RNS Number:0906L
National Australia Bank Ld
14 May 2003
SECTION 4
RESULTS FOR THE HALF YEAR ENDED 31 MARCH 2003
DETAILED FINANCIAL INFORMATION
The following section does not puport to be a set of interim financial
statements. For the Group's interim financial statements refer to the Appendix
4B filed with the ASX.
1. Performance Summary by Division
2. Net Interest Income
3. Net Interest Margins & Spreads
4. Average Balance Sheet & Related Interest
5. Gross Loans & Advances
6. Net Life Insurance Income
7. Revenue
8. Expenses
9. Full Time Equivalent Employees
10. Doubtful Debts
11. Asset Quality
12. Income Tax Reconciliation
13. Significant Items
14. Exchange Rates
15. Capital Adequacy
16. Cash Earnings per Share
17. Risk Management
18. Financial Information for US Investors
44
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Detailed Financial Information - Note 1: Performance Summary by Division
1. PERFORMANCE SUMMARY BY DIVISION
Half year ended Note FSA FSE FSNZ CIB Other Total WM Elimina-tions Total
31 March 2003 $m $m $m $m (1) Banking $m (2) Group
$m $m $m $m
Net interest income 2 1,710 1,239 328 434 (19 ) 3,692 54 - 3,746
Net life insurance 6 - - - - - - 81 - 81
income(3)
Other operating income 7 950 503 167 505 (1 ) 2,124 366 (58 ) 2,432
(4)
Net operating income 2,660 1,742 495 939 (20 ) 5,816 501 (58 ) 6,259
Operating expenses(5) 8 1,214 873 252 374 37 2,750 394 (58 ) 3,086
(6)
Underlying profit 1,446 869 243 565 (57 ) 3,066 107 - 3,173
Charge to provide for 10 156 135 7 23 - 321 1 - 322
doubtful debts
Cash earnings before 1,290 734 236 542 (57 ) 2,745 106 - 2,851
tax
Income tax benefit - 6 - - - - - - (70 ) - (70
)
net life insurance
income
Income tax expense - 12 386 226 77 126 (34 ) 781 9 - 790
other
Cash earnings before 904 508 159 416 (23 ) 1,964 167 - 2,131
significant items
Wealth Management - - - - - - (205 ) - (205
)
revaluation loss after
tax
Goodwill amortisation 1 31 1 - 16 49 - - 49
Net profit before 903 477 158 416 (39 ) 1,915 (38 ) - 1,877
significant items
Significant items 13 - - - - - - - - -
after tax
Net profit 903 477 158 416 (39 ) 1,915 (38 ) - 1,877
Net profit - - - 4 - 4 6 - 10
attributable to
outside equity
interest
Net profit 903 477 158 412 (39 ) 1,911 (44 ) - 1,867
attributable to
members of the Company
Distributions 94
Earnings attributable 1,773
to ordinary
shareholders
45
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Half year Note FSA FSE FSNZ CIB Other Total WM Elimina- Total Disposed Total
ended $m $m $m $m (1) Banking $m tions(2) Ongoing Oper- Group
30 September $m $m $m Operations ations $m
2002 $m (7)
$m
Net interest 2 1,677 1,204 292 505 (94 ) 3,584 45 - 3,629 (10 ) 3,619
income
Net life 6 - - - - - - (250 ) - (250 ) - (250
)
insurance
income(3)
Other 7 920 503 146 459 13 2,041 411 (69 ) 2,383 142 2,525
operating
income(4)
Net operating 2,597 1,707 438 964 (81 ) 5,625 206 (69 ) 5,762 132 5,894
income
Operating 8 1,232 840 234 391 17 2,714 482 (69 ) 3,127 118 3,245
expenses(5)(6)
Underlying 1,365 867 204 573 (98 ) 2,911 (276 ) - 2,635 14 2,649
profit
Charge to 10 100 190 (13 ) 21 (37 ) 261 (1 ) - 260 20 280
provide for
doubtful debts
Cash earnings 1,265 677 217 552 (61 ) 2,650 (275 ) - 2,375 (6 ) 2,369
before tax
Income tax 6 - - - - - - (354 ) - (354 ) - (354)
benefit - net
life insurance
income
Income tax 12 378 212 77 111 (7 ) 771 2 - 773 3 776
expense -
other
Cash earnings 887 465 140 441 (54 ) 1,879 77 - 1,956 (9 ) 1,947
before
significant
items
Wealth - - - - - - (389 ) - (389 ) - (389)
Management
revaluation
loss after tax
Goodwill - 31 1 - 21 53 - - 53 - 53
amortisation
Net profit 887 434 139 441 (75 ) 1,826 (312 ) - 1,514 (9 ) 1,505
before
significant
items
Significant 13 (183 ) (117 ) (13 ) (24 ) (35 ) (372 ) (17 ) - (389 ) - (389)
items after
tax
Net profit 704 317 126 417 (110 ) 1,454 (329 ) - 1,125 (9 ) 1,116
Net profit - - - - - - (1 ) - (1 ) - (1)
attributable
to outside
equity
interest
Net profit 704 317 126 417 (110 ) 1,454 (328 ) - 1,126 (9 ) 1,117
attributable
to members of
the Company
Distributions 92
Earnings 1,025
attributable
to ordinary
shareholders
46
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Half year ended Note FSA FSE FSNZ CIB Other Total WM Elimina- Total Disposed
Total
31 March 2002 $m $m $m $m (1) Banking $m tions(2) Ongoing Oper-
Group
$m $m $m Operations ations $m
$m (7)
$m
Net interest 2 1,630 1,229 257 546 (145 ) 3,517 56 - 3,573 30 3,603
income
Net life 6 - - - - - - 240 - 240 - 240
insurance income
(3)
Other operating 7 860 525 137 428 (10 ) 1,940 388 (63 ) 2,265 2,594 4,859
income(4)
Net operating 2,490 1,754 394 974 (155 ) 5,457 684 (63 ) 6,078 2,624 8,702
income
Operating 8 1,218 837 210 368 (15 ) 2,618 331 (63 ) 2,886 2,576 5,462
expenses(5)(6)
Underlying profit 1,272 917 184 606 (140 ) 2,839 353 - 3,192 48 3,240
Charge to provide 10 46 188 8 146 (1 ) 387 - - 387 30 417
for doubtful
debts
Cash earnings 1,226 729 176 460 (139 ) 2,452 353 - 2,805 18 2,823
before tax
Income tax 6 - - - - - - 106 - 106 - 106
expense - net
life insurance
income
Income tax 12 356 228 59 83 (37 ) 689 26 - 715 (89 ) 626
expense - other
Cash earnings 870 501 117 377 (102 ) 1,763 221 - 1,984 107 2,091
before
significant items
Wealth Management - - - - - - 237 - 237 - 237
revaluation
profit after tax
Goodwill - 31 1 - 16 48 - - 48 - 48
amortisation
Net profit before 870 470 116 377 (118 ) 1,715 458 - 2,173 107 2,280
significant items
Significant items (2 ) - - (7 ) (5 ) (14 ) (3 ) - (17 ) - (17)
after tax
Net profit 868 470 116 370 (123 ) 1,701 455 - 2,156 107 2,263
Net profit - - - - - - 7 - 7 - 7
attributable to
outside equity
interest
Net profit 868 470 116 370 (123 ) 1,701 448 - 2,149 107 2,256
attributable to
members of the
Company
Distributions 95
Earnings 2,161
attributable to
ordinary
shareholders
--------------------
(1) Other includes Excess Capital, Group Funding, Corporate Centre
and elimination entries within Total Banking.
(2) Elimination of inter-divisional income and expenses (eg. revenue
sharing arrangements between divisions).
(3) Net life insurance income is the profit before tax excluding net
interest income of the life insurance and funds management businesses of the
statutory funds of the life insurance companies of the Group. The contribution
of net revenue after tax is $151 million for the March 2003 half year.
(4) Other operating income excludes the net interest income and net
life insurance income and revaluation profit/(loss).
(5) Other operating expenses excludes the life insurance expenses
incorporated within net life insurance income (Wealth Management only).
(6) Other operating expenses includes defined pension expense
(Financial Services Europe only).
(7) Disposed Operations includes HomeSide, Vivid and intra-group
elimination entries.
47
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Detailed Financial Information - Note 2: Net Interest Income
2. NET INTEREST INCOME
Half year to Fav/(unfav)
change on
Note Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
Group
Ongoing operations
Interest income
Loans to customers 7,539 7,015 6,707 7.5 12.4
Other interest 896 1,112 1,371 (19.4 ) (34.6 )
Total interest income 7 8,435 8,127 8,078 3.8 4.4
Interest expense
Deposits and other borrowings 3,482 3,353 3,349 (3.8 ) (4.0 )
Other 1,207 1,145 1,156 (5.4 ) (4.4 )
Total interest expense 8 4,689 4,498 4,505 (4.2 ) (4.1 )
Total ongoing operations 3,746 3,629 3,573 3.2 4.8
Disposed operations
Interest income 7 - 63 207 large large
Interest expense 8 - 73 177 large large
Total disposed operations - (10 ) 30 large large
Net interest income 3,746 3,619 3,603 3.5 4.0
By Division
Ongoing operations
Financial Services Australia 1,710 1,677 1,630 2.0 4.9
Financial Services Europe 1,239 1,204 1,229 2.9 0.8
Financial Services New 328 292 257 12.3 27.6
Zealand
Retail Banking 3,277 3,173 3,116 3.3 5.2
Corporate & Institutional 434 505 546 (14.1 ) (20.5 )
Banking
Other (incl. Excess Capital, (19 ) (94 ) (145 ) 79.8 86.9
Group Funding & Corporate
Centre)
Total Banking 3,692 3,584 3,517 3.0 5.0
Wealth Management 54 45 56 20.0 (3.6 )
Total ongoing operations 3,746 3,629 3,573 3.2 4.8
Total disposed operations - (10 ) 30 large large
Net interest income 3,746 3,619 3,603 3.5 4.0
48
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Detailed Financial Information - Note 3: Net Interest Margin & Spreads
3. NET INTEREST MARGINS & SPREADS
Half year to Fav/(unfav)
change on
Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
% % % basis pts basis pts
Group
Group interest spread 2.22 % 2.36 % 2.41 % (0.14 ) (0.19 )
Group interest margin(1) 2.56 % 2.63 % 2.71 % (0.07 ) (0.15 )
Group interest margin (excluding 2.52 % 2.56 % 2.64 % (0.04 ) (0.12 )
earnings on Excess Capital)(1)
By Region
Australia(2)
Australia interest spread 2.30 % 2.54 % 2.74 % (0.24 ) (0.44 )
Australia interest margin(1) 2.59 % 2.71 % 2.87 % (0.12 ) (0.28 )
Australia interest margin (excluding 2.51 % 2.57 % 2.72 % (0.06 ) (0.21 )
earnings on Excess Capital)(1)
Europe(2)
Europe interest spread 2.08 % 2.47 % 2.50 % (0.39 ) (0.42 )
Europe interest margin(1)(3) 2.57 % 2.90 % 2.99 % (0.33 ) (0.42 )
Other International(2)
Other International interest spread 1.59 % 1.32 % 1.25 % 0.27 0.34
Other International interest margin 1.70 % 1.42 % 1.43 % 0.28 0.27
(1)
By Division
Net interest margin(1)
Financial Services Australia 3.18 % 3.38 % 3.53 % (0.20 ) (0.35 )
Financial Services Europe 4.18 % 4.21 % 4.16 % (0.03 ) 0.02
Financial Services New Zealand 2.78 % 2.68 % 2.54 % 0.10 0.24
Corporate & Institutional Banking 0.58 % 0.73 % 0.81 % (0.15 ) (0.23 )
Net interest spread
Financial Services Australia 2.73 % 2.86 % 3.05 % (0.13 ) (0.32 )
Financial Services Europe 3.82 % 3.82 % 3.64 % - 0.18
Financial Services New Zealand 3.09 % 3.00 % 2.91 % 0.09 0.18
--------------------
(1) Interest margin is net interest income as a percentage of average
interest-earning assets.
(2) Australia, Europe and Other International include intragroup
cross border loans/borrowings and associated interest.
(3) The decline in Europe margin has been impacted by the Money
Markets division within Corporate & Institutional Banking. This includes the
impact of lower trading income and an increase in a structured lending product
called "reverse repo" loans.
49
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Detailed Financial Information - Note 4: Average Balance Sheet & Related
Interest
4. AVERAGE BALANCE SHEET & RELATED INTEREST
The following tables set forth the major categories of interest earning assets
and interest bearing liabilities, together with their respective interest rates
earned or paid by the Group. Averages are predominantly daily averages.
Interest income figures include interest income on non-accruing loans to the
extent cash payments have been received. Amounts classified as Other
International represent interest-earning assets or interest-bearing liabilities
of the controlled entities and overseas branches, excluding Europe and
HomeSide. Non-accrual loans are included with interest-earning assets within
loans and advances.
Average assets and interest income
Half year ended Mar 03 Half year ended Sep 02
Average Interest Average Average Interest Average
balance $m rate balance $m rate
$m % $m %
Interest earning assets
Due from other financial
institutions
Australia 4,139 52 2.52 3,334 55 3.29
Europe 7,400 130 3.52 6,265 103 3.28
Other International 3,990 34 1.71 4,087 41 2.00
Regulatory deposits
Europe 156 1 1.29 140 1 1.42
Other International 67 - - 19 - -
Marketable debt securities
Australia 14,852 417 5.63 15,083 405 5.36
Europe 10,961 223 4.08 11,969 249 4.15
Other International 9,001 157 3.50 9,952 153 3.07
Loans and advances(1)
Australia 125,206 4,136 6.62 116,025 3,834 6.59
Europe 80,351 2,235 5.58 71,034 2,120 5.95
HomeSide - - - 15 - -
Other International 37,324 1,168 6.28 33,629 1,060 6.29
Other interest earning assets
(2)
Australia 5 57 n/a 9 246 n/a
Europe 380 12 n/a 661 11 n/a
HomeSide - - n/a 2,397 61 n/a
Other International 32 (187 ) n/a 21 (149 ) n/a
Intragroup loans(3)
Europe 7,109 175 4.94 2,216 133 11.97
Other International 11,137 153 2.76 12,786 117 1.83
Average interest earning
assets and interest income
incl intragroup loans by:
Australia 144,202 4,662 6.48 134,451 4,540 6.73
Europe 106,357 2,776 5.23 92,285 2,617 5.66
HomeSide - - - 2,412 61 5.04
Other International 61,551 1,325 4.32 60,494 1,222 4.03
Total average interest 312,110 8,763 5.63 289,642 8,440 5.81
earning assets and interest
income incl. intragroup loans
50
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Average assets and interest income
Half year ended Mar 03 Half year ended Sep 02
Average Interest Average Average Interest Average
balance $m rate balance $m rate
$m % $m %
Intragroup loans eliminations (18,246 ) (328 ) 3.61 (15,002 ) (250 ) 3.32
Total average interest
earning assets by:
Australia 144,202 4,662 6.48 134,451 4,540 6.73
Europe 99,248 2,601 5.26 90,069 2,484 5.50
HomeSide - - - 2,412 61 5.04
Other International 50,414 1,172 4.66 47,708 1,105 4.62
Total average interest 293,864 8,435 5.76 274,640 8,190 5.95
earning assets
Non-interest earning assets
Investments relating to life
insurance business(4)
Australia 30,357 32,749
Europe 332 395
Other International 179 171
Acceptances
Australia 22,209 21,890
Europe 139 166
Other International 27 89
Fixed assets
Australia 1,363 1,351
Europe 786 770
HomeSide - 1
Other International 121 166
Other assets
Australia 20,872 21,707
Europe 8,142 9,047
HomeSide - 5,952
Other International 3,925 3,824
Total average non-interest
earning assets by:
Australia 74,801 77,697
Europe 9,399 10,378
HomeSide - 5,953
Other International 4,252 4,250
Total average non-interest 88,452 98,278
earning assets
Provision for doubtful debts
Australia (1,133 ) (1,419 )
Europe (917 ) (918 )
HomeSide - (19 )
Other International (321 ) (332 )
Total average assets by:
Australia 217,870 210,729
Europe 107,730 99,529
HomeSide - 8,346
Other International 54,345 51,626
Total average assets 379,945 370,230
Percentage of total average 42.7 % 43.1 %
assets applicable to
international operations
51
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Average liabilities and interest expense
Half year ended Mar 03 Half year ended Sep 02
Average Interest Average Average Interest Average
balance $m rate balance $m rate
$m % $m %
Interest bearing liabilities
Time deposits
Australia 40,306 1,063 5.29 40,127 1,110 5.52
Europe 34,223 566 3.32 30,848 555 3.59
Other International 28,063 504 3.60 31,138 452 2.90
Savings deposits
Australia 7,606 158 4.17 5,564 124 4.45
Europe 14,264 143 2.01 14,705 150 2.03
Other International 2,976 42 2.83 2,705 32 2.36
Other demand deposits
Australia 37,372 451 2.42 34,091 420 2.46
Europe 13,324 116 1.75 14,516 127 1.75
Other International 2,841 41 2.89 2,620 44 3.35
Government and Official
Institutions
Australia 831 17 4.10 863 17 3.93
Other International 2,527 16 1.27 1,838 19 2.06
Due to other financial
institutions
Australia 5,373 85 3.17 5,437 108 3.96
Europe 26,920 520 3.87 18,579 376 4.04
Other International 16,074 168 2.10 15,203 175 2.30
Short-term borrowings
Other International 6,024 23 0.77 4,599 24 1.04
Long-term borrowings
Australia 19,605 347 3.55 19,013 380 3.99
HomeSide - - - 2,248 79 7.01
Other International 500 13 5.21 170 4 4.69
Other interest bearing
liabilities
Australia 4,753 342 n/a 8,264 288 n/a
Europe 3 1 n/a 25 1 n/a
Other International - (4 ) n/a - 6 n/a
Loan Capital
Australia 435 11 5.07 510 13 5.08
Europe 1,264 66 10.47 1,193 67 11.20
Intragroup loans
Australia 18,246 328 3.61 15,002 250 3.32
Average interest bearing
liabilities and interest
expense incl intragroup loans
by:
Australia 134,527 2,802 4.18 128,871 2,710 4.19
Europe 89,998 1,412 3.15 79,866 1,276 3.19
HomeSide - - - 2,248 79 7.01
Other International 59,005 803 2.73 58,273 756 2.59
Total average interest 283,530 5,017 3.55 269,258 4,821 3.57
bearing liabilities and
interest expense incl.
intragroup loans
52
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Average liabilities and interest expense
Half year ended Mar 03 Half year ended Sep 02
Average Interest Average Average Interest Average
balance $m rate balance $m rate
$m % $m %
Intragroup loans eliminations (18,246 ) (328 ) 3.61 (15,002 ) (250 ) 3.32
Total average interest
bearing liabilities and
interest expense by:
Australia 116,281 2,474 4.27 113,869 2,460 4.31
Europe 89,998 1,412 3.15 79,866 1,276 3.19
HomeSide - - - 2,248 79 7.01
Other International 59,005 803 2.73 58,273 756 2.59
Total average interest 265,284 4,689 3.54 254,256 4,571 3.59
bearing liabilities and
interest expense
Non-interest bearing
liabilities
Deposits not bearing interest
Australia 5,107 4,852
Europe 6,015 5,622
Other International 1,369 1,327
Liability on acceptances
Australia 22,209 21,890
Europe 139 166
Other International 27 89
Life insurance policy
liabilities(4)
Australia 30,253 30,795
Europe 259 324
Other International 285 115
Other liabilities
Australia 14,611 17,264
Europe 8,482 6,269
HomeSide - 1,372
Other International 2,229 2,470
Total average non-interest
bearing liabilities by:
Australia 72,180 74,801
Europe 14,895 12,381
HomeSide - 1,372
Other International 3,910 4,001
Total average non-interest 90,985 92,555
bearing liabilities
53
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Equity
Half year ended Mar 03 Half year ended Sep 02
Average Interest Average Average Interest Average
balance $m rate balance $m rate
$m % $m %
Equity
Contributed equity 6,872 7,626
Preference share capital 730 730
National Income Securities 1,945 1,945
Reserves 1,770 1,656
Retained profits 12,186 11,394
Outside equity interest in 173 68
controlled entities
Equity 23,676 23,419
Total liabilities and equity 379,945 370,230
Percentage of total average 47.1 % 45.7 %
liabilities applicable to
international operations
--------------------
(1) Includes non-accrual loans.
(2) Includes interest on derivatives and escrow deposits.
(3) The calculations for Australia, Europe, HomeSide and Other
International include intragroup cross border loans/borrowings and associated
interest.
(4) Included within investments relating to life insurance business
are interest-earning debt securities. The interest earned from these securities
is reported in life insurance income, and has therefore been treated as
non-interest earning for the purposes of this note. The assets and liabilities
held in the statutory funds of the Group's Australian life insurance business
are subject to the restrictions of the Life Insurance Act 1995.
54
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Detailed Financial Information - Note 5: Gross Loans & Advances
5. GROSS LOANS & ADVANCES
As at Change on
Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
By region
Ongoing operations
Australia 130,058 120,885 112,371 7.6 15.7
Europe 80,226 77,750 65,895 3.2 21.7
New Zealand 28,174 25,702 24,298 9.6 16.0
United States 5,031 7,230 5,064 (30.4 ) (0.7 )
Asia 3,327 3,936 4,173 (15.5 ) (20.3 )
Total ongoing operations 246,816 235,503 211,801 4.8 16.5
Total disposed operations - 181 257 large large
Total gross loans and advances 246,816 235,684 212,058 4.7 16.4
Securitised loans 747 929 1,175 (19.6 ) (36.4 )
By product
Ongoing operations
Housing 103,458 95,987 85,483 7.8 21.0
Term lending(1) 72,435 73,990 70,294 (2.1 ) 3.0
Overdrafts 18,012 18,765 17,988 (4.0 ) 0.1
Leasing 15,772 15,882 14,998 (0.7 ) 5.2
Credit cards 6,512 6,584 6,187 (1.1 ) 5.3
Other(1) 30,627 24,295 16,851 26.1 81.8
Total ongoing operations 246,816 235,503 211,801 4.8 16.5
Total disposed operations - 181 257 large large
Total gross loans and advances 246,816 235,684 212,058 4.7 16.4
--------------------
(1) Comparative information in relation to reverse repurchase
agreements has been reclassified from term lending to other, to ensure
consistency with 31 March 2003 balances.
As at Mar 03
By product & region Australia Europe New United Asia Total
$m $m Zealand States $m $m
$m $m
Housing 75,379 16,641 10,859 - 579 103,458
Term Lending 31,753 21,867 12,587 4,008 2,220 72,435
Overdrafts 4,826 12,096 1,090 - - 18,012
Leasing 7,466 8,242 28 - 36 15,772
Credit cards 3,648 1,918 946 - - 6,512
Other 6,986 19,462 2,664 1,023 492 30,627
Total gross loans and 130,058 80,226 28,174 5,031 3,327 246,816
advances
55
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Increase / (decrease) from Sep 02
Movement from Sep 2002 Australia Europe New United Asia Total
excluding foreign exchange % % Zealand States % %
% %
Gross loans and advances
Including:
Housing 10.1 4.4 7.5 large 11.3 8.8
Term lending(1) 3.4 (2.1 ) - 2.8 (7.5 ) 0.6
Overdrafts (3.9 ) 6.8 (14.6 ) large - 1.7
Leasing 4.2 4.6 large - (7.7 ) 4.5
Credit cards 3.5 (3.5 ) 1.7 - - 1.1
Increase / (decrease) from March 02
Movement from March 2002 Australia Europe New United Asia Total
excluding foreign exchange % % Zealand States % %
% %
Gross loans and advances
Including:
Housing 23.1 8.1 11.1 large 26.1 19.0
Term lending(1) 6.0 3.0 0.1 (1.5 ) (11.1 ) 2.8
Overdrafts (3.3 ) 8.5 11.3 - - 5.2
Leasing 6.6 6.2 large - (7.7 ) 6.5
Credit cards 6.8 1.2 2.5 - - 4.4
--------------------
(1) Comparative information in relation to reverse repurchase
agreements has been reclassified from term lending to other, to ensure
consistency with 31 March 2003 balances.
56
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By Division FSA FSE FSNZ CIB WM Other Total Disposed Total
$m $m $m $m $m (1) Ongoing Operations Group
$m Operations (2) $m
$m $m
As at 31 March
2003
Housing lending 72,057 16,641 10,828 610 4,069 (747 ) 103,458 - 103,458
Non-housing 38,201 36,014 10,191 58,097 1,788 (933 ) 143,358 - 143,358
lending
Total gross loans 110,258 52,655 21,019 58,707 5,857 (1,680 ) 246,816 - 246,816
and advances
As at 30
September 2002
Housing lending 65,720 17,413 9,494 618 3,671 (929 ) 95,987 89 96,076
Non-housing 37,204 40,401 9,360 51,787 1,660 (896 ) 139,516 92 139,608
lending
Total gross loans 102,924 57,814 18,854 52,405 5,331 (1,825 ) 235,503 181 235,684
and advances
As at 31 March
2002
Housing lending 59,126 15,637 8,805 546 3,268 (1,175 ) 86,207 115 86,322
Non-housing 35,803 37,133 8,484 44,271 1,521 (1,618 ) 125,594 142 125,736
lending
Total gross loans 94,929 52,770 17,289 44,817 4,789 (2,793 ) 211,801 257 212,058
and advances
--------------------
(1) Other includes Excess Capital, Group Funding, Corporate Centre
and intra-group elimination entries.
(2) Disposed Operations includes HomeSide, Vivid and intra-group
elimination entries
57
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Detailed Financial Information - Note 6: Net Life Insurance Income
6. NET LIFE INSURANCE INCOME
Half year to Fav/(unfav)
change on
Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
Ongoing operations
Premium and related revenue 503 652 482 (22.9 ) 4.4
Investment revenue 224 (3,169 ) 2,181 large (89.7 )
Life insurance income 727 (2,517 ) 2,663 large (72.7 )
Claims expense 513 539 417 4.8 (23.0 )
Change in policy liabilities (250 ) (3,218 ) 1,581 (92.2 ) large
Policy acquisition and maintenance expense 344 366 385 6.0 10.6
Investment management fees 39 48 38 18.8 (2.6 )
Other life insurance-related expenses - (2 ) 2 large large
Life insurance expenses 646 (2,267 ) 2,423 large 73.3
Net life insurance income 81 (250 ) 240 large (66.3 )
Income tax expense/(benefit) - net life (70 ) (354 ) 106 (80.2 ) large
insurance
income
Net life insurance income after tax 151 104 134 45.2 12.7
Net life insurance income is the profit before tax excluding net interest income
of the life insurance and funds management businesses of the statutory funds of
the life insurance companies of the Group. Refer to note 57 of the Group's
annual financial report 2002 for further details for the year ended 30 September
2002.
58
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Detailed Financial Information - Note 7: Revenue
7. REVENUE
Half year to Fav/(unfav)
change on
Note Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
Ongoing operations
Interest income 2 8,435 8,127 8,078 3.8 4.4
Premium and related revenue 503 652 482 (22.9 ) 4.4
Investment revenue 224 (3,169 ) 2,181 large (89.7 )
Life insurance income 6 727 (2,517 ) 2,663 large (72.7 )
Wealth Management other operating income 366 411 388 (10.9 ) (5.7 )
Revaluation profit/(loss) (239 ) (525 ) 370 54.5 large
Wealth Management total income 127 (114 ) 758 large (83.2 )
Total Banking other operating income
Dividends received 18 20 15 (10.0 ) 20.0
Profit on sale of property, plant and 13 6 7 large 85.7
equipment
Loan fees from banking 698 697 651 0.1 7.2
Money transfer fees 509 514 498 (1.0 ) 2.2
Trading income 318 288 275 10.4 15.6
Foreign exchange income 7 13 2 (46.2 ) large
Fees and commissions 396 387 350 2.3 13.1
Fleet service fees 40 29 29 37.9 37.9
Other income 125 87 113 43.7 10.6
Total Banking other operating income 2,124 2,041 1,940 4.1 9.5
Eliminations (58 ) (69 ) (63 ) 15.9 7.9
Banking other operating income net of 2,066 1,972 1,877 4.8 10.1
eliminations
Total revenue from ongoing operations 11,355 7,468 13,376 52.0 (15.1 )
Disposed operations
Interest income - 63 207 large large
HomeSide
Proceeds from sale of HomeSide operating - 15 2,299 large large
assets
Other - 128 295 large large
Other operating income - 143 2,594 large large
Total revenue from disposed operations - 206 2,801 large large
Significant revenue
Proceeds from sale of SR Investment - 2,671 - large large
(HomeSide)
Group eliminations - (1 ) - large large
Total revenue from ordinary activities 11,355 10,344 16,177 9.8 (29.8 )
59
--------------------------------------------------------------------------------
Other operating income (before revaluation profit/(loss) and significant income)
by Division
Half year to Fav/(unfav)
change on
Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
Ongoing operations
Financial Services Australia 950 920 860 3.3 10.5
Financial Services Europe 503 503 525 - (4.2 )
Financial Services New Zealand 167 146 137 14.4 21.9
Retail Banking 1,620 1,569 1,522 3.3 6.4
Corporate & Institutional Banking 505 459 428 10.0 18.0
Other (incl. Excess Capital, Group (1 ) 13 (10 ) large 90.0
Funding & Corporate Centre)
Total Banking 2,124 2,041 1,940 4.1 9.5
Wealth Management 366 411 388 (10.9 ) (5.7 )
Eliminations (58 ) (69 ) (63 ) 15.9 7.9
Total ongoing operations 2,432 2,383 2,265 2.1 7.4
Disposed operations
HomeSide - 143 2,594 large large
Eliminations - (1 ) - large large
Total disposed operations - 142 2,594 large large
Other operating income 2,432 2,525 4,859 (3.7 ) (49.9 )
60
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Detailed Financial Information - Note 8: Expenses
8. EXPENSES
Note Half year to Fav/(unfav)
change on
Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
Ongoing operations
Interest expense 2 4,689 4,498 4,505 (4.2 ) (4.1 )
Claims expense 513 539 417 4.8 (23.0 )
Change in policy liabilities (250 ) (3,218 ) 1,581 (92.2 ) large
Policy acquisition and maintenance expense 344 366 385 6.0 10.6
Investment management fees 39 48 38 18.8 (2.6 )
Other life insurance-related expenses - (2 ) 2 large large
Life insurance expenses 6 646 (2,267 ) 2,423 large 73.3
Wealth Management other operating expenses 383 418 331 8.4 (15.7 )
Investor compensation 11 64 - 82.8 large
Wealth Management other operating expenses 394 482 331 18.3 (19.0 )
Total Banking other operating expenses
Personnel expenses
Salaries and related on costs 1,279 1,233 1,229 (3.7 ) (4.1 )
Superannuation 95 56 63 (69.6 ) (50.8 )
Other 106 128 128 17.2 17.2
1,480 1,417 1,420 (4.4 ) (4.2 )
Occupancy expenses
Rental on operating leases 131 120 118 (9.2 ) (11.0 )
Depreciation and amortisation 35 36 39 2.8 10.3
Other 106 107 103 0.9 (2.9 )
272 263 260 (3.4 ) (4.6 )
General expenses
Advertising and marketing 84 88 73 4.5 (15.1 )
Non-lending losses 23 11 36 large 36.1
Communications, postage and stationery 189 207 215 8.7 12.1
Depreciation and amortisation 141 146 142 3.4 0.7
Fees and commissions 39 49 40 20.4 2.5
Computer equipment and software 109 109 105 - (3.8 )
Professional fees 111 107 103 (3.7 ) (7.8 )
Travel 26 23 18 (13.0 ) (44.4 )
Freight and cartage 17 31 28 45.2 39.3
Other expenses 259 263 178 1.5 (45.5 )
998 1,034 938 3.5 (6.4 )
Total Banking other operating expenses 2,750 2,714 2,618 (1.3 ) (5.0 )
Eliminations (58 ) (69 ) (63 ) (15.9 ) (7.9 )
Banking other operating expenses net of 2,692 2,645 2,555 (1.8 ) (5.4 )
eliminations
Other operating expenses 3,086 3,127 2,886 1.3 (6.9 )
Total operating expenses from ongoing 8,421 5,358 9,814 (57.2 ) 14.2
operations
61
--------------------------------------------------------------------------------
Note Half year to Fav/(unfav)
change on
Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
Disposed operations
Interest expense - 73 177 large large
HomeSide
Carrying value and expenses attributable to the - 4 2,318 large large
sale of HomeSide operating assets
Other - 114 257 large large
Other disposed operations - 1 1 large large
Operating expenses - 119 2,576 large large
Total operating expenses from disposed - 192 2,753 large large
operations
Significant expenses
Provision for restructure - 556 24 large large
Carrying value of SR Investment sold - 2,686 - large large
Significant expenses - 3,242 24 large large
Group eliminations - (1 ) - large large
Total operating expenses before goodwill and 8,421 8,791 12,591 4.2 33.1
charge to provide for doubtful debts
Amortisation of goodwill 49 53 48 7.5 (2.1 )
Charge to provide for doubtful debts 10 322 280 417 (15.0 ) 22.8
Total expenses 8,792 9,124 13,056 3.6 32.7
Operating expenses (before goodwill, significant expenses and charge to provide
for doubtful debts) by Division
Ongoing operations
Financial Services Australia 1,214 1,232 1,218 1.5 0.3
Financial Services Europe 873 840 837 (3.9 ) (4.3 )
Financial Services New Zealand 252 234 210 (7.7 ) (20.0 )
Retail Banking 2,339 2,306 2,265 (1.4 ) (3.3 )
Corporate & Institutional Banking 374 391 368 4.3 (1.6 )
Other (incl. Excess Capital, Group Funding & 37 17 (15 ) large large
Corporate Centre)
Total Banking 2,750 2,714 2,618 (1.3 ) (5.0 )
Wealth Management 394 482 331 18.3 (19.0 )
Eliminations (58 ) (69 ) (63 ) (15.9 ) (7.9 )
Total ongoing operations 3,086 3,127 2,886 1.3 (6.9 )
Disposed operations
Vivid - 1 1 large large
HomeSide - 118 2,575 large large
Eliminations - (1 ) - large large
Total disposed operations - 118 2,576 large large
Other operating expenses 3,086 3,245 5,462 4.9 43.5
62
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Detailed Financial Information - Note 9: Full Time Equivalent Employees
9. FULL TIME EQUIVALENT EMPLOYEES (1)
As at Change on
Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
No. No. No. % %
By Region
Ongoing operations
Australia(2) 24,288 24,294 24,481 - (0.8 )
Europe 13,298 13,540 13,641 (1.8 ) (2.5 )
New Zealand(2) 4,640 4,560 4,564 1.8 1.7
United States 135 127 133 6.3 1.5
Asia 641 641 800 - (19.9 )
Total ongoing operations 43,002 43,162 43,619 (0.4 ) (1.4 )
Total disposed operations - 40 39 large large
Total full time equivalent employees 43,002 43,202 43,658 (0.5 ) (1.5 )
(FTEs)
By Division
Ongoing operations
Financial Services Australia(2)(3) 18,338 18,096 18,455 1.3 (0.6 )
Financial Services Europe 11,563 11,719 11,945 (1.3 ) (3.2 )
Financial Services New Zealand 4,221 4,277 4,274 (1.3 ) (1.2 )
Retail Banking 34,122 34,092 34,674 0.1 (1.6 )
Corporate & Institutional Banking 2,537 2,564 2,582 (1.1 ) (1.7 )
Other (incl. Excess Capital, Group Funding 433 401 420 8.0 3.1
& Corporate Centre)
Total Banking 37,092 37,057 37,676 0.1 (1.6 )
Wealth Management(4) 5,910 6,105 5,943 (3.2 ) (0.6 )
Total ongoing operations 43,002 43,162 43,619 (0.4 ) (1.4 )
Total disposed operations - 40 39 large large
Total full time equivalent employees 43,002 43,202 43,658 (0.5 ) (1.5 )
(FTEs)
Average half year FTEs 43,016 43,682 46,807 (1.5 ) (8.1 )
--------------------
(1) Full-time equivalent staff include part-time staff (pro-rated)
and non-payroll FTE's (ie. contractors.)
(2) Acquisition of Hertz Fleetlease Ltd, increased Financial Services
Australia FTEs by 166 (Australia 37, New Zealand 129).
(3) FTEs at 31 March 2003 reflect the impact of the graduate intake
in February 2003 (142), particularly in Business and Agribusiness.
(4) As at 31 March 2002 Wealth Management full-time equivalent
employees includes employees of joint venture interests (231 FTEs). These
employees are excluded from September 2002 and March 2003.
63
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Detailed Financial Information - Note 10: Doubtful Debts
10. DOUBTFUL DEBTS
Half year to Fav/(unfav)
change on
Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
Total charge for doubtful debts by
Region
Ongoing operations
Australia 160 7 101 large (58.4 )
Europe 151 199 182 24.1 17.0
New Zealand - (18 ) 6 large large
United States 21 60 109 65.0 80.7
Asia (10 ) 12 (11 ) large (9.1 )
Total ongoing operations 322 260 387 (23.8 ) 16.8
Total disposed operations - 20 30 large large
Total charge to provide for doubtful 322 280 417 (15.0 ) 22.8
debts
Total charge for doubtful debts by
Division
Ongoing operations
Financial Services Australia 156 100 46 (56.0 ) large
Financial Services Europe 135 190 188 28.9 28.2
Financial Services New Zealand 7 (13 ) 8 large 12.5
Retail Banking 298 277 242 (7.6 ) (23.1 )
Corporate & Institutional Banking 23 21 146 (9.5 ) 84.2
Other (incl. Excess Capital, Group - (37 ) (1 ) large large
Funding & Corporate Centre)(1)
Total Banking 321 261 387 (23.0 ) 17.1
Wealth Management 1 (1 ) - large large
Total ongoing operations 322 260 387 (23.8 ) 16.8
Total disposed operations - 20 30 large large
Total charge to provide for doubtful 322 280 417 (15.0 ) 22.8
debts
--------------------
(1) Reallocation of the Group statistical provisioning reserve to the
operating divisions in the half year to 30 September 2002.
64
--------------------------------------------------------------------------------
Movement in provision for doubtful debts
Half year to Mar 03 Half year to Sep 02
Specific General Total Specific General Total
$m $m $m $m $m $m
Opening balance
Ongoing operations 553 2,022 2,575 651 2,059 2,710
HomeSide - - - - 25 25
Group opening balance 553 2,022 2,575 651 2,084 2,735
Movements relating to ongoing operations
Transfer to/(from) specific/general provision 386 (386 ) - 365 (365 ) -
Bad debts recovered 111 - 111 101 - 101
Bad debts written off (456 ) - (456 ) (580 ) - (580 )
Charge to profit and loss - 322 322 - 260 260
Foreign currency translation and (21 ) (61 ) (82 ) 16 66 82
consolidation adjustments
Movements relating to disposed operations
HomeSide
Charge to profit and loss - - - - 18 18
Provision no longer required - - - - (42 ) (42 )
Foreign currency translation and - - - - (1 ) (1 )
consolidation adjustments
Vivid
Charge to profit and loss - - - - 2 2
Closing balance
Ongoing operations 573 1,897 2,470 553 2,022 2,575
Total provision for doubtful debts 573 1,897 2,470 553 2,022 2,575
65
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Detailed Financial Information - Note 11: Asset Quality
11. ASSET QUALITY
As at Change on
Summary of impaired assets Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
Gross non-accrual loans 1,583 1,590 1,750 (0.4 ) (9.5 )
Gross restructured loans 1 6 5 (83.3 ) (80.0 )
Gross assets acquired through security enforcement 2 3 2 (33.3 ) -
Gross impaired assets 1,586 1,599 1,757 (0.8 ) (9.7 )
Less: Specific provisions - non-accrual loans(1) (525 ) (500 ) (602 ) 5.0 (12.8 )
Net impaired assets 1,061 1,099 1,155 (3.5 ) (8.1 )
--------------------
(1) Specific provision - non-accrual loans includes $48 million of
specific provision in relation to accrued portfolio facilities past due 90-180
days within credit cards.
As at Mar 03 As at Sep 02 As at Mar 02
Total impaired assets by region Gross Net Gross Net Gross Net
$m $m $m $m $m $m
Ongoing operations
Australia 862 556 894 595 917 604
Europe 447 302 544 399 579 414
New Zealand 35 29 27 23 36 28
United States 241 173 117 66 220 105
Asia 1 1 2 1 2 1
Total ongoing operations 1,586 1,061 1,584 1,084 1,754 1,152
Total disposed operations - - 15 15 3 3
Total gross impaired assets 1,586 1,061 1,599 1,099 1,757 1,155
Movement in gross impaired assets Australia Europe New United Asia Total
$m $m Zealand States $m $m
$m $m
Balance at 30 Sep 2001 963 695 42 34 6 1,740
New 525 133 17 195 - 870
Written off (170 ) (99 ) (4 ) - (2 ) (275 )
Returned to performing or repaid (401 ) (78 ) (19 ) - (2 ) (500 )
Foreign currency translation adjustments - (69 ) - (9 ) - (78 )
Balance at 31 Mar 2002 917 582 36 220 2 1,757
New 440 128 25 9 - 602
Written off (195 ) (141 ) (4 ) (101 ) - (441 )
Returned to performing or repaid (268 ) (64 ) (31 ) (1 ) - (364 )
Foreign currency translation adjustments - 41 1 3 - 45
Balance at 30 Sep 2002 894 546 27 130 2 1,599
New 413 175 29 219 - 836
Written off (133 ) (156 ) (2 ) (1 ) (1 ) (293 )
Returned to performing or repaid (312 ) (76 ) (21 ) (87 ) - (496 )
Foreign currency translation adjustments - (42 ) 2 (20 ) - (60 )
Gross impaired assets at 31 Mar 2003 862 447 35 241 1 1,586
66
--------------------------------------------------------------------------------
As at
Gross non-accrual loans to gross loans & Mar 03 Sep 02 Mar 02
acceptances - by region % % %
Ongoing operations
Australia 0.57 0.63 0.69
Europe 0.55 0.70 0.87
New Zealand 0.12 0.11 0.15
United States 4.79 1.61 4.34
Asia 0.03 0.05 0.05
Total ongoing operations 0.59 0.62 0.75
Total disposed operations - 7.74 1.26
Total gross non-accrual loans to gross loans & 0.59 0.62 0.75
acceptances
Group provisioning coverage ratios
Net impaired assets to total equity 4.5 4.7 4.9
Net impaired assets to total equity plus 4.1 4.3 4.5
general provision
Specific provision to gross impaired assets 36.1 34.6 37.0
General and specific provisions to gross 155.7 161.0 155.7
impaired assets
General provision to risk-weighted assets 0.75 0.82 0.88
The amounts below are not classified as impaired assets and therefore are not
included in the summary on the previous page.
As at Change on
Memorandum disclosure Mar 03 Sep 02 Mar 02 Sep 02 Mar 02
$m $m $m % %
Accruing loans past due 90 days or more with adequate 90 78 82 15.4 9.8
security (net)
Accruing portfolio facilities past due 90 to 180 days 26 30 33 (13.3 ) (21.2 )
(net)
90 days past due loans - by region
Ongoing operations
Australia 43 29 27 48.3 59.3
Europe 42 45 48 (6.7 ) (12.5 )
New Zealand 5 4 7 25.0 (28.6 )
Total 90 day past due loans 90 78 82 15.4 9.8
67
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Detailed Financial Information - Note 12: Income Tax Reconciliation
12. INCOME TAX RECONCILIATION
Half year to
Mar 03 Sep 02 Mar 02
$m $m $m
Group
Operating profit before income tax
Australia 1,325 316 1,972
Overseas 1,238 904 1,149
Operating profit/(loss) before tax attributable to the statutory 69 (264 ) 236
funds of the life insurance business
Total operating profit excluding that attributable to the statutory 2,494 1,484 2,885
funds of the life insurance business before income tax
Prima facie income tax at 30% 748 445 866
Add/(deduct) tax effect of permanent differences:
Attributable foreign income 13 19 6
Non-allowable depreciation on buildings 4 2 5
Rebate of tax on dividends, interest etc (23 ) 61 (17 )
Foreign tax rate differences (3 ) (3 ) (3 )
Amortisation of goodwill 15 14 15
Future income tax benefits no longer required - 1 1
Non-taxable amounts attributable to HomeSide US operation - (48 ) (5 )
Restatement of tax timing differences due to changes in the - 2 -
Australian company income tax rate
Recognition of HomeSide US operation future income tax benefit - - (89 )
not previously recognised
Under/(over) provision in prior year 6 (12 ) 18
Other (4 ) (23 ) (45 )
Total income tax expense on operating profit excluding that 756 458 752
attributable to the statutory funds of the life insurance business
Income tax attributable to the statutory funds of the life insurance (70 ) (354 ) 106
business
Total income tax expense 686 104 858
Effective tax rate excluding statutory funds attributable to the life 30.3 % 30.9 % 26.1 %
insurance business
By Division
Ongoing operations
Financial Services Australia 386 378 356
Financial Services Europe 226 212 228
Financial Services New Zealand 77 77 59
Retail Banking 689 667 643
Corporate & Institutional Banking 126 111 83
Other (incl. Excess Capital, Group Funding & Corporate Centre) (34 ) (7 ) (37 )
Total Banking 781 771 689
Wealth Management
Operating profit (61 ) (352 ) 132
Revaluation profit/(loss) (34 ) (136 ) 133
Total ongoing operations 686 283 954
Total disposed operations - 3 (89 )
Significant items - (182 ) (7 )
Total income tax expense 686 104 858
68
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Half year to
Supplementary Income Tax Reconciliation Wealth Management Mar 03 Sep 02 Mar 02
$m $m $m
Operating profit before income tax
Australia (166 ) (826 ) 670
Overseas 33 26 53
Operating profit/(loss) before tax attributable to the statutory 69 (264 ) 236
funds of the life insurance business
Total operating profit/(loss) excluding that attributable to the (202 ) (536 ) 487
statutory funds of the life insurance business before income tax
Prima facie income tax at 30% (61 ) (161 ) 146
Add/(deduct) tax effect of permanent differences:
Foreign tax rate differences (1 ) - 1
Amortisation of goodwill - (5 ) 1
Restatement of tax timing differences due to changes in the Australian - 2 -
company income tax rate
Under/(over) provision in prior year 7 3 3
Other 30 27 8
Total income tax expense/(benefit) on operating profit excl. that (25 ) (134 ) 159
attributable to the statutory funds of the life insurance business
Income tax attributable to the statutory funds of the life insurance (70 ) (354 ) 106
business
Total income tax expense/(benefit)(1) (95 ) (488 ) 265
Effective tax rate excluding statutory funds attributable to the life (12.4 )% (25.0 )% 32.6 %
insurance business
--------------------
(1) Wealth Management total income tax expense/(benefit) excludes the
tax benefit on significant items.
Banking operations before goodwill
Cash earnings before income tax
Australia 1,496 1,559 1,374
Overseas 1,249 1,091 1,078
Total cash earnings 2,745 2,650 2,452
Prima facie income tax at 30% 824 795 736
Add/(deduct) tax effect of permanent differences:
Attributable foreign income 13 19 6
Non-allowable depreciation on buildings 4 2 5
Rebate of tax on dividends, interest etc (23 ) 47 (3 )
Foreign tax rate differences (2 ) (3 ) (4 )
Future income tax benefits no longer required - (33 ) 1
Under/(over) provision in prior year (1 ) (15 ) 15
Other (34 ) (41 ) (67 )
Total income tax expense on cash earnings 781 771 689
Effective tax rate 28.5 % 29.1 % 28.1 %
69
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Detailed Financial Information - Note 13: Significant Items
13. SIGNIFICANT ITEMS
Half year to
Mar 03 Sep 02 Mar 02
$m $m $m
Ongoing operations
Restructuring expenses - (556 ) (24 )
Tax benefit - 161 7
Net restructuring expenses - (395 ) (17 )
Disposal of SR Investment (HomeSide)
Proceeds on the sale of SR Investment - 2,671 -
Cost of SR Investment sold - (2,686 ) -
Loss on sale of SR Investment - (15 ) -
Income tax benefit - 21 -
Net profit on sale of SR Investment - 6 -
Significant items after tax - (389 ) (17 )
Restructuring expenses
During 2002, the Group recognised costs of $412 million after tax resulting from
its Positioning for Growth (PfG) program and related actitivities. The
initiative comprised fundamentally of a reorganisation of the Group structure as
well as a series of revenue and cost enhancement initiatives. Restructuring
expenses primarily related to redundancies of $230 million, Technology
write-downs of $88 million, surplus lease space of $54 million, and other
restructuring costs of $40 million. During 2002, payments of $101 million
(before tax) were incurred in relation to 859 redundancies.
Sale of HomeSide
On 27 August 2002, the National sold all of its shares in SR Investment, Inc.,
the parent company of HomeSide Lending, Inc., to Washington Mutual Bank, FA.
Total proceeds were approximately US$1.5 billion (A$2.7 billion), comprised of
the interim settlement amount of approximately US$1.3 billion based on an
agreed estimated value of the net assets sold as at closing, plus approximately
US$0.2 billion representing amounts receivable in relation to the sale of bulk
mortgage servicing rights. The sale was completed on 1 October 2002. This
resulted in a profit on sale of US$3 million (A$6 million), which was recognised
as a significant item for the year ending 30 September 2002.
70
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Detailed Financial Information - Note 14: Exchange Rates
14. EXCHANGE RATES
Exchange rates Statement of Statement of
Financial Performance Financial Position
average half year to spot as at
Mar 03 Sep 02 Mar 02 Mar 03 Sep 02 Mar 02
Great British Pounds 0.3626 0.3655 0.3590 0.3828 0.3474 0.3732
Euros 0.5554 0.5785 0.5811 0.5571 0.5528 0.6090
United States Dollars 0.5757 0.5496 0.5151 0.6038 0.5440 0.5322
New Zealand Dollars 1.1028 1.1727 1.2257 1.0908 1.1565 1.2075
Impact on Statement of Financial Performance of exchange rate movements on the
ongoing operations result
Half year to March 2003 since September Europe New United Asia Total
2002 $m Zealand States $m $m
Favourable/(unfavourable) $m $m
Net interest income 13 23 (7 ) (2 ) 27
Other operating income 5 14 (4 ) (1 ) 14
Other operating expenses (10 ) (17 ) 2 1 (24 )
Charge to provide for doubtful debts (1 ) - 1 - -
Income tax expense (2 ) (5 ) - - (7 )
Net operating profit from ongoing 5 15 (8 ) (2 ) 10
operations
Half year to March 2003 since March 2002 Europe New United Asia Total
Favourable/(unfavourable) $m Zealand States $m $m
$m $m
Net interest income (6 ) 38 (17 ) (4 ) 11
Other operating income (4 ) 23 (9 ) (6 ) 4
Other operating expenses 4 (28 ) 5 3 (16 )
Charge to provide for doubtful debts 1 - 2 (1 ) 2
Income tax expense 2 (9 ) - 1 (6 )
Net operating profit from ongoing (3 ) 24 (19 ) (7 ) (5 )
operations
71
--------------------------------------------------------------------------------
Impact on Statement of Financial Position of exchange rate movements on the
March 2003 ongoing operations
Since September 2002 Europe New United Asia Total
increase/(decrease) $m Zealand States $m $m
$m $m
Total assets (10,384 ) 1,869 (3,126 ) (839 ) (12,480 )
Gross loans and advances (6,822 ) 1,548 (716 ) (413 ) (6,403 )
Including:
Housing (1,479 ) 574 (1 ) (57 ) (963 )
Term Lending (2,074 ) 715 (429 ) (276 ) (2,064 )
Overdrafts (1,118 ) 72 (9 ) - (1,055 )
Leasing (788 ) - - (4 ) (792 )
Credit cards (195 ) 53 - - (142 )
Deposits and other borrowings (6,461 ) 1,259 (1,415 ) (359 ) (6,976 )
Since March 2002 Europe New United Asia Total
increase/(decrease) $m Zealand States $m $m
$m $m
Total assets (1,954 ) 3,232 (3,743 ) (1,107 ) (3,572 )
Gross loans and advances (1,204 ) 2,600 (600 ) (428 ) 368
Including:
Housing (236 ) 945 1 (61 ) 649
Term Lending (314 ) 1,216 (548 ) (306 ) 48
Overdrafts (242 ) 95 - - (147 )
Leasing (185 ) - - (6 ) (191 )
Credit cards (41 ) 89 - - 48
Deposits and other borrowings (1,267 ) 2,043 (1,401 ) (356 ) (981 )
72
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Detailed Financial Information - Note 15: Capital Adequacy
15. CAPITAL ADEQUACY
Regulatory capital position
Under guidelines issued by APRA, life insurance and funds management activities
are excluded from the calculation of risk-weighted assets, and the related
controlled entities are deconsolidated for the purposes of calculating capital
adequacy. The intangible component of the investment in these controlled
entities (the difference between the appraisal value and the embedded value) is
deducted from Tier 1 capital, and the embedded value is deducted from the total
of eligible Tier 1 and Tier 2 capital. Additionally, any profits from these
activities included in the Group's results are excluded from the determination
of Tier 1 capital to the extent that they have not been remitted to the Company
in the form of dividends. A reconciliation of capital under the different bases
is provided.
As at
Reconciliation to shareholders funds Mar 03 Sep 02 Mar 02
$m $m $m
Contributed equity 9,052 9,931 10,486
Reserves 1,254 2,105 1,480
Retained profits (1) 13,224 11,148 11,416
Outside equity interest 285 67 69
Estimated reinvestment under dividend reinvestment plan 163 127 301
Less: Goodwill (787 ) (775 ) (828 )
Estimated interim dividend (1) (1,205 ) - -
Intangible assets - Wealth Management (2,448 ) (2,448 ) (2,448 )
Fair value adjustment on mortgage servicing rights (10% MSR) - (131 ) (570 )
Asset revaluation reserve (7 ) (7 ) -
Deconsolidation of Wealth Management profits (net of dividends) (2) (125 ) (719 ) (1,080 )
FITB (excluding FITB on the general provision for doubtful debts) (3) (108 ) - -
Outside equity interest (285 ) (67 ) (69 )
Tier 1 Capital 19,013 19,231 18,757
Asset revaluation reserve 7 7 -
General provision for doubtful debts 1,323 1,414 1,471
Perpetual floating rate notes 414 460 470
Dated subordinated debts 4,666 6,174 6,349
Exchangeable capital units 1,262 1,262 1,262
Notional revaluation of investment securities to market 21 12 (3 )
Tier 2 Capital 7,693 9,329 9,549
Investment in non-consolidated controlled entities (net of intangible (2,948 ) (2,808 ) (2,732 )
component deducted from Tier 1)
Holdings of other financial institutions' capital instruments (445 ) (445 ) (445 )
Deductions (3,393 ) (3,253 ) (3,177 )
Total regulatory capital 23,313 25,307 25,129
Risk-weighted assets - credit risk 250,703 244,363 234,788
Risk-weighted assets - market risk 3,666 3,475 2,444
Total risk-weighted assets 254,369 247,838 237,232
Risk adjusted capital ratios
Tier 1 7.47 % 7.76 % 7.91 %
Tier 2 3.02 % 3.76 % 4.03 %
Deductions (1.33 )% (1.31 )% (1.34 )%
Total capital 9.16 % 10.21 % 10.60 %
--------------------
(1) The Group has adopted the new Accounting Standard AASB 1044, which
has resulted in a change in the accounting for dividend provisions. Under APRA
guidelines the estimated dividend must be deducted from Tier 1 Capital.
(2) From 31 March 2003, deconsolidation of Wealth Management profits
are based on statutory accounts. Prior periods were based on the management
accounts.
(3) APRA requires any excess FITB (excluding FITB impact on the general
provision for doubtful debts) over the provision for deferred income tax
liabilities be deducted from Tier 1 capital.
73
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As at
Adjusted common equity ratio reconciliation Mar 03 Sep 02 Mar 02
$m $m $m
Tier 1 Capital 19,013 19,231 18,757
Adjusted for:
National Income Securities (1,945 ) (1,945 ) (1,945 )
Preference shares (730 ) (730 ) (730 )
Investment in non-consolidated controlled entities (net of intangible (2,948 ) (2,808 ) (2,732 )
component deducted from Tier 1)
Holdings of other financial institutions' capital instruments (445 ) (445 ) (445 )
Adjusted common equity 12,945 13,303 12,905
Total risk-weighted assets 254,369 247,838 237,232
Adjusted common equity ratio 5.09 % 5.37 % 5.44 %
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Detailed Financial Information - Note 16: Cash Earnings per Share
16. CASH EARNINGS PER SHARE
Half year to
Mar 03 Sep 02 Mar 02
Basic Diluted Basic Diluted Basic Diluted
(1) (1) (1)
Earnings ($m)
Cash earnings before significant 2,027 2,027 1,856 1,856 1,989 1,989
items (2)
Potential dilutive adjustments
Interest expense on exchangeable - 48 - 48 - 54
capital units
Adjusted cash earnings before 2,027 2,075 1,856 1,904 1,989 2,043
significant items
Weighted average ordinary shares
(no. millions)
Weighted average ordinary shares 1,524 1,524 1,544 1,544 1,555 1,555
Potential dilutive ordinary shares
Options - 5 - 10 - 8
Partly paid ordinary shares - 1 - 1 - 1
Exchangeable capital units - 65 - 65 - 65
Total weighted average ordinary 1,524 1,595 1,544 1,620 1,555 1,629
shares
Cash earnings per share (cents) 133.0 130.1 120.3 117.5 127.9 125.4
--------------------
(1) The weighted average diluted number of ordinary shares includes the
impact of options, partly paid ordinary shares and potential conversion of
exchangeable captal units.
(2) Refer to page 7 for a reconcilation of cash earnings before
significant items to Group net profit.
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Detailed Financial Information - Note 17: Risk Management
17. RISK MANAGEMENT
Market risk
The management of market risk is discussed in detail in the Group's annual
financial report 2002, at Risk Management and Note 46 Derivative Financial
Instruments. Please refer to that report for detailed information regarding the
management of risk.
Trading risk
The following table shows the Group's Value at Risk (VaR) for all member banks'
trading portfolios, including both physical and derivative positions. The
figures reflect the potential losses across products and regions in which the
Group operates.
Average value Minimum value Maximum value
half year to half year to half year to
Value at risk at 99% confidence Mar 03 Sep 02 Mar 03 Sep 02 Mar 03 Sep 02
level $m $m $m $m $m $m
Foreign exchange risk 7 7 3 3 19 19
Interest rate risk 20 16 16 10 25 23
Volatility risk 3 4 2 2 5 5
Commodities risk - - - - 1 1
Diversification benefit (6 ) (7 ) n/a n/a n/a n/a
Total 25 20 20 13 35 33
VaR measures the adverse changes in the trading portfolio value brought about by
daily changes in market rates at a 99% confidence level for the half year to 31
March 2003.
VaR is measured individually according to interest rate risk, foreign exchange
risk and volatility risk. The individual risk categories do not sum to the
total risk number due to portfolio effect. Risk limits are applied in these
categories separately, and against the total risk position.
Balance sheet risk
a) Structural interest rate risk
This table presents a summary of the aggregated structural earnings at risk
relating to non-trading assets and liabilities that are sensitive to changes in
interest rates. Based on the structural interest rate risk position at balance
date, the table shows the possible impact on net income for the 12 months ending
September 30, 2003 under a rising or declining interest rate environment.
Forecast effect on Forecast effect on
net income 2003(1) net income 2002
Rising Declining Rising Declining
rates rates rates rates
$m $m $m $m
Australian dollars 67 (44 ) 21 (19 )
Non-Australian dollars 21 (8 ) (7 ) (30 )
--------------------
(1) Represents the forecast effect on net interest income for the year
ending 30 September 2003 and the prior year comparative.
b) Structural foreign exchange rate risk
Refer table below.
c) Liquidity risk
Refer to the Group's annual financial report 2002 at Risk Management for a
detailed discussion of the management of these risks.
Operational, credit & country risk
Refer to the Group's annual financial report 2002 at Risk Management for a
detailed discussion of the management of these risks.
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Derivatives fair values
This table shows the fair value of all derivative instruments held or issued by
the Group. It includes trading and other than trading contracts.
As at Mar 03 As at Sep 02
Notional Credit Fair Notional Credit Fair
principal equivalent value principal equivalent value
$m $m $m $m $m $m
Foreign exchange rate-related
contracts
Spot and forward contracts 298,250 8,307 (212 ) 312,513 7,072 304
Cross currency swaps 76,615 5,663 69 64,326 4,512 (31 )
Futures 176 - - 191 - -
Options 247,826 3,534 (244 ) 297,306 4,002 369
622,867 17,504 (387 ) 674,336 15,586 642
Interest rate-related contracts
Forward rate agreements 56,273 16 1 41,602 53 38
Swaps 517,840 15,673 55 504,306 7,915 959
Futures 90,597 - 1 101,015 - (34 )
Options 45,696 463 195 56,808 680 701
710,406 16,152 252 703,731 8,648 1,664
Other contracts 10,524 429 14 6,930 464 392
Total derivative financial 1,343,797 34,085 (121 ) 1,384,997 24,698 2,698
instruments
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Detailed Financial Information - Note 18: Financial Information for US Investors
18. FINANCIAL INFORMATION FOR US INVESTORS
Generally accepted accounting principles applicable in the United States (US
GAAP) differ in some respects from those applying in Australia (Australian
GAAP). Figures adjusted to a US GAAP basis are set out below.
Half year to Mar 03 Half year to Mar 02
Consolidated Statement of Financial Performance A$m US$m (1) A$m US$m (1)
Net profit reported using Australian GAAP 1,867 1,129 2,256 1,203
Life insurance accounting adjustments:
Movement in excess of net market value over net assets of 266 161 (382 ) (204 )
life insurance controlled entities
Amortisation of goodwill - - (83 ) (44 )
Amortisation of present value of future profits (PVFP) asset (97 ) (59 ) (41 ) (22 )
Difference in revenue recognition, change in life insurance 39 24 39 21
policy liabilities and deferred acquisition cost asset
Difference in investments relating to life insurance business (13 ) (8 ) 14 8
asset values and unrealised profits on available for sale
securities
Movement in and elimination of deferred tax liabilities 3 2 95 51
Difference in minority interest share of profit 10 6 5 2
Other life insurance accounting adjustments 83 50 (58 ) (31 )
Other adjustments:
Difference in depreciation charge for buildings and profit/ 1 1 - (1 )
(loss) on sale of land and buildings
Amortisation of goodwill 49 30 2 1
Pension expense (15 ) (9 ) 9 5
Difference in recognition of profit on sale and leaseback 8 5 6 3
transactions
Employee share compensation (37 ) (22 ) (19 ) (10 )
Difference in lease revenue recognition (3 ) (2 ) (6 ) (3 )
Movement in fair value of derivative financial instruments 55 33 (369 ) (197 )
and associated impact on provision for mortgage servicing
rights
Net income according to US GAAP 2,216 1,341 1,468 782
Earnings per share according to US GAAP (cents)
Basic 139.3 84.2 88.3 47.1
Diluted 133.5 80.7 86.8 46.3
78
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Half year to Mar 03 Half year to Mar 02
Comprehensive Income Under US GAAP A$m US$m (1) A$m US$m (1)
Net income according to US GAAP 2,216 1,341 1,468 782
Other comprehensive income
Foreign currency translation reserve (852 ) (515 ) (937 ) (500 )
Asset revaluation reserve - - (16 ) (9 )
Available for sale securities 6 4 (2 ) (1 )
Shadow policy liabilities adjustment (24 ) (15 ) 25 13
Revaluation surplus (82 ) (50 ) (44 ) (23 )
Movement in fair value of derivative financial instruments - - 16 9
Total other comprehensive income (952 ) (576 ) (958 ) (511 )
Total comprehensive income according to US GAAP 1,264 765 510 271
79
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As at Mar 03 As at Mar 02
Equity A$m US$m (1) A$m US$m (1)
Issued and paid-up capital
Contributed equity reported using Australian GAAP 9,052 5,472 10,486 5,592
Employee share compensation 81 49 45 24
Issued and paid-up capital according to US GAAP 9,133 5,521 10,531 5,616
Reserves
Reserves reported using Australian GAAP 1,254 758 1,480 789
Foreign currency translation reserve (390 ) (236 ) (825 ) (440 )
Asset Revaluation Reserve (7 ) (4 ) - -
Reserves according to US GAAP 857 518 655 349
Retained profits
Retained profits less outside equity interest reported using 13,224 7,994 11,416 6,088
Australian GAAP
Life insurance accounting adjustments:
Movement in excess of net market value over net assets of (4,815 ) (2,911 ) (5,564 ) (2,968 )
life insurance controlled entities
Recognition and amortisation of goodwill 2,935 1,774 3,018 1,609
Recognition and amortisation of PVFP assets 1,492 902 1,683 898
Difference in revenue recognition, change in life insurance (439 ) (265 ) (731 ) (390 )
policy liabilities and deferred acquisition cost asset
Difference in investments relating to life insurance business 57 34 22 12
asset values and unrealised profits on available for sale
securities
Movement in and elimination of deferred tax liabilities 254 154 325 173
Recalculation of minority interest (121 ) (73 ) (73 ) (39 )
Movement in market value of subordinated debt (1 ) (1 ) (5 ) (2 )
Movement in revaluation surplus 98 59 5 3
Other adjustments:
Elimination of revaluation surplus of land and buildings (98 ) (59 ) (91 ) (49 )
Adjustment of provision for depreciation on buildings 90 54 88 47
revalued
Amortisation of goodwill 49 30 - -
Pension expense 81 49 84 45
Unamortised profit on sale-leaseback transactions (51 ) (31 ) (66 ) (35 )
Employee share compensation (81 ) (49 ) (45 ) (24 )
Difference in lease revenue recognition (106 ) (64 ) (95 ) (51 )
Transitional adjustment on adoption of SFAS 133 (232 ) (140 ) (232 ) (124 )
Movements in fair value of derivative financial instruments 964 583 217 116
and associated impact on provision for mortgage servicing
rights
Unrealised profit on shares in entities and other securities 290 175 347 185
Provision for final cash dividend - - 1,115 595
Other (19 ) (11 ) (21 ) (11 )
Retained profits according to US GAAP 13,571 8,204 11,397 6,078
Outside equity interest
Outside equity interest reported using Austalian GAAP 285 172 69 37
Reclassification of minority interest (285 ) (172 ) (69 ) (37 )
Outside equity interest according to US GAAP - - - -
80
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Equity (continued)
As at Mar 03 As at Mar 02
A$m US$m (1) A$m US$m (1)
Accumulated other comprehensive income
Accumulated other comprehensive income reported using
Australian GAAP
Balance brought forward under US GAAP 1,125 680 1,767 942
Shadow life insurance policy liability adjustment (24 ) (15 ) (937 ) (500 )
Unrealised profits/(losses) on available for sale debt 6 4 (16 ) (9 )
securities
Foreign currency translation reserve (852 ) (515 ) (2 ) (1 )
Asset revaluation reserve - - 25 13
Revaluation surplus (82 ) (50 ) (44 ) (23 )
Movements in fair value of derivative financial instruments - - 16 9
Accumulated other comprehensive income according to US GAAP 173 104 809 431
Total equity according to US GAAP 23,734 14,347 23,392 12,474
81
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As at Mar 03 As at Mar 02
Consolidated Statement of Financial Position A$m US$m (1) A$m US$m (1)
Assets
Total assets reported using Australian GAAP 394,196 238,291 361,637 192,861
Life insurance accounting adjustments:
Elimination of excess of interest of net market values (4,815 ) (2,911 ) (5,564 ) (2,968 )
over net assets of life insurance controlled entities
Recognition and accumulated amortisation of goodwill 2,935 1,774 3,018 1,609
Recognition and accumlated amortisation of PVFP asset 1,492 902 33 18
Restatement and reclassification of deferred acquitision 348 210 314 168
costs
Difference in investment asset values in life insurance 29 18 1,683 898
entities
Other adjustments:
Revaluation surplus of land and buildings (98 ) (59 ) (91 ) (49 )
Adjustment of provision for depreciation on buildings 90 54 88 47
revalued
Amortisation of goodwill 49 30 - -
Pension fund adjustment 81 49 84 45
Difference in lease revenue recognition (121 ) (73 ) (107 ) (57 )
Assets of special purpose entity consolidated 40 24 - -
Fair value adjustments to derivative financial 3,828 2,314 1,493 796
instruments and associated impact on provision for
mortgage servicing rights
Unrealised profit on shares in entities and other 290 175 348 185
securities
Early pool-buyout reinstatement - - 559 298
Other (19 ) (11 ) (21 ) (11 )
Total assets according to US GAAP 398,325 240,787 363,474 193,840
Liabilities
Total liabilities reported using Australian GAAP 370,381 223,895 338,186 180,355
Life insurance accounting adjustments:
Difference in life insurance policy liabilities and 864 522 1,048 559
reclassification of deferred acquisition costs
Elimination of present value discount on deferred tax (254 ) (154 ) (325 ) (173 )
liabilities
Increase in and reclassification of minority interests 406 245 142 75
Subordinated debt revaluation from market value to cost 1 1 5 3
Other adjustments:
Unamortised profit on sale-leaseback transactions 51 31 66 35
Deferred tax liability associated with difference in (15 ) (9 ) (12 ) (6 )
lease revenue recognition
Fair value adjustments to derivative financial 2,987 1,806 1,557 830
instruments
Deferred tax liability associated with fair value 130 79 (29 ) (15 )
adjustments to derivative financial instruments
Liabilities of special purpose entity consolidated 40 24 - -
Elimination of dividend provided for but not formally - - (1,115 ) (595 )
declared prior to balance date
Proceeds received in advance - early pool-buyout - - 559 298
Total liabilities reported according to US GAAP 374,591 226,440 340,082 181,366
Net assets according to US GAAP 23,734 14,347 23,392 12,474
(1) Translated from Australian dollars at the rate of US$0.6045
equals A$1.00 (March 2002: US$0.5333 equals A$1.00) the "Noon Buying Rate" per
the Federal Reserve Bank of New York on 31 March 2003.
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GLOSSARY OF TERMS
Cash earnings
Cash earnings is defined as follows:
Net profit
Less:
Outside equity interest
Distributions
Revaluation profit/(loss) after tax
Add:
Goodwill amortisation
Cash earnings
Cash earnings is a key performance measure and financial target used by the
Group. Management externally disclose annual performance targets for the Group
based on growth in cash earnings per share (which is calculated on the basis of
cash earnings).
Cash earnings is a key performance measure used by the broking community, as
well as by those Australian peers of the Group with a similar business
portfolio.
Cash earnings does not refer to, or in any way purport to represent the cash
flows, funding or liquidity position of the Group. It does not refer to any
amount represented on a Cash Flow Statement.
Adjustments are made between net profit and cash earnings as follows:
* Outside equity interest - this reflects the allocation of
profit to minority interests in the Group, and is adjusted from net profit to
reflect the amount of net profit that is attributable to ordinary shareholders
* Distributions - this reflects payments to holders of National
Income Securities and Trust units, and is adjusted from net profit to reflect
the amount of net profit that is attributable to ordinary shareholders
* Revaluation profit/(loss) - relates to the movement in net
market value (including the value of intangible assets) of investments in life
insurance controlled entities recorded on the balance sheet in accordance with
Australian Accounting Standards. As it relates to an intangible asset,
management believes it is prudent to isolate this amount from the underlying
operating result. It is separately identified and discussed in detail.
Management further wish to separate this, as the method for accounting for the
value of life insurance controlled entities is not comparable on an
international basis.
* Goodwill amortisation - relates to the straight-line method
of amortising goodwill (an intangible asset recorded on the balance sheet) in
accordance with Australian Accounting Standards. Financial statement users
generally do not regard goodwill amortisation expense as being useful
information in analysing investments. As it relates to an intangible asset,
management believes it is prudent to isolate this amount from the underlying
operating result.
Cash earnings before significant items (and net profit before significant items)
Under Australian Accounting Standard AASB 1018(5.4) "when a revenue or an
expense from ordinary activities is of such a size, nature or incidence that its
disclosure is relevant in explaining the financial performance of the entity for
the reporting period and its disclosure is not otherwise required by this or
another Standard, its nature and amount must be disclosed separately either on
the face of the statement of financial performance or in the notes in the
financial report".
The Group has identified such items as 'significant items' on its Performance
Summaries.
Management believe that the inclusion of these items distorts the underlying
operating results of the Group and cause difficulty in identifying underlying
performance trends and issues. Through the clear separation and identification
of these items the Group ensures that they are identified and discussed in full,
as well as ensuring that the underlying performance is highlighted and discussed
in full. Further it facilitates the forecasting of future year results.
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Cost to income ratio
The cost to income ratio for the Banking divisions is calculated as total costs
(defined in table below) divided by total income (defined in table below):
Total expenses
Less:
Interest expense
Life insurance expenses
Goodwill amortisation
Charge to provide for doubtful debts
Significant expenses
Total costs for purposes of cost to income ratio
Total revenue
Less:
Interest revenue
Life insurance income
Significant revenue
Total income for purposes of cost to income ratio
The cost to income ratio calculated on this basis is a standard efficiency
measure used widely across the Australian banking industry. In the above income
calculation, National Australia Bank does not include net life insurance income
and the pre-tax equivalent gross up of certain structured finance transactions.
The Group has set a number of externally disclosed efficiency targets for the
cost to income ratio as calculated above.
Economic Value Added (EVA)
EVA is a profitability measure designed to recognise the requirement to generate
a satisfactory return on the economic capital invested in the business. If the
business produces profit in excess of its cost of capital then value is created
for shareholders.
Senior management are required to place a significant percentage of total
remuneration at risk depending upon the outcome of Group EVA for the year. This
aligns management interests with those of shareholders.
The Group has set an externally disclosed target growth target for EVA.
Sales (Wealth Management)
Includes sales for Retail and Corporate Investment products and Risk products.
Investment product sales represent the initial application amount and any
additional contributions made. Inflows into cash products and reinvestment of
distributions are excluded. Risk sales represent first year annual premiums for
new business, CPI increases and one-off increases in the sum insured.
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This information is provided by RNS
The company news service from the London Stock Exchange
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