Other (incl. Excess Capital, Group Funding and Corporate Centre)
Performance Summary
| Half year to | Fav/ (unfav) change on |
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Year to | Fav/ (unfav) change on |
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| By Division | Sep 03 $m |
Mar 03 $m |
Mar 03 % |
Sep 03 $m |
Sep 02 $m |
Sep 02 % |
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| Excess Capital (1) | 16 | 38 | (57.9) | 54 | 137 | (60.6) | |
| Group Funding | (34) | (32) | (6.3) | (66) | (265) | 75.1 | |
| Corporate Centre | (36) | (29) | (24.1) | (65) | (28) | large | |
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| Other (2) |
(54) | (23) | large | (77) | (156) | 50.6 | |
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(1) Net interest income from excess capital (after tax).
(2) Refer to Note 1 (Performance Summary By Division) for a reconciliation of Other (including Excess Capital, Group Funding & Corporate Centre) to Group net profit.
EXCESS CAPITAL
The Group's earnings on excess capital for the 2003 year were $54 million compared with $137 million in the prior year reflecting a lower volume of excess capital due to the impact of the share buy-back and a lower average earning rate.
Earnings on excess capital is calculated by applying the average three-year bank bill swap rate of 4.96% (5.49% prior year) to the estimated excess.
When estimating excess capital, benchmarks are chosen having regard to Australian and international peers and the risk profile and asset base of the Group's banking operations. Excess capital does not represent the total amount of surplus capital held by the Group.
GROUP FUNDING
Group Funding acts as the central vehicle for movements of capital and structural funding to support the Group's operations. This minimises the earnings distortion to the operating divisions and enhances the comparability of divisional performance over time.
Group Funding experienced a loss of $66 million compared to a loss of $265 million for the prior year. The main factors contributing to the movement include:
- the funding benefit on the proceeds from the sale of SR Investment Inc. (HomeSide);
- a one-off benefit on the restructure of the hedging swaps on the TrUEPrSSM preference shares;
- lower inter-company funding costs with the falling interest rate environment; and
- a one-off unfavourable interest accrual adjustment in the March 2002 half.
CORPORATE CENTRE
Corporate Centre comprises the following non-operating units – Group and Corporate Finance, Corporate Development, People & Culture, Risk Management, Nautilus Insurance, Technology, Office of the CEO, and Group eliminations.
The Corporate Centre result for the year has primarily been impacted by four key areas:
- an ongoing major review of regulatory compliance and associated quality improvements;
- operating costs (including amortisation) of the Integrated Systems Implementation (ISI) program, which is the Group's strategic infrastructure program;
- impact of Basel II and IFRS on the ISI program; and
- expenses associated with corporate structure, funding and acquisition-related strategic initiatives.