 11,641 33% 23%
Due to other financial institutions	23,012 22,014 21,610 5% 6%
Other wholesale borrowings4	(1,128) 2,735 2,140 large large
Total wholesale funding	161,285 157,768 158,410 2% 2%
Shareholders' equity (excl preference shares)	37,083 34,258 33,284 8% 11%

Total funding	506,572 470,887 457,682 8% 11%

Wholesale funding5
Short term wholesale funding	63,333 54,601 54,078 16% 17%
Long term wholesale funding
- Less than 1 year residual maturity	27,883 26,736 26,779 4% 4%
- Greater than 1 year residual maturity	63,293 71,052 72,065 -11% -12%
Hybrid capital including preference shares	6,776 5,379 5,488 26% 23%
Total wholesale funding and preference share capital
	161,285 157,768 158,410 2% 2%
excluding shareholders' equity


Total funding maturity
Short term wholesale funding	12% 12% 12%
Long term wholesale funding
- Less than 1 year residual maturity	6% 6% 6%
- Greater than 1 year residual maturity	12% 15% 16%
Total customer liabilities (funding)	61% 59% 58%
Shareholders' equity and hybrid debt	9% 8% 8%
Total funding and shareholders' equity	100% 100% 100%

1. Includes term deposits, other deposits excluding securitisation deposits and an adjustment to eliminate OnePath Australia investments in ANZ deposit products

2. Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in OnePath 3.

The decrease in liability for acceptances is due to a switch in products used for funding purpose

Includes net derivative balances, special purpose vehicles, other borrowings and preference share capital Euro hybrids

5. Long term wholesale funding amounts are stated at original hedged exchange rates. Movements due to currency fluctuations in actual amounts borrowed are classified as short term wholesale funding

REVIEW OF OPERATING RESULTS

Capital Management

Capital Management
		As at
	Sep 11		Mar 11	Sep 10
Common Equity Tier 11	8.5%		8.5%	8.0%
Tier 1	10.9%		10.5%	10.1%
Tier 2	1.2%		1.6%	1.8%
Total capital	12.1%		12.1%	11.9%
Risk weighted assets $M	279,964		264,236	264,242

1. Common Equity Tier 1 is Tier 1 excluding hybrid Tier 1 capital instruments Further details of the components of capital and the capital adequacy calculation are set out on pages 39 to 42

The Basel II Accord principles took effect from 1 January 2008. For calculation of minimum capital requirements under Pillar 1 (Capital Requirements) of the Basel II Accord, ANZ has been accredited by Australian Prudential Regulation Authority (APRA) to use Advanced Internal Ratings Based (AIRB) methodology for credit risk weighted assets and Advanced Measurement Approach (AMA) for the operational risk weighted asset equivalent.

Common Equity Tier 1 Ratio

The Common Equity Tier 1 ratio at September 2011 of 8.5% represents an increase from September 2010 of 47 basis points and an increase from March 2011 of 3 basis points. The key contributors to the increase were:

	Half Year Full Year
	Sep 11 vs Mar 11 Sep 11 vs Sep 10
Common Equity Tier 1
Underlying profit after preference share dividends	+107bps ($2.8B) +213bps ($5.6B)
Ordinary share dividends net of reinvestment	-46bps ($1.2B) -83bps ($2.2B)
Risk weighted assets (excluding FX impact)
Portfolio growth and mix	-43bps -51bps
Risk migration and Expected Losses in excess of Eligible Provisions	+7bps +7bps
Portfolio data review	+2bps +2bps
Non-credit risk	0bps -1bps
Profit retention in insurance businesses and associates	-9bps -15bps
Non-underlying profit items	-5bps -11bps
Capitalised software expense	-9bps -14bps
Other items	-1bps +7bps
Net organic	+3bps +54bps
Shanghai Rural Commercial Bank	0bps -5bps
Bank of Tianjin	0bps -2bps
Investments	0bps -7bps
Total Common Equity Tier 1 movement	+3bps +47bps

Tier 1 (in addition to Common Equity Tier 1 above)
Hybrid Tier 1 capital	+51bps +51bps
Additional Tier 1 usage attributable to risk weighted asset growth and other	-11bps -14bps
Total Tier 1 movement	+43bps +84bps

REVIEW OF OPERATING RESULTS

Capital management, cont’d

Hybrid Tier 1 Capital

ANZ raises hybrid Tier 1 capital to further strengthen the Group’s capital base and supplement its Common Equity Tier 1 capital position, ensuring compliance with APRA’s prudential capital requirements and meeting Group operating targets for Tier 1. The total amount of qualifying hybrid Tier 1 capital is known as Residual Tier 1 capital which is limited to 25% of Tier 1 capital. Innovative Tier 1 capital, a sub category of Residual Tier 1 capital, is limited to 15% of Tier 1 capital. As at 30 September 2011, ANZ’s hybrid Tier 1 capital usage and instrument details were as follows:

Instrument	$M	% of Net	Limit	Amount in	Accounting	Interest
		Tier 1 capital		issue currency	classification	rate
UK Stapled Securities	721			GBP450 million	Debt	Coupon 6.54%
ANZ Convertible						90 day BBSW + 2.50%
Preference Shares (CPS1)	1,081			AUD1,081 million	Debt	(gross pay equivalent)
ANZ Convertible						90 day BBSW + 3.10%
Preference Shares (CPS2)	1,969			AUD1,969 million	Debt	(gross pay equivalent)
ANZ Convertible						180 day BBSW + 3.10%
Preference Shares (CPS3)	1,340			AUD1,340 million	Debt	(gross pay equivalent)
Non-innovative instruments	5,111
Euro Trust Securities	871			EURO500 million	Equity	Euribor (3 month) + 0.66%
US Trust Securities	770			USD750 million	Debt	Coupon: 5.36%
Innovative instruments	1,641	5.4%	15%
Residual Tier 1 capital	6,752	22.1%	25%

Regulatory change

Following on from the December 2010 Basel Committee paper on prudential capital reforms, on 6 September 2011 APRA released a discussion paper detailing the implementation of their proposed Basel III capital reforms in Australia.

The discussion paper proposes to adopt the Basel III reforms with increased capital deductions from Common Equity Tier 1 capital, higher capital targets with prescribed minimum capital buffers; and tighter requirements around hybrid Tier 1 and Tier 2 securities. In addition to higher risk weightings for counterparty credit risk proposed by the December 2010 Basel Committee paper, the adjustments to ANZ’s capital ratios proposed by the discussion paper are set out below and APRA is proposing that these become effective from January 2013. The APRA proposals generally adopt a more conservative approach than the December 2010 Basel Committee paper and ANZ believes full alignment to Basel III would be more appropriate.

The Basel Committee is still to release final proposals for contingent capital and measures to address systematic and inter-connected risks – these are expected in 2012.

REVIEW OF OPERATING RESULTS

Capital management, cont’d

The following table reconciles the September 2011 APRA Basel II capital ratios to the pro-forma APRA Basel III ratios, based on our current interpretation of APRA’s 6 September 2011 discussion paper methodology. This is then fully aligned to the Basel Committee’s framework including the December 2010 consultation paper.

framework including the December 2010 consultation paper.
	Common Equity
	Tier 1Capital Tier 1Capital Total Capital
APRA September 2011 Basel II	8.5% 10.9% 12.1%
Plus: Dividend not provided for (net of DRP)	0.5% 0.5% 0.5%
Less: Tier 2 capital deductions moved to Common Equity Tier 1
Investment in ADIs and overseas equivalents	(0.4%) (0.4%) -
Investment in ANZ insurance subsidiaries including OnePath	(0.4%) (0.4%) -
Expected losses in excess of eligible provisions	(0.2%) (0.2%) -
Other	(0.1%) (0.1%) (0.1%)
Less: 10% reduction of existing hybrid Tier 1 and Tier 2 securities1	- (0.2%) (0.4%)
	7.9% 10.1% 12.1%
Less: estimated increase in RWA2	(0.4%) (0.5%) (0.6%)
Pro forma ratio - should the APRA Basel III proposals be adopted	7.5% 9.6% 11.5%
Plus: adjustments to fully align to Basel III
10% allowance for investments in insurance subsidiaries and ADIs including overseas equivalents
	0.8% 0.7% 0.6%

Up to 5% allowance for deferred tax assets3	0.2% 0.2% 0.2%
Other capital items	0.2% 0.2% 0.3%
Pro forma Basel III (fully aligned capital)	8.7% 10.7% 12.6%
Plus: additional APRA Basel II conservative RWA methodologies
Mortgage 20% LGD floor and others	0.6% 0.7% 0.7%
IRRBB RWA (APRA Pillar 1 approach)	0.2% 0.3% 0.4%
Pro forma Basel III fully aligned	9.5% 11.7% 13.7%

1. From 1 January 2013 transitional treatment for existing securities on issue will apply. The maximum that can be included in the respective capital base is 90% of the volume of eligible transitional Tier 1 and Tier 2 securities on issue at 31 December 2012. The cap will reduce by 10 percentage points each year until 1 January 2022

2. Excludes additional RWA for Market Risk and Securitisation applicable to APRA enhancements to the Basel II framework effective 1 January 2012 and potential impacts arising from APRA’s yet to be released Basel III liquidity reforms

Including alignment of deferred tax asset associated with Expected Losses in excess of Eligible Provisions calculation to Basel III methodology

REVIEW OF OPERATING RESULTS

	As at ($M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Qualifying Capital
Tier 1
Shareholders' equity and non-controlling interests	37,954 35,129 34,155 8% 11%
Prudential adjustments to shareholders' equity Table 1	(3,479) (2,637) (2,840) 32% 23%
Fundamental Tier 1 capital	34,475 32,492 31,315 6% 10%
Deductions Table 2	(10,611) (10,070) (10,057) 5% 6%
Common Equity Tier 1 capital	23,864 22,422 21,258 6% 12%
Non-innovative Tier 1 capital instruments Table on p37	5,111 3,751 3,787 36% 35%
Innovative Tier 1 capital instruments Table on p37	1,641 1,597 1,646 3% 0%
Tier 1 capital	30,616 27,770 26,691 10% 15%


Tier 2
Upper Tier 2 capital Table 3	1,228 1,166 1,223 5% 0%
Subordinated notes Table 4	5,017 6,176 6,619 -19% -24%
Deductions Table 2	(3,071) (3,055) (3,026) 1% 1%
Tier 2 capital	3,174 4,287 4,816 -26% -34%
	33,790 32,057 31,507 5% 7%


Totalqualifying capital

Capital adequacy ratios
Common Equity Tier 1	8.5% 8.5% 8.0%
Tier 1	10.9% 10.5% 10.1%
Tier 2	1.2% 1.6% 1.8%
Total	12.1% 12.1% 11.9%
	279,964 264,236 264,242 6% 6%
Risk weighted assets Table 5

REVIEW OF OPERATING RESULTS

Capital management, cont’d

	As at ($M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10

Table 1: Prudential adjustments to shareholders' equity
Treasury shares attributable to OnePath policy holders	358 359 358 0% 0%
Reclassification of preference share capital	(871) (871) (871) 0% 0%
Accumulated retained profits and reserves of insurance, funds management and securitisation entities and associates	(1,686) (1,274) (1,312) 32% 29%
Deferred fee revenue including fees deferred as part of loan yields	414 398 402 4% 3%
Hedging reserve	(169) (29) (11) large large
Available-for-sale reserve	(126) (57) (80) large 58%
Dividend not provided for	(1,999) (1,662) (1,895) 20% 5%
Accrual for Dividend Reinvestment Plans	600 499 569 20% 5%
Total	(3,479) (2,637) (2,840) 32% 23%

Table 2: Deductions from Tier 1 capital
Unamortised goodwill & other intangibles (excluding OnePath Australia and New Zealand)	(3,027) (2,855) (2,952) 6% 3%
Intangible component of investments in OnePath Australia and New Zealand1
	(2,071) (2,059) (2,043) 1% 1%

Capitalised software	(1,490) (1,263) (1,127) 18% 32%
Capitalised expenses including loan and lease origination fees	(688) (666) (655) 3% 5%
Applicable deferred tax assets (excluding the component relating to the general reserve for impairment of financial assets)	(136) (154) (235) -12% -42%
Mark-to-market impact of own credit spread	(128) (18) (19) large large
Sub-total	(7,540) (7,015) (7,031) 7% 7%
Deductions taken 50% from Tier 1 and 50% from Tier 2 Gross 50% 50% 50%
Investment in ANZ insurance subsidiaries (399) (200) (200) (198) 0% 1%
Investment in funds management entities (57) (29) (29) (36) 0% -19%
Investment in OnePath Australia and New Zealand (1,813) (906) (901) (845) 1% 7%
Investment in other Authorised Deposit Taking Institutions and overseas equivalents (2,302) (1,151) (1,162) (988) -1% 16%
Expected losses in excess of eligible provisions (951) (475) (473) (560) 0% -15%
Investment in other commercial operations (4) (2) (8) (21) -75% -90%
Other deductions (617) (308) (282) (378) 9% -19%
Sub-total (6,143) (3,071) (3,055) (3,026) 1% 1%
Total (10,611) (10,070) (10,057) 5% 6%

Table 3: Upper Tier 2 capital
Perpetual subordinated notes 962 902 943 7% 2%
General reserve for impairment of financial assets net of attributable deferred tax asset2 266 264 280 1% -5%
Total 1,228 1,166 1,223 5% 0%

Table 4: Subordinated notes[3 ]

For capital adequacy calculation purposes, subordinated note issues are reduced by 20% of the original amount over the last four years to maturity and are limited to 50% of Tier 1 capital.

1. Calculation based on prudential requirements

2. Under Basel II, this consists of the surplus of the general reserve for impairment of financial assets, net of tax and/or the provisions attributable to the standardised portfolio

3. The fair value adjustment is excluded for prudential purposes as the prudential standard only permits inclusion of cash received and makes no allowance for hedging

REVIEW OF OPERATING RESULTS

Capital management, cont’d

		As at ($M) Movement
		Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10

	Sep 11
Table 5: Risk weighted assets
On balance sheet	183,039	175,661 173,035 4% 6%
Commitments	43,041	37,619 39,835 14% 8%
Contingents	9,536	9,621 10,084 -1% -5%
Derivatives	13,212	10,345 10,563 28% 25%
Total credit risk	248,828	233,246 233,517 7% 7%
Market risk - Traded	3,046	2,547 5,652 20% -46%
Market risk - IRRBB	8,439	10,112 7,690 -17% 10%
Operational risk	19,651	18,331 17,383 7% 13%
Total risk weighted assets	279,964	264,236 264,242 6% 6%

		As at ($M) Movement
		Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
	Sep 11
Table 6: Credit risk weighted assets by Basel asset class
Subject to Advanced IRB approach
Corporate	106,120	98,393 101,940 8% 4%
Sovereign	4,365	3,217 2,720 36% 60%
Bank	9,456	6,958 6,135 36% 54%
Residential mortgage	41,041	40,126 38,708 2% 6%
Qualifying revolving retail (credit cards)	7,468	7,552 7,205 -1% 4%
Other retail	19,240	18,485 17,899 4% 7%
Credit risk weighted assets
	187,690	174,731 174,607 7% 7%
subject to Advanced IRB approach


Credit risk specialised lending exposures
	27,757	26,799 26,605 4% 4%
subject to slotting criteria


Subject to Standardised approach
Corporate	22,484	20,680 20,560 9% 9%
Residential mortgage	845	406 567 large 49%
Qualifying revolving retail (credit cards)	2,344	2,207 2,279 6% 3%
Other retail	1,650	1,710 1,396 -4% 18%
Credit risk weighted assets subject to Standardised approach	27,323	25,003 24,802 9% 10%


Credit risk weighted assets relating to securitisation exposures	1,136	1,209 2,091 -6% -46%
Credit risk weighted assets relating to equity exposures	1,399	1,635 1,577 -14% -11%
Other assets	3,523	3,869 3,835 -9% -8%
Total credit risk weighted assets	248,828	233,246 233,517 7% 7%
		Collective Provision Regulatory Expected Loss


Table 7: Collective rovision and reulator exected loss b		As at ($M) As at ($M)
p gy p y division		Sep 11 Sep 10 Sep 11 Sep 10
Australia		1,062 1,021 1,891 1,749
Asia Pacific, Europe & America		501 519 148 134
Institutional		1,383 1,342 1,429 1,773
New Zealand		456 537 904 1,002
Group Centre		40 - - -
Less: Institutional Asia Pacific, Europe & America		(269) (270) (127) (121)
Underlying collective provision and regulatory expected loss		3,173 3,149 4,245 4,537
Adjustments between statutory and underlying		3 4 16 18
Collective provision and regulatory expected loss		3,176 3,153 4,261 4,555

REVIEW OF OPERATING RESULTS

Capital management, cont’d

	As at ($M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Table 8: Expected loss in excess of eligible provisions


Basel expected loss
Defaulted	1,975 2,018 2,225 -2% -11%
Non-defaulted	2,286 2,285 2,330 0% -2%
	4,261 4,303 4,555 -1% -6%

Less: Qualifying collective provision after tax
Collective provision	(3,176) (3,177) (3,153) 0% 1%
Non-qualifying collective provision	375 271 234 38% 60%
Standardised collective provision	340 378 399 -10% -15%
Deferred tax asset	730 719 725 2% 1%
	(1,731) (1,809) (1,795) -4% -4%

Less: Qualifying individual provision after tax
Individual provision	(1,697) (1,717) (1,875) -1% -9%
Standardised individual provision	477 429 458 11% 4%
Collective provision on advanced defaulted	(359) (259) (224) 39% 60%
	(1,579) (1,547) (1,641) 2% -4%

Gross deduction	951 947 1,119 0% -15%
50/50 deduction (refer table 2)	475 473 559 0% -15%

REVIEW OF OPERATING RESULTS

Deferred acquisition costs and deferred income

The Group recognises deferred acquisition costs relating to the acquisition of interest earning assets as assets and nets acquisition costs relating to debt against the relevant liability. The Group also recognised deferred income that is integral to the yield of an originated financial instrument, net of any direct incremental costs. This income is deferred and recognised as net interest income over the expected life of the financial instrument under AASB 139: ‘Financial Instruments: Recognition and Measurement’. Deferred acquisition costs relating to OnePath Australia are excluded from this analysis.

The balances of deferred acquisition costs and deferred income were:

	Deferred Acquisition Costs1 Deferred Income
	Sep 11 Mar 11 Sep 10 Sep 11 Mar 11 Sep 10
	$M $M $M $M $M $M
Australia	597 583 556 86 95 109
Asia Pacific, Europe & America	- - 1 86 57 51
Institutional	- - - 284 261 252
New Zealand	32 32 42 28 27 25
Group Centre	59 51 56 - - -
Less: Institutional Asia Pacific, Europe & America	- - - (70) (42) (35)
Total	688 666 655 414 398 402

1. Deferred acquisition costs largely include the amounts of brokerage capitalised and amortised in Australia and New Zealand. Deferred acquisition costs also include capitalised debt raising expenses

Deferred acquisition costs analysis:

	Full Year Sep 2011 Full Year Sep 2010 Amortisation Charge Capitalised Costs1 Amortisation Charge Capitalised Costs1 $M $M $M $M 314 355 278 340 1 - 2 - - - - - 31 21 40 18 19 25 15 29 - - - - 365 401 335 387


Australia
Asia Pacific, Europe & America
Institutional
New Zealand
Group Centre
Less: Institutional Asia Pacific, Europe & America
Total

1. Costs capitalised during the year exclude brokerage trailer commissions paid

Software capitalisation

At 30 September 2011, the Group’s intangibles included $1,572 million in relation to costs incurred in acquiring and developing software. Details are set out in the table below:

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Balance at start of period	1,349 1,217 11% 1,217 849 43%
Software capitalised during the period	368 277 33% 645 592 9%
Amortisation during the period	(127) (122) 4% (249) (207) 20%
Software impaired/written-off	(21) (23) -9% (44) (17) large
Foreign exchange differences	3 - n/a 3 - n/a
Total software capitalisation	1,572 1,349 17% 1,572 1,217 29%
Less: software capitalised excluded from Capital calculation	(82) (86) -5% (82) (90) -9%
Capitalised software
	1,490 1,263 18% 1,490 1,127 32%
as per deductions from Tier 1 capital

REVIEW OF OPERATING RESULTS

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SEGMENT REVIEW

Section 4 – Segment Review

Segment performance Australia Australia Wealth Asia Pacific, Europe & America Institutional New Zealand Institutional Asia Pacific, Europe & America Group Centre

SEGMENT REVIEW

Segment Performance

The Group operates on a divisional structure with Australia, Asia Pacific, Europe & America (APEA), Institutional and New Zealand being the major operating divisions. The Group manages Institutional APEA on a matrix structure. Accordingly, the divisional analysis on the following pages reflects this matrix reporting structure.

September 2011 Full Year

	Asia Pacific, Europe & Group Less: Institutional Asia Pacific, Europe &
AUD M Australia America Institutional New Zealand Centre America Group
Net interest income 5,821 1,130 3,092 1,693 381 (636) 11,481
Other external operating income 2,358 1,364 1,814 466 (35) (636) 5,331
Operating income 8,179 2,494 4,906 2,159 346 (1,272) 16,812
Operatingexpenses (3,506) (1,488) (2,001) (1,015) (388) 680 (7,718)
Profit before credit impair't and income tax 4,673 1,006 2,905 1,144 (42) (592) 9,094
Provision for credit impairment (711) (110) (258) (166) (40) 74 (1,211)
Profit before income tax 3,962 896 2,647 978 (82) (518) 7,883
Income tax expense (1,185) (166) (750) (286) 46 119 (2,222)
Non-controlling interests - (9) (2) - - 2 (9)
Pro forma profit 2,777 721 1,895 692 (36) (397) 5,652
Foreign exchange adjustments n/a n/a n/a n/a n/a n/a n/a
Pro forma adjustments - - - - - - -
Underlying profit 2,777 721 1,895 692 (36) (397) 5,652

September 2010 Full Year


AUD M	Australia America Institutional New Zealand Centre America Group
Net interest income	5,426 1,010 3,178 1,579 219 (543) 10,869
Other external operatingincome	2,366 1,103 1,684 472 (48) (472) 5,105
Operating income	7,792 2,113 4,862 2,051 171 (1,015) 15,974
Operatingexpenses	(3,361) (1,224) (1,717) (1,035) (302) 507 (7,132)
Profit before credit impair't and income tax	4,431 889 3,145 1,016 (131) (508) 8,842
Provision for credit impairment	(598) (177) (742) (395) (10) 77 (1,845)
Profit before income tax	3,833 712 2,403 621 (141) (431) 6,997
Income tax expense	(1,116) (83) (670) (172) (23) 87 (1,977)
Non-controllinginterests	- (6) - - - - (6)
Pro forma profit	2,717 623 1,733 449 (164) (344) 5,014
Foreign exchange adjustments	- 62 49 16 (36) (39) 52
Pro forma adjustments	(43) (9) (4) (2) 13 4 (41)
Underlying profit	2,674 676 1,778 463 (187) (379) 5,025

September 2011 Full Year vs September 2010 Full Year

Asia Pacific, Europe &
% Australia America Institutional New Zealand Centre America Group
Net interest income 7% 12% -3% 7% 74% 17% 6%
Other external operatingincome 0% 24% 8% -1% -27% 35% 4%
Operating income 5% 18% 1% 5% large 25% 5%
Operatingexpenses 4% 22% 17% -2% 28% 34% 8%
Profit before credit impair't and income tax 5% 13% -8% 13% -68% 17% 3%
Provision for credit impairment 19% -38% -65% -58% large -4% -34%
Profit before income tax 3% 26% 10% 57% -42% 20% 13%
Income tax expense 6% 100% 12% 66% large 37% 12%
Non-controllinginterests n/a 50% n/a n/a n/a n/a 50%
Pro forma profit 2% 16% 9% 54% -78% 15% 13%
Foreign exchange adjustments n/a n/a n/a n/a n/a n/a n/a
Pro forma adjustments -100% -100% -100% -100% -100% -100% -100%
Underlying profit 4% 7% 7% 49% -81% 5% 12%

SEGMENT REVIEW

September 2011 Half Year

September 2011 Half Year

AUD M	Australia America Institutional New Zealand Centre America Group
Net interest income	2,948 570 1,563 859 223 (324) 5,839
Other external operatingincome	1,173 648 770 238 1 (287) 2,543
Operating income	4,121 1,218 2,333 1,097 224 (611) 8,382
Operatingexpenses	(1,760) (753) (1,019) (513) (214) 362 (3,897)
Profit before credit impair't and income tax	2,361 465 1,314 584 10 (249) 4,485
Provision for credit impairment	(297) (67) (104) (92) (38) 47 (551)
Profit before income tax	2,064 398 1,210 492 (28) (202) 3,934
Income tax expense	(619) (60) (343) (144) 31 39 (1,096)
Non-controllinginterests	- (4) - - - - (4)
Pro forma profit	1,445 334 867 348 3 (163) 2,834
Foreign exchange adjustments	n/a n/a n/a n/a n/a n/a n/a
Pro forma adjustments	- - - - - - -
Underlying profit	1,445 334 867 348 3 (163) 2,834

March 2011 Half Year

March 2011 Half Year

AUD M	Australia America Institutional New Zealand Centre America Group
Net interest income	2,873 541 1,517 848 157 (298) 5,638
Other external operating income	1,185 694 1,035 232 4 (339) 2,811
Operating income	4,058 1,235 2,552 1,080 161 (637) 8,449
Operatingexpenses	(1,746) (711) (968) (511) (175) 304 (3,807)
Profit before credit impair't and income tax	2,312 524 1,584 569 (14) (333) 4,642
Provision for credit impairment	(414) (41) (152) (75) (2) 25 (659)
Profit before income tax	1,898 483 1,432 494 (16) (308) 3,983
Income tax expense	(566) (104) (406) (144) 2 78 (1,140)
Non-controlling interests	- (5) (2) - - 2 (5)
Pro forma profit	1,332 374 1,024 350 (14) (228) 2,838
Foreign exchange adjustments	- 13 4 (6) (25) (6) (20)
Pro forma adjustments	- - - - - - -
Underlying profit	1,332 387 1,028 344 (39) (234) 2,818

September 2011 Half Year vs March 2011 Half Year

September 2011 Half Year vs March 2011 Half Year
Asia Pacific, Europe &
% Australia America Institutional New Zealand Centre America Group
Net interest income 3% 5% 3% 1% 42% 9% 4%
Other external operatingincome -1% -7% -26% 3% -77% -15% -10%
Operating income 2% -1% -9% 2% 39% -4% -1%
Operatingexpenses 1% 6% 5% 0% 22% 19% 2%
Profit before credit impair't and income tax 2% -11% -17% 3% large -25% -3%
Provision for credit impairment -28% 63% -32% 23% large 88% -16%
Profit before income tax 9% -18% -16% 0% 75% -34% -1%
Income tax expense 9% -42% -16% 0% large -50% -4%
Non-controllinginterests n/a -20% -100% n/a n/a -100% -20%
Pro forma profit 8% -11% -15% -1% large -29% 0%
Foreign exchange adjustments n/a n/a n/a n/a n/a n/a n/a
Pro forma adjustments n/a n/a n/a n/a n/a n/a n/a
Underlying profit 8% -14% -16% 1% large -30% 1%

SEGMENT REVIEW

Australia

Philip Chronican

Australia division comprises Retail, Commercial and Wealth segments. Retail includes Retail Distribution and Retail Products. Commercial includes Esanda, Regional Commercial Banking, Business Banking and Small Business Banking. Wealth includes ANZ Private and OnePath Australia.

For 2010 comparative purposes, results shown are pro-forma results that assume full ownership of OnePath Australia.

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Net interest income	2,948 2,873 3% 5,821 5,426 7%
Other external operating income	1,173 1,185 -1% 2,358 2,366 0%
Operating income	4,121 4,058 2% 8,179 7,792 5%
Operating expenses	(1,760) (1,746) 1% (3,506) (3,361) 4%
Profit before credit impairment and income tax	2,361 2,312 2% 4,673 4,431 5%
Provision for credit impairment	(297) (414) -28% (711) (598) 19%
Profit before tax	2,064 1,898 9% 3,962 3,833 3%
Income tax expense	(619) (566) 9% (1,185) (1,116) 6%
Pro forma profit	1,445 1,332 8% 2,777 2,717 2%
Pro forma adjustments	- - n/a - (43) -100%
Underlying profit	1,445 1,332 8% 2,777 2,674 4%


Consisting of:
Retail	754 713 6% 1,467 1,385 6%
Commercial	531 434 22% 965 920 5%
Wealth	159 186 -15% 345 412 -16%
Other	1 (1) large - - n/a
Pro forma profit	1,445 1,332 8% 2,777 2,717 2%


Balance Sheet
Net loans & advances including acceptances	231,155 224,930 3% 231,155 217,952 6%
Other external assets	41,176 43,822 -6% 41,176 43,041 -4%
External assets	272,331 268,752 1% 272,331 260,993 4%
Deposits and other borrowings	128,490 121,096 6% 128,490 112,540 14%
Other external liabilities	46,625 50,114 -7% 46,625 48,785 -4%
External liabilities	175,115 171,210 2% 175,115 161,325 9%
Risk weighted assets	84,295 83,242 1% 84,295 81,406 4%
Average net loans and advances including acceptances	227,715 221,769 3% 224,750 206,413 9%
Average deposits and other borrowings	124,553 117,022 6% 120,798 107,553 12%

Ratios
Return on average assets	1.06% 1.01% 1.04% 1.10%
Net interest average margin	2.56% 2.58% 2.57% 2.59%
Operating expenses to operating income (pro forma)	42.7% 43.0% 42.9% 43.1%
Operating expenses to operating income	42.7% 43.0% 42.9% 42.8%
Operating expenses to average assets	1.29% 1.32% 1.31% 1.34%
Individual provision charge	371 298 24% 669 579 16%
Individual provision charge as a % of average net advances	0.32% 0.27% 0.30% 0.28%
Collective provision charge (credit)	(74) 116 large 42 4 large
Collective provision charge (credit) as a % of average net advances	(0.06%) 0.10% 0.02% 0.00%
Net impaired assets	660 616 7% 660 562 17%
Net impaired assets as a % of net advances	0.29% 0.27% 0.29% 0.26%
Total employees	17,768 17,630 1% 17,768 17,348 2%

SEGMENT REVIEW

Australia

Philip Chronican

 September 2011 v September 2010

On a pro forma basis profit increased 2%, with profit before credit impairment and income tax up 5%.

Net interest income increased 7% driven by strong growth in both average deposits of 12% and average net loans and advances including acceptances of 9%. Net interest margin decreased 2 basis points.

Growth in average net loans and advances was driven by above system growth in Mortgages combined with double digit growth in both the Business Banking and Small Business Banking portfolios. Deposit growth was very strong, with solid contributions from both the Retail and Commercial deposit portfolios.

Net interest margin declined 2 bps in the year as continued competitive pricing on deposits and the impact of a shift in deposit product mix towards higher priced term deposits and on-line accounts more than offset any benefit from asset repricing.

Other external operating income was flat as the adverse impact of removing exception fees and deferred establishment fees in Retail was largely offset by volume driven increases.

Operating expenses were up 4% largely due to inflationary impacts, annual salary increases, higher FTE levels and project related spend.

Provision for credit impairment increased 19% in the year. South East Queensland in particular struggled due to higher than national average unemployment combined with adverse tourism impacts from the strong AUD and the floods earlier in the year. The individual provision increased 16% reflecting the stress on customers as a consequence of the deteriorating economic conditions. The year on year increase of $38 million in the collective provision charge was driven by growth and an upward trend in delinquencies in the Retail portfolio, flood provisions and writebacks in the prior year. Net impaired assets increased from 0.26% to 0.29% of net advances.

 September 2011 v March 2011

On a pro forma basis profit increased 8%, with profit before credit impairment and income tax up 2% in an environment characterised by strong growth in deposits and slowing Mortgage system growth, partly offset by an improvement in Commercial lending.

Net interest income increased 3% due to strong growth in average deposits of 6%, and an increase in average net loans and advances of 3%, partly offset by 2 basis points decline in net interest margin.

Growth in average net loans and advances was driven by improved growth across Commercial through the Small Business Banking, Business Banking and the Regional Commercial Banking lending portfolios. Mortgage growth slowed to 3% in the September half. Deposit growth for Australia Division was strong, with Small Business Banking and Business Banking delivering strong growth. Retail deposits grew at 6% with the majority of growth coming through Savings products, primarily Progress Saver, with term deposits and transaction deposits broadly flat half on half.

Net Interest margin declined 2 bps in the September half as benefits from asset repricing were offset by competitive pricing on deposits.

Other external operating income decreased 1% due to a difficult environment for both the Insurance and Funds Management businesses, which was partly offset by growth in Retail and Commercial.

Operating expenses were up less than 1%, with FTE up due to project related increases.

Provision for credit impairment decreased 28% in the September half reflecting a lower collective provision charge partly offset by an increase in individual provision charge. The increase to the individual provision was across both the Retail and Commercial segments partly due to soft economic conditions in a number of sectors, exacerbated by the extreme weather events such as the Queensland floods. The collective provision reduction in the September half reflects slower volume growth and the release of surplus flood provisions raised in the March half but not required based on loss experience. Growth in net impaired assets was marginal in the September half as deteriorating economic conditions were partly mitigated by active management of the impaired portfolio.

SEGMENT REVIEW

Australia

Philip Chronican

Business operating segments

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Retail	$M $M $M $M
Net interest income	1,753 1,723 2% 3,476 3,203 9%
Other external operating income	507 482 5% 989 1,020 -3%
Operating income	2,260 2,205 2% 4,465 4,223 6%
Operating expenses	(987) (967) 2% (1,954) (1,882) 4%
Profit before credit impairment and income tax	1,273 1,238 3% 2,511 2,341 7%
Provision for credit impairment	(195) (224) -13% (419) (361) 16%
Profit before tax	1,078 1,014 6% 2,092 1,980 6%
Income tax expense	(324) (301) 8% (625) (595) 5%
Pro forma profit	754 713 6% 1,467 1,385 6%
Pro forma adjustments	- - n/a - - n/a
Underlying profit	754 713 6% 1,467 1,385 6%

Risk weighted assets	43,829 43,489 1% 43,829 41,444 6%


Commercial
Net interest income	1,160 1,115 4% 2,275 2,130 7%
Other external operating income	139 134 4% 273 274 0%
Operating income	1,299 1,249 4% 2,548 2,404 6%
Operating expenses	(430) (438) -2% (868) (818) 6%
Profit before credit impairment and income tax	869 811 7% 1,680 1,586 6%
Provision for credit impairment	(108) (192) -44% (300) (274) 9%
Profit before tax	761 619 23% 1,380 1,312 5%
Income tax expense	(230) (185) 24% (415) (392) 6%
Pro forma profit	531 434 22% 965 920 5%
Pro forma adjustments	- - n/a - (8) -100%
Underlying profit	531 434 22% 965 912 6%

Risk weighted assets	37,878 36,722 3% 37,878 36,472 4%


Wealth
Net interest income	29 28 4% 57 66 -14%
Other external operating income	528 569 -7% 1,097 1,093 0%
Operating income	557 597 -7% 1,154 1,159 0%
Operating expenses	(337) (335) 1% (672) (655) 3%
Profit before credit impairment and income tax	220 262 -16% 482 504 -4%
Provision for credit impairment	6 2 large 8 37 -78%
Profit before tax	226 264 -14% 490 541 -9%
Income tax expense	(67) (78) -14% (145) (129) 12%
Pro forma profit	159 186 -15% 345 412 -16%
Pro forma adjustments	- - n/a - (35) -100%
Underlying profit	159 186 -15% 345 377 -8%

Risk weighted assets	2,154 2,465 -13% 2,154 3,146 -32%

SEGMENT REVIEW

Australia

Philip Chronican

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Individual provision charge	$M $M $M $M
Retail	204 169 21% 373 338 10%
Mortgages	23 5 large 28 21 33%
Consumer Cards and
	165 147 12% 312 287 9%
Unsecured Lending

Deposits	9 7 29% 16 17 -6%
Other	7 10 -30% 17 13 31%
Commercial	169 129 31% 298 265 12%
Esanda	39 42 -7% 81 96 -16%
Regional Commercial Banking	70 50 40% 120 79 52%
Business Banking	32 16 100% 48 41 17%
Small Business Banking	28 21 33% 49 49 0%
Wealth	(2) - n/a (2) (9) -78%
Pro forma individual provision charge	371 298 24% 669 594 13%
Pro forma adjustments	- - n/a - (15) -100%
Underlying individual provision charge	371 298 24% 669 579 16%

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Collective provision charge
Retail	(9) 55 large 46 23 100%
Mortgages	2 10 -80% 12 23 -48%
Consumer Cards and
	2 21 -90% 23 (3) large
Unsecured Lending

Deposits	(1) - n/a (1) 2 large
Other	(12) 24 large 12 1 large
Commercial	(61) 63 large 2 9 -78%
Esanda	(11) (3) large (14) (8) 75%
Regional Commercial Banking	2 (9) large (7) 13 large
Business Banking	(39) 4 large (35) (13) large
Small Business Banking	1 4 -75% 5 18 -72%
Other	(14) 67 large 53 (1) large
Wealth	(4) (2) 100% (6) (28) -79%
Pro forma collective provision charge	(74) 116 large 42 4 large
Pro forma adjustments	- - n/a - - n/a
Underlying collective provision charge	(74) 116 large 42 4 large

SEGMENT REVIEW

Australia

Philip Chronican

	As at ($M) Movement
	Sep 11 Sep 11
Net loans & advances including acceptances	Sep 11 Mar 11 Sep 10 v. Mar 11 v. Sep 10
Retail	180,711 175,878 169,322 3% 7%
Mortgages	169,924 165,177 158,973 3% 7%
Consumer Cards & Unsecured Lending
	10,192 10,162 9,808 0% 4%

Other	595 539 541 10% 10%
Commercial	47,835 46,196 45,720 4% 5%
Esanda	14,481 14,319 14,269 1% 1%
Regional Commercial Banking	13,575 13,071 13,520 4% 0%
Business Banking	16,158 15,547 14,658 4% 10%
Small Business Banking	3,675 3,376 3,272 9% 12%
Other	(54) (117) 1 -54% large
Wealth	2,609 2,856 2,910 -9% -10%
Underlying net loans & advances including acceptances
	231,155 224,930 217,952 3% 6%

	As at ($M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Customer deposits
Retail	87,275 82,422 77,292 6% 13%
Mortgages	11,279 10,754 10,374 5% 9%
Consumer Cards and Unsecured Lending
	268 248 253 8% 6%

Deposits	75,619 71,515 66,773 6% 13%
Other	109 (95) (108) large large
Commercial	39,694 37,199 33,677 7% 18%
Esanda	203 314 496 -35% -59%
Regional Commercial Banking	10,776 10,316 9,194 4% 17%
Business Banking	13,846 13,233 11,838 5% 17%
Small Business Banking	14,869 13,336 12,149 11% 22%
Wealth	1,521 1,286 1,279 18% 19%
Underlying customer deposits	128,490 120,907 112,248 6% 14%

SEGMENT REVIEW

Wealth

Philip Chronican

For comparative purposes, the financial results of OnePath Australia included in the figures presented below are based on 100% ownership for all reporting periods on a stand alone basis. Certain prior year comparative figures have been reclassified to conform with the current year’s presentation.

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Net interest income	29 28 4% 57 66 -14%
Other operating income	46 56 -18% 102 121 -16%
Net funds management and insurance income	482 513 -6% 995 972 2%
Operating income	557 597 -7% 1,154 1,159 0%
Operating expenses	(337) (335) 1% (672) (655) 3%
Profit before credit impairment and income tax	220 262 -16% 482 504 -4%
Provision for credit impairment	6 2 large 8 37 -78%
Profit before income tax	226 264 -14% 490 541 -9%
Income tax expense	(67) (78) -14% (145) (129) 12%
Profit after tax	159 186 -15% 345 412 -16%

OnePath Consolidated1	145 166 -13% 311 325 -4%
ANZ Private & Other Wealth2	9 20 -55% 29 58 -50%
Wholesale Legacy	5 - n/a 5 29 -83%
Profit after tax	159 186 -15% 345 412 -16%

1. OnePath consolidated includes OnePath Group, ANZ Financial Planning & ANZ General insurance 2.

ANZ Private and Other Wealth includes Private Bank, ANZ Trustees, Investment Lending and E*Trade and Other Wealth (excluding Wholesale Legacy)

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Net funds management and insurance income	$M4 $M $M $M
Net funds management income	189 195 -3% 384 403 -5%
Net insurance income	148 204 -27% 352 369 -5%
Net advice income	80 56 43% 136 116 17%
Capital investment earnings3	65 58 12% 123 84 46%
Total	482 513 -6% 995 972 2%

3. Includes yield on shareholder assets, interest and inflation rate impacts on risk and annuity reserves, and mark-to-market movement on capital-guaranteed reserves

4. From 1 April 2011, the classification of certain expenses reported in operating income and expenses changed following a review to align with ANZ policies. Had the restatement occurred 1 October 2009, the restatement would have affected individual income lines in the March 2011 half and September 2011 full year as follows: March 2011 half year and September 2011 full year – Net funds management income +$4 million, Net insurance income -$9 million, Net advice income +$23 million, Capital investment earnings +$2 million; September 2010 full year – Net funds management income +$9 million, Net insurance income -$32 million, Net advice income +$40 million, Capital investment earnings +$3 million

	Half Year Full Year
	Sep 11 $M7 Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Net insurance income
Planned profit margin:
Group & Individual	166 176 -6% 342 327 5%
General Insurance	15 17 -12% 32 28 14%
Experience profit5	(36) 11 large (25) 19 large
Assumption changes6	3 - n/a 3 (5) large
Total	148 204 -27% 352 369 -5%

Experience profit variations are gains or losses arising from actual experience differing from plan, on Group, Individual and General Insurance business 6. Assumption changes are gains or losses arising from a change in valuation methods and best estimate assumptions

7. From 1 April 2011, the classification of certain expenses reported in operating income and expenses changed following a review to align with ANZ policies. Had the restatement occurred 1 October 2009, the restatement would have affected individual income lines in the March 2011 half and September 2011 full year as follows: Group & Individual Planned profit margin -$8 million, General insurance Planned profit margin -$1 million; September 2010 full year –Group & Individual Planned profit margin -$28 million, General insurance Planned profit margin -$4 million

SEGMENT REVIEW

Wealth

Philip Chronican

	Half Year Full Year
	Sep 11 $M8 Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Operating expenses
OnePath Consolidated	(256) (259) -1% (515) (519) -1%
ANZ Private & Other Wealth	(81) (76) 7% (157) (136) 15%
Total	(337) (335) 1% (672) (655) 3%

8. From 1 April 2011, the classification of certain expenses reported in operating income and expenses changed following a review to align with ANZ policies. Had the restatement occurred 1 October 2009, the restatement would have resulted in an increase of $20 million in the March 2011 half year and both September 2011 and 2010 full years

	Half Year Full Year
	Sep 11 Mar 11 Sep 11 Sep 10
Performance measures	% % % %
Cost to income9	60.7% 56.1% 58.3% 56.6%
Operating expenses to average funds under management	0.6% 0.6% 0.6% 0.6%
Insurance expenses to in-force premiums	8.7% 11.9% 10.0% 13.1%
Retail insurance lapse rates	13.3% 12.1% 12.7% 12.3%

9. Cost to income ratio is operating expenses / operating income

	As at ($M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Funds under management
Funds under management - average	43,127 44,974 44,550 -4% -3%
Funds under management - end of period	40,798 45,456 44,493 -10% -8%
Composed of:
Australian equities	12,675 16,127 15,235 -21% -17%
Global equities	5,993 7,124 7,036 -16% -15%
Cash and fixed interest	17,110 16,357 16,658 5% 3%
Property and infrastructure	2,516 2,936 2,782 -14% -10%
ANZ Trustees	2,504 2,912 2,782 -14% -10%
Total	40,798 45,456 44,493 -10% -8%
	Sep 11 In- Out- Other Sep 10 $M flows flows flows10 $M 15,192 2,152 (3,113) (646) 16,799 4,888 286 (800) (240) 5,642 1,096 120 (396) (28) 1,400 11,925 1,755 (1,290) (780) 12,240 5,193 780 (883) (334) 5,630 2,504 449 (504) (223) 2,782 40,798 5,542 (6,986) (2,251) 44,493

Wealth Management cashflows
OneAnswer
Other Personal Investment
Mezzanine
Employer Super
Oasis
ANZ Trustees
Total

10. Other flows includes investment income net of taxes, fees and charges, and distributions

	As at ($M) Movement
	Sep 11 Sep 11
Insurance annual in-force premiums	Sep 11 Mar 11 Sep 10 v. Mar 11 v. Sep 10
Group	502 462 452 9% 11%
Individual	749 704 653 6% 15%
General Insurance	311 302 295 3% 5%
Total	1,562 1,468 1,400 6% 12%

	Sep 11 $M New business $M Lapses $M Sep 10 $M
Insurance cash flows
Group	502 66 (16) 452
Individual	749 163 (67) 653
General Insurance	311 85 (69) 295
Total	1,562 314 (152) 1,400

SEGMENT REVIEW

Wealth

Philip Chronican

	As at Movement
Aligned adviser numbers	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Group & aligned financial planners11	2,021 2,131 2,134 -5% -5%
11. Includes authorised representatives of dealer groups wholly or partially controlled by OnePat	h Australia, and ANZ Group financial planners
Embedded value and value of new business (OnePath only)12	$M
Embedded value as at September 2010	3,411
Value of franking credit balance transferred to ANZ13	(139)
Restated embedded value as at September 2010	3,272
Value of new business14	155
Expected return15	361
Experience deviations and assumption changes16	(175)
Sub-total embedded value before economic assumption changes and net transfer
	3,613

Economic assumptions change17	84
Net transfer18	(355)
Embedded value as at September 2011	3,342

12. Embedded value represents the present value of future profits and releases of capital arising from the business in force at the valuation date and adjusted net assets. It is determined using best estimate assumptions with franking credits included at 70% of face value. Projected cash flows have been discounted using capital asset pricing model risk discount rates of 9.25-10.75%

13. The value of franking credit balance was transferred to ANZ as OnePath corporate tax matters are now consolidated at ANZ Group level

14. Value of new business represents the present value of future profits less the cost of capital arising from the new business written over the period

15. Expected return represents expected increase in value over the period

16. Experience deviations and assumption changes arise from deviations from and changes to best estimate assumptions underlying the prior year embedded value. The adverse movement is primarily due to higher ongoing management expense assumption and lower funds under management as a result of adverse market movements.

17. Risk discount rates have decreased by 75-100 basis points over the twelve month period, leading to a positive impact on Embedded Value

18. Net transfer represents net capital movements over the period including cash dividends paid ($274 million) and franking credits transferred ($81 million)

OnePath only	As at	($M)
Total capital sources by equity class	Sep 11	Sep 10
Share capital	1,914	1,772
Reserves	11	(35)
Retained earnings19	530	698
Outside equity interest	7	-
Total OnePath Australia shareholder equity	2,462	2,435
Unsecured loan	432	432
Total OnePath Australia capital source	2,894	2,867
Total capital sources by asset class
Australian equities	-	39
International fixed interest	125	117
Australian fixed interest	181	337
Cash	1,413	1,125
Total OnePath Australia shareholder funds	1,719	1,618
Other including intangibles20	1,175	1,249
Total OnePath Australia capital source	2,894	2,867

19. September 2010 includes impact of push down allocated cost tax adjustments arising from the 100% acquisition of OnePath Australia

20. Intangibles include goodwill, deferred acquisition cost and capitalised software

SEGMENT REVIEW

Wealth

Philip Chronican

 September 2011 v September 2010

Wealth profit after tax was $67 million (16%) lower as a result of volatile market conditions and negative investor sentiment adversely impacting volumes and margin compression. In addition, the result has been impacted by the catastrophic weather events of 2011, higher levels of investment in strategic projects and the normalisation of the provision for credit impairments following the recovery of asset valuations in 2010 from the 2009 level.

Net interest income is lower due to the repayment of wholesale legacy loans combined with higher funding costs in ANZ Private and Other Wealth.

Other operating income was $19 million (16%) lower predominantly driven by the adverse investor sentiment in the second half negatively impacting on volumes, as well as a one-off impairment charge in E*Trade.

Funds management net income was 5% lower due to a combination of margin squeeze, negative investor sentiment and lower average FUM.

Income from Insurance operations reflected continued growth across all Retail segments, however general insurance claims were higher due to the catastrophic weather events in the September 2011 full year. Excluding the expense reclassification noted in footnote 4 on page 53, net advice income is marginally higher in 2011 compared to 2010.

Capital investment earnings increased largely due to the recovery from the impacts of the Global Financial Crisis during the September 2010 full year.

Operating expenses increased $17 million (3%) due to higher levels of investment in strategic projects and one off charges relating to software impairments, partially offset by integration benefits and tight control of discretionary spend.

Releases of provisions for credit impairment were significantly higher in 2010 due to improved asset valuations on legacy wholesale equity backed loans during the year, resulting in a decrease of $29 million (78%) in the credit impairment expense.

Tax expense and the related effective tax rate were higher in the September 2011 year as the September 2010 year benefited from one-off tax credits.

 September 2011 v March 2011

Wealth profit after tax was down $27 million (15%) due to lower insurance net income as a result of unfavourable claims and lapse experience in Individual Life, and a deterioration in the funds management business driven by volatile investment markets in the second half of the year.

Other operating income was $10 million (18%) lower predominantly driven by the adverse investor sentiment negatively impacting on volumes, as well as a one-off impairment charge in E*Trade.

The decline in funds management net income of 3% was mainly driven by lower average volume and margin deterioration.

Excluding the expense reclassification noted in footnote 4 on page 53, net insurance income was $47 million (24%) lower due to adverse claims and lapse experience partially offset by strong new business growth. Net advice income is consistent with the first half.

Operating expenses decreased by $18 million (5%) after adjusting for the expense reclassification with integration benefits offset by a one-off charge relating to software impairment and investment in strategic projects.

Provision releases were slightly higher due to improved asset valuations on legacy wholesale equity backed loans, as well as the loan book maturing in the September 2011 half.

SEGMENT REVIEW

Wealth Philip Chronican

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SEGMENT REVIEW

Asia Pacific, Europe & America Alex Thursby

Asia Pacific, Europe & America division includes Retail which provides retail and small business banking services and investment and insurance products and services for Asia Pacific customers, Asia Partnerships which is a portfolio of strategic partnerships in Asia, and Institutional which offers a full range of financial services to institutional customers.

	Half Year Full Year
Table reflects USD for the APEA division	Sep 11 USD M Mar 11 USD M Movt Sep 11 USD M Sep 10 USD M Movt
AUD results shown on page 93
Net interest income	600 558 8% 1,158 1,008 15%
Other external operating income	686 712 -4% 1,398 1,083 29%
Operating income	1,286 1,270 1% 2,556 2,091 22%
Operating expenses	(795) (731) 9% (1,526) (1,212) 26%
Profit before credit impairment and income tax	491 539 -9% 1,030 879 17%
Provision for credit impairment	(70) (43) 63% (113) (174) -35%
Profit before income tax	421 496 -15% 917 705 30%
Income tax expense	(64) (105) -39% (169) (82) large
Non-controlling interests	(4) (5) -20% (9) (6) 50%
Pro forma profit	353 386 -9% 739 617 20%
Pro forma adjustments	- - n/a - (9) -100%
Underlying profit	353 386 -9% 739 608 22%

Consisting of:
Retail	56 64 -13% 120 34 large
Asia Partnerships	173 146 18% 319 306 4%
Institutional	174 233 -25% 407 345 18%
Operations & Support	(50) (57) -12% (107) (68) 57%
Pro forma profit	353 386 -9% 739 617 20%

Balance Sheet
Net loans & advances including acceptances	37,736 31,976 18% 37,736 26,218 44%
Other external assets	48,002 34,938 37% 48,002 30,553 57%
External assets	85,738 66,914 28% 85,738 56,771 51%
Customer deposits	63,080 54,552 16% 63,080 45,057 40%
Other deposits and borrowings	7,273 5,343 36% 7,273 7,325 -1%
Deposits and other borrowings	70,353 59,895 17% 70,353 52,382 34%
Other external liabilities	20,173 15,461 30% 20,173 12,281 64%
External liabilities	90,526 75,356 20% 90,526 64,663 40%
Risk weighted assets	55,695 49,128 13% 55,695 41,783 33%
Average net loans and advances including acceptances	36,173 29,313 23% 32,752 21,015 56%
Average deposits and other borrowings	67,075 56,944 18% 62,023 46,559 33%

Ratios
Return on average assets	0.79% 1.03% 0.90% 1.03%
Net interest average margin	1.52% 1.74% 1.62% 1.68%
Net interest average margin (excluding Global Markets)	2.59% 2.95% 2.76% 3.01%
Operating expenses to operating income (pro forma)	61.8% 57.6% 59.7% 58.0%
Operating expenses to operating income	61.8% 57.6% 59.7% 55.2%
Operating expenses to average assets	1.78% 1.95% 1.86% 1.73%
Individual provision charge	81 51 59% 132 138 -4%
Individual provision charge as a % of average net advances	0.45% 0.35% 0.40% 0.65%
Collective provision charge (credit)	(11) (8) 38% (19) 1 large
Collective provision charge (credit) as a % of average net advances	(0.06%) (0.05%) (0.06%) 0.00%
Net impaired assets	276 283 -2% 276 258 7%
Net impaired assets as a % of net advances	0.73% 0.89% 0.73% 0.98%
Total employees	10,650 10,718 -1% 10,650 10,332 3%

SEGMENT REVIEW

Asia Pacific, Europe & America Alex Thursby

Commentary reflects USD results

 September 2011 v September 2010

On a pro forma basis, profit grew 20% with solid profit growth by both the Retail and Institutional businesses despite lower Global Markets trading income in the September 2011 half year. We completed the acquisitions of the RBS businesses in the Philippines, Vietnam and Hong Kong during the March 2010 half year and in Taiwan, Singapore and Indonesia during the September 2010 half year. Asia Partnerships’ profit contribution held steady despite the impairment charge relating to the carrying value of our investment in Saigon Thuong Tin Commercial Joint-Stock Bank (Sacombank) in the March 2011 half year and the positive impact of the reversal of the Saigon Securities Incorporation (SSI) impairment charge in 2010.

Key factors affecting the result were:

Solid balance sheet growth contributed to net interest income increasing 15% compared with 2010.
Other external operating income grew 29% primarily from higher fees and other income by Global Markets, the gain from the sale of credit cards loan portfolios in Taiwan, and increased earnings from Asia Partnerships.
The 26% increase in operating expenses resulted from the build-up of regional revenue generating staff and support capabilities.
Provision charges for credit impairment decreased 35%. Individual provision charges were 4% lower in 2011 due to higher recoveries achieved mainly in the Retail businesses in Asia (in particular, Taiwan), partially offset by higher charges associated with certain legacy institutional positions. Collective provision charges were lower due to the upgrade of a few large Institutional customers and the release arising from active de-risking of the previously RBS-owned portfolios.
While volumes were strong there was margin pressure arising from competitor pricing activity evident in the second half of the year.
Net loans and advances including acceptances increased 44%. All business lines increased loans and deposits reflecting strong franchise momentum.

 September 2011 v March 2011

Profit decreased 9% compared with the March 2011 half year. Earnings from the Institutional business reduced 25% with lower trading income by Global Markets partially offset by higher customer driven revenues. Earnings from the Retail business for the March 2011 half year included the gain from the sale of credit card loan portfolios in Taiwan.

Key factors affecting the result were:

Net interest income was 8% higher compared with the prior half year, driven by balance sheet growth.
Other external operating income decreased 4%, principally due to the lower contribution by Global Markets mainly as a result of lower trading income in difficult conditions. Increased earnings in the September half from Asia Partnerships reflected the impact of the Sacombank impairment charge recorded in the March 2011 half year. Retail delivered solid growth after taking into account the gain from the sale of credit card portfolios in Taiwan in the March 2011 half year.
Operating expenses increased 9%, reflecting continued and targeted investments in expanding distribution and building front line capability across the region. Employees reduced by 1% compared with the March 2011 half year.
Provision charges for credit impairment were 63% higher compared with the prior half year. This was mainly driven by 57% higher individual provision charges associated with a small number of certain legacy institutional positions. Collective provision write-back for the September 2011 half year was 25% higher with the release arising from active de-risking of the portfolios acquired through the acquisitions of the RBS businesses (in particular, Taiwan), partially offset by the higher charges driven by growth in loans and advances.
Net loans and advances increased 18% and customer deposits 16%. All business lines increased loans and deposits reflecting strong franchise momentum.
While volumes increased strongly, net interest margin (excluding Global Markets) was 36 basis points lower than for the March half, reflecting increased pricing competition and the product mix impact of de-risking the portfolio.

SEGMENT REVIEW

Asia Pacific, Europe & America Alex Thursby

Business operating segments

Table reflects USD results	Half Year Full Year
	Sep 11 USD M Mar 11 USD M Movt Sep 11 USD M Sep 10 USD M Movt
Retail
Net interest income	296 281 5% 577 517 12%
Other external operating income	177 176 1% 353 269 31%
Operating income	473 457 4% 930 786 18%
Operating expenses	(378) (356) 6% (734) (636) 15%
Profit before credit impairment and income tax	95 101 -6% 196 150 31%
Provision for credit impairment	(21) (16) 31% (37) (91) -59%
Profit before income tax	74 85 -13% 159 59 large
Income tax expense	(18) (20) -10% (38) (22) 73%
Non-controlling interests	- (1) -100% (1) (3) -67%
Pro forma profit	56 64 -13% 120 34 large
Pro forma adjustments	- - n/a - (5) -100%
Underlying profit	56 64 -13% 120 29 large

Risk weighted assets	11,266 10,252 10% 11,277 8,461 33%


Asia Partnerships
Net interest income	(36) (34) 6% (70) (55) 27%
Other external operating income	200 191 5% 391 353 11%
Operating income	164 157 4% 321 298 8%
Operating expenses	(4) (4) 0% (8) (4) 100%
Profit before credit impairment and income tax	160 153 5% 313 294 6%
Profit before income tax	160 153 5% 313 294 6%
Income tax expense	13 (7) large 6 12 -50%
Non-controlling interests	- - n/a - - n/a
Pro forma profit	173 146 18% 319 306 4%
Pro forma adjustments	- - n/a - - n/a
Underlying profit	173 146 18% 319 306 4%

Risk weighted assets	n/a n/a n/a n/a n/a n/a


Institutional
Net interest income	342 310 10% 652 545 20%
Other external operating income	305 347 -12% 652 469 39%
Operating income	647 657 -2% 1,304 1,014 29%
Operating expenses	(381) (317) 20% (698) (507) 38%
Profit before credit impairment and income tax	266 340 -22% 606 507 20%
Provision for credit impairment	(49) (27) 81% (76) (77) -1%
Profit before income tax	217 313 -31% 530 430 23%
Income tax expense	(43) (78) -45% (121) (85) 42%
Non-controlling interests	- (2) -100% (2) - n/a
Pro forma profit	174 233 -25% 407 345 18%
Pro forma adjustments	- - n/a - (4) -100%
Underlying profit	174 233 -25% 407 341 19%

Risk weighted assets	42,616 38,640 10% 42,616 33,109 29%

SEGMENT REVIEW

Asia Pacific, Europe & America Alex Thursby

	Half Year Full Year
	Sep 11 USD M Mar 11 USD M Movt Sep 11 USD M Sep 10 USD M Movt
Individual provision charge
Retail	33 24 38% 57 87 -34%
Asia	27 20 35% 47 74 -36%
Pacific	6 4 50% 10 13 -23%
Institutional	48 27 78% 75 77 -3%
Transaction Banking	40 15 large 55 23 large
Global Loans	(13) (5) large (18) 28 large
Global Markets	22 16 38% 38 19 100%
Other	(1) 1 large - 7 -100%
Pro forma individual provision charge	81 51 59% 132 164 -20%
Pro forma adjustments	- - n/a - (26) -100%
Underlying individual provision charge	81 51 59% 132 138 -4%

	Half Year Full Year	Half Year Full Year
	Sep 11 USD M Mar 11 USD M Movt Sep 11 USD M Sep 10 USD M Movt
Collective provision charge
Retail	(12) (8) 50% (20) 4 large
Asia	(12) (6) 100% (18) 8 large
Pacific	- (2) -100% (2) (4) -50%
Institutional	1 - n/a 1 - n/a
Transaction Banking	(4) 9 large 5 3 67%
Global Loans	6 (6) large - - n/a
Global Markets	(2) (2) 0% (4) (3) 33%
Other	1 (1) large - - n/a
Operations & Support	- - n/a - 6 -100%
Pro forma collective provision charge	(11) (8) 38% (19) 10 large
Pro forma adjustments	- - n/a - (9) -100%
Underlying collective provision charge	(11) (8) 38% (19) 1 large
		As at (USD M) Movement
		Sep 11 Sep 11
Net loans & advances including acceptances		Sep 11 Mar 11 Sep 10 v. Mar 11 v. Sep 10
Retail		6,663 5,841 5,402 14% 23%
Asia		4,323 3,668 3,274 18% 32%
Pacific		2,340 2,173 2,128 8% 10%
Institutional		31,077 26,142 20,822 19% 49%
Transaction Banking		11,499 9,596 4,921 20% large
Global Loans		18,978 15,834 13,343 20% 42%
Other		600 712 2,558 -16% -77%
Operations & Support		(4) (7) (6) -43% -33%
Underlying net loans & advances
		37,736 31,976 26,218 18% 44%
including acceptances


		As at (USD M) Movement
		Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Customer deposits
Retail		14,192 12,887 12,223 10% 16%
Asia		10,293 9,549 9,026 8% 14%
Pacific		3,899 3,338 3,197 17% 22%
Institutional		48,872 41,664 32,827 17% 49%
Transaction Banking		28,574 21,032 16,861 36% 69%
Global Markets		19,979 19,988 16,597 0% 20%
Other		319 644 (631) -50% large
Operations & Support		16 1 7 large large
Underlying customer deposits		63,080 54,552 45,057 16% 40%

SEGMENT REVIEW

Institutional division Shayne Elliott

Institutional provides global financial services to government, corporate and institutional clients. We provide solutions for clients with complex financial needs, based on a deep understanding of their businesses and industries, offering specialist products and services within Transaction Banking, Global Loans and Global Markets.

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Net interest income	1,563 1,517 3% 3,092 3,178 -3%
Other external operating income	770 1,035 -26% 1,814 1,684 8%
Operating income	2,333 2,552 -9% 4,906 4,862 1%
Operating expenses	(1,019) (968) 5% (2,001) (1,717) 17%
Profit before credit impairment and income tax	1,314 1,584 -17% 2,905 3,145 -8%
Provision for credit impairment	(104) (152) -32% (258) (742) -65%
Profit before income tax	1,210 1,432 -16% 2,647 2,403 10%
Income tax expense and non-controlling interests	(343) (408) -16% (752) (670) 12%
Pro forma profit	867 1,024 -15% 1,895 1,733 9%
Foreign exchange adjustments	n/a 4 n/a n/a 49 n/a
Pro forma adjustments	- - n/a - (4) -100%
Underlying profit	867 1,028 -16% 1,895 1,778 7%

Consisting of:
Transaction Banking	266 218 22% 486 442 10%
Global Loans	509 459 11% 972 581 67%
Global Markets	131 385 -66% 516 720 -28%
Relationship & Infrastructure	(39) (38) 3% (79) (10) large
Pro forma profit	867 1,024 -15% 1,895 1,733 9%

Balance Sheet
Net loans & advances including acceptances1	91,151 83,727 9% 91,151 78,705 16%
Other external assets	146,525 104,058 41% 146,525 106,316 38%
External assets	237,676 187,785 27% 237,676 185,021 28%
Customer deposits	117,434 98,747 19% 117,434 97,681 20%
Other deposits and borrowings	11,077 9,004 23% 11,077 11,950 -7%
Deposits and other borrowings	128,511 107,751 19% 128,511 109,631 17%
Other external liabilities	72,305 50,113 44% 72,305 67,677 7%
External liabilities	200,816 157,864 27% 200,816 177,308 13%
Risk weighted assets	140,838 129,788 9% 140,838 130,643 8%

Ratios
Return on average assets	0.81% 1.05% 0.92% 0.94%
Net interest average margin	1.86% 1.98% 1.92% 2.15%
Net interest average margin (excluding Global Markets)	2.96% 3.13% 3.04% 3.12%
Operating expenses to operating income	43.7% 38.2% 40.8% 35.3%
Operating expenses to average assets	0.95% 1.01% 0.98% 0.92%
Individual provision charge	75 150 -50% 224 799 -72%
Individual provision charge as a % of average net advances2	0.17% 0.37% 0.27% 1.10%
Collective provision charge (credit)	29 4 large 34 (58) large
Collective provision charge (credit) as a % of average net advances2	0.07% 0.01% 0.04% (0.08%)
Net impaired assets	2,194 2,667 -18% 2,194 3,012 -27%
Net impaired assets as a % of net advances1	2.41% 3.19% 2.41% 3.83%
Total employees	6,448 6,362 1% 6,448 6,180 4%

1. 2010 comparatives have been adjusted to include bill acceptances (Sep 2010: $6,035 million), previously included as trading securities

2. 2010 comparatives have been adjusted to include average bill acceptances (Sep 2010: $5,430 million), previously included as trading securities

SEGMENT REVIEW

Institutional division

Shayne Elliott

 September 2011 v September 2010

Institutional’s goal is to build the best bank in the world for clients who are dependent on trade and capital flows across the region, particularly those in the natural resources, agribusiness and infrastructure sectors. Aligned to this strategic ambition, our priority products are trade, cash management, foreign exchange and commodities and capital markets.

Pro forma profit increased 9%, a solid performance in difficult market conditions, with the changing geographic distribution of profit reflecting our super regional strategy. While overall pro forma global revenue increased 1%, customer revenues were up 10% to $4.3 billion, but this was offset by lower trading and balance sheet revenues which were down 36% reflecting the difficult market conditions. Customer revenues in our priority sectors of resources, agribusiness and infrastructure grew around 19%. Over 1,300 new relationships were acquired during the year.

APEA revenues grew 30% and represent 26% of global revenues (2010: 20%). Partially offsetting APEA revenue growth was a 7% contraction in Australia, where trading conditions were particularly difficult in the second half. Despite challenging economic conditions, New Zealand performed well with revenue up 2% on 2010.

Within our priority product segments, Payments and Cash Management (“PCM”) revenues grew 13% on the back of investment in our “Transactive” cash management platforms. Customer deposits in PCM were up 27% with particularly strong growth in Asia, up 68%. Trade revenues were up 29% with 58% growth in Asia. Markets sales were up 13% and FX revenues increased 22% with FX sales revenues now representing 52% of total Global Markets sales revenues (2010: 48%).

Net interest margin (excluding Global Markets) was down 8 basis points, partially due to a one-off interest write back in 2010 which increased prior year net interest margin by 3 basis points as well as the geographic mix effect with significant increase in volumes in the lower spread Asia region. Net loans and advances were up $12.4 billion, 16%, with APEA growth of $10.5 billion (49%). Australian lending increased $2.6 billion (5%) and the margins on our lending portfolios in Australia and New Zealand were held relatively steady following repricing completed in 2010.

Expenses increased 17% mainly due to the run rate impact of investments made in building out APEA capabilities in the prior year and in cash platforms to support the super regional strategy.

Credit impairment expense was down 65% reflecting the improvement in the quality of the book as well as the credit cycle.

 September 2011 v March 2011

Pro forma profit for the half year decreased 15% reflecting the fall in Global Markets’ trading and balance sheet revenues, down 70%. Markets’ sales revenues were up 3% (or 11% excluding capital markets where securitization portfolio volumes and margins were down in line with the market), reflecting our investment in FX capabilities and mitigating the impact of the trading revenue decline.

Our priority product and customer segments continued to deliver strong results during the second half of the year:

Customer revenue momentum continued and over 600 new relationships were acquired. The priority sectors of natural resources, agribusiness and infrastructure grew at 20%.
Customer deposit growth was 19%. Deposit growth in APEA was approximately $10 billion and around $8 billion in Australia. Australian growth in part reflects strong systems growth, and the new cash management platform with the Asian growth consequent to the build out of our Asian franchise.
Our diversification across the super region was evidenced by a 27% growth in lending in APEA, with the Asian lending book growing 29% and APEA now representing 35% of the loan portfolio.

Net interest margin (excluding Markets) declined 17 basis points due to competitive pressures in the domestic market, geographic diversification with growth skewed to lower spread Asian region, and the impact of the continued improvement in the quality of our lending portfolio.

With the slowing of revenue, expenses were limited to a 5% uplift. In Australia and New Zealand expenses growth was due to ongoing investment in strategic capability builds including cash management and payments infrastructure. Expense growth in Asia reflected the build out of foreign exchange capability and investment in cash platforms.

Provision for credit impairment decreased 32% in second half 2011 in line with the improving economic environment which saw individual provisions decrease aided by an increase in recoveries and writebacks.

SEGMENT REVIEW

Institutional division

Shayne Elliott

Business operating segments

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||||||||
|---|---|---|---|---|---|---|
|Half Year|Full Year|
|Sep 11|Mar 11|Movt|Sep 11|Sep 10|Movt|
|Transaction Banking|$M|$M|$M|$M|
|Net interest income|353|325|9%|681|593|15%|
|Other external operating income|307|271|13%|580|491|18%|
|Operating income|660|596|11%|1,261|1,084|16%|
|Operating expenses|(278)|(276)|1%|(556)|(478)|16%|
|Profit before credit impairment and income tax|382|320|19%|705|606|16%|
|Provision for credit impairment|(13)|(21)|-38%|(35)|21|large|
|Profit before income tax|369|299|23%|670|627|7%|
|Income tax expense and non-controlling interests|(103)|(81)|27%|(184)|(185)|-1%|
|Pro forma profit|266|218|22%|486|442|10%|
|Foreign exchange adjustments|n/a|2|n/a|n/a|12|n/a|
|Pro forma adjustments|-|-|n/a|-|-|n/a|
|Underlying profit|266|220|21%|486|454|7%|
|Risk weighted assets|24,189|21,649|12%|24,189|20,731|17%|
|Global Loans|
|Net interest income|919|922|0%|1,847|1,703|8%|
|Other external operating income|89|94|-5%|185|206|-10%|
|Operating income|1,008|1,016|-1%|2,032|1,909|6%|
|Operating expenses|(248)|(237)|5%|(487)|(428)|14%|
|Profit before credit impairment and income tax|760|779|-2%|1,545|1,481|4%|
|Provision for credit impairment|(70)|(136)|-49%|(206)|(669)|-69%|
|Profit before income tax|690|643|7%|1,339|812|65%|
|Income tax expense and non-controlling interests|(181)|(184)|-2%|(367)|(231)|59%|
|Pro forma profit|509|459|11%|972|581|67%|
|Foreign exchange adjustments|n/a|4|n/a|n/a|15|n/a|
|Pro forma adjustments|-|-|n/a|-|-|n/a|
|Underlying profit|509|463|10%|972|596|63%|
|Risk weighted assets|84,226|78,913|7%|84,226|79,040|7%|
|Global Markets|
|Net interest income|291|267|9%|560|832|-33%|
|Other external operating income|346|652|-47%|1,003|920|9%|
|Operating income|637|919|-31%|1,563|1,752|-11%|
|Operating expenses|(423)|(399)|6%|(828)|(678)|22%|
|Profit before credit impairment and income tax|214|520|-59%|735|1,074|-32%|
|Provision for credit impairment|(18)|19|large|1|(64)|large|
|Profit before income tax|196|539|-64%|736|1,010|-27%|
|Income tax expense and non-controlling interests|(65)|(154)|-58%|(220)|(290)|-24%|
|Pro forma profit|131|385|-66%|516|720|-28%|
|Foreign exchange adjustments|n/a|-|n/a|n/a|17|n/a|
|Pro forma adjustments|-|-|n/a|-|-|n/a|
|Underlying profit|131|385|-66%|516|737|-30%|
|Risk weighted assets|31,951|28,436|12%|31,951|30,413|5%|

----- End of picture text -----

SEGMENT REVIEW

Institutional division

Shayne Elliott

Institutional division Shayne Elliott
Analysis of Global Markets income
	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Composition of Global Markets pro forma income
by product class
Fixed income	223 452 -51% 679 999 -32%
Foreign exchange	328 324 1% 652 533 22%
Capital markets	60 89 -33% 150 174 -14%
Other	26 54 -52% 82 46 78%
Pro forma Global Markets income	637 919 -31% 1,563 1,752 -11%

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Composition of Global Markets pro forma income
by geography
Australia	256 490 -48% 745 1,055 -29%
Asia Pacific, Europe & America	257 315 -18% 582 467 25%
New Zealand	124 114 9% 236 230 3%
Pro forma Global Markets income	637 919 -31% 1,563 1,752 -11%

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Composition of Global Markets Pro Forma income
by activity
Trading1	56 247 -77% 303 370 -18%
Sales2	510 496 3% 1,009 889 13%
Balance sheet3	71 176 -60% 251 493 -49%
Pro forma Global Markets income	637 919 -31% 1,563 1,752 -11%

1. Trading represents management of positions taken as part of direct client sales flow and the Group’s strategic positions 2.

Sales represents direct client flow business on core products such as fixed income, FX, commodities and capital markets

Balance sheet represents hedging of interest rate risk on the Group’s loan and deposit books and the management of the Bank’s liquidity portfolio

SEGMENT REVIEW

Institutional division Shayne Elliott

Market risk

Traded market risk

Below are aggregate Value at Risk (VaR) exposures at 97.5% and 99% confidence levels covering both physical and derivatives trading positions for the Bank’s principal trading centres. All figures are in AUD.

97.5% confidence level (1 day holding period)

	As a	t High for Low for Avg for	As a
	Sep 11	year year year	Sep 10 year year year
		Sep 11 Sep 11 Sep 11	Sep 10 Sep 10 Sep 10
	$M $M $M $M		$M $M $M $M
Value at Risk at 97.5% confidence
Foreign exchange	6.0 7.9 0.8 3.1		2.6 7.8 0.8 2.0
Interest rate	4.7 16.1 4.2 9.4		11.2 24.9 9.2 17.2
Credit	3.4 8.5 2.4 5.4		3.0 4.9 1.7 3.1
Commodities	2.0 4.3 1.6 2.6		2.1 3.7 1.1 2.3
Equity	2.5 2.5 0.4 0.9		0.5 0.8 0.2 0.4
Diversification benefit	(10.4) n/a n/a (10.3)		(7.1) n/a n/a (8.2)
Total VaR	8.2 18.8 5.7 11.1		12.3 24.9 10.0 16.8

99% confidence level (1 day holding period)

Value at Risk at 99% confidence
Foreign exchange 7.8 10.9 1.0 4.2			3.6 10.4 1.3 3.1
Interest rate 7.0 26.4 5.4 13.5			19.3 57.4 15.2 30.5
Credit 4.9 10.5 3.2 6.9			3.9 7.0 2.1 4.4
Commodities 3.2 6.5 2.4 4.1			3.6 5.4 2.4 3.6
Equity 3.4 3.5 0.6 1.3			0.8 1.2 0.5 0.8
Diversification benefit (14.6) n/a n/a (14.2)			(9.4) n/a n/a (9.8)
Total VaR 11.7 29.5 8.3 15.8			21.8 71.4 15.0 32.6

Non-traded interest rate risk

Non-traded interest rate risk is managed by Global Markets and relates to the potential adverse impact of changes in market interest rates on future net interest income for the Group. Interest rate risk is reported using various techniques including VaR and scenario analysis to a 1% rate shock.

97.5% confidence level (1 day holding period)

	As at	High for	Low for	Avg for	As at	High for	Low for	Avg for
	Sep 11	year	year	year	Sep 10	year	year	year
		Sep 11	Sep 11	Sep 11		Sep 10	Sep 10	Sep 10
	$M	$M	$M	$M	$M	$M	$M	$M
Value at Risk at 97.5% confidence
Australia	12.2	20.1	10.5	14.4	18.2	27.3	18.0	22.0
New Zealand	8.1	13.5	7.9	9.3	13.8	13.8	7.8	11.1
Asia Pacific, Europe & America	3.9	5.5	2.3	3.5	4.3	8.9	4.3	5.9
Diversification benefit	(9.7)	n/a	n/a	(8.0)	(11.6)	n/a	n/a	(8.2)
Total VaR	14.5	26.5	13.2	19.2	24.7	39.6	24.7	30.8

Impact of 1% rate shock on the next 12 months’ net interest income[1 ]

	As
	Sep 11	Sep 10
As at period end	1.36%	1.09%
Maximum exposure	1.51%	1.61%
Minimum exposure	0.50%	0.60%
Average exposure (in absolute terms)	1.08%	0.98%

1. The impact is expressed as a percentage of net interest income. A positive result indicates that a rate increase is positive for net interest income. Conversely, a negative indicates a rate increase is negative for net interest income.

SEGMENT REVIEW

Institutional division Shayne Elliott

Institutional division Shayne Elliott
	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Individual provision charge	$M $M $M $M
Australia	32 130 -75% 162 716 -77%
Asia Pacific, Europe & America	47 25 88% 73 76 -4%
New Zealand	(4) (7) -43% (11) 5 large
Pro forma individual provision charge	75 148 -49% 224 797 -72%
Foreign exchange adjustments	n/a 2 n/a n/a 8 n/a
Pro forma adjustments	- - n/a - (6) -100%
Underlying individual provision charge	75 150 -50% 224 799 -72%

	Half Year Full Year	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Collective provision charge	$M $M $M $M
Australia	37 7 large 45 (9) large
Asia Pacific, Europe & America	1 - n/a 1 1 0%
New Zealand	(9) (3) large (12) (47) -74%
Pro forma collective provision charge	29 4 large 34 (55) large
Foreign exchange adjustments	n/a - n/a n/a (2) n/a
Pro forma adjustments	-	- n/a - (1) -100%
Underlying collective provision charge	29	4 large 34 (58) large

		As at ($M) Movement
		Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Net loans & advances including acceptances
Australia		53,835 53,226 51,285 1% 5%
Asia Pacific, Europe & America		31,936 25,300 21,538 26% 48%
New Zealand		5,380 5,201 5,882 3% -9%
Underlying net loans & advances
		91,151 83,727 78,705 9% 16%
including acceptances


		As at ($M) Movement
		Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Customer deposits
Australia		58,029 49,826 55,108 16% 5%
Asia Pacific, Europe & America		50,224 40,322 33,958 25% 48%
New Zealand		9,181 8,599 8,617 7% 7%
Underlying customer deposits		117,434 98,747 97,681 19% 20%

SEGMENT REVIEW

New Zealand David Hisco

New Zealand comprises Retail, Commercial and Wealth. Retail provides a full range of banking services to personal customers. Commercial includes Commercial & Agri and Business Banking. Wealth includes Private Banking and OnePath New Zealand.

	Half Year Full Year
Table reflects NZD results for New Zealand	Sep 11 NZD M Mar 11 NZD M Movt Sep 11 NZD M Sep 10 NZD M Movt
AUD results shown on page 94
Net interest income	1,112 1,098 1% 2,210 2,061 7%
Other external operating income	307 301 2% 608 614 -1%
Operating income	1,419 1,399 1% 2,818 2,675 5%
Operating expenses	(664) (661) 0% (1,325) (1,349) -2%
Profit before credit impairment and income tax	755 738 2% 1,493 1,326 13%
Provision for credit impairment	(119) (98) 21% (217) (516) -58%
Profit before income tax	636 640 -1% 1,276 810 58%
Income tax expense	(185) (187) -1% (372) (225) 65%
Pro forma profit	451 453 0% 904 585 55%
Pro forma adjustments	- - n/a - (2) -100%
Underlying profit	451 453 0% 904 583 55%

Consisting of:
Retail	142 125 14% 267 186 44%
Commercial	290 292 -1% 582 361 61%
Wealth	32 26 23% 58 42 38%
Operations & Support	(13) 10 large (3) (4) -25%
Pro forma profit	451 453 0% 904 585 55%

Balance Sheet
Net loans & advances including acceptances	86,766 88,402 -2% 86,766 88,345 -2%
Other external assets	2,670 2,716 -2% 2,670 3,248 -18%
External assets	89,436 91,118 -2% 89,436 91,593 -2%
Customer deposits	50,235 51,054 -2% 50,235 48,347 4%
Other deposits and borrowings	4,783 2,861 67% 4,783 7,307 -35%
Deposits and other borrowings	55,018 53,915 2% 55,018 55,654 -1%
Other external liabilities	16,822 18,157 -7% 16,822 16,912 -1%
External liabilities	71,840 72,072 0% 71,840 72,566 -1%
Risk weighted assets	48,743 51,000 -4% 48,743 51,708 -6%
Average net loans and advances including acceptances	87,583 88,837 -1% 88,208 88,176 0%
Average deposits and other borrowings	54,116 55,171 -2% 54,642 57,313 -5%

Ratios
Return on average assets	0.99% 0.98% 0.99% 0.64%
Net interest average margin	2.50% 2.44% 2.47% 2.30%
Operating expenses to operating income	46.8% 47.3% 47.0% 50.1%
Operating expenses to average assets	1.46% 1.44% 1.45% 1.47%
Individual provision charge	174 159 9% 333 455 -27%
Individual provision charge as a % of average net advances	0.40% 0.36% 0.38% 0.52%
Collective provision charge (credit)	(55) (61) -10% (116) 61 large
Collective provision charge (credit) as a % of average net advances	(0.13%) (0.14%) (0.13%) 0.07%
Net impaired assets	1,298 1,669 -22% 1,298 1,442 -10%
Net impaired assets as a % of net advances	1.49% 1.89% 1.49% 1.63%
Total employees	8,884 9,022 -2% 8,884 9,073 -2%

SEGMENT REVIEW

New Zealand David Hisco

Commentary reflects NZD results

September 2011 v September 2010

Financial performance in the 2011 year was strongly ahead of that in 2010, driven by a clear focus on simplifying the business, margin management and lower credit provisioning, although the lack of credit growth had a moderating impact.

On a pro forma basis, profit for the 2011 year increased 55%, with the result including a NZD299 million decrease in credit impairment charge. Profit before credit impairment and income tax increased 13%, driven by revenue growth and supported by strong management of costs.

Our customer value proposition in New Zealand continues to be strong across the businesses, with the Simplification Program contributing to a significant uplift in Retail customer satisfaction during the year, culminating in ANZ being awarded the Sunday StarTimes Canstar Cannex Bank of the Year Award, with The National Bank second.

Key components of the pro forma underlying result were:

Net interest income increased 7%. This growth reflected the margin benefit from re-pricing of the fixed rate lending book, and mix benefit from an increased proportion of variable rate lending in the mortgage portfolio. Deposit margins, however, were reduced in the competitive environment. Lending volumes declined 2% and customer deposits increased 4%, both largely market-driven.
Other external operating income declined 1%, reflecting lower Retail fees driven by a full year’s impact from the fee restructure implemented during 2010. This was partly offset by increased income in Wealth from growth in the OnePath insurance and KiwiSaver businesses, and increased investment funds under management in Private Banking.
Operating expenses decreased 2%, reflecting productivity gains from simplifying the business, which more than offset inflationary impacts.
Provision for credit impairment charge decreased NZD299 million. The individual provision charge was cyclically lower, down NZD122 million on last year. The collective provision charge decreased NZD177 million, largely reflecting credit cycle adjustments booked in the 2010 year, with part releases in 2011. The total loss rate (total provision charge as a percentage of average net advances) for the 2011 year was 0.25%, down from 0.59% for the 2010 year.

 September 2011 v March 2011

The New Zealand economy has continued to re-balance with households and businesses focused on repaying debt and strengthening their balance sheets. Financial performance in the September 2011 half held up well despite the moderating impact of this deleveraging headwind on revenue growth, with strong management of costs an important factor in the financial results for the half.

Profit before credit impairment and income tax increased 2%, reflecting modest revenue growth from net interest margin improvement and subdued lending volumes. Costs were held flat. The credit impairment charge increased NZD21 million, resulting in marginally lower pro forma underlying profit compared with the March 2011 half year (NZD2 million decline).

Key components of the pro forma underlying result were:

Net interest income increased 1%, reflecting margin improvement of 6 basis points driven by re-pricing benefits flowing from rollover of the fixed rate lending book, and customers favouring variable over fixed rate mortgages. These gains were moderated by higher funding costs as cheaper term funding rolled off during the year. Lending volumes declined 2% with the agri sector in particular impacted by de-leveraging. Customer deposits declined 2% after above-system growth in the first half.
Other external operating income increased 2%, reflecting stronger income in Wealth that was assisted by positive revaluations of net policyholder assets driven by falling interest rates. Fees and commissions remained constrained in a competitive environment.
Operating expenses were held flat in the September 2011 half. This positive outcome reflected a strong focus on cost management in the current environment, including constraints on discretionary expenditure, and realisation of productivity gains that is reflected in lower FTE across the businesses and support functions. The result continues the improving trend in the cost to income ratio, down 50 basis points to 46.8% in the September 2011 half.
Provision for credit impairment charge increased NZD21 million. After allowing for Christchurch earthquake related individual provisions and the matching unwind of the associated collective provision, individual provisions were modestly lower and the increased credit provision charge reflected a higher level of unwind in management overlays in the March 2011 half.

SEGMENT REVIEW

New Zealand

David Hisco

Business operating segments

Table reflects NZD results	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Retail	NZD M NZD M NZD M NZD M
Net interest income	443 418 6% 861 798 8%
Other external operating income	143 144 -1% 287 302 -5%
Operating income	586 562 4% 1,148 1,100 4%
Operating expenses	(340) (348) -2% (688) (686) 0%
Profit before credit impairment and income tax	246 214 15% 460 414 11%
Provision for credit impairment	(43) (35) 23% (78) (149) -48%
Profit before income tax	203 179 13% 382 265 44%
Income tax expense	(61) (54) 13% (115) (79) 46%
Pro forma profit	142 125 14% 267 186 44%
Pro forma adjustments	- - n/a - - n/a
Underlying profit	142 125 14% 267 186 44%

Risk weighted assets	16,816 17,105 -2% 16,816 16,897 0%


Commercial
Net interest income	669 665 1% 1,334 1,241 7%
Other external operating income	62 65 -5% 127 143 -11%
Operating income	731 730 0% 1,461 1,384 6%
Operating expenses	(241) (249) -3% (490) (504) -3%
Profit before credit impairment and income tax	490 481 2% 971 880 10%
Provision for credit impairment	(76) (64) 19% (140) (365) -62%
Profit before income tax	414 417 -1% 831 515 61%
Income tax expense	(124) (125) -1% (249) (154) 62%
Pro forma profit	290 292 -1% 582 361 61%
Pro forma adjustments	- - n/a - - n/a
Underlying profit	290 292 -1% 582 361 61%

Risk weighted assets	30,448 32,461 -6% 30,448 33,499 -9%


Wealth
Net interest income	8 1 large 9 6 50%
Other external operating income	102 93 10% 195 171 14%
Operating income	110 94 17% 204 177 15%
Operating expenses	(70) (67) 4% (137) (140) -2%
Profit before credit impairment and income tax	40 27 48% 67 37 81%
Provision for credit impairment	- 1 -100% 1 (2) large
Profit before income tax	40 28 43% 68 35 94%
Income tax expense	(8) (2) large (10) 7 large
Pro forma profit	32 26 23% 58 42 38%
Pro forma adjustments	- - n/a - (2) -100%
Underlying profit	32 26 23% 58 40 45%

Risk weighted assets	894 928 -4% 894 814 10%

SEGMENT REVIEW

New Zealand

David Hisco

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Individual provision charge	NZD M NZD M NZD M NZD M
Retail	40 47 -15% 87 162 -46%
Commercial	134 113 19% 247 291 -15%
Commercial & Agri	113 103 10% 216 217 0%
Business Banking	21 10 large 31 74 -58%
Wealth	- (1) -100% (1) 2 large
Pro forma individual provision charge	174 159 9% 333 455 -27%
Pro forma adjustments	- - n/a - - n/a
Underlying individual provision charge	174 159 9% 333 455 -27%

	Half Year Full Year
	Sep 11 NZD M Mar 11 NZD M Movt Sep 11 NZD M Sep 10 NZD M Movt
Collective provision charge
Retail	3 (12) large (9) (13) -31%
Commercial	(58) (49) 18% (107) 74 large
Commercial & Agri	(58) (41) 41% (99) 86 large
Business Banking	- (8) -100% (8) (12) -33%
Pro forma collective provision charge	(55) (61) -10% (116) 61 large
Pro forma adjustments	- - n/a - - n/a
Underlying collective provision charge	(55) (61) -10% (116) 61 large

	As at (NZD M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Net loans & advances including acceptances
Retail	35,080 35,691 36,016 -2% -3%
Commercial	50,402 51,464 51,168 -2% -1%
Commercial & Agri	34,875 36,295 36,330 -4% -4%
Business Banking	15,527 15,169 14,838 2% 5%
Wealth	1,284 1,247 1,161 3% 11%
Underlying net loans & advances including acceptances
	86,766 88,402 88,345 -2% -2%

	As at (NZD M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Customer deposits
Retail	27,934 27,830 27,001 0% 3%
Commercial	17,804 18,389 16,793 -3% 6%
Commercial & Agri	10,095 10,713 9,496 -6% 6%
Business Banking	7,709 7,676 7,297 0% 6%
Wealth	4,497 4,835 4,553 -7% -1%
Underlying customer deposits	50,235 51,054 48,347 -2% 4%

SEGMENT REVIEW

Group Centre[1 ]

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Net interest income	223 157 42% 381 219 74%
Other external operating income	1 4 -77% (35) (48) -27%
Operating income	224 161 39% 346 171 large
Operating expenses	(214) (175) 22% (388) (302) 28%
Profit/(Loss) before credit impairment and income tax	10 (14) large (42) (131) -68%
Provision for credit impairment	(38) (2) large (40) (10) large
Profit/(Loss) before income tax	(28) (16) 75% (82) (141) -42%
Income tax expense and non-controlling interests	31 2 large 46 (23) large
Pro forma profit/(loss)	3 (14) large (36) (164) -78%
Foreign exchange adjustments	n/a (25) n/a n/a (36) n/a
Pro forma adjustments	- - n/a - 13 -100%
Underlying profit/(loss)	3 (39) large (36) (187) -81%

Total employees	6,689 6,241 7% 6,689 5,557 20%

1. Group Centre comprises Technology, Global Services & Operations, Group Human Resources, Group Risk Management, Group Treasury (includes the funding component of Treasury results, with the mismatch component being included in Institutional Division’s Global Markets business), Group Strategy and Marketing, Corporate Affairs, Corporate Communications, Group Financial Management and Shareholder Functions

 September 2011 v September 2010

The pro forma loss of $36 million improved $128 million compared to a loss of $164 million for the September 2010 full year largely as a result of earnings on higher surplus capital. Significant factors influencing the result were:

Operating income improved $175 million largely due to higher earnings on central capital combined with a lower funding cost associated with lower debit tax balances, and profit recognised on the sale of our Martin Place headquarters in Sydney of $19 million. There were offsetting variances between net interest and other income as a result of elimination entries associated with the consolidation of OnePath Australia.
Operating expenses increased $86 million largely as a result of increased project related technology expenditure and increased investment in our Chengdu and Manila Hubs.
Provision for credit impairment increased $30 million with $40 million of flood provisions transferred to the Centre to provide for emerging issues resulting from the global uncertainty.

 September 2011 v March 2011

The pro forma profit of $3 million compared to a loss of $14 million for the March 2011 half. Significant factors influencing the result were:

Operating income improved $63 million largely as a result of higher earnings on central capital and profit recognised on the sale of our Martin Place Headquarters in Sydney of $19 million in the second half. There were offsetting variances between net interest and other income as a result of elimination entries associated with the consolidation of OnePath Australia.
Operating expenses increased $39 million with increased project related technology expenditure and increased investment in our Chengdu and Manila Hubs.
Provision for credit impairment increased $36 million with $40 million of flood provisions transferred to the Centre to provide for emerging issues resulting from the global uncertainty.

GEOGRAPHIC REGION RESULTS

Section 5 – Geographic Region Results

Geographic performance Australia geography Asia Pacific, Europe & America geography New Zealand geography

GEOGRAPHIC REGION RESULTS

Geographic Performance

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Profit after tax	$M $M $M $M
Australia	1,917 1,917 0% 3,834 3,293 16%
Asia Pacific, Europe & America	306 384 -20% 690 520 33%
New Zealand	468 363 29% 831 688 21%
	2,691 2,664 1% 5,355 4,501 19%
Asia Pacific, Europe & America (USD)	323 382 -15% 705 468 51%
New Zealand (NZD)	607 478 27% 1,085 867 25%

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Underlying Profit
Australia	1,976 1,962 1% 3,938 3,623 9%
Asia Pacific, Europe & America	365 397 -8% 762 701 9%
New Zealand	493 459 7% 952 701 36%
	2,834 2,818 1% 5,652 5,025 12%
Asia Pacific, Europe & America (USD)	385 396 -3% 781 631 24%
New Zealand (NZD)	638 605 5% 1,243 882 41%

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt
Pro forma profit1
Australia	1,976 1,991 -1% 3,938 3,692 7%
Asia Pacific, Europe & America	365 381 -4% 762 645 18%
New Zealand	493 466 6% 952 677 41%
	2,834 2,838 0% 5,652 5,014 13%
Asia Pacific, Europe & America (USD)	385 396 -3% 781 640 22%
New Zealand (NZD)	638 605 5% 1,243 884 41%

1. Refer page 92 for a reconciliation of divisional to geographic region results

	As at ($M) Movement
	Sep 11 Sep 11
Net loans & advances including acceptances by region	Sep 11 Mar 11 Sep 10 v. Mar 11 v. Sep 10
Australia	284,951 278,195 269,161 2% 6%
Asia Pacific, Europe & America	38,779 30,905 27,118 25% 43%
New Zealand	73,555 70,260 73,121 5% 1%
Underlying net loans & advances including acceptances
	397,285 379,360 369,400 5% 8%

Non continuing business	22 29 28 -24% -21%
Net loans & advances including acceptances	397,307 379,389 369,428 5% 8%

	As at ($M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Customer deposits by region
Australia	183,216 168,086 164,795 9% 11%
Asia Pacific, Europe & America	64,827 52,790 46,607 23% 39%
New Zealand	48,710 46,226 45,470 5% 7%
Underlying customer deposits	296,753 267,102 256,872 11% 16%
Non continuing business	1 4 3 -75% -67%
Customer deposits	296,754 267,106 256,875 11% 16%

GEOGRAPHIC REGION RESULTS

Australia geography

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Net interest income	4,283 4,131 4% 8,413 8,007 5%
Other external operating income	1,557 1,808 -14% 3,325 3,433 -3%
Operating income	5,840 5,939 -2% 11,738 11,440 3%
Operating expenses	(2,607) (2,537) 3% (5,145) (4,791) 7%
Profit before credit impairment and income tax	3,233 3,402 -5% 6,593 6,649 -1%
Provision for credit impairment	(405) (552) -27% (957) (1,315) -27%
Profit before tax	2,828 2,850 -1% 5,636 5,334 6%
Income tax expense	(852) (859) -1% (1,698) (1,642) 3%
Pro forma profit	1,976 1,991 -1% 3,938 3,692 7%
Foreign exchange adjustments	n/a (29) n/a n/a (39) n/a
Pro forma adjustments	- - n/a - (30) -100%
Underlying profit	1,976 1,962 1% 3,938 3,623 9%
Adjustments between statutory profit and underlying profit	(59) (45) 31% (104) (330) -68%
Profit	1,917 1,917 0% 3,834 3,293 16%


Balance Sheet
Net loans & advances including acceptances	284,951 278,195 2% 284,951 269,161 6%
Other external assets	122,051 108,071 13% 122,051 111,909 9%
External assets	407,002 386,266 5% 407,002 381,070 7%
Customer deposits	183,216 168,086 9% 183,216 164,795 11%
Other deposits and borrowings	58,798 55,436 6% 58,798 37,899 55%
Deposits and other borrowings	242,014 223,522 8% 242,014 202,694 19%
Other external liabilities	142,035 135,892 5% 142,035 154,944 -8%
External liabilities	384,049 359,414 7% 384,049 357,638 7%
Risk weighted assets	174,210 169,653 3% 174,210 171,078 2%
Average net loans and advances including acceptances	280,929 274,547 2% 277,746 254,576 9%
Average deposits and other borrowings	232,752 217,896 7% 225,345 197,567 14%

Ratios
Net interest average margin	2.61% 2.59% 2.60% 2.61%
Net interest average margin (excluding Global Markets)	2.92% 2.91% 2.91% 2.87%
Operating expenses to operating income (pro forma)	44.6% 42.7% 43.8% 41.9%
Operating expenses to operating income	44.6% 43.0% 43.8% 41.8%
Operating expenses to average assets	1.29% 1.30% 1.29% 1.26%
Individual provision charge	402 428 -6% 830 1,304 -36%
Individual provision charge as a % of average net advances	0.29% 0.31% 0.30% 0.51%
Collective provision charge (credit)	3 124 -98% 127 (4) large
Collective provision charge (credit) as a % of average net advances	0.00% 0.09% 0.05% (0.00%)
Net impaired assets	2,630 3,052 -14% 2,630 3,372 -22%
Net impaired assets as a % of net advances	0.92% 1.10% 0.92% 1.25%
Total employees	24,162 24,315 -1% 24,162 23,633 2%

GEOGRAPHIC REGION RESULTS

Asia Pacific, Europe & America geography

	Half Year Full Year
Table reflects USD for the APEA region	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	USD M USD M USD M USD M
Net interest income	570 534 7% 1,104 960 15%
Other external operating income	693 706 -2% 1,399 1,085 29%
Operating income	1,263 1,240 2% 2,503 2,045 22%
Operating expenses	(758) (703) 8% (1,461) (1,150) 27%
Profit before credit impairment and income tax	505 537 -6% 1,042 895 16%
Provision for credit impairment	(70) (43) 63% (113) (174) -35%
Profit before income tax	435 494 -12% 929 721 29%
Income tax expense	(46) (93) -51% (139) (75) 85%
Non-controlling interests	(4) (5) -20% (9) (6) 50%
Pro forma profit	385 396 -3% 781 640 22%
Pro forma adjustments	- - n/a - (9) -100%
Underlying profit	385 396 -3% 781 631 24%
Adjustments between statutory profit and underlying profit	(62) (14) large (76) (163) -53%
Profit	323 382 -15% 705 468 51%


Geographic segments:
Asia	275 277 -1% 552 392 41%
Pacific	88 63 40% 151 132 14%
Europe & America	22 56 -61% 78 116 -33%
Pro forma profit	385 396 -3% 781 640 22%


Balance Sheet
Net loans & advances including acceptances	37,736 31,935 18% 37,736 26,218 44%
Other external assets	48,365 32,108 51% 48,365 29,048 67%
External assets	86,101 64,043 34% 86,101 55,266 56%
Customer deposits	63,084 54,547 16% 63,084 45,060 40%
Other deposits and borrowings	7,283 5,345 36% 7,283 7,326 -1%
Deposits and other borrowings	70,367 59,892 17% 70,367 52,386 34%
Other external liabilities	20,038 13,329 50% 20,038 10,298 95%
External liabilities	90,405 73,221 23% 90,405 62,684 44%
Risk weighted assets	55,772 49,136 14% 55,772 42,168 32%
Average net loans and advances including acceptances	36,221 29,272 24% 32,755 21,018 56%
Average deposits and other borrowings	67,085 56,943 18% 62,027 46,563 33%

Ratios
Net interest average margin	1.39% 1.60% 1.49% 1.54%
Net interest average margin (excluding Global Markets)	2.31% 2.77% 2.53% 2.72%
Operating expenses to operating income (pro forma)	60.0% 56.7% 58.4% 56.2%
Operating expenses to operating income	60.0% 56.7% 58.4% 53.2%
Operating expenses to average assets	1.63% 1.83% 1.72% 1.56%
Individual provision charge	80 51 57% 131 138 -5%
Individual provision charge as a % of average net advances	0.45% 0.35% 0.40% 0.65%
Collective provision charge (credit)	(10) (8) 25% (19) 1 large
Collective provision charge (credit) as a % of average net advances	(0.06%) (0.05%) (0.06%) 0.00%
Net impaired assets	276 283 -2% 276 258 7%
Net impaired assets as a % of net advances	0.73% 0.89% 0.73% 0.98%
Total employees	15,124 14,545 4% 15,124 13,816 9%

GEOGRAPHIC REGION RESULTS

New Zealand geography

	Half Year Full Year
Table reflects NZD results for New Zealand region	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	NZD M NZD M NZD M NZD M
Net interest income	1,313 1,285 2% 2,598 2,489 4%
Other external operating income	428 409 5% 837 738 13%
Operating income	1,741 1,694 3% 3,435 3,227 6%
Operating expenses	(739) (759) -3% (1,498) (1,544) -3%
Profit before credit impairment and income tax	1,002 935 7% 1,937 1,683 15%
Provision for credit impairment	(102) (85) 20% (187) (461) -59%
Profit before income tax	900 850 6% 1,750 1,222 43%
Income tax expense	(262) (245) 7% (507) (338) 50%
Pro forma profit	638 605 5% 1,243 884 41%
Pro forma adjustments	- - n/a - (2) -100%
Underlying profit	638 605 5% 1,243 882 41%
Adjustments between statutory profit and underlying profit	(31) (127) -76% (158) (15) large
Profit	607 478 27% 1,085 867 25%


Balance Sheet
Net loans & advances including acceptances	93,613 95,470 -2% 93,613 96,074 -3%
Other external assets	35,079 27,764 26% 35,079 28,923 21%
External assets	128,692 123,234 4% 128,692 124,997 3%
Customer deposits	61,994 62,812 -1% 61,994 59,743 4%
Other deposits and borrowings	7,244 5,537 31% 7,244 10,552 -31%
Deposits and other borrowings	69,238 68,349 1% 69,238 70,295 -2%
Other external liabilities	34,779 31,772 9% 34,779 31,095 12%
External liabilities	104,017 100,121 4% 104,017 101,390 3%
Risk weighted assets	61,650 63,904 -4% 61,650 65,100 -5%
Average net loans and advances including acceptances	94,385 95,540 -1% 94,961 95,472 -1%
Average deposits and other borrowings	69,186 70,003 -1% 69,593 72,196 -4%

Ratios
Net interest average margin	2.40% 2.35% 2.38% 2.27%
Net interest average margin (excluding Global Markets)	2.56% 2.48% 2.52% 2.31%
Operating expenses to operating income	42.4% 44.8% 43.6% 47.6%
Operating expenses to average assets	1.18% 1.23% 1.20% 1.23%
Individual provision charge	168 151 11% 319 461 -31%
Individual provision charge as a % of average net advances	0.36% 0.32% 0.34% 0.48%
Collective provision charge (credit)	(66) (66) 0% (132) - n/a
Collective provision charge (credit) as a % of average net advances	(0.14%) (0.14%) (0.14%) 0.00%
Net impaired assets	1,307 1,684 -22% 1,307 1,463 -11%
Net impaired assets as a % of net advances	1.40% 1.76% 1.40% 1.52%
Total employees	9,270 9,365 -1% 9,270 9,412 -2%

GEOGRAPHIC REGION RESULTS

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PROFIT RECONCILIATION

Section 6 – Profit Reconciliation

Adjustments between statutory profit and underlying profit Pro forma adjustments Reconciliation of statutory profit to underlying profit Asia Pacific, Europe & America division (AUD) New Zealand (AUD) Divisional to Geographic region reconciliation matrix

PROFIT RECONCILIATION

Adjustments between statutory profit and underlying profit

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Statutory profit attributable to shareholders of the Company	2,691 2,664 1% 5,355 4,501 19%
Adjustments between statutory profit and underlying profit	143 154 -7% 297 524 -43%
Underlying profit	2,834 2,818 1% 5,652 5,025 12%

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Adjustments between statutory profit

and underlying profit

New Zealand technology integration	11 75 -85% 86 - n/a
Acquisition costs and valuation adjustments	54 72 -25% 126 480 -74%
Treasury shares adjustment	(56) 15 large (41) 32 large
Tax on New Zealand conduits	- - n/a - (38) -100%
Changes in New Zealand tax legislation	1 (3) large (2) 36 large
Economic hedging - fair value (gains)/losses	3 114 -97% 117 146 -20%
Revenue and net investment hedges (gains)/losses	81 (30) large 51 (24) large
NZ managed funds impacts	3 (42) large (39) (34) 15%
Non continuing businesses
Credit intermediation trades	41 (45) large (4) (54) -93%
Other	5 (2) large 3 (20) large
	143 154 -7% 297 524 -43%
Total adjustments between
statutory profit and underlying profit

Explanation of adjustments between statutory profit and underlying profit

New Zealand technology integration

On 25 November 2010, ANZ announced it would adopt a single core banking system across the ANZ and The National Bank networks in New Zealand to simplify its business and improve products and services for customers. As a result, ANZ has incurred costs of $125 million (Sep 11 half: $17 million; Mar 11 half: $108 million), after tax impact of $86 million (Sep 11 half: $11 million; Mar 11 half: $75 million after tax) associated with the system integration. This project is expected to result in lower operational and technology costs.

Acquisition costs and valuation adjustments

	Pre-tax	Pre-tax	Net of tax
	Half Year	Full Year	Half Year Full Year
	Sep 11 $M Mar 11 $M	Sep 11 $M Sep 10 $M	Sep 11 $M Mar 11 $M Sep 11 $M Sep 10 $M


OnePath step acquisition1	- -	- 185	- - - 185
AFS reserve write-off2	- -	- 32	- - - 32
Integration and transaction costs (refer below)	46 68	114 275	38 55 93 231
Amortisation of intangibles relating to acquisition	23 24	47 46	16 17 33 32
Total	69 92	161 538	54 72 126 480

Valuation adjustment following recalculation of the fair value of the Group’s pre-existing 49% interest on acquisition date under the provisions of AASB 3R Business Combinations (Revised)
Adjustment to write-off previously equity accounted debit available-for-sale reserves

Integration and transaction costs were as follows:

Royal Bank of Scotland acquired assets - $70 million ($63 million net of tax) relating to the exiting of the Transitional Services Agreement with RBS and one-off costs associated with converting the technology and processes of the acquired businesses to those of ANZ. The integration is complete.
OnePath - $37 million ($25 million net of tax) include costs associated with the integration of OnePath employees onto ANZ employee terms and conditions and migration to ANZ payroll, disengagement from ING Groep and launch of the OnePath brand and harmonisation with ANZ’s policies across risk, finance, technology, governance, shared services and operations.
Landmark - $7 million ($5 million net of tax) associated with costs of transitioning loans onto ANZ systems. The integration is complete.

PROFIT RECONCILIATION

Explanation of adjustments between statutory profit and underlying profit, cont’d

Treasury shares adjustment

ANZ shares held by ANZ in the consolidated managed funds and life business are deemed to be Treasury shares. Realised and unrealised gains and losses from these shares and dividends received on these shares are reversed as these are not permitted to be recognised in income. In deriving underlying profit, these earnings are included to ensure there is no asymmetrical impact on the Group’s profits because the Treasury shares support policyholder liabilities which are revalued in deriving income. Accordingly, an adjustment to statutory profit of $48 million gain (Sep 2011 half: $64 million gain; Mar 2011 half: $16 million loss; Sep 2010 full year: $35 million loss), after tax impact $41 million gain (Sep 2011 half: $56 million gain; Mar 2011: $15 million loss; Sep 2010 full year: $32 million loss) has been recognised.

Tax on New Zealand conduits

The New Zealand Inland Revenue Department (IRD) had disputed the treatment of a number of structured finance transactions as part of an audit of the 2000 to 2005 tax years. During 2009, a provision of $196 million (NZD240 million) was recognised net of indemnities provided by Lloyds Banking Group plc. During the 2010 full year, the Group reached a settlement with the IRD in respect of all the transactions in dispute, therefore enabling the release of $38 million in tax provisions.

Changes in New Zealand tax legislation

In May 2010 legislation was passed to reduce the New Zealand corporate tax rate from 30% to 28% and to remove the ability to claim tax depreciation on buildings with an estimated useful life greater than 50 years, effective for the 2011-2012 income tax year. The estimated impact on the value of deferred tax was $36 million in the 2010 full year, with a subsequent adjustment of $2 million in the 2011 full year.

Economic hedging – fair value (gains)/losses and mark-to-market adjustments on revenue and net investment hedges

The Group enters into economic hedges to manage its interest rate and foreign exchange risk. The application of AASB 139: Financial Instruments – Recognition and Measurement results in volatility within the income statement in relation to economic hedges as follows:

approved classes of derivatives not designated in accounting hedge relationships but that are considered to be economic hedges, including hedges of NZD and USD revenue;
income/(loss) arising from the use of the fair value option (principally arising from the valuation of the ‘own name’ credit spread on debt issues designated at fair value); and
ineffectiveness from designated accounting cash flow, fair value and net investment hedges.

ANZ separately reports the impact of volatility due to economic hedging as the profit or loss resulting from the transactions outlined above will reverse over time to be matched with the profit or loss from the economically hedged item as part of underlying profit.

Funding and lending related swaps are primarily foreign exchange rate swaps which are being used to convert the proceeds of foreign currency debt issuances into floating rate Australian dollar and New Zealand dollar debt (‘funding swaps’). As these swaps do not qualify for hedge accounting, movements in the fair values are recorded in the Income Statement. The main drivers of these fair values are currency basis spreads and the AUD and NZD fluctuation against other major funding currencies. This category also includes economic hedges of select structured finance and specialised leasing transactions that do not qualify for hedge accounting. The main drivers of these fair values are Australian and New Zealand yield curves.

Much of the volatility seen from basis spreads in the first half 2011 continued in the second half 2011 resulting in gains both from narrowing spreads and the depreciating AUD. These gains were more than offset by reductions in Australian and New Zealand yield curves which resulted in losses on the hedges of structured finance and specialised leasing transactions.

Volatility arising from the use of the fair value option on own debt hedged by derivatives has been driven by the widening of credit spreads since March 2011. Depreciation of the AUD against the USD and NZD in the second half of the year resulted in losses on hedges of the Group’s NZD and USD revenues.

	Half Year Full Year
	Sep 11 Mar 11 Sep 11 Sep 10
Impact on income statement	$M $M $M $M
Timing differences where IFRS results in assymetry between the
hedge and hedged items
Funding and lending related swaps	(159) (158) (317) (253)
Use of the fair value option on own debt hedged by derivatives	158 (3) 155 45
Revenue and net investment hedges	(119) 43 (76) 34
Ineffective portion of cash flow and fair value hedges	(11) 6 (5) 6
Profit before tax	(131) (112) (243) (168)
Profit after tax	(84) (84) (168) (122)

PROFIT RECONCILIATION

Cumulative pre-tax timing differences
relating to economic hedging		As at($M)
	Sep 11	Mar 11	Sep 10
Timing differences where IFRS results in assymetry between the
hedge and hedged items (before tax)
Funding and lending related swaps	(562)	(403)	(245)
Use of the fair value option on own debt hedged by derivatives	183	25	28
Revenue and net investment hedges	(30)	89	46
Ineffective portion of cash flow and fair value hedges	33	44	38
	(376)	(245)	(133)

ANZ share of OnePath NZ managed funds impacts

During the March 2011 half year, the collateralised debt obligations held within the ING Diversified Yield Fund and the ING Regular Income Fund were sold, resulting in a gain of $45 million ($31 million after tax) being recognised in profit, of which $32 million ($22 million after tax) was transferred from the available-for-sale reserve. In addition, further income of $16 million (Sep 2010 full year: $40 million) from the underlying securities was recognised up to the point of sale, after tax impact $11 million (Sep 2010 full year: $34 million). The charge of $3 million (after tax) during the September 2011 half year comprises the tax liability payable on the final wind up of the Funds.

Credit risk on impaired derivatives (nil profit after tax impact)

Reclassification of a charge to income for credit valuation adjustments on defaulted and impaired derivatives to provision for credit impairment of $17 million reversal (Sep 2011 half: $2 million reversal; Mar 2011 half: $15 million reversal, Sep 2010 full year: $34 million charge).

Non continuing businesses

In 2009, Institutional reviewed its existing business portfolio in light of its new strategic and business goals to determine the optimal structure for the division. As a result, new business ceased in several product areas, including the Alternative Assets and Private Equity businesses. The Group’s structured credit intermediation trades are also included within non continuing businesses and will result in the profit/(loss) fluctuating as the credit risk adjustment is impacted by market movements in credit spreads and exchange rate movements. A summary of the impact of non continuing businesses follows:

Non continuing businesses	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Net interest income	(2) - n/a (2) 2 large
Other operating income	(35) 58 large 23 110 -79%
Operating income	(37) 58 large 21 112 -81%
Operating expenses	(10) (4) large (14) (14) 0%
Profit before credit impairment and income tax	(47) 54 large 7 98 -93%
Provision for credit impairment	(9) - n/a (9) (1) large
Profit before income tax	(56) 54 large (2) 97 large
Income tax expense	10 (7) large 3 (23) large
Profit/(Loss)	(46) 47 large 1 74 -99%

PROFIT RECONCILIATION

Explanation of Pro forma adjustments

		Half Year			Full Year
			Movt
	Sep 11	Mar 11		Sep 11	Sep 10 Movt
	$M $M			$M $M
Underlying profit	2,834 2,818 1%			5,652 5,025 12%
Foreign exchange adjustments1	n/a 20 n/a			n/a (52) n/a
Pro forma adjustments	- - n/a			- 41 -100%
Pro forma profit	2,834 2,838 0%			5,652 5,014 13%

1. Refer to page 28 for the impact of foreign exchange movements

Pro forma adjustments

The pro forma adjustments to the profit and loss statement have been calculated on the following basis:

OnePath Australia and OnePath New Zealand – additional 51% acquired on 30 November 2009. The 2010 full year includes the removal of two months of equity accounted results and the addition of two months assuming 100% ownership, including purchase price adjustments and intercompany eliminations.
Royal Bank of Scotland – various acquisitions, from 21 November 2009 to 12 June 2010. 2010 full year pro forma numbers have been based on the estimated run rate extrapolated for the March and September half years. Expenses have been adjusted for items which would not have occurred had the acquisitions not taken place. Provisions have been based on estimates for each country using appropriate loss rates for each asset class under ANZ methodologies. Given the nature of the acquisition, reliable data on prior period profit and loss items are not available.
Landmark – purchased 1 March 2010. The 2010 full year adjustments have been calculated based on the seven months actuals for 2010. Provisions have been based on due diligence findings during the acquisition, adjusted to align to ANZ policies and risk estimates for 2010.
Funding and other adjustments – reversal of actual interest earned on $1.8 billion capital raised prior to ING acquisition and other intercompany elimination adjustments.
All pro forma adjustments are using September 2011 exchange rates. Pro forma adjustments have not been made to the balance sheet.

September 2010 Full Year		OnePath
		New Total Funding Total
	Landmark RBS Australia Zealand OnePath Adj acquisitions
Net interest income	37 133 5 - 5 (2) 173
Other operating income	1 95 143 14 157 (16) 237
Operating income	38 228 148 14 162 (18) 410
Operating expenses	(12) (181) (93) (14) (107) - (300)
Profit before credit impair't and income tax	26 47 55 - 55 (18) 110
Provision for credit impairment	(15) (35) - - - - (50)
Profit before income tax	11 12 55 - 55 (18) 60
Income tax expense	(3) (3) (20) 2 (18) 5 (19)
Non-controlling interests	- - - - - - -
Pro forma adjustments	8 9 35 2 37 (13) 41

PROFIT RECONCILIATION

Reconciliation of statutory profit to underlying profit

September 2011 Full Year
	Statutory		Less: Adjustments to statutory profit						Cash
	profit								profit
							Economic	Revenue
		Acquisition	Treasury	Policy-	Tax on	Changes in	hedging -	and
		costs and	shares	holders	New	New Zealand	fair value	investment
		valuation	adjust-	tax	Zealand	tax	gains/	hedges -
		adjustments	ment	gross up	Conduits	legislation	losses	MtM
	$M	$M	$M	$M	$M	$M	$M	$M	$M
Net interest income	11,483	2	-	-	-	-	-	-	11,481
Fee income	2,391	-	-	-	-	-	-	-	2,391
Foreign exchange earnings	817	-	-	-	-	-	-	(74)	891
Profit on trading instruments	356	-	-	-	-	-	(21)	-	377
Net income from wealth mgmt	1,405	3	48	208	-	-	-	-	1,146
Other	480	-	-	-	-	-	(147)	-	627
Other operating income	5,449	3	48	208	-	-	(168)	(74)	5,432
Operating income	16,932	5	48	208	-	-	(168)	(74)	16,913
Personnel expenses	(4,775)	(24)	-	-	-	-	-	-	(4,751)
Premises expenses	(685)	(4)	-	-	-	-	-	-	(681)
Computer expenses	(1,041)	(19)	-	-	-	-	-	-	(1,022)
Other expenses	(1,522)	(119)	-	-	-	-	-	-	(1,403)
Operating expenses	(8,023)	(166)	-	-	-	-	-	-	(7,857)
Profit before credit impair't and tax	8,909	(161)	48	208	-	-	(168)	(74)	9,056
Provision for credit impairment	(1,237)	-	-	-	-	-	-	-	(1,237)
Profit before income tax	7,672	(161)	48	208	-	-	(168)	(74)	7,819
Income tax expense	(2,309)	34	(7)	(208)	-	2	51	23	(2,204)
Non-controlling interests	(8)	1	-	-	-	-	-	-	(9)
Profit	5,355	(126)	41	-	-	2	(117)	(51)	5,606
September 2010 Full Year

	Statutory		Less: Adjustments to statutory profit	Less: Adjustments to statutory profit	Less: Adjustments to statutory profit	Less: Adjustments to statutory profit			Cash
	profit								profit
							Economic	Revenue
		Acquisition	Treasury	Policy-	Tax on	Changes in	hedging -	and
		costs and	shares	holders	New	New Zealand	fair value	investment
		valuation	adjust-	tax	Zealand	tax	gains/	hedges -
		adjustments	ment	gross up	Conduits	legislation	losses	MtM
	$M	$M	$M	$M	$M	$M	$M	$M	$M
Net interest income	10,869	(2)	-	-	-	-	(1)	-	10,872
Fee income	2,324	-	-	-	-	-	-	-	2,324
Foreign exchange earnings	747	-	-	-	-	-	-	34	713
Profit on trading instruments	354	-	-	-	-	-	(3)	-	357
Net income from wealth mgmt	1,099	-	(35)	215	-	-	-	-	919
Other	299	(217)	-	-	-	-	(199)	-	715
Other operating income	4,823	(217)	(35)	215	-	-	(202)	34	5,028
Operating income	15,692	(219)	(35)	215	-	-	(203)	34	15,900
Personnel expenses	(4,289)	(75)	-	-	-	-	-	-	(4,214)
Premises expenses	(639)	(3)	-	-	-	-	-	-	(636)
Computer expenses	(866)	(19)	-	-	-	-	-	-	(847)
Other expenses	(1,510)	(222)	-	-	-	-	-	-	(1,288)
Operating expenses	(7,304)	(319)	-	-	-	-	-	-	(6,985)
Profit before credit impair't and tax	8,388	(538)	(35)	215	-	-	(203)	34	8,915
Provision for credit impairment	(1,787)	-	-	-	-	-	-	-	(1,787)
Profit before income tax	6,601	(538)	(35)	215	-	-	(203)	34	7,128
Income tax expense	(2,096)	56	3	(215)	38	(36)	57	(10)	(1,989)
Non-controlling interests	(4)	2	-	-	-	-	-	-	(6)
Profit	4,501	(480)	(32)	-	38	(36)	(146)	24	5,133

PROFIT RECONCILIATION

September 2011 Full Year

	Less:	Adjustments	to statutory profit	to statutory profit		Underlying	Add: Pro forma	adjustments	Pro forma
						profit			profit
		Non cont.
		business -		Credit risk	Total
NZ		Credit	Non cont.	on	adjustments			Foreign
technology	NZ managed	Intermed'n	business -	impaired	to statutory		Pro forma	exchange
integration	funds impacts	Trades	Other	derivatives	profits		adjustments	adjustments
$M	$M	$M	$M	$M	$M	$M	$M	$M	$M
2	-	-	(2)	-	2	11,481	-	n/a	11,481
-	-	-	3	-	3	2,388	-	n/a	2,388
-	(1)	-	-	-	(75)	892	-	n/a	892
-	62	4	-	17	62	294	-	n/a	294
-	-	-	-	-	259	1,146	-	n/a	1,146
-	-	-	16	-	(131)	611	-	n/a	611
-	61	4	19	17	118	5,331	-	n/a	5,331
2	61	4	17	17	120	16,812	-	n/a	16,812
(18)	-	-	(13)	-	(55)	(4,720)	-	n/a	(4,720)
-	-	-	-	-	(4)	(681)	-	n/a	(681)
-	-	-	-	-	(19)	(1,022)	-	n/a	(1,022)
(107)	-	-	(1)	-	(227)	(1,295)	-	n/a	(1,295)
(125)	-	-	(14)	-	(305)	(7,718)	-	n/a	(7,718)
(123)	61	4	3	17	(185)	9,094	-	n/a	9,094
-	-	-	(9)	(17)	(26)	(1,211)	-	n/a	(1,211)
(123)	61	4	(6)	-	(211)	7,883	-	n/a	7,883
37	(22)	-	3	-	(87)	(2,222)	-	n/a	(2,222)
-	-	-	-	-	1	(9)	-	n/a	(9)
(86)	39	4	(3)	-	(297)	5,652	-	n/a	5,652

September 2010 Full Year

	Less: Adjustments	Less: Adjustments	to statutory profit	to statutory profit		Underlying	Add: Pro forma	adjustments	Pro forma
						profit			profit
		Non cont.
		business -		Credit risk	Total
NZ		Credit	Non cont.	on	adjustments			Foreign
technology	NZ managed	Intermed'n	business -	impaired	to statutory		Pro forma	exchange
integration	funds impacts	Trades	Other	derivatives	profits		adjustments	adjustments
$M	$M	$M	$M	$M	$M	$M	$M	$M	$M
-	8	-	2	-	7	10,862	173	(166)	10,869
-	-	-	3	-	3	2,321	65	(43)	2,343
-	-	-	-	-	34	713	8	37	758
-	10	69	-	(34)	42	312	5	(5)	312
-	-	-	-	-	180	919	190	(7)	1,102
-	22	-	38	-	(356)	655	(31)	(34)	590
-	32	69	41	(34)	(97)	4,920	237	(52)	5,105
-	40	69	43	(34)	(90)	15,782	410	(218)	15,974
-	-	-	(7)	-	(82)	(4,207)	(168)	100	(4,275)
-	-	-	(1)	-	(4)	(635)	(39)	16	(658)
-	-	-	(1)	-	(20)	(846)	(34)	15	(865)
-	-	-	(5)	-	(227)	(1,283)	(59)	8	(1,334)
-	-	-	(14)	-	(333)	(6,971)	(300)	139	(7,132)
-	40	69	29	(34)	(423)	8,811	110	(79)	8,842
-	-	-	(1)	34	33	(1,820)	(50)	25	(1,845)
-	40	69	28	-	(390)	6,991	60	(54)	6,997
-	(6)	(15)	(8)	-	(136)	(1,960)	(19)	2	(1,977)
-	-	-	-	-	2	(6)	-	-	(6)
-	34	54	20	-	(524)	5,025	41	(52)	5,014

PROFIT RECONCILIATION

September 2011 Half Year

	Statutory		Less: Adjustments to statutory profit						Cash
	profit								profit
							Economic	Revenue
		Acquisition	Treasury	Policy-	Tax on	Changes in	hedging -	and
		costs and	shares	holders	New	New Zealand	fair value	investment
		valuation	adjust-	tax	Zealand	tax	gains/	hedges -
		adjustments	ment	gross up	Conduits	legislation	losses	MtM
	$M	$M	$M	$M	$M	$M	$M	$M	$M
Net interest income	5,837	1	-	-	-	-	(1)	-	5,837
Fee income	1,214	-	-	-	-	-	-	-	1,214
Foreign exchange earnings	386	-	-	-	-	-	-	(117)	503
Profit on trading instruments	(108)	-	-	-	-	-	(21)	-	(87)
Net income from wealth mgmt	663	3	64	42	-	-	-	-	554
Other	335	-	-	-	-	-	8	-	327
Other operating income	2,490	3	64	42	-	-	(13)	(117)	2,511
Operating income	8,327	4	64	42	-	-	(14)	(117)	8,348
Personnel expenses	(2,378)	(4)	-	-	-	-	-	-	(2,374)
Premises expenses	(341)	(1)	-	-	-	-	-	-	(340)
Computer expenses	(514)	(10)	-	-	-	-	-	-	(504)
Other expenses	(764)	(58)	-	-	-	-	-	-	(706)
Operating expenses	(3,997)	(73)	-	-	-	-	-	-	(3,924)
Profit before credit impair't and tax	4,330	(69)	64	42	-	-	(14)	(117)	4,424
Provision for credit impairment	(562)	-	-	-	-	-	-	-	(562)
Profit before income tax	3,768	(69)	64	42	-	-	(14)	(117)	3,862
Income tax expense	(1,074)	14	(8)	(42)	-	(1)	11	36	(1,084)
Non-controlling interests	(3)	1	-	-	-	-	-	-	(4)
Profit	2,691	(54)	56	-	-	(1)	(3)	(81)	2,774
March 2011 Half Year
	Statutory		Less: Adjustments to statutory profit						Cash
	profit								profit
							Economic	Revenue
		Acquisition	Treasury	Policy-	Tax on	Changes in	hedging -	and
		costs and	shares	holders	New	New Zealand	fair value	investment
		valuation	adjust-	tax	Zealand	tax	gains/	hedges -
		adjustments	ment	gross up	Conduits	legislation	losses	MtM
	$M	$M	$M	$M	$M	$M	$M	$M	$M
Net interest income	5,646	1	-	-	-	-	1	-	5,644
Fee income	1,177	-	-	-	-	-	-	-	1,177
Foreign exchange earnings	431	-	-	-	-	-	-	43	388
Profit on trading instruments	464	-	-	-	-	-	-	-	464
Net income from wealth mgmt	742	-	(16)	166	-	-	-	-	592
Other	145	-	-	-	-	-	(155)	-	300
Other operating income	2,959	-	(16)	166	-	-	(155)	43	2,921
Operating income	8,605	1	(16)	166	-	-	(154)	43	8,565
Personnel expenses	(2,397)	(20)	-	-	-	-	-	-	(2,377)
Premises expenses	(344)	(3)	-	-	-	-	-	-	(341)
Computer expenses	(527)	(9)	-	-	-	-	-	-	(518)
Other expenses	(758)	(61)	-	-	-	-	-	-	(697)
Operating expenses	(4,026)	(93)	-	-	-	-	-	-	(3,933)
Profit before credit impair't and tax	4,579	(92)	(16)	166	-	-	(154)	43	4,632
Provision for credit impairment	(675)	-	-	-	-	-	-	-	(675)
Profit before income tax	3,904	(92)	(16)	166	-	-	(154)	43	3,957
Income tax expense	(1,235)	20	1	(166)	-	3	40	(13)	(1,120)
Non-controlling interests	(5)	-	-	-	-	-	-	-	(5)
Profit	2,664	(72)	(15)	-	-	3	(114)	30	2,832

PROFIT RECONCILIATION

September 2011 Half Year

	Less:	Adjustments	to statutory profit	to statutory profit		Underlying	Add: Pro forma	adjustments	Pro forma
						profit			profit
		Non cont.
		business -		Credit risk	Total
NZ		Credit	Non cont.	on	adjustments			Foreign
technology	NZ managed	Intermed'n	business -	impaired	to statutory		Pro forma	exchange
integration	funds impacts	Trades	Other	derivatives	profits		adjustments	adjustments
$M	$M	$M	$M	$M	$M	$M	$M	$M	$M
1	(1)	-	(2)	-	(2)	5,839	-	n/a	5,839
-	-	-	1	-	1	1,213	-	n/a	1,213
-	(1)	-	-	-	(118)	504	-	n/a	504
-	2	(51)	-	2	(68)	(40)	-	n/a	(40)
-	-	-	-	-	109	554	-	n/a	554
-	-	-	15	-	23	312	-	n/a	312
-	1	(51)	16	2	(53)	2,543	-	n/a	2,543
1	-	(51)	14	2	(55)	8,382	-	n/a	8,382
-	-	-	(9)	-	(13)	(2,365)	-	n/a	(2,365)
-	-	-	-	-	(1)	(340)	-	n/a	(340)
20	-	-	-	-	10	(524)	-	n/a	(524)
(37)	-	-	(1)	-	(96)	(668)	-	n/a	(668)
(17)	-	-	(10)	-	(100)	(3,897)	-	n/a	(3,897)
(16)	-	(51)	4	2	(155)	4,485	-	n/a	4,485
-	-	-	(9)	(2)	(11)	(551)	-	n/a	(551)
(16)	-	(51)	(5)	-	(166)	3,934	-	n/a	3,934
5	(3)	10	-	-	22	(1,096)	-	n/a	(1,096)
-	-	-	-	-	1	(4)	-	n/a	(4)
(11)	(3)	(41)	(5)	-	(143)	2,834	-	n/a	2,834

March 2011 Half Year

	Less:	Adjustments	to statutory profit	to statutory profit		Underlying	Add: Pro forma	adjustments	Pro forma
						profit			profit
		Non cont.
		business -		Credit risk	Total
NZ		Credit	Non cont.	on	adjustments			Foreign
technology	NZ managed	Intermed'n	business -	impaired	to statutory		Pro forma	exchange
integration	funds impacts	Trades	Other	derivatives	profits		adjustments	adjustments
$M	$M	$M	$M	$M	$M	$M	$M	$M	$M
1	1	-	-	-	4	5,642	-	(4)	5,638
-	-	-	2	-	2	1,175	-	(5)	1,170
-	-	-	-	-	43	388	-	40	428
-	60	55	-	15	130	334	-	(4)	330
-	-	-	-	-	150	592	-	-	592
-	-	-	1	-	(154)	299	-	(8)	291
-	60	55	3	15	171	2,788	-	23	2,811
1	61	55	3	15	175	8,430	-	19	8,449
(18)	-	-	(4)	-	(42)	(2,355)	-	15	(2,340)
-	-	-	-	-	(3)	(341)	-	2	(339)
(20)	-	-	-	-	(29)	(498)	-	2	(496)
(70)	-	-	-	-	(131)	(627)	-	(5)	(632)
(108)	-	-	(4)	-	(205)	(3,821)	-	14	(3,807)
(107)	61	55	(1)	15	(30)	4,609	-	33	4,642
-	-	-	-	(15)	(15)	(660)	-	1	(659)
(107)	61	55	(1)	-	(45)	3,949	-	34	3,983
32	(19)	(10)	3	-	(109)	(1,126)	-	(14)	(1,140)
-	-	-	-	-	-	(5)	-	-	(5)
(75)	42	45	2	-	(154)	2,818	-	20	2,838

PROFIT RECONCILIATION

Underlying profit by division – Australia

September 2011 Full Year


$M	Retail	Commercial	Wealth	Other	Australia
Net interest income	3,476	2,275	57	13	5,821
Other external operating income	989	273	1,097	(1)	2,358
Operating income	4,465	2,548	1,154	12	8,179
Operating expenses	(1,954)	(868)	(672)	(12)	(3,506)
Profit before credit impairment and income tax	2,511	1,680	482	-	4,673
Provision for credit impairment	(419)	(300)	8	-	(711)
Profit before tax	2,092	1,380	490	-	3,962
Income tax expense	(625)	(415)	(145)	-	(1,185)
Non-controlling interests	-	-	-	-	-
Underlying profit	1,467	965	345	-	2,777

September 2010 Full Year
$M	Retail	Commercial	Wealth	Other	Australia
Net interest income	3,203	2,093	61	27	5,384
Other external operating income	1,020	273	950	(21)	2,222
Operating income	4,223	2,366	1,011	6	7,606
Operating expenses	(1,882)	(806)	(562)	(6)	(3,256)
Profit before credit impairment and income tax	2,341	1,560	449	-	4,350
Provision for credit impairment	(361)	(259)	37	-	(583)
Profit before tax	1,980	1,301	486	-	3,767
Income tax expense	(595)	(389)	(109)	-	(1,093)
Non-controlling interests	-	-	-	-	-
Underlying profit	1,385	912	377	-	2,674

September 2011 Half Year
$M	Retail	Commercial	Wealth	Other	Australia
Net interest income	1,753	1,160	29	6	2,948
Other external operating income	507	139	528	(1)	1,173
Operating income	2,260	1,299	557	5	4,121
Operating expenses	(987)	(430)	(337)	(6)	(1,760)
Profit before credit impairment and income tax	1,273	869	220	(1)	2,361
Provision for credit impairment	(195)	(108)	6	-	(297)
Profit before tax	1,078	761	226	(1)	2,064
Income tax expense	(324)	(230)	(67)	2	(619)
Non-controlling interests	-	-	-	-	-
Underlying profit	754	531	159	1	1,445

March 2011 Half Year


$M	Retail Commercial Wealth Other Australia
Net interest income	1,723 1,115 28 7 2,873
Other external operating income	482 134 569 - 1,185
Operating income	2,205 1,249 597 7 4,058
Operating expenses	(967) (438) (335) (6) (1,746)
Profit before credit impairment and income tax	1,238 811 262 1 2,312
Provision for credit impairment	(224) (192) 2 - (414)
Profit before tax	1,014 619 264 1 1,898
Income tax expense	(301) (185) (78) (2) (566)
Non-controlling interests	- - - - -
Underlying profit	713 434 186 (1) 1,332

PROFIT RECONCILIATION

Underlying profit by division – Asia Pacific, Europe & America

September 2011 Full Year


USD M Retail Partnerships Institutional Support & America
Net interest income 577 (70) 652 (1) 1,158
Other external operating income 353 391 652 2 1,398
Operating income 930 321 1,304 1 2,556
Operating expenses (734) (8) (698) (86) (1,526)
Profit before credit impairment and income tax 196 313 606 (85) 1,030
Provision for credit impairment (37) - (76) - (113)
Profit before income tax 159 313 530 (85) 917
Income tax expense (38) 6 (121) (16) (169)
Non-controlling interests (1) - (2) (6) (9)
Underlying profit 120 319 407 (107) 739

September 2010 Full Year


		Operations & Asia Pacific, Europe
USD M	Retail Partnerships Institutional Support & America
Net interest income	408 (55) 519 1 873
Other external operating income	185 353 456 (8) 986
Operating income	593 298 975 (7) 1,859
Operating expenses	(477) (4) (481) (65) (1,027)
Profit before credit impairment and income tax	116 294 494 (72) 832
Provision for credit impairment	(63) - (70) (6) (139)
Profit before income tax	53 294 424 (78) 693
Income tax expense	(21) 12 (83) 13 (79)
Non-controlling interests	(3) - - (3) (6)
Underlying profit	29 306 341 (68) 608

September 2011 Half Year


USD M Retail Partnerships Institutional & Support & America
Net interest income 296 (36) 342 (2) 600
Other external operating income 177 200 305 4 686
Operating income 473 164 647 2 1,286
Operating expenses (378) (4) (381) (32) (795)
Profit before credit impairment and income tax 95 160 266 (30) 491
Provision for credit impairment (21) - (49) - (70)
Profit before income tax 74 160 217 (30) 421
Income tax expense (18) 13 (43) (16) (64)
Non-controlling interests - - - (4) (4)
Underlying profit 56 173 174 (50) 353

March 2011 Half Year


		Operations Asia Pacific, Europe
USD M	Retail Partnerships Institutional & Support & America
Net interest income	281 (34) 310 1 558
Other external operating income	176 191 347 (2) 712
Operating income	457 157 657 (1) 1,270
Operating expenses	(356) (4) (317) (54) (731)
Profit before credit impairment and income tax	101 153 340 (55) 539
Provision for credit impairment	(16) - (27) - (43)
Profit before income tax	85 153 313 (55) 496
Income tax expense	(20) (7) (78) - (105)
Non-controlling interests	(1) - (2) (2) (5)
Underlying profit	64 146 233 (57) 386

PROFIT RECONCILIATION

Underlying profit by division – Institutional

September 2011 Full Year
	Transaction	Global	Global	Relationship &
AUD M	Banking	Loans	Markets	Infrastructure	Institutional
Net interest income	681	1,847	560	4	3,092
Other external operating income	580	185	1,003	46	1,814
Operating income	1,261	2,032	1,563	50	4,906
Operating expenses	(556)	(487)	(828)	(130)	(2,001)
Profit before credit impair't and income tax	705	1,545	735	(80)	2,905
Provision for credit impairment	(35)	(206)	1	(18)	(258)
Profit before income tax	670	1,339	736	(98)	2,647
Income tax expense and non-controlling interests	(184)	(367)	(220)	19	(752)
Underlying profit	486	972	516	(79)	1,895

September 2010 Full Year
	Transaction	Global	Global	Relationship &
AUD M	Banking	Loans	Markets	Infrastructure	Institutional
Net interest income	610	1,733	857	26	3,226
Other external operating income	501	215	949	56	1,721
Operating income	1,111	1,948	1,806	82	4,947
Operating expenses	(489)	(442)	(705)	(112)	(1,748)
Profit before credit impair't and income tax	622	1,506	1,101	(30)	3,199
Provision for credit impairment	21	(673)	(67)	(22)	(741)
Profit before income tax	643	833	1,034	(52)	2,458
Income tax expense and non-controlling interests	(189)	(237)	(297)	43	(680)
Underlying profit	454	596	737	(9)	1,778

September 2011 Half Year
	Transaction	Global	Global	Relationship &
AUD M	Banking	Loans	Markets	Infrastructure	Institutional
Net interest income	353	919	291	-	1,563
Other external operating income	307	89	346	28	770
Operating income	660	1,008	637	28	2,333
Operating expenses	(278)	(248)	(423)	(70)	(1,019)
Profit before credit impair't and income tax	382	760	214	(42)	1,314
Provision for credit impairment	(13)	(70)	(18)	(3)	(104)
Profit before income tax	369	690	196	(45)	1,210
Income tax expense and non-controlling interests	(103)	(181)	(65)	6	(343)
Underlying profit	266	509	131	(39)	867

March 2011 Half Year

March 2011 Half Year

AUD M	Banking Loans Markets Infrastructure Institutional
Net interest income	328 928 269 4 1,529
Other external operating income	273 96 657 18 1,044
Operating income	601 1,024 926 22 2,573
Operating expenses	(278) (239) (405) (60) (982)
Profit before credit impair't and income tax	323 785 521 (38) 1,591
Provision for credit impairment	(22) (136) 19 (15) (154)
Profit before income tax	301 649 540 (53) 1,437
Income tax expense and non-controlling interests	(81) (186) (155) 13 (409)
Underlying profit	220 463 385 (40) 1,028

PROFIT RECONCILIATION

Underlying profit by division – New Zealand

September 2011 Full Year

September 2011 Full Year
		Operations &
NZD M Retail Commercial Wealth Support New Zealand
Net interest income 861 1,334 9 6 2,210
Other external operating income 287 127 195 (1) 608
Operating income 1,148 1,461 204 5 2,818
Operating expenses (688) (490) (137) (10) (1,325)
Profit before credit impairment and income tax 460 971 67 (5) 1,493
Provision for credit impairment (78) (140) 1 - (217)
Profit before income tax 382 831 68 (5) 1,276
Income tax expense (115) (249) (10) 2 (372)
Underlying profit 267 582 58 (3) 904

September 2010 Full Year

September 2010 Full Year
		Operations &
NZD M Retail Commercial Wealth Support New Zealand
Net interest income 798 1,241 6 16 2,061
Other external operating income 302 143 154 (2) 597
Operating income 1,100 1,384 160 14 2,658
Operating expenses (686) (504) (123) (19) (1,332)
Profit before credit impairment and income tax 414 880 37 (5) 1,326
Provision for credit impairment (149) (365) (2) - (516)
Profit before income tax 265 515 35 (5) 810
Income tax expense (79) (154) 5 1 (227)
Underlying profit 186 361 40 (4) 583

September 2011 Half Year

September 2011 Half Year
		Operations
NZD M Retail Commercial Wealth & Support New Zealand
Net interest income 443 669 8 (8) 1,112
Other external operating income 143 62 102 - 307
Operating income 586 731 110 (8) 1,419
Operating expenses (340) (241) (70) (13) (664)
Profit before credit impairment and income tax 246 490 40 (21) 755
Provision for credit impairment (43) (76) - 1 (119)
Profit before income tax 203 414 40 (20) 636
Income tax expense (61) (124) (8) 7 (185)
Underlying profit 142 290 32 (13) 451

March 2011 Half Year

March 2011 Half Year
		Operations
NZD M Retail Commercial Wealth & Support New Zealand
Net interest income 418 665 1 14 1,098
Other external operating income 144 65 93 (1) 301
Operating income 562 730 94 13 1,399
Operating expenses (348) (249) (67) 3 (661)
Profit before credit impairment and income tax 214 481 27 16 738
Provision for credit impairment (35) (64) 1 (1) (98)
Profit before income tax 179 417 28 15 640
Income tax expense (54) (125) (2) (5) (187)
Underlying profit 125 292 26 10 453

PROFIT RECONCILIATION

Divisional to Geographic region reconciliation matrix



	September 2011 Full Year
	AUD M	Australia America New Zealand Pro forma
Divisions	Australia	2,772 5 n/a 2,777
	Asia Pacific, Europe & America	(46) 767 n/a 721
	Institutional	1,236 397 262 1,895
	New Zealand	n/a n/a 692 692
	Group Centre	(24) (10) (2) (36)
	Less: Institutional Asia Pacific, Europe & America	n/a (397) n/a (397)
	Pro forma profit	3,938 762 952 5,652
	Foreign exchange adjustments	n/a n/a n/a n/a
	Pro forma adjustments	- - - -
	Underlying profit	3,938 762 952 5,652
	Adjustments between statutory profit and underlying profit	(104) (72) (121) (297)
	Profit	3,834 690 831 5,355


	September 2010 Full Year
	AUD M
Divisions	Australia	2,713 4 n/a 2,717
	Asia Pacific, Europe & America	(35) 658 n/a 623
	Institutional	1,113 344 276 1,733
	New Zealand	n/a n/a 449 449
	Group Centre	(99) (17) (48) (164)
	Less: Institutional Asia Pacific, Europe & America	n/a (344) n/a (344)
	Pro forma profit	3,692 645 677 5,014
	Foreign exchange adjustments	(39) 65 26 52
	Pro forma adjustments	(30) (9) (2) (41)
Divisions	Underlying profit	3,623 701 701 5,025
	Adjustments between statutory profit and underlying profit	(330) (181) (13) (524)
	Profit	3,293 520 688 4,501


	September 2011 Half Year
	AUD M
	Australia	1,443 2 n/a 1,445
	Asia Pacific, Europe & America	(35) 369 n/a 334
	Institutional	566 163 138 867
	New Zealand	n/a n/a 348 348
	Group Centre	2 (6) 7 3
	Less: Institutional Asia Pacific, Europe & America	n/a (163) n/a (163)
	Pro forma profit	1,976 365 493 2,834
	Foreign exchange adjustments	n/a n/a n/a n/a
	Pro forma adjustments	- - - -
	Underlying profit	1,976 365 493 2,834
	Adjustments between statutory profit and underlying profit	(59) (59) (25) (143)
	Profit	1,917 306 468 2,691
Divisions

	March 2011 Half Year
	AUD M
	Australia	1,329 3 n/a 1,332
	Asia Pacific, Europe & America	(11) 385 n/a 374
	Institutional	671 228 125 1,024
	New Zealand	n/a n/a 350 350
	Group Centre	2 (7) (9) (14)
	Less: Institutional Asia Pacific, Europe & America	n/a (228) n/a (228)
	Pro forma profit	1,991 381 466 2,838
	Foreign exchange adjustments	(29) 16 (7) (20)
	Pro forma adjustments	- - - -
	Underlying profit	1,962 397 459 2,818
	Adjustments between statutory profit and underlying profit	(45) (13) (96) (154)
	Profit	1,917 384 363 2,664

PROFIT RECONCILIATION

Asia Pacific, Europe & America Alex Thursby

	Half Year Full Year
Table reflects AUD for the APEA division	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
USD results shown on page 58	$M $M $M $M
Net interest income	570 541 5% 1,130 1,010 12%
Other external operating income	648 694 -7% 1,364 1,103 24%
Operating income	1,218 1,235 -1% 2,494 2,113 18%
Operating expenses	(753) (711) 6% (1,488) (1,224) 22%
Profit before credit impairment and income tax	465 524 -11% 1,006 889 13%
Provision for credit impairment	(67) (41) 63% (110) (177) -38%
Profit before income tax	398 483 -18% 896 712 26%
Income tax expense	(60) (104) -42% (166) (83) 100%
Non-controlling interests	(4) (5) -20% (9) (6) 50%
Pro forma profit	334 374 -11% 721 623 16%
Foreign exchange adjustments	n/a 13 n/a n/a 62 n/a
Pro forma adjustments	- - n/a - (9) -100%
Underlying profit	334 387 -14% 721 676 7%

Consisting of:
Retail	54 63 -15% 117 39 large
Asia Partnerships	163 141 16% 311 313 -1%
Institutional	163 228 -29% 397 344 15%
Operations & Support	(46) (58) -21% (104) (73) 42%
Pro forma profit	334 374 -11% 721 623 16%

Balance Sheet
Net loans & advances including acceptances	38,779 30,946 25% 38,779 27,118 43%
Other external assets	49,329 33,811 46% 49,329 31,603 56%
External assets	88,108 64,757 36% 88,108 58,721 50%
Customer deposits	64,824 52,795 23% 64,824 46,604 39%
Other deposits and borrowings	7,474 5,170 45% 7,474 7,576 -1%
Deposits and other borrowings	72,298 57,965 25% 72,298 54,180 33%
Other external liabilities	20,730 14,962 39% 20,730 12,704 63%
External liabilities	93,028 72,927 28% 93,028 66,884 39%
Risk weighted assets	57,234 47,545 20% 57,234 43,218 32%
Average net loans and advances including acceptances	34,444 29,443 17% 31,951 23,377 37%
Average deposits and other borrowings	63,795 57,195 12% 60,504 51,790 17%

Ratios
Return on average assets	0.79% 1.03% 0.90% 1.03%
Net interest average margin	1.52% 1.74% 1.62% 1.68%
Net interest average margin (excluding Global Markets)	2.59% 2.95% 2.76% 3.01%
Operating expenses to operating income (pro forma)	61.8% 57.6% 59.7% 57.9%
Operating expenses to operating income	61.8% 57.6% 59.7% 55.2%
Operating expenses to average assets	1.78% 1.95% 1.86% 1.73%
Individual provision charge	76 52 46% 128 153 -16%
Individual provision charge as a % of average net advances	0.45% 0.35% 0.40% 0.65%
Collective provision charge (credit)	(9) (9) 0% (18) 1 large
Collective provision charge (credit) as a % of average net advances	(0.06%) (0.05%) (0.06%) 0.00%
Net impaired assets	284 274 4% 284 267 6%
Net impaired assets as a % of net advances	0.73% 0.89% 0.73% 0.98%
Total employees	10,650 10,718 -1% 10,650 10,332 3%

PROFIT RECONCILIATION

New Zealand David Hisco

	Half Year Full Year
Table reflects AUD results for New Zealand	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
NZD results shown on page 68	$M $M $M $M
Net interest income	859 848 1% 1,693 1,579 7%
Other external operating income	238 232 3% 466 472 -1%
Operating income	1,097 1,080 2% 2,159 2,051 5%
Operating expenses	(513) (511) 0% (1,015) (1,035) -2%
Profit before credit impairment and income tax	584 569 3% 1,144 1,016 13%
Provision for credit impairment	(92) (75) 23% (166) (395) -58%
Profit before income tax	492 494 0% 978 621 57%
Income tax expense	(144) (144) 0% (286) (172) 66%
Pro forma profit	348 350 -1% 692 449 54%
Foreign exchange adjustments	n/a (6) n/a n/a 16 n/a
Pro forma adjustments	- - n/a - (2) -100%
Underlying profit	348 344 1% 692 463 49%

Consisting of:
Retail	109 97 12% 204 143 43%
Commercial	224 225 0% 446 277 61%
Wealth	25 20 25% 44 33 33%
Operations & Support	(10) 8 large (2) (4) -50%
Pro forma profit	348 350 -1% 692 449 54%

Balance Sheet
Net loans & advances including acceptances	68,174 65,059 5% 68,174 67,239 1%
Other external assets	2,099 1,999 5% 2,099 2,472 -15%
External assets	70,273 67,058 5% 70,273 69,711 1%
Customer deposits	39,471 37,572 5% 39,471 36,797 7%
Other deposits and borrowings	3,758 2,106 78% 3,758 5,561 -32%
Deposits and other borrowings	43,229 39,678 9% 43,229 42,358 2%
Other external liabilities	13,218 13,363 -1% 13,218 12,872 3%
External liabilities	56,447 53,041 6% 56,447 55,230 2%
Risk weighted assets	38,299 37,533 2% 38,299 39,355 -3%
Average net loans and advances including acceptances	67,659 67,516 0% 67,587 69,964 -3%
Average deposits and other borrowings	41,807 41,930 0% 41,868 45,476 -8%

Ratios
Return on average assets	0.99% 0.98% 0.99% 0.64%
Net interest average margin	2.50% 2.44% 2.47% 2.30%
Operating expenses to operating income	46.8% 47.3% 47.0% 50.1%
Operating expenses to average assets	1.46% 1.44% 1.45% 1.47%
Individual provision charge	134 121 11% 255 361 -29%
Individual provision charge as a % of average net advances	0.40% 0.36% 0.38% 0.52%
Collective provision charge (credit)	(42) (47) -11% (89) 48 large
Collective provision charge (credit) as a % of average net advances	(0.13%) (0.14%) (0.13%) 0.07%
Net impaired assets	1,019 1,228 -17% 1,019 1,097 -7%
Net impaired assets as a % of net advances	1.49% 1.89% 1.49% 1.63%
Total employees	8,884 9,022 -2% 8,884 9,073 -2%

Australia and New Zealand Banking Group Limited

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Full year ended 30 September 2011

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTS

*CONTENTS*	*PAGE*
Condensed Consolidated Income Statement	97
Condensed Consolidated Statement of Comprehensive Income	98
Condensed Consolidated Balance Sheet	99
Condensed Consolidated Cash Flow Statement	100
Condensed Consolidated Statement of Changes in Equity	101
Notes to Condensed Financial Statements	102
Appendix 4E Statement	118

CONDENSED CONSOLIDATED INCOME STATEMENT

Australia and New Zealand Banking Group Limited

Note	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Interest income	15,423 14,945 3% 30,368 26,608 14%
Interest expense	(9,586) (9,299) 3% (18,885) (15,739) 20%
Net interest income 3	5,837 5,646 3% 11,483 10,869 6%
Other operating income 3	1,634 1,974 -17% 3,608 3,291 10%
Net funds management and insurance income 3	663 742 -11% 1,405 1,099 28%
Share of joint venture profit from OnePath Australia and OnePath New Zealand 14
	- - n/a - 33 -100%

Share of associates' profit 14	193 243 -21% 436 400 9%
Operating income	8,327 8,605 -3% 16,932 15,692 8%
Operating expenses 4	(3,997) (4,026) -1% (8,023) (7,304) 10%
Profit before credit impairment and income tax	4,330 4,579 -5% 8,909 8,388 6%
Provision for credit impairment 9	(562) (675) -17% (1,237) (1,787) -31%
Profit before income tax	3,768 3,904 -3% 7,672 6,601 16%
Income tax expense 5	(1,074) (1,235) -13% (2,309) (2,096) 10%
Profit for the period	2,694 2,669 1% 5,363 4,505 19%
Comprising:
Profit attributable to non-controlling interests	3 5 -40% 8 4 100%
Profit attributable to shareholders of the Company
	2,691 2,664 1% 5,355 4,501 19%


Earnings per ordinary share (cents)
Basic 7	104.0 104.2 0% 208.2 178.9 16%
Diluted 7	99.3 101.2 -2% 198.8 174.6 14%
Dividend per ordinary share (cents) 6	76 64 19% 140 126 11%

The notes appearing on pages 102 to 117 form an integral part of the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Australia and New Zealand Banking Group Limited

		Full Year
	Sep 11	Sep 10	Movt
	$M	$M
Profit for the period	5,363	4,505	19%
Other comprehensive income
Currency translation adjustments
Exchange differences taken to equity	330	(1,006)	large
Available-for-sale assets
Valuation gain/(loss) taken to equity	77	136	-43%
Cumulative (gain)/loss transferred to the income statement	19	8	large
Cash flow hedges
Valuation gain/(loss) taken to equity	229	187	22%
Transferred to income statement for the period	(9)	(54)	-83%
Share of associates' other comprehensive income	(15)	18	large
Actuarial gain/(loss) on defined benefit plans	(15)	(6)	large
Income tax on items transferred directly to / from equity
Foreign currency translation reserve	(5)	(10)	-50%
Available-for-sale reserve	(35)	(38)	-8%
Cash flow hedge reserve	(63)	(36)	75%
Actuarial gain / (loss) on defined benefits plan	5	2	large
Other comprehensive income	518	(799)	large
Total comprehensive income for the period	5,881	3,706	59%
Comprising:
Total comprehensive income
attributable to non-controlling interests	8	4	100%
Total comprehensive income attributable
to shareholders of the company	5,873	3,702	59%

The notes appearing on pages 102 to 117 form an integral part of the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEET

Australia and New Zealand Banking Group Limited

		As at ($M) Movement
		Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Assets	Note
Liquid assets		24,899 19,298 18,945 29% 31%
Due from other financial institutions		8,824 7,479 5,481 18% 61%
Trading securities1		36,074 28,966 33,515 25% 8%
Derivative financial instruments		54,118 29,646 37,821 83% 43%
Available-for-sale assets		22,264 18,323 20,742 22% 7%
Net loans and advances1	8	396,337 378,812 351,897 5% 13%
Customers' liability for acceptances1		970 577 11,495 68% -92%
Shares in associates and joint venture entities		3,513 3,239 2,965 8% 18%
Current tax assets		41 20 76 large -46%
Deferred tax assets		599 653 792 -8% -24%
Goodwill and other intangible assets2		6,964 6,632 6,630 5% 5%
Investments backing policyholder liabilities		29,859 32,958 32,171 -9% -7%
Other assets		7,901 8,685 7,015 -9% 13%
Premises and equipment		2,125 2,159 2,158 -2% -2%
Total assets		594,488 537,447 531,703 11% 12%
Liabilities
Due to other financial institutions		23,012 22,014 21,610 5% 6%
Deposits and other borrowings	10	368,729 331,789 310,383 11% 19%
Derivative financial instruments		50,088 29,796 37,217 68% 35%
Liability for acceptances1		970 577 11,495 68% -92%
Current tax liabilities		1,128 750 973 50% 16%
Deferred tax liabilities		28 40 35 -30% -20%
Policyholder liabilities		27,503 29,718 28,981 -7% -5%
External unit holder liabilities (life insurance funds)		5,033 5,501 5,448 -9% -8%
Payables and other liabilities		10,251 10,688 8,115 -4% 26%
Provisions		1,248 1,285 1,297 -3% -4%
Bonds and notes		56,551 58,526 59,714 -3% -5%
Loan capital		11,993 11,634 12,280 3% -2%
Total liabilities		556,534 502,318 497,548 11% 12%
Net assets		37,954 35,129 34,155 8% 11%
Shareholders' equity
Ordinary share capital	11,12	21,343 20,594 19,886 4% 7%
Preference share capital	11,12	871 871 871 0% 0%
Reserves	12	(2,095) (3,171) (2,587) -34% -19%
Retained earnings	12	17,787 16,766 15,921 6% 12%
Share capital and reserves attributable to
		37,906 35,060 34,091 8% 11%
shareholders of the Company

Non-controlling interests		48 69 64 -30% -25%
Total equity		37,954 35,129 34,155 8% 11%

1. In 2011 the Group ceased re-discounting Commercial bill acceptances in its Australian operations. This has impacted balance sheet classifications as there is no intention to trade the commercial bills as negotiable instruments, therefore they are classified as commercial bill loans initially recognised at fair value and subsequently measured at amortised cost:

Sep 2011 - Trading securities: $nil; Net loans and advances $17,326 million; Customer’s liability for acceptances $nil; Liability for acceptances $nil Mar 2011 - Trading securities: $nil; Net loans and advances $17,371 million; Customers’ liability for acceptances $nil; Liability for acceptances $nil

Sep 2010 - Trading securities: $6,035 million; Net loans and advances $nil; Customers’ liability for acceptances $11,150 million; Liability for acceptances $11,150 million 2. Excludes notional goodwill in equity accounted entities

The notes appearing on pages 102 to 117 form an integral part of the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Australia and New Zealand Banking Group Limited

	Full Year	Full Year
	Sep 11	Sep 10
	Inflows	Inflows
	(Outflows)	(Outflows)
	$M	$M
Cash flows from operating activities
Interest received	30,260	26,362
Dividends received	84	54
Fee income received	2,471	2,177
Other income received	1,408	1,230
Interest paid	(18,797)	(15,726)
Personnel expenses paid	(4,547)	(4,102)
Premises expenses paid	(596)	(557)
Other operating expenses paid	(2,034)	(1,625)
Cash settled on derivatives	(2,038)	(1,823)
Income taxes paid
Australia	(1,727)	(353)
Overseas	(306)	(629)
Goods and services tax received	50	33
Net cash flows from funds management and insurance business
Funds management income received	870	665
Insurance premium income received	4,988	6,144
Claims and policyholder liability payments	(4,531)	(5,587)
Investment income (paid)/received	(21)	536
Commission expense (paid)/received	(491)	(353)
Net cash flows from investments backing policyholder liabilities
Purchase of insurance assets	(9,127)	(9,982)
Proceeds from sale/maturity of insurance assets	10,182	10,021
(Increase)/decrease in operating assets
Liquid assets - greater than three months	1,593	2,184
Due from other financial institutions - greater than three months	(1,476)	(65)
Trading securities	(7,614)	(2,004)
Loans and advances	(25,568)	(17,044)
Increase/(decrease) in operating liabilities
Deposits and other borrowings	43,834	14,726
Due to other financial institutions	1,350	55
Payables and other liabilities	584	(1,288)
Net cashprovided by operating activities	18,801	3,049
Cash flows from investing activities
Available-for-sale assets
Purchases	(40,657)	(29,312)
Proceeds from sale or maturity	39,518	25,244
Controlled entities and associates
Purchased (net of cash acquired)	(304)	50
Proceeds from sale (net of cash disposed)	74	15
Premises and equipment
Purchases	(319)	(317)
Proceeds from sale	6	24
Other assets	(849)	(1,428)
Net cash used in investing activities	(2,531)	(5,724)
Cash flows from financing activities
Bonds and notes
Issue proceeds	12,213	21,756
Redemptions	(17,193)	(17,105)
Loan capital
Issue proceeds	1,341	1,976
Redemptions	(1,579)	(2,565)
Dividends paid	(2,113)	(1,671)
Share capital issues	43	37
On market sharepurchases	(137)	(78)
Net cash(used in)/provided by financing activities	(7,425)	2,350
Net cash provided by operating activities	18,801	3,049
Net cash used in investing activities	(2,531)	(5,724)
Net cash(used in)/provided byfinancingactivities	(7,425)	2,350
Net increase/(decrease) in cash and cash equivalents	8,845	(325)
Cash and cash equivalents at beginning of period	20,610	21,511
Effects of exchange rate changes on cash and cash equivalents	566	(576)
Cash and cash equivalents at end ofperiod	30,021	20,610

The notes appearing on pages 102 to 117 form an integral part of the Condensed Consolidated Financial Statements

100

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Australia and New Zealand Banking Group Limited

					Shareholders'
					equity
	Ordinary				attributable to	Non-	Total
	share	Preference		Retained	Equity holders	controlling	Shareholders'
	capital	shares	Reserves1	earnings	of the Bank	interests	equity
	$M	$M	$M	$M	$M	$M	$M
As at 1 October 2009	19,151	871	(1,787)	14,129	32,364	65	32,429
Profit or loss	-	-	-	4,501	4,501	4	4,505
Other comprehensive income for the period	-	-	(795)	(4)	(799)	-	(799)
Total comprehensive income for the period	-	-	(795)	4,497	3,702	4	3,706
Transactions with equity holders in
their capacity as equity holders:
Dividends paid	-	-	-	(2,678)	(2,678)	-	(2,678)
Dividend reinvestment plan	1,007	-	-	-	1,007	-	1,007
Other equity movements:
Share based payments and exercises	-	-	7	-	7	-	7
Group share option scheme	37	-	-	-	37	-	37
Treasury shares OnePath Australia adjustment	(360)	-	-	-	(360)	-	(360)
Group employee share acquisition scheme	51	-	-	-	51	-	51
Adjustments to opening retained
earnings on adoption of revised	-	-	-	(39)	(39)	-	(39)
accounting standard AASB 3R
Other changes	-	-	(12)	12	-	(5)	(5)
As at 30 September 2010	19,886	871	(2,587)	15,921	34,091	64	34,155
Profit or loss	-	-	-	5,355	5,355	8	5,363
Other comprehensive income for the period	-	-	528	(10)	518	-	518
Total comprehensive income for the period	-	-	528	5,345	5,873	8	5,881
Transactions with equity holders in
their capacity as equity holders:
Dividends paid	-	-	-	(3,503)	(3,503)	-	(3,503)
Dividend income on treasury shares
held within the Group's	-	-	-	23	23	-	23
life insurance statutory funds
Dividend reinvestment plan	1,367	-	-	-	1,367	-	1,367
Transactions with non-controlling interests	-	-	(22)	-	(22)	(22)	(44)
Other equity movements:
Share based payments and exercises	-	-	(14)	-	(14)	-	(14)
Group share option scheme	43	-	-	-	43	-	43
Treasury shares OnePath Australia adjustment	2	-	-	-	2	-	2
Group employee share acquisition scheme	45	-	-	-	45	-	45
Other changes	-	-	-	1	1	(2)	(1)
As at 30 September 2011	21,343	871	(2,095)	17,787	37,906	48	37,954

1. Further information on other comprehensive income is disclosed in Note 12

The notes appearing on pages 102 to 117 form an integral part of the Condensed Consolidated Financial Statements

101

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Basis of preparation

These Condensed Consolidated Financial Statements:

should be read in conjunction with the ANZ Annual Report for the year ended 30 September 2011 and any public announcements made by the Parent Entity and its controlled entities (the Group) for the year ended 30 September 2011 in accordance with the continuous disclosure obligations under the Corporations Act 2001 and the ASX Listing Rules;
does not include all notes of the type normally included in the Annual Financial Report;
are presented in Australian dollars unless otherwise stated; and
were approved by the Board of Directors on 2 November 2011.

i) Statement of compliance

These Condensed Consolidated Financial Statements have been prepared in accordance with the accounts provisions of the Banking Act 1959 (as amended), Australian Accounting Standards (“AASs”), Australian Accounting Standards Board (“AASB”) Interpretations, other authoritative pronouncements of the AASB and the Corporations Act 2001.

ii) Use of estimates and assumptions

The preparation of the financial statements requires the use of management judgement, estimates and assumptions that affect reported amounts and the application of policies. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable. Actual results may differ from these estimates. Discussion of these critical accounting treatments, which include complex or subjective decisions or assessments, are covered in Note 2. Such estimates may require review in future periods.

iii) Basis of measurement

The financial information has been prepared in accordance with the historical cost basis except that the following assets and liabilities are stated at their fair value:

derivative financial instruments, including in the case of fair value hedging, the fair value of any applicable underlying exposure;
financial assets treated as available-for-sale;
financial instruments held for trading; and
assets and liabilities designated at fair value through profit and loss.

In accordance with AASB 1038 Life Insurance Contracts, life insurance liabilities are measured using the Margin on Services model.

In accordance with AASB 119 Employee Benefits, defined benefit obligations are measured using the Projected Unit Credit method.

iv) Changes in accounting policy and early adoptions

All new Accounting Standards and Interpretations applicable to annual reporting periods beginning on or after 1 October 2010 have been applied to the Group effective from the required date of application. The initial application of these Standards and Interpretations has not had a material impact on the financial position or the financial results of the Group.

There has been no other change in accounting policy during the year.

v) Rounding

The Parent Entity is an entity of the kind referred to in the Australian Securities and Investments Commission class order 98/100 dated 10 July 1998 (as amended). Consequently, amounts in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except where otherwise indicated.

vi) Comparatives

Certain amounts in the comparative information have been reclassified to conform with current period financial statement presentations. During the current year, this includes the reclassification of certain assets from Liquid Assets to Net Loans and Advances following a review of the definition of the Liquid Assets category and the reclassification of certain customer deposit liabilities from Deposits and Other Borrowings to Due from Other Financial Institutions.

102

NOTES TO CONDENSED FINANCIAL STATEMENTS

2. Critical estimates and judgements used in applying accounting policies

The Group prepares its financial report in accordance with policies which are based on AAS’s, other authoritative accounting pronouncements and Interpretations of the AASB and the Corporations Act 2001. This involves the Group making estimates and assumptions that affect the reported amounts within the financial statements. Estimates and judgements are continually evaluated and are based on historical factors, including expectations of future events that are believed to be reasonable under the circumstances. All material changes to accounting policies and estimates, and the application of these policies and judgements are approved by the Audit Committee of the Board.

A brief explanation of critical estimates and judgement and their impact on the Group follows:

 Provisions for credit impairment

The Group’s accounting policy relating to measuring the impairment of loans and advances requires the Group to assess impairment at least at each reporting date. The credit provisions raised (individual and collective) represent management’s best estimate of the losses incurred in the loan portfolio at balance date based on experienced judgement. The collective provision is estimated on the basis of historical loss experience for assets with credit characteristics similar to those in the collective pool. The historical loss experience is adjusted based on current observable data and events, and an assessment of the impact of model risk. The provision also takes into account the impact of large concentrated losses within the portfolio and the economic cycle.

The use of such judgements and reasonable estimates is considered by management to be an essential part of the process and does not impact on reliability. Individual provisioning is applied when the full collectability of a loan is identified as being doubtful.

Individual and collective provisioning is calculated using discounted expected future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are revised regularly to reduce any differences between loss estimates and actual loss experience.

 Special purpose and off-balance sheet entities

The Group may invest in or establish special purpose entities (SPEs) to enable it to undertake specific types of transactions. The main types of SPEs are securitisation vehicles, structured finance entities, and entities used to sell credit protection.

Where the Group has established SPEs which are controlled by the Group, they are consolidated in the Group’s financial statements.

The Group does not consolidate SPEs that it does not control. As it can be complex to determine whether the Group has control of an SPE, the Group makes judgements about its exposure to the risks and rewards, as well as about its ability to make operational decisions for the SPE in question.

The table below summarises the main types of SPEs with which the Group is involved, the reason for their establishment, and the control factors associated with ANZ’s interest in them. Although there may be some indicators of control, ANZ does not bear the majority of residual risks and rewards of the SPEs, therefore they are not consolidated.

Type of SPE	Reason for establishment	Control factors
Securitisation vehicles	Securitisation is a financing technique	ANZ may manage these securitisation
	whereby assets are transferred to an SPE	vehicles, service assets in the vehicle,
	which funds the purchase by issuing	or provide liquidity or other support.
	securities. This enables ANZ (in the case	ANZ retains the risks associated with
	where transferred assets originate within	the provision of these services. For any
	ANZ) or customers to increase diversity of	SPE which is not consolidated, credit
	funding sources.	and market risks associated with the
		underlying assets are not retained or
		assumed by ANZ except to the limited
		extent that ANZ provides arm’s length
		services and facilities.
Structured finance entities	These entities are set up to assist with the	ANZ may manage these vehicles, hold
	structuring of client financing. The	minor amounts of capital, provide
	resulting lending arrangements are at arms	financing or derivatives.
	length and ANZ typically has limited
	ongoing involvement with the entity.
Credit protection	The SPE in this category is created to allow	ANZ may manage this vehicle.
	ANZ to purchase credit protection.

103

NOTES TO CONDENSED FINANCIAL STATEMENTS

2. Critical estimates and judgements used in applying accounting policies, cont’d

 Significant associates

The carrying values of all significant investments in associates are subject to an annual recoverable amount test. This assessment involves ensuring that the investment’s fair value less costs to sell or its value in use is greater than its carrying amount. Judgement is applied when determining the assumptions supporting these calculations.

The Group reviews its investments in associates against the following impairment indicators:

actual financial performance against budgeted financial performance;
any material unfavourable operational factors and regulatory factors;
any material unfavourable economic outlook and market competitive factors;
carrying value against available quoted market values (supported by third-party broker valuations where available); and
carrying value against market capitalisation (for listed investments).

Where appropriate, additional potential impairment indicators are reviewed which are more specific to the respective investment.

As at 30 September 2011, no impairment of associates was identified as a result of either the review of impairment indicators listed above or the recoverable amount test.

 Available-for-sale financial assets

The accounting policy for impairment of available-for-sale financial assets requires the Group to assess whether there is objective evidence of impairment. This requires judgement when considering whether such evidence exists and, if so, reliably determining the impact of such events on the estimated cash flows of the asset.

During the year ended 30 September 2011, an impairment of $35 million (2010: $nil) was recognised in the income statement in respect of Sacombank after assessing that the decline in the market value in Australian dollars of the investment was significant and prolonged.

 Financial instruments at fair value

A significant portion of financial instruments are carried on the balance sheet at fair value.

The best evidence of fair value is a quoted price in an active market. Accordingly, wherever possible, fair value is based on the quoted market price for the financial instrument.

In the event that there is no active market for the instrument, fair value is based on present value estimates or other market accepted valuation techniques. The valuation models incorporate the impact of bid/ask spread, counterparty credit spreads and other factors that would influence the fair value determined by a market participant.

The majority of valuation techniques employ only observable market data. However, for certain financial instruments, the fair value cannot be determined with reference to current market transactions or valuation techniques whose variables only include data from observable markets.

In respect of the valuation component where market observable data is not available, the fair value is determined using data derived and extrapolated from market data and tested against historic transactions and observed market trends. These valuations are based upon assumptions established by application of professional judgement to analyse the data available to support each assumption. Changing the assumptions changes the resulting estimate of fair value.

The majority of outstanding derivative positions are transacted over-the-counter and therefore need to be valued using valuation techniques. Included in the determination of the fair value of derivatives is a credit valuation adjustment to reflect the credit worthiness of the counterparty, representing the credit risk component of the overall fair value movement on a particular derivative asset. The total valuation adjustment is influenced by the mark-to-market of the derivative trades and by the movement in the market cost of credit.

104

NOTES TO CONDENSED FINANCIAL STATEMENTS

2. Critical estimates and judgements used in applying accounting policies, cont’d

Goodwill and indefinite life intangible assets

The carrying values of goodwill and intangible assets with indefinite lives are reviewed at each balance date and writtendown, to the extent that they are no longer supported by probable future benefits.

Goodwill and intangible assets with indefinite useful lives are allocated to cash-generating units (CGUs) for the purpose of impairment testing. In respect of goodwill, the CGUs are based on the operating segments of the Group. During the year the operating segments were changed from the major geographies in which the Group operates to the major divisions through which the Group operates. Goodwill has been reallocated accordingly.

Impairment testing of goodwill and indefinite life intangibles is performed annually, or more frequently when there is an indication that the asset may be impaired. Impairment testing is conducted by comparing the recoverable amount of the CGU with the current carrying amount of its net assets, including goodwill and intangibles as applicable. Where the current carrying value is greater than the recoverable amount, a charge for impairment is recognised in the income statement.

The most significant components of the Group's goodwill balance at 30 September 2011 relate to the New Zealand division which was $1,720 million (Sep 2010: $1,653 million, Mar 2011: $1,611 million) and Australia division which was $1,433 million (Sep 2010: $1,414 million, Mar 2011: $1,434 million).

The recoverable amount of the CGU to which each goodwill component is allocated is estimated using a market multiple approach as representative of the fair value less costs to sell of each CGU. The price earnings multiples are based on observable multiples in the respective markets in which the Group operates. The earnings are based on the current forecast earnings of the divisions. Key assumptions on which management has based its determination of fair value less costs to sell include assumptions regarding market multiples, costs to sell and forecast earnings. Changes in assumptions upon which the valuation is based could materially impact the assessment of the recoverable amount of each CGU.

As at 30 September 2011, the results of the impairment testing performed did not result in any material impairment being identified.

 Intangible assets with finite useful lives

The carrying value of intangible assets with finite useful lives are reviewed each balance date for any indication of impairment. This assessment involves applying judgement and consideration is given to both internal and external indicators of potential impairment. The majority of the Group’s intangible assets with a finite life is represented by capitalised software and intangible assets purchased as part of the acquisition of OnePath Australia Limited and OnePath (NZ) Limited.

As at 30 September 2011, the results of the impairment testing performed did not result in any material impairment being identified.

 Life insurance contract liabilities

Policy liabilities for life insurance contracts are computed using statistical or mathematical methods, which are expected to give approximately the same results as if an individual liability was calculated for each contract. The computations are made by suitably qualified personnel on the basis of recognised actuarial methods, with due regard to relevant actuarial principles and standards. The methodology takes into account the risks and uncertainties of the particular classes of life insurance business written. Deferred policy acquisition costs are connected with the measurement basis of life insurance liabilities and are equally sensitive to the factors that are considered in the liability measurement.

The key factors that affect the estimation of these liabilities and related assets are:

the cost of providing the benefits and administering these insurance contracts;
mortality and morbidity experience on life insurance products, including enhancements to policyholder benefits;
discontinuance experience, which affects the Group’s ability to recover the cost of acquiring new business over the lives of the contracts; and
the amounts credited to policyholders’ accounts compared to the returns on invested assets through asset-liability management and strategic and tactical asset allocation.

In addition, factors such as regulation, competition, interest rates, taxes and general economic conditions affect the level of these liabilities.

The total value of policy liabilities for life insurance contracts have been appropriately calculated in accordance with these principles.

Taxation

Significant judgement is required in determining provisions held in respect of uncertain tax positions. The Group estimates its tax liabilities based on its understanding of the relevant law in each of the countries in which it operates.

105

NOTES TO CONDENSED FINANCIAL STATEMENTS

3. Income

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Interest income	15,423 14,945 3% 30,368 26,608 14%
Interest expense	(9,586) (9,299) 3% (18,885) (15,739) 20%
Net interest income	5,837 5,646 3% 11,483 10,869 6%

i) Fee and commission income
Lending fees1	346 306 13% 652 634 3%
Non-lending fees and commissions	1,027 1,026 0% 2,053 1,967 4%
Total fee and commission income	1,373 1,332 3% 2,705 2,601 4%
Fee and commission expense2	(159) (155) 3% (314) (277) 13%
Net fee and commission income	1,214 1,177 3% 2,391 2,324 3%

ii) Other income
Net foreign exchange earnings	386 431 -10% 817 747 9%
Net gains from trading securities and derivatives3	(39) 334 large 295 319 -8%
Credit risk on derivatives	(49) 70 large 21 35 -40%
Fair value impairment for OnePath Australia & OnePath NZ	- - n/a - (217) -100%
Movement on financial instruments measured at fair
	(12) (155) -92% (167) (202) -17%
value through profit & loss4

Brokerage income	30 31 -3% 61 70 -13%
NZ managed funds impacts	1 60 -98% 61 4 large
Write-down on assets in non continuing businesses	(11) (2) large (13) (12) 8%
Write-back of investment in Saigon Securities
	- - n/a - 25 -100%
Incorporation

Write-down of investment in Sacombank	- (35) -100% (35) - n/a
Private equity and infrastructure earnings	25 1 large 26 43 -40%
Profit on sale of property	22 2 large 24 2 large
Other	67 60 12% 127 153 -17%
Total other income	420 797 -47% 1,217 967 26%
Other operating income	1,634 1,974 -17% 3,608 3,291 10%

iii) Net funds management and insurance income
Funds management income	426 442 -4% 868 730 19%
Investment income	(1,816) 1,305 large (511) 1,165 large
Insurance premium income	652 532 23% 1,184 847 40%
Commission income (expense)	(253) (237) 7% (490) (358) 37%
Claims	(285) (263) 8% (548) (414) 32%
Changes in policyholder liabilities5	1,875 (1,021) large 854 (836) large
Elimination of Treasury share (gain)/loss	64 (16) large 48 (35) large
Total net funds management and insurance income	663 742 -11% 1,405 1,099 28%
Total other operating income	2,297 2,716 -15% 5,013 4,390 14%
Share of joint venture & associates' profit	193 243 -21% 436 433 1%
Total income6	17,913 17,904 0% 35,817 31,431 14%
Profit before income tax as a % of total income	21.04% 21.81% 21.42% 21.00%

1. Lending fees exclude fees treated as part of the effective yield calculation and included in interest income

2. Includes interchange fees paid

3. Does not include interest income

4. Includes fair value movements (excluding realised and accrued interest) on derivatives entered into to manage interest rate and foreign exchange risk on funding instruments and not designated as accounting hedges, ineffective portions of cashflow hedges, and fair value movements in financial assets and liabilities designated fair value

5. Includes policyholder tax gross up, which represents contribution tax (recovered at 15% on the super contributions made by members) debited to the policyholder account once a year in July when the statement is issued to the members at the end of the 30 June financial year

6. Total income includes external dividend income of $11 million (Mar 2011 half: $8 million; Sep 2010 full year: $18 million; Sep 2011 half year: $3 million)

106

NOTES TO CONDENSED FINANCIAL STATEMENTS

4. Operating expenses

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Personnel
Employee entitlements and taxes	159 147 8% 306 259 18%
Salaries and wages	1,496 1,475 1% 2,971 2,639 13%
Superannuation costs - defined benefit plans	8 5 60% 13 14 -7%
Superannuation costs - defined contribution plans	140 147 -5% 287 253 13%
Equity-settled share-based payments	88 78 13% 166 140 19%
Temporary staff	127 123 3% 250 215 16%
Other	354 389 -9% 743 730 4%
Total personnel expenses	2,372 2,364 0% 4,736 4,250 11%

Premises
Depreciation and amortisation	45 44 2% 89 79 13%
Rent	195 192 2% 387 365 6%
Utilities and other outgoings	81 84 -4% 165 160 3%
Other	20 24 -17% 44 35 26%
Total premises expenses	341 344 -1% 685 639 7%

Computer
Computer contractors	60 83 -28% 143 120 19%
Data communications	66 59 12% 125 94 33%
Depreciation and amortisation	174 174 0% 348 297 17%
Rentals and repairs	64 56 14% 120 100 20%
Software purchased	143 107 34% 250 214 17%
Software written-off	18 2 large 20 17 18%
Other	10 25 -60% 35 24 46%
Total computer expenses	535 506 6% 1,041 866 20%

Other
Advertising and public relations	119 116 3% 235 252 -7%
Audit fees and other fees	9 9 0% 18 15 20%
Depreciation of furniture and equipment	49 48 2% 97 91 7%
Freight and cartage	33 32 3% 65 62 5%
Non-lending losses	29 24 21% 53 67 -21%
Postage and stationery	66 64 3% 130 130 0%
Professional fees	138 136 1% 274 349 -21%
Telephone	36 39 -8% 75 68 10%
Travel	103 105 -2% 208 196 6%
Amortisation and impairment of intangible assets	68 54 26% 122 95 28%
Other	74 62 19% 136 190 -28%
Total other expenses	724 689 5% 1,413 1,515 -7%

Restructuring
New Zealand technology integration	17 108 -84% 125 - n/a
Other	8 15 -47% 23 34 -32%
Total restructuring expenses	25 123 -80% 148 34 large
Operating expenses	3,997 4,026 -1% 8,023 7,304 10%

107

NOTES TO CONDENSED FINANCIAL STATEMENTS

5. Income tax expense

Reconciliation of the prima facie income tax expense on pre-tax rofit with the income tax exense chared in the Income	Half Year Full Year
p p g Statement	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Profit before income tax	3,768 3,904 -3% 7,672 6,601 16%
Prima facie income tax expense at 30%	1,131 1,171 -3% 2,302 1,980 16%
Tax effect of permanent differences:
Overseas tax rate differential	(24) (5) large (29) 5 large
Rebateable and non-assessable dividends	(3) (2) 50% (5) (5) 0%
Profit from associates and joint venture entities	(58) (73) -21% (131) (130) 1%
Fair value adjustment for OnePath Australia
	- - n/a - 65 -100%
and OnePath New Zealand

Mark-to-market (gains)/losses on fair valued
	- - n/a - (2) -100%
investments related to associated entities

Write-back of investment in
	- - n/a - (7) -100%
Saigon Securities Incorporation

Write-down of investment in Sacombank	- 11 -100% 11 - n/a
Offshore Banking Unit	6 (6) large - (7) -100%
New Zealand conduits	- - n/a - (38) -100%
Impact of changes in New Zealand tax legislation	1 (3) large (2) 36 large
OnePath Australia - policyholder income and contributions tax	30 116 -74% 146 150 -3%
Non-deductible RBS integration costs	- 4 -100% 4 27 -85%
Resolution of US tax matter	- - n/a - (31) -100%
Withholding tax provision no longer required	(35) - n/a (35) - n/a
Other	23 22 5% 45 54 -17%
	1,071 1,235 -13% 2,306 2,097 10%
Income tax under/(over) provided in previous years	3 - n/a 3 (1) large
Total income tax expense charged
	1,074 1,235 -13% 2,309 2,096 10%
in the income statement

Australia	861 986 -13% 1,847 1,753 5%
Overseas	213 249 -14% 462 343 35%
	1,074 1,235 -13% 2,309 2,096 10%
Effective Tax Rate - Group	28.5% 31.6% 30.1% 31.8%

Taxation of Financial Arrangements “TOFA”

The Group adopted the new tax regime for financial arrangements (TOFA) in Australia effective from 1 October 2009. The regime aims to more closely align the tax and accounting recognition and measurement of the financial arrangements within scope and their related flows. Deferred tax balances for financial arrangements that existed on adoption at 1 October 2009 will reverse over a four year period.

108

NOTES TO CONDENSED FINANCIAL STATEMENTS

6. Dividends

	Half Year Full Year

Dividend per ordinary share (cents)	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Interim (fully franked)	n/a 64 n/a 64 52 23%
Final (fully franked)	76 n/a n/a 76 74 3%
Total	76 64 19% 140 126 11%


Ordinary share dividend	$M $M % $M $M %
Interim dividend	1,662 - n/a 1,662 1,318 26%
Final dividend	- 1,895 n/a 1,895 1,403 35%
Bonus option plan adjustment	(31) (35) -11% (66) (54) 22%
Total1	1,631 1,860 -12% 3,491 2,667 31%
Ordinary share dividend payout ratio (%)2	74.5% 62.5% 68.5% 71.6%

1. Dividends are not accrued and are recorded when paid

Dividend payout ratio calculated using proposed 2011 final dividend of $1,999 million (not shown in the above table), which is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the March 2011 half year and September 2010 year calculated using gross dividend of $1,662 million and $1,895 million respectively. Dividend payout ratio calculated by adjusting profit attributable to shareholders of the company by the amount of preference shares dividends paid.

Ordinary Shares

The Directors propose that a final dividend of 76 cents be paid on 16 December 2011 on each eligible fully paid ANZ ordinary share. The proposed 2011 final dividend will be fully franked for Australian tax purposes.

Australia and New Zealand Banking Group Limited (ANZ) has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the 2011 final dividend. For the 2011 final dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares. The “Acquisition Price” to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume weighted average sale price of fully paid ANZ ordinary shares sold on the ASX during the seven trading days commencing on 18 November 2011 less a 1.5% discount, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for the 2011 final dividend must be received by ANZ's Share Registrar by 5.00 pm (Australian Eastern Daylight Time) on 16 November 2011. Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in Great Britain (including the Channel Islands and the Isle of Man) or New Zealand will be converted to pounds sterling and New Zealand dollars respectively at an exchange rate calculated at 5.00 pm (Australian Eastern Daylight Time) on 18 November 2011. There is no foreign conduit income attributed to the dividend.

Preference Shares

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

Preference share dividend
Euro Trust Securities	6 6 0% 12 11 9%

Dividend per preference share
Euro Trust Securities	€10.13 €8.11 25% €18.24 €13.93 31%

109

NOTES TO CONDENSED FINANCIAL STATEMENTS

7. Earnings per share

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Number of fully paid ordinary shares on issue (M)1	2,629.0 2,596.4 1% 2,629.0 2,559.7 3%


Basic
Profit attributable to shareholders of the Company ($M)	2,691 2,664 1% 5,355 4,501 19%
Less Preference share dividends ($M)	(6) (6) 0% (12) (11) 9%
Profit less preference share dividends ($M)	2,685 2,658 1% 5,343 4,490 19%
Weighted average number of ordinary shares (M)	2,581.5 2,550.1 1% 2,565.9 2,509.3 2%
Basic earnings per share (cents)	104.0 104.2 0% 208.2 178.9 16%


Diluted
Profit less preference share dividends ($M)	2,685 2,658 1% 5,343 4,490 19%
Interest on US Trust Securities ($M)2	14 14 0% 28 35 -20%
Interest on UK Stapled Hybrid Securities ($M)3	22 24 -8% 46 51 -10%
Interest on Convertible Preference Shares (ANZ CPS) ($M)4	84 84 0% 168 134 25%

Profit attributable to shareholders of the Company
excluding interest on US Trust Securities and convertible preference	2,805 2,780 1% 5,585 4,710 19%
shares (ANZ CPS) ($M)

Weighted average number of shares on issue (M)	2,581.5 2,550.1 1% 2,565.9 2,509.3 2%
Weighted average number of convertible options (M)	4.1 5.0 -18% 4.5 4.8 -6%
Weighted average number of convertible US Trust
	41.6 32.1 30% 41.6 37.2 12%
Securities at current market price (M)2

Weighted average number of convertible UK Stapled
	38.9 31.0 25% 38.9 32.8 19%
Securities (M)3

Weighted average number of Convertible Preference Shares (ANZ CPS)
	158.7 130.1 22% 158.7 112.9 41%
(M)4

Adjusted weighted average number of shares - diluted (M)	2,824.8 2,748.3 3% 2,809.6 2,697.0 4%
Diluted earnings per share (cents)	99.3 101.2 -2% 198.8 174.6 14%

1. Number of fully paid ordinary shares on issue includes Treasury shares of 30.3 million at 30 September 2011 (Mar 2011: 31.3 million; Sep 2010: 28.2 million). Shares in the Company which are purchased on-market by the ANZ Employee Share Acquisition Plan or issued by the Company to the ANZ Employee Share Acquisition Plan are classified as Treasury shares (to the extent that they relate to unvested employee share-based awards). In addition, the life insurance business may also purchase and hold shares in the Company to back policy liabilities in the life insurance statutory funds. These shares are also classified as Treasury shares.

2. The US Trust Securities issued on 27 November 2003 convert to ordinary shares in 2053 at the market price of ANZ ordinary shares less 5% unless redeemed or bought back prior to that date. The US Trust Securities can be de-stapled and the investor left with coupon paying preference shares at ANZ’s discretion at any time, or at the investor’s discretion under certain circumstances. AASB 133 requires that potential ordinary shares for which conversion to ordinary share capital is mandatory must be included in the calculation of diluted EPS. The inclusion of these issues in EPS increased the diluted number of shares by 41.6 million for the half and full year ended 30 September 2011.

3. UK Stapled Securities (issued on 15 June 2007) are GBP denominated stapled securities that convert to ordinary shares on the fifth anniversary of the issue date at the market price of ANZ ordinary shares less 5% (subject to certain conversion conditions). AASB 133 requires that potential ordinary shares for which conversion to ordinary share capital is mandatory must be considered in the calculation of diluted EPS. The inclusion of this issue in EPS increased the diluted number of shares by 38.9 million for the half and full year ended 30 September 2011.

4. There are three “Tranches” of convertible preference shares (ANZ CPS). ANZ CPS1 are convertible preference shares issued on 30 September 2008 that convert to ordinary shares on 16 June 2014 at the market price of ANZ ordinary shares less 2.5% (subject to certain conversion conditions). The ANZ CPS2 are convertible preference shares issued on 17 December 2009 that convert to ordinary shares on 15 December 2016 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). ANZ CPS3 are convertible preference shares issued on 28 September 2011 that convert to ordinary shares on 1 September 2019 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). AASB 133 requires that potential ordinary shares for which conversion to ordinary share capital is mandatory, must be included in the calculation of diluted EPS. The inclusion of ANZ CPS1 and CPS2 in EPS increased the diluted number of shares by 158.7 million for the half and full year ended 30 September 2011. However, the conversion of ANZ CPS3 did not have any dilutive impact for the half or full year ended 30 September 2011 and has been excluded.

110

NOTES TO CONDENSED FINANCIAL STATEMENTS

8. Net loans and advances

	As at ($M) Movement
	Sep 11 Sep 11
	Sep 11 Mar 11 Sep 10 v. Mar 11 v. Sep 10
Australia
Overdrafts	6,326 6,169 6,604 3% -4%
Credit card outstandings	9,062 8,912 8,502 2% 7%
Commercial bills outstanding1	17,326 17,371 - 0% n/a
Term loans - housing	169,970 165,205 159,046 3% 7%
Term loans - non-housing	74,206 72,777 69,868 2% 6%
Lease receivables	1,769 1,510 1,600 17% 11%
Hire purchase	9,549 9,603 9,974 -1% -4%
Other	891 981 878 -9% 1%
	289,099 282,528 256,472 2% 13%

Asia Pacific, Europe & America
Overdrafts	739 694 689 6% 7%
Credit card outstandings	1,053 1,036 1,060 2% -1%
Commercial bills outstanding	1,008 554 432 82% large
Term loans - housing	2,850 2,368 2,058 20% 38%
Term loans - non-housing	33,011 26,285 23,114 26% 43%
Lease receivables	130 144 116 -10% 12%
Other	213 250 240 -15% -11%
	39,004 31,331 27,709 24% 41%

New Zealand
Overdrafts	1,068 1,179 1,378 -9% -22%
Credit card outstandings	1,074 1,020 1,056 5% 2%
Term loans - housing	42,562 40,202 41,554 6% 2%
Term loans - non-housing	29,170 28,247 29,602 3% -1%
Lease receivables	185 174 175 6% 6%
Hire purchase	419 378 377 11% 11%
Other	216 211 264 2% -18%
	74,694 71,411 74,406 5% 0%
Total gross loans and advances	402,797 385,270 358,587 5% 12%
Less: Provision for credit impairment (refer note 9)	(4,873) (4,894) (5,028) 0% -3%
Less: Unearned income2	(2,216) (2,179) (2,262) 2% -2%
Add: Capitalised brokerage/mortgage origination fees	629 615 600 2% 5%
	(6,460) (6,458) (6,690) 0% -3%
Total net loans and advances3	396,337 378,812 351,897 5% 13%

1. In 2011 the Group ceased re-discounting commercial bill acceptances in its Australian operations resulting in reclassification of balances into net loans and advances

2. Includes fees deferred and amortised using the effective interest method of $414 million (Mar 2011: $398 million; Sep 2010: $402 million)

3. Differs to net loans and advances including acceptances shown on pages 11, 12 and 31 as bill acceptances of $970 million (Mar 2011: $577 million; Sep 2010: $11,495 million) are excluded

111

NOTES TO CONDENSED FINANCIAL STATEMENTS

9. Provision for credit impairment

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Collective provision	$M $M $M $M
Balance at start of period	3,177 3,153 1% 3,153 3,000 5%
Charge/(credit) to income statement	(58) 65 large 7 (4) large
Provisions acquired	- - n/a - 240 -100%
Adjustment for exchange rate fluctuations	57 (41) large 16 (83) large
Total collective provision1	3,176 3,177 0% 3,176 3,153 1%
Individual provision
Balance at start of period	1,717 1,875 -8% 1,875 1,526 23%
Charge to income statement for loans and advances	599 594 1% 1,193 1,770 -33%
Provisions acquired	- - n/a - 394 -100%
Adjustment for exchange rate fluctuations	51 (43) large 8 (100) large
Discount unwind	(82) (103) -20% (185) (165) 12%
Bad debts written-off	(718) (703) 2% (1,421) (1,693) -16%
Recoveries of amounts previously written-off	130 97 34% 227 143 59%
Total individual provision	1,697 1,717 -1% 1,697 1,875 -9%
Total provision for credit impairment	4,873 4,894 0% 4,873 5,028 -3%

1. The collective provision includes amounts for off-balance sheet credit exposures: $572 million at 30 September 2011 (Mar 2011: $579 million; Sep 2010: $576 million). The impact on the income statement for the year ended 30 September 2011 was a $7 million release (Sep 2011 half year: $17 million release; Mar 2011 half year: $10 million charge; Sep 2010 full year: $nil)

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
Provision movement analysis	$M $M $M $M
New and increased provisions
Australia	694 668 4% 1,362 1,620 -16%
Asia Pacific, Europe & America	120 92 30% 212 171 24%
New Zealand	237 222 7% 459 559 -18%
	1,051 982 7% 2,033 2,350 -13%
Provision releases	(322) (291) 11% (613) (437) 40%
	729 691 5% 1,420 1,913 -26%
Recoveries of amounts previously written-off	(130) (97) 34% (227) (143) 59%
Individual provision charge for loans and advances	599 594 1% 1,193 1,770 -33%
Impairment on available-for-sale assets	21 16 31% 37 21 76%
Collective provision charge/(credit) to income statement	(58) 65 large 7 (4) large
Charge to income statement	562 675 -17% 1,237 1,787 -31%

	As at ($M) Movement
	Sep 11 Mar 11 Sep 10 Sep 11 v. Mar 11 Sep 11 v. Sep 10
Individual provision balance
Australia	908 938 977 -3% -7%
Asia Pacific, Europe & America	387 373 429 4% -10%
New Zealand	402 406 469 -1% -14%
Total individual provision	1,697 1,717 1,875 -1% -9%

112

NOTES TO CONDENSED FINANCIAL STATEMENTS

10. Deposits and other borrowings

	As at ($M) Movement
	Sep 11 Sep 11
	Sep 11 Mar 11 Sep 10 v. Mar 11 v. Sep 10
Certificates of deposit	55,554 51,513 39,530 8% 41%
Term deposits	153,200 142,668 135,467 7% 13%
Other deposits bearing interest and other borrowings	132,812 114,539 111,391 16% 19%
Deposits not bearing interest	11,334 10,631 10,598 7% 7%
Commercial paper	14,333 10,769 11,641 33% 23%
Borrowing corporations' debt	1,496 1,669 1,756 -10% -15%
Total deposits and other borrowings	368,729 331,789 310,383 11% 19%

11. Share capital

Issued and quoted securities

		Issue price	Amount paid
	Number quoted	per share	up per share
Ordinary shares
As at 30 September 2011	2,629,034,037
Issued during the year	69,371,612
Preference shares
As at 30 September 2011
Euro Trust Securities1	500,000	€1,000	€1,000

1. On 13 December 2004 the Group issued €500 million hybrid capital. The instruments consist of Floating Rate Non-cumulative Trust Securities issued by ANZ Capital Trust III each representing a unit consisting of €1,000 principal amount of subordinated floating rate notes due 2053 issued by ANZ Jackson Funding PLC stapled to a fully paid up preference share with a liquidation preference of €1,000 each, issued by Australia and New Zealand Banking Group Limited

	Half Year Full Year
	Sep 11 Mar 11 Sep 11 Sep 10
	$M $M $M $M
Profit as a % of shareholders' equity	14.2% 15.2% 14.1% 13.2%
including preference shares at end ofperiod(annualised)1

1. Profit attributable to shareholders

113

NOTES TO CONDENSED FINANCIAL STATEMENTS

12. Shareholders’ equity

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Share capital
Balance at start of period	21,465 20,757 3% 20,757 20,022 4%
Ordinary share capital
Dividend reinvestment plan	655 712 -8% 1,367 1,007 36%
Group employee share acquisition scheme1	77 (32) large 45 51 -12%
Treasury shares in OnePath Australia2	1 1 0% 2 (360) large
Group share option scheme	16 27 -41% 43 37 16%
Total share capital	22,214 21,465 3% 22,214 20,757 7%

Foreign currency translation reserve
Balance at start of period	(3,299) (2,742) 20% (2,742) (1,725) 59%
Currency translation adjustments net of hedges after tax	881 (557) large 324 (1,017) large
Total foreign currency translation reserve	(2,418) (3,299) -27% (2,418) (2,742) -12%

Share option reserve3
Balance at start of period	42 64 -34% 64 69 -7%
Share based payments and exercises	8 (21) large (13) 7 large
Transfer of options and rights lapsed to retained earnings	- (1) -100% (1) (12) -92%
Total share option reserve	50 42 19% 50 64 -22%

1. As at 30 September 2011, there were 13,795,601 Treasury shares outstanding (Mar 11: 14,495,458; Sep 10: 11,472,666) . Shares in the Company which are purchased on-market by ANZEST Pty Ltd (trustee of ANZ employee share and option plans) or issued by the Company to ANZEST Pty Ltd are classified as Treasury shares (to the extent that they relate to unvested employee share-based awards).

2. On acquisition of OnePath Australia, an adjustment was made for ANZ shares held by OnePath Australia. As at 30 September 2011, there were 16,469,102 OnePath Australia Treasury shares outstanding (Mar 11: 16,776,922; Sep 10: 16,710,967). OnePath Australia purchases and holds shares in the Company to back policy liabilities in the life insurance statutory funds. These shares are also classified as Treasury shares.

3. The share option reserve arises on the grant of share options/deferred share rights/performance rights (“options and rights”) to selected employees under the ANZ Share Option Plan. Amounts are transferred from the share option reserve to other equity accounts when the options and rights are exercised and to retained earnings when lapsed or forfeited after vesting. Forfeited options and rights due to termination prior to vesting are credited to the income statement.

114

NOTES TO CONDENSED FINANCIAL STATEMENTS

12. Shareholders’ equity, cont’d

	Half Year Full Year
	Sep 11 Mar 11 Movt Sep 11 Sep 10 Movt
	$M $M $M $M
Available-for-sale revaluation reserve5
Balance at start of period	57 80 -29% 80 (41) large
Gain/(loss) recognised after tax	83 (53) large 30 112 -73%
Transferred to income statement	(14) 30 large 16 9 78%
Total available-for-sale revaluation reserve	126 57 large 126 80 58%


Hedging reserve6
Balance at start of period	29 11 large 11 (90) large
Gain/(loss) recognised after tax	142 22 large 164 138 19%
Transferred to income statement	(2) (4) -50% (6) (37) -84%
Total hedging reserve	169 29 large 169 11 large

Transactions with non-controlling interests reserve
Balance at the start of the period	- - n/a - - n/a
Transactions with non-controlling interests7	(22) - n/a (22) - n/a
Total transactions with non-controlling interests reserve	(22) - n/a (22) - n/a
Total reserves	(2,095) (3,171) -34% (2,095) (2,587) -19%

Retained earnings
Balance at start of period	16,766 15,921 5% 15,921 14,129 13%
Profit attributable to shareholders of the Company	2,691 2,664 1% 5,355 4,501 19%
Transfer of options lapsed from share option reserve	- 1 -100% 1 12 -92%
Total available for appropriation	19,457 18,586 5% 21,277 18,642 14%
Actuarial gain/(loss) on defined benefit plans after tax8	(43) 33 large (10) (4) large
Adjustments to opening retained earnings on adoption of
	- - n/a - (39) -100%
revised accounting standard AASB 3R

Ordinary share dividends paid	(1,631) (1,860) -12% (3,491) (2,667) 31%
Dividend income on Treasury shares held within the
	10 13 -23% 23 - n/a
Group's life insurance statutory funds

Preference share dividends paid	(6) (6) 0% (12) (11) 9%
Retained earnings at end of period	17,787 16,766 6% 17,787 15,921 12%

Share capital and reserves attributable to
	37,906 35,060 8% 37,906 34,091 11%
shareholders of the Company

Non-controlling interests	48 69 -30% 48 64 -25%
Total equity	37,954 35,129 8% 37,954 34,155 11%

5. The available-for-sale revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold, that portion of the reserve which relates to that financial asset is realised and recognised in the income statement. Where a revalued financial asset is impaired, that portion of the reserve which relates to that financial asset is recognised in the income statement

6. The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge is recognised in the income statement when the hedged transaction impacts profit or loss, consistent with the applicable accounting policy

The premium in excess of the book value paid to acquire an additional interest in a controlled entity from the non-controlling shareholder

ANZ has taken the option available under AASB 119 to recognise actuarial gains/losses on defined benefit superannuation plans directly in retained earnings

115

NOTES TO CONDENSED FINANCIAL STATEMENTS

13. Contingent liabilities and contingent assets

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

Refer to Note 44 of the 2011 ANZ Annual Report (when released) for a detailed listing of current contingent liabilities and contingent assets.

Exception fees class action

In September 2010, litigation funder IMF (Australia) Ltd commenced a class action against ANZ, which it said was on behalf of 27,000 ANZ customers (which may now be in excess of 30,000) and relating to more than $50 million in exception fees charged to those customers over the previous 6 years. The case is at an early stage. ANZ is defending it. There is a risk that further claims could emerge.

Securities Lending

There are ongoing developments concerning the events surrounding ANZ’s securities lending business which may continue for some time. There is a risk that further actions (court proceedings or regulatory actions) may be commenced against various parties, including ANZ. The potential impact or outcome of future claims (if any) cannot presently be ascertained. ANZ would review and defend any claim, as appropriate.

On 4 July 2008, ANZ appointed a receiver and manager to Primebroker Securities Limited. On 31 August 2009, an Associate Justice set aside some statutory demands served by the receiver and said that, among other things, ANZ's appointment of the receiver to Primebroker was invalid. The receiver is appealing the decision. ANZ has joined in the appeal.

Separately:

On 14 April 2010, the liquidator of Primebroker filed an action against the receiver of Primebroker and ANZ, alleging (among other things) that a charge created on 12 February 2008 is void against the liquidators. The action initially claimed $98 million and was subsequently increased to $177 million (plus interest and costs) from ANZ.
On 15 July 2010, Primebroker and some associated companies brought an action against parties including ANZ, seeking approximately $150 million and certain unquantified amounts. The allegations include misleading or deceptive conduct, wrongful appointment of receivers, and failure to perform an alleged equity investment agreement.

ANZ is defending these actions.

116

NOTES TO CONDENSED FINANCIAL STATEMENTS

14. Associates, joint venture entities and investments

	Half Year Full Year
	Sep 11 $M Mar 11 $M Movt Sep 11 $M Sep 10 $M Movt

	193 243 -21% 436 433 1%
Profit after income tax

Contributions to profit[1 ]

	Contribution to Group post-tax profit Ownership interest held by Group	Contribution to Group post-tax profit Ownership interest held by Group


Associates	Half Year	Full Year As at
	Sep 11 $M Mar 11 $M	Sep 11 $M Sep 10 $M Sep 11 % Mar 11 % Sep 10 %

P.T. Bank Pan Indonesia	29 40	69 79 39 39 39
Metrobank Card Corporation Inc	6 4	10 10 40 40 40
Bank of Tianjin	26 28	54 68 20 20 20
AMMB Holdings Berhad	61 53	114 114 24 24 24
Shanghai Rural Commercial Bank	71 102	173 80 20 20 20
Saigon Securities Inc.	(2) 2	- 9 18 18 18
Other associates	2 14	16 17 n/a n/a n/a

Joint ventures
OnePath Australia Limited2	- -	- 28 100 100 100
OnePath NZ Holdings Limited2	- -	- 5 100 100 100
Diversified Yield Fund
	- -	- 23 99 99 99
and Diversified Income Fund3


Profit after income tax	193 243	436 433

1. The results differ from the published results of these entities due to the application of IFRS, Group Accounting Policies and acquisition adjustments. This amounted to $81 million in 2011 (Sep 2010 full year $79 million), comprising $61 million in the March 2011 half and $20 million in the September 2011 half.

2. Accounted for as joint ventures up to 30 November 2009 prior to full acquisition

Increase in fair value of securities held in the Diversified Yield Fund and Diversified Income Fund which were accounted for as associates up to 30 November 2009 prior to full acquisition of OnePath (NZ) Holdings Limited

15. Exchange rates

Major exchange rates used in translation of results of offshore controlled entities and branches and investments in associates and joint venture entities were as follows:

	Balance sheet	Profit & Loss Average
	As at	Half Year Full Year
	Sep 11 Mar 11 Sep 10	Sep 11 Mar 11 Sep 11 Sep 10
Chinese Yuan	6.2149 6.7742 6.4687	6.8160 6.5906 6.7036 6.1242
Euro	0.7194 0.7305 0.7111	0.7403 0.7303 0.7353 0.6632
Great British Pound	0.6243 0.6415 0.6105	0.6513 0.6258 0.6386 0.5769
Indian Rupee	47.599 46.083 43.414	47.663 44.844 46.258 41.509
Indonesian Rupiah	8573.0 8997.5 8625.3	9075.9 8895.0 8985.7 8279.6
Malaysian Ringgit	3.1052 3.1266 2.9850	3.1858 3.0679 3.1270 2.9582
New Zealand Dollar	1.2727 1.3588 1.3139	1.2945 1.3158 1.3051 1.2603
Papua New Guinea Kina	2.1794 2.6596 2.5920	2.4682 2.6148 2.5413 2.4570
United States Dollar	0.9731 1.0333 0.9668	1.0544 0.9956 1.0251 0.8990

16. Significant events since balance date

There are no significant events from 30 September 2011 to the date of this report.

117

APPENDIX 4E STATEMENT

The directors of Australia and New Zealand Banking Group Limited confirm that the condensed consolidated financial statements set out on pages 97 to 117 are based upon the financial information contained in the audited consolidated financial statements of the Group for the year ended 30 September 2011.

==> picture [72 x 26] intentionally omitted <==

==> picture [65 x 29] intentionally omitted <==

John Morschel Chairman

Michael R P Smith Director

2 November 2011

118

SUPPLEMENTARY INFORMATION

Average balance sheet and related interest

Averages used in the following tables are predominantly daily averages. Interest income figures are presented on a tax-equivalent basis. Impaired loans are included under the interest earning asset category, ‘loans and advances’. Intra-group interest earning assets and interest bearing liabilities are treated as external assets and liabilities for the geographic segments.

	Full year Sep 11 Full year Sep 10
	Ave bal Int Rate Ave bal Int Rate $M $M % $M $M %

Interest earning assets
Due from other financial institutions
Australia	2,168 101 4.7% 2,951 117 4.0%
New Zealand	655 14 2.1% 717 19 2.6%
Asia Pacific, Europe & America	7,252 106 1.5% 7,509 49 0.7%
Trading and available-for-sale assets
Australia	32,685 1,520 4.7% 34,994 1,522 4.3%
New Zealand	7,212 336 4.7% 6,716 329 4.9%
Asia Pacific, Europe & America	11,460 192 1.7% 10,897 209 1.9%
Loans and advances and acceptances
Australia	280,821 21,534 7.7% 257,682 18,233 7.1%
New Zealand	73,736 4,654 6.3% 76,869 4,596 6.0%
Asia Pacific, Europe & America	32,831 1,426 4.3% 24,056 1,123 4.7%
Other assets
Australia	4,529 220 4.9% 3,284 144 4.4%
New Zealand	2,235 152 6.8% 2,980 174 5.8%
Asia Pacific, Europe & America	11,863 113 1.0% 10,622 93 0.9%
Intragroup assets
Australia	2,978 574 19.3% 6,069 480 7.9%
Asia Pacific, Europe & America	9,072 9 0.1% 6,638 51 0.8%
	479,497 30,951 451,984 27,139
Intragroup elimination	(12,050) (583) (12,707) (531)
	467,447 30,368 6.5% 439,277 26,608 6.1%
Non-interest earning assets
Derivatives
Australia	28,506 28,580
New Zealand	7,979 7,871
Asia Pacific, Europe & America	3,481 3,050
Premises and equipment	2,163 2,163
Insurance assets	32,448 27,081
Other assets	26,691 22,151
Provisions for credit impairment
Australia	(3,046) (3,049)
New Zealand	(973) (1,114)
Asia Pacific, Europe & America	(877) (676)
	96,372 86,057
Total average assets	563,819 525,334

119

SUPPLEMENTARY INFORMATION

	Full year Sep 11 Full year Sep 10
	Ave bal Int Rate Ave bal Int Rate $M $M % $M $M %

Interest bearing liabilities
Time deposits
Australia	124,080 6,863 5.5% 99,969 4,873 4.9%
New Zealand	29,310 1,305 4.5% 29,624 1,267 4.3%
Asia Pacific, Europe & America	46,364 549 1.2% 43,716 455 1.0%
Savings deposits
Australia	20,109 821 4.1% 19,458 660 3.4%
New Zealand	2,023 47 2.3% 2,094 41 2.0%
Asia Pacific, Europe & America	5,097 23 0.5% 2,947 15 0.5%
Other demand deposits
Australia	66,053 2,646 4.0% 62,864 2,114 3.4%
New Zealand	13,696 379 2.8% 13,839 343 2.5%
Asia Pacific, Europe & America	6,985 28 0.4% 3,312 15 0.5%
Due to other financial institutions
Australia	8,312 367 4.4% 5,399 197 3.6%
New Zealand	955 22 2.3% 1,100 27 2.5%
Asia Pacific, Europe & America	14,726 136 0.9% 10,722 103 1.0%
Commercial paper
Australia	7,570 378 5.0% 6,925 288 4.2%
New Zealand	3,384 111 3.3% 7,020 211 3.0%
Borrowing corporations' debt
Australia	519 34 6.6% 1,280 80 6.3%
New Zealand	1,190 68 5.7% 1,101 55 5.0%
Loan capital, bonds and notes
Australia	67,517 4,102 6.1% 68,445 3,514 5.1%
New Zealand	15,042 725 4.8% 14,074 657 4.7%
Asia Pacific, Europe & America	39 - 0.0% - - 0.0%
Other liabilities1
Australia	4,260 329 n/a 15,033 799 n/a
New Zealand	141 (77) n/a 51 5 n/a
Asia Pacific, Europe & America	745 29 n/a 427 20 n/a
Intragroup liabilities
New Zealand	12,050 583 4.8% 12,707 531 4.2%
	450,167 19,468 422,107 16,270
Intragroup elimination	(12,050) (583) (12,707) (531)
	438,117 18,885 4.3% 409,400 15,739 3.8%
Non-interest bearing liabilities
Deposits
Australia	4,947 5,000
New Zealand	3,718 3,586
Asia Pacific, Europe & America	2,034 1,780
Derivatives
Australia	23,290 25,585
New Zealand	6,000 5,907
Asia Pacific, Europe & America	(775) (1,830)
Insurance Liabilities	29,285 23,855
External unit holder liabilities	5,476 4,662
Other liabilities	15,861 14,133
	89,836 82,678
Total average liabilities	527,953 492,078

1. Includes foreign exchange swap costs

120

SUPPLEMENTARY INFORMATION

	Half year Sep 11 Half year Mar 11
	Ave bal Int Rate Ave bal Int Rate $M $M % $M $M %

Interest earning assets
Due from other financial institutions
Australia	1,673 41 4.9% 2,666 60 4.5%
New Zealand	734 8 2.2% 575 6 2.1%
Asia Pacific, Europe & America	5,831 66 2.3% 8,679 40 0.9%
Trading and available-for-sale assets
Australia	33,664 793 4.7% 31,700 727 4.6%
New Zealand	7,621 175 4.6% 6,801 161 4.7%
Asia Pacific, Europe & America	11,470 99 1.7% 11,449 93 1.6%
Loans and advances and acceptances
Australia	284,053 10,979 7.7% 277,574 10,556 7.6%
New Zealand	73,863 2,288 6.2% 73,609 2,366 6.4%
Asia Pacific, Europe & America	35,340 724 4.1% 30,308 702 4.6%
Other assets
Australia	4,664 117 5.0% 4,393 103 4.7%
New Zealand	2,154 76 7.0% 2,317 76 6.6%
Asia Pacific, Europe & America	15,747 58 0.7% 7,958 55 1.4%
Intragroup assets
Australia	3,012 300 19.9% 2,943 274 18.7%
Asia Pacific, Europe & America	9,057 (2) 0.0% 9,086 11 0.2%
	488,883 15,722 470,058 15,230
Intragroup elimination	(12,069) (299) (12,029) (285)
	476,814 15,423 6.5% 458,029 14,945 6.5%
Non-interest earning assets
Derivatives
Australia	30,192 26,812
New Zealand	8,461 7,494
Asia Pacific, Europe & America	3,459 3,503
Premises and equipment	2,154 2,171
Insurance assets	32,119 32,780
Other assets	27,830 25,546
Provisions for credit impairment
Australia	(3,096) (2,996)
New Zealand	(949) (998)
Asia Pacific, Europe & America	(849) (906)
	99,321 93,406
Total average assets	576,135 551,435

121

SUPPLEMENTARY INFORMATION

	Half year Sep 11 Half year Mar 11
	Ave bal Int Rate Ave bal Int Rate
	$M $M % $M $M %
Interest bearing liabilities
Time deposits
Australia	126,865 3,534 5.6% 121,281 3,330 5.5%
New Zealand	29,258 625 4.3% 29,363 681 4.7%
Asia Pacific, Europe & America	47,980 293 1.2% 44,739 256 1.1%
Savings deposits
Australia	20,211 417 4.1% 20,006 404 4.0%
New Zealand	2,075 23 2.2% 1,970 24 2.4%
Asia Pacific, Europe & America	4,354 10 0.5% 5,845 14 0.5%
Other demand deposits
Australia	68,627 1,411 4.1% 63,464 1,236 3.9%
New Zealand	14,373 187 2.6% 13,014 192 3.0%
Asia Pacific, Europe & America	9,199 17 0.4% 4,758 11 0.5%
Due to other financial institutions
Australia	8,241 187 4.5% 8,383 180 4.3%
New Zealand	1,207 14 2.3% 702 8 2.3%
Asia Pacific, Europe & America	15,204 64 0.8% 14,246 72 1.0%
Commercial paper
Australia	9,532 240 5.0% 5,597 138 4.9%
New Zealand	2,744 43 3.1% 4,028 68 3.4%
Borrowing corporations' debt
Australia	448 13 5.8% 591 21 7.1%
New Zealand	1,209 37 6.1% 1,171 31 5.3%
Loan capital, bonds and notes
Australia	65,532 1,988 6.1% 69,512 2,113 6.1%
New Zealand	14,780 353 4.8% 15,305 372 4.9%
Asia Pacific, Europe & America	54 - 0.0% 23 - 0.0%
Other liabilities1
Australia	3,909 160 n/a 4,615 168 n/a
New Zealand	231 (47) n/a 50 (30) n/a
Asia Pacific, Europe & America	925 18 n/a 564 10 n/a
Intragroup liabilities
New Zealand	12,069 298 4.9% 12,029 285 4.8%
	459,027 9,885 441,256 9,584
Intragroup elimination	(12,069) (299) (12,029) (285)
	446,958 9,586 4.3% 429,227 9,299 4.3%
Non-interest bearing liabilities
Deposits
Australia	5,018 4,876
New Zealand	3,782 3,653
Asia Pacific, Europe & America	2,239 1,828
Derivatives
Australia	23,302 23,277
New Zealand	6,836 5,160
Asia Pacific, Europe & America	106 (1,661)
Insurance Liabilities	29,382 29,187
External unit holder liabilities	5,504 5,447
Other liabilities	15,973 15,749
	92,142 87,516
Total average liabilities	539,100 516,743

1. Includes foreign exchange swap costs

122

SUPPLEMENTARY INFORMATION

	Half Year Full Year
	Sep 11 Mar 11 Sep 11 Sep 10
	$M $M $M $M
Total average assets
Australia	403,100 391,302 397,215 371,370
New Zealand	96,744 94,220 95,486 98,427
Asia Pacific, Europe & America	88,360 77,942 83,168 68,244
less intragroup elimination	(12,069) (12,029) (12,050) (12,707)
	576,135 551,435 563,819 525,334
% of total average assets attributable to overseas activities	30.6% 29.6% 30.1% 30.5%

Average interest earning assets
Australia	327,066 319,276 323,181 304,980
New Zealand	84,372 83,302 83,838 87,282
Asia Pacific, Europe & America	77,445 67,480 72,478 59,722
less intragroup elimination	(12,069) (12,029) (12,050) (12,707)
	476,814 458,029 467,447 439,277

Total average liabilities
Australia	378,053 367,962 373,021 348,793
New Zealand	90,457 88,099 89,283 92,442
Asia Pacific, Europe & America	82,659 72,711 77,699 63,550
less intragroup elimination	(12,069) (12,029) (12,050) (12,707)
	539,100 516,743 527,953 492,078
% of total average liabilities attributable to overseas activities	29.9% 28.8% 29.3% 29.1%

Total average shareholders' equity1
Ordinary share capital, reserves and retained earnings	36,164 33,821 34,995 32,385
Preference share capital	871 871 871 871
	37,035 34,692 35,866 33,256
Total average liabilities and shareholders' equity	576,135 551,435 563,819 525,334

1. Average shareholders’ equity includes OnePath Australia shares that are eliminated from the closing shareholders’ equity balance of $358 million (Mar 2011: $359 million; Sep 2010: $360 million)

123

SUPPLEMENTARY INFORMATION

	Half Year Full Year
	Sep 11 Mar 11 Sep 11 Sep 10
	% % % %
Gross earnings rate1
Australia	7.46 7.36 7.41 6.72
New Zealand	6.02 6.28 6.15 5.86
Asia Pacific, Europe & America	2.43 2.68 2.55 2.56
Total Group	6.45 6.54 6.50 6.06

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

Australia
Net interest spread	2.23 2.17 2.20 2.23
Interest attributable to net non-interest bearing items	0.38 0.42 0.40 0.38
Net interest margin - Australia	2.61 2.59 2.60 2.61

New Zealand
Net interest spread	2.10 2.06 2.08 2.02
Interest attributable to net non-interest bearing items	0.30 0.29 0.30 0.25
Net interest margin - New Zealand	2.40 2.35 2.38 2.27

Asia Pacific, Europe & America
Net interest spread	1.39 1.64 1.51 1.56
Interest attributable to net non-interest bearing items	(0.00) (0.04) (0.02) (0.02)
Net interest margin - Asia Pacific, Europe & America	1.39 1.60 1.49 1.54

Group
Net interest spread	2.17 2.20 2.19 2.21
Interest attributable to net non-interest bearing items	0.27 0.27 0.27 0.26
Net interest margin	2.44 2.47 2.46 2.47

1. Average interest rate received on average interest earning assets

124

DEFINITIONS

AAS - Australian Accounting Standards.

AASB - Australian Accounting Standards Board.

Collective provision is the Provision for credit losses that are inherent in the portfolio but not able to be individually identified. A collective provision may only be recognised when a loss event has already occurred. Losses expected as a result of future events, no matter how likely, are not recognised.

Customer deposits represent term deposits, other deposits bearing interest, deposits not bearing interest and borrowing corporations debt excluding securitisation deposits.

Economic profit is a risk adjusted profit measure. Economic profit is determined by adjusting underlying accounting profit with economic credit costs, the benefit of imputation credits and the cost of capital. This measure is used to evaluate business unit performance and is included in determining the variable component of remuneration packages.

Expected loss is determined based on the expected average annual loss of principal over the economic cycle for the current risk profile of the lending portfolio.

IFRS – International Financial Reporting Standards.

Impaired assets are those financial assets where doubt exists as to whether the full contractual amount will be received in a timely manner, or where concessional terms have been provided because of the financial difficulties of the customer. Financial Assets are impaired if there is objective evidence of impairment as a result of a loss event that occurred prior to the reporting date, and that loss event has had an impact, which can be reliably estimated, on the expected future cash flows of the individual asset or portfolio of assets.

Impaired commitments and contingencies comprises undrawn facilities and contingent facilities where the customer’s status is defined as impaired.

Impaired loans comprises drawn facilities where the customer’s status is defined as impaired.

Individual provision charge is the amount of expected credit losses on financial instruments assessed for impairment on an individual basis (as opposed to on a collective basis). It takes into account expected cash flows over the lives of those financial instruments.

Liquid assets are cash and cash equivalent assets. Cash equivalent assets are highly liquid investments with short periods to maturity, are readily convertible to cash at ANZ’s option and are subject to an insignificant risk of changes in value.

Net advances includes gross loans and advances and acceptances and capitalised brokerage/mortgage origination fees, less unearned income and provisions for credit impairment.

Net interest average margin is net interest income as a percentage of average interest earning assets.

Net tangible assets equals share capital and reserves attributable to shareholders of the Group less preference share capital and unamortised intangible assets (including goodwill and software).

Operating expenses excludes the provision for impairment of loans and advances charge.

Operating income includes net interest and other operating income.

Pro forma results includes adjustments to restate the Group’s underlying profit to assume the acquisitions of OnePath Australia and New Zealand, Landmark and RBS took effect from 1 October 2009. Pro forma results have also been adjusted for exchange rate movements. This enhances the comparability of financial information between reporting periods.

125

DEFINITIONS

Repo discount is a discount applicable on the repurchase by a central bank of an eligible security pursuant to a repurchase agreement.

Restructured items comprise facilities in which the original contractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those typically offered to new facilities with similar risk.

Revenue includes net interest income and other operating income.

Segment review description:

The Group operates on a divisional structure with Australia, Asia Pacific, Europe & America (APEA), Institutional and New Zealand being the major operating divisions. The Group manages Institutional APEA on a matrix structure. Accordingly, the results for Institutional APEA are included in both the APEA division and Institutional division.

Australia

Australia division comprises Retail, Commercial and Wealth segments, and Operations and Support which includes the central support functions for the division.

Retail
Retail Distribution operates the Australian branch network, Australian call centre, specialist businesses (including specialist mortgage sales staff, mortgage broking and franchisees, direct channels (Mortgage Direct and One Direct)) and distribution services including the ANZ Affluent proposition.
Retail Products is responsible for delivering a range of products including mortgages, cards, unsecured lending, transaction banking, savings and deposits:
- Mortgages provide housing finance to consumers in Australia for both owner occupied and investment purposes.
- Cards and Unsecured Lending provides consumer credit cards, ePayment products, personal loans and ATM facilities in Australia.
- Deposits provide transaction banking and savings products, such as term deposits and cash management accounts.

 Commercial

Esanda provides motor vehicle and equipment finance and investment products.
Regional Commercial Banking provides a full range of banking services to personal customers and to small business and agribusiness customers in rural and regional Australia, and includes the recent acquisition of loans and deposits from Landmark Financial Services.
Business Banking provides a full range of banking services, including risk management, to metropolitan based small to medium sized business clients with a turnover of up to A$50 million.
Small Business Banking provides a full range of banking services for metropolitan-based small businesses in Australia with lending up to A$550,000.

 Wealth

ANZ Private & Other Wealth specialises in assisting high net worth individuals and families to manage, grow and preserve their family assets. The businesses within ANZ Private & Other Wealth include Private Bank, ANZ Trustees, E*Trade, Investment Lending and Other Wealth.
OnePath Consolidated was formerly the INGA JV entity between ANZ and the ING Groep and is now a wholly owned subsidiary of ANZ. OnePath Consolidated operates as part of ANZ's Wealth business. It provides a comprehensive range of wealth and insurance products available through financial advisers or direct to customers and includes ANZ Financial Planners. OnePath also includes ANZ Financial Planning and ANZ General Insurance.

Asia Pacific, Europe & America (APEA)

Asia Pacific, Europe & America division comprises Retail, Asia Partnerships, Institutional, and Operations & Support which includes the Central Support functions for the division.

Retail which provides retail and small business banking services to customers in the Asia Pacific region and also includes investment and insurance products and services for Asia Pacific customers.
Asia Partnerships which is a portfolio of strategic partnerships in Asia. This includes investments in Indonesia with PT Bank Pan Indonesia, in the Philippines with Metrobank Cards Corporation, in China with Bank of Tianjin and Shanghai Rural Commercial Bank, in Malaysia with AMMB Holdings Berhad and in Vietnam with Saigon Thuong Tin Commercial Joint-Stock (Sacombank) and Saigon Securities Incorporation.
Operations & Support which includes the central support functions for the division.
Institutional Asia Pacific, Europe & America matrix reports to the APEA and Institutional divisions and is also referred to in the paragraph below entitled “Institutional".

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DEFINITIONS

Segment review description, continued:

During the September 2010 full year, ANZ acquired selected Royal Bank of Scotland Group PLC businesses in Asia. The acquisition of the businesses in Philippines, Vietnam and Hong Kong were completed during the March 2010 half, and the acquisition of the businesses in Taiwan, Singapore and Indonesia during the September 2010 half. The acquisition impacts the Retail and Institutional segments.

New Zealand

New Zealand comprises Retail, Commercial and Wealth segments, and Operations and Support which includes the central support functions (including Treasury funding).

Retail
Provides a full range of banking services to personal customers under the ANZ and National Bank brands in New Zealand.
Commercial
Commercial & Agri incorporates the ANZ and National Bank brands and provides financial solutions through a relationship management model for medium-sized businesses, including agri-business, with a turnover of up to NZ$150 million. Asset Finance (including motor vehicle and equipment finance), operating leases and investment products are provided under the UDC brand.
Business Banking provides a full range of banking services to small enterprises, typically with turnover of less than NZ$5 million.
Wealth
Private Banking includes private banking operations under the ANZ and National Bank brands.
OnePath New Zealand (formerly ING NZ) manufactures and distributes investment and insurance products and provides related advice. It was formerly a joint venture between ANZ and ING whereby ANZ owned 49% of OnePath NZ and received proportional equity accounted earnings. ANZ acquired the remaining 51% interest to take full ownership during the 2010 financial year.

Institutional

Institutional provides global financial services to government, corporate and institutional clients with a focus on solutions for clients with complex financial needs, based on a deep understanding of their businesses and industries, with particular expertise in natural resources, agriculture and infrastructure. Institutional delivers transaction banking, specialised and relationship lending and markets solutions in Australia, New Zealand, Asia Pacific, Europe and America.

Transaction Banking provides working capital solutions including deposit products, cash transaction banking management, trade finance, international payments, and clearing services principally to institutional and corporate customers.
Global Markets provides risk management services to corporate and institutional clients globally in relation to foreign exchange, interest rates, credit, commodities, debt capital markets, wealth solutions and equity derivatives. Markets provides origination, underwriting, structuring and risk management services, advice and sale of credit and derivative products globally. Markets also manages the Group’s interest rate risk position and liquidity portfolio.
Global Loans provides term loans, working capital facilities and specialist loan structuring. It provides specialist credit analysis, structuring, execution and ongoing monitoring of strategically significant customer transactions, including project and structured finance, debt structuring and acquisition finance, loan product structuring and management, structured asset and export finance.
Relationship and infrastructure includes client relationship management teams for global institutional and financial institution and corporate customers in Australia and Asia, corporate advisory and central support functions. The relationship management costs are allocated to the product lines.

Underlying profit represents the directors’ assessment of the profit for the ongoing business activities of the Group, and is based on guidelines published by the Australian Institute of Company Directors (AICD) and the Financial Services Institute of Australasia (FINSIA). ANZ applies this guidance by adjusting statutory profit for non-core items that are not part of the normal ongoing operations of the Group including one-off gains and losses, gains and losses on the sale of businesses, non-continuing businesses, timing differences on economic hedges, and acquisition related costs. The adjustments made in arriving at underlying earnings are included in statutory profit, and are therefore subject to audit within the context of the group statutory audit opinion. The external auditor has informed the Audit Committee that the adjustments are based on the guidelines released by the AICD and FINSIA, and consistent with prior period adjustments.

127

ALPHABETICAL INDEX

PAGE

Appendix 4E Statement......................................................................................................................................................118 Associates, joint venture entities and investments.................................................................................................................117 Basis of preparation...........................................................................................................................................................102 Condensed Consolidated Balance Sheet ................................................................................................................................ 99 Condensed Consolidated Cash Flow Statement......................................................................................................................100 Condensed Consolidated Income Statement .......................................................................................................................... 97 Condensed Consolidated Statement of Comprehensive Income ................................................................................................ 98 Condensed Statement of Changes in Equity..........................................................................................................................101 Contingent liabilities and contingent assets...........................................................................................................................116 Critical estimates and judgements used in applying Accounting Policies....................................................................................103 Definitions........................................................................................................................................................................125 Deposits and other borrowings............................................................................................................................................113 Dividends .........................................................................................................................................................................109 Earnings per share ............................................................................................................................................................110 Exchange rates .................................................................................................................................................................117 Financial Highlights............................................................................................................................................................... 7 Geographic region review.................................................................................................................................................... 73 Income ............................................................................................................................................................................106 Income tax expense ..........................................................................................................................................................108 Media Release...................................................................................................................................................................... 1 Net loans and advances .....................................................................................................................................................111 Operating expenses...........................................................................................................................................................107 Profit reconciliation............................................................................................................................................................. 79 Provision for credit impairment ...........................................................................................................................................112 Review of Operating Results ................................................................................................................................................ 13 Segment Review ................................................................................................................................................................ 45 Share capital ....................................................................................................................................................................113 Shareholders’ equity..........................................................................................................................................................114 Significant events since balance date...................................................................................................................................117 Supplementary information - Average balance sheet and related interest .................................................................................119

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AI assistant

Australia and New Zealand Banking Group Ltd. — Annual Report 2011

10425_rns_2011-11-02_12130641-b3d8-4a7c-922d-3fbbc3f737f6.pdf

Australia and New Zealand Banking Group Limited

Consolidated Financial Report Dividend Announcement and Appendix 4E

Report for the full year ended 30 September 2011

Dividend Reinvestment Plan and Bonus Option Plan

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT and APPENDIX 4E

Media Release

ANZ 2011 Full Year Result Result driven by solid underlying business performance; accelerating execution of the super regional strategy

Group Balance Sheet & Profit Key Points[1]

Divisional and Business Overview[3]

PERFORMANCE BY DIVISION[4]

Strategic Focus and Progress

Divisional Results

ASIA PACIFIC EUROPE & AMERICA (all figures pro forma and USD)

Strategic Focus and Progress

Divisional Results

Strategic Focus and Progress

Divisional Results

Strategic Focus and Progress

Divisional Results

BALANCE SHEET, CAPITAL AND FUNDING

CREDIT QUALITY

For media enquiries contact:

For investor and analyst enquiries contact:

CONTENTS

Section 2 – Financial highlights

Profit

FINANCIAL HIGHLIGHTS

Underlying profit

Pro forma profit excluding exchange rate movements

FINANCIAL HIGHLIGHTS

Financial ratios - Profit and Loss

FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS

Divisional performance

CONTENTS

Section 3 – Review of Operating Results

Review of Group results

Underlying profit

Pro forma profit excluding exchange rate movements

Pro forma adjustments

 September 2011 v September 2010

 September 2011 v March 2011

Income and expenses

Net interest income

 September 2011 v September 2010

Average interest earning assets

Average deposits and other borrowings

Income and expenses, cont’d

Net interest income, cont’d

 September 2011 v September 2010, cont’d

 September 2011 v March 2011

Average interest earning assets

Average deposits and other borrowings

Income and expenses, cont’d

 September 2011 v September 2010

Fee Income

Foreign Exchange

Net income from wealth management

Income and expenses, cont’d

Other operating income, cont’d

Other income

Fee Income

Income and expenses, cont’d

Pro forma operating expenses

 September 2011 v March 2011

Pro forma operating expenses

Income and expenses, cont’d

Expenses, cont’d

Credit risk (including credit risk on derivatives)

Provision for credit impairment charge

Individual provision charge

Credit risk (including credit risk on derivatives), cont’d

Individual Provision Charge, cont’d

Collective provision charge

Credit risk (including credit risk on derivatives), cont’d

Expected loss

Credit risk (gain)/loss on derivatives

Australia and New Zealand Banking Group Ltd. Annual Report 2011