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The Group is a major provider of financial services across Australia, New Zealand, the UK and in global markets. As such, we play a significant role in the management of economic, social and environmental wealth that underlies the welfare of the community and its wide range of stakeholders. This includes:
- clearing and settling of payments in order to facilitate the exchange of goods and services
- managing the savings of households and businesses
- providing credit to assist the transfer of resources through time across regions, industries, governments, businesses and households
- managing uncertainty and risk to help maintain confidence in the financial system and the community.
The Group sources funds used for revenue generating activities, such as lending and investing, through the issue of both debt and equity. Debt is primarily deposit accounts, certificates of deposit, money market accounts, and other types of deposits made by individuals, businesses and other financial institutions and wholesale funding. In return for the use of these funds the Group pays interest to the depositor. Equity is raised primarily through the issue of shares and other capital instruments. The Group pays dividends to shareholders and distributions on its other capital instruments.
2005 Financial performance summary
Our financial performance in the 12 months to 30 September 2005 reflects our focus on making the operational changes required to stabilise the Group’s performance. This process is largely complete, with the focus now on rebuilding the competitive position of each business and restoring the Group’s profitability.
Key financial highlights and achievements
The Group’s performance was impacted by a range of factors:
- sale of the Irish banking operations
- one-off costs — notably the South Korea litigation, the Northern Bank robbery and reimbursements to customers of overcharged fees and taxes
- a deliberate change in strategy for the IMS business, which has resulted in a reduction in low-yielding assets unfavourably impacting cash earnings, but improving return on assets and return on equity
- continued pressure on costs, particularly due to one-off costs and regulatory and compliance projects including Basel, Sarbanes-Oxley and International Financial Reporting Standards (IFRS). Significant restructuring and investment plans have been developed across all of the Group’s business units to address the cost pressures identified.
Business volumes and revenue in the banking businesses showed early signs of gathering momentum across all regions, albeit offset to some extent by margin compression in the first half of the year. In addition, the wealth management result reflected favourable investment markets. Asset quality remains sound with reductions in the overall level of impaired assets and past due loans.
Net profit attributable to members of the Company $4,132 m
Net profit attributable to members of the Company of $4,132 million in 2005 increased $955 million or 30.1% in comparison to 2004. Net profit attributable to members of the Company before significant items of $3,761 million in 2005, increased $200 million from 2004. Refer to Figure 19.
Total capital ratio
The Group’s Tier 1 ratio increased during the year and is at the top end of the Group’s stated target ranges at 30 September 2005. Capital ratios were positively impacted as a consequence of a deliberate strategy to reduce low yielding assets, the significant gain on sale of the Irish banking operations and the growth in contributed equity as a result of the issue of Trust Preferred Securities II on 23 March 2005. Restructuring charges negatively impacted the capital ratios in the year. Refer to Figure 20.
Return on equity & total shareholder return (3-year)
Return on average ordinary shareholder funds increased from 14.0% for the September 2004 to 16.6% for the September 2005 year. Total shareholder return (3-year) decreased from 3.8% to 2.4% in 2005. Refer to Figure 21.
2005 value generated in the community
Through its business activities, the Group generates gross value add in the community by earning income (refer to Table 17) which is distributed to the local communities in which we operate through shareholders, governments and employees (refer to Table 18).
| Table 17: Gross value add in the community17 |
| Year to 30 September 2005 |
$m |
| Net interest income |
7,082 |
| Fee income |
4,157 |
| Trading income |
656 |
| Net life insurance income |
1,672 |
| Other income |
289 |
| Net operating income |
13,856 |
| Significant revenue |
2,493 |
| Total net income |
16,349 |
| Other costs18 |
(3,811) |
| Movement in excess of net market value over net assets of life insurance controlled entities |
335 |
| Significant expense |
(2,209) |
| Total |
10,664 |
| Table 18: 2005 distribution of community value |
| Distribution of community value |
Australia
$m |
Europe
$m |
New Zealand
$m |
| Shareholder19 |
2,125 |
1,525 |
424 |
| Government20 |
1,665 |
251 |
131 |
| Employees21 |
2,348 |
1,205 |
325 |
| Depreciation & goodwill |
268 |
175 |
73 |
| Interest expense |
| Year to 30 September 2005 |
$m |
| Deposits and other borrowings |
10,401 |
| Other financial institutions |
1,780 |
| Bonds, notes and subordinated debt |
1,494 |
| Other debt issues |
115 |
| Total interest expense |
13,790 |
Full year dividend 166 cents
On 9 November 2005, a final dividend of 83 cents per full-paid ordinary share, 80% franked, was declared in respect of the year ended 30 September 2005. This brings the full year dividend to 166 cents (80% franked). Refer to Figure 22.
Diluted earnings per share 248 cents (after significant items)
Diluted earnings per share (after significant items) increased 26.5% from 196 cents to 248 cents. Refer to Figure 22.
For further details on our 2005 financial results, please refer to the 2005 Annual Financial Report on our Group website  .
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