Review of Operations
Profits
The statutory net profit after tax for the year ended 30 June 2004 was $2,572 million, an increase of 28% on the prior financial year. Net profit after tax from ordinary activities (‘underlying basis’) was $3,078 million, an increase of 15% on the prior financial year. The difference between statutory and underlying profit is due to the amortisation of goodwill, an adjustment to the appraisal value of the life and funds management businesses, investment returns on shareholders’ funds in the funds management and insurance business and incremental expenses in relation to the Which new Bank program. Underlying profit is more closely aligned to operating performance than statutory profit.
The underlying result reflects:- Continued strong home lending growth in Australia and New Zealand, significantly stronger general and life insurance results and improved performance from the funds management business;
- Cost control across the business;
- A favourable credit environment, with very low levels of corporate and personal defaults; and
- Initial benefits arising from the Which new Bank program.
Earnings per Share
Consistent with the increase in statutory profit explained above, statutory earnings per share were 197 cents, up 40 cents on the prior year of 157 cents. Underlying earnings per share were 237 cents, up 27 cents compared with 210 cents for 2002/2003.
Dividend
A final dividend of 104 cents per share fully franked will be paid on 24 September 2004 to shareholders on the register at 5:00 pm on 20 August 2004. The ex dividend date is 16 August 2004. This brings the full year dividend to 183 cents per share fully franked.
The dividend is determined having regard to a number of factors including rate of business growth, capital adequacy, investment requirements, cyclical nature of investment returns and a range of other factors. As previously communicated to the market, the dividend for 2004 was determined after adding back to the year’s earnings the expenses arising from the Which new Bank program.
Return on Equity
Return on equity (‘underlying basis’) was 15.1%, which represents an increase on the prior financial year.
Assets
Lending Assets Growth
Lending assets have increased by $31 billion or 18% over the prior financial year to $206 billion. This largely reflects continued strong growth for home lending, which has increased by $22 billion or 22%.
Funds Under Administration
Total funds under administration (“FUA”) at 30 June 2004 were $110 billion, an 11% increase for the year. This increase is reflective of the strong investment returns achieved during the year. Total FUA consists of $38 billion in retail funds, $27 billion in wholesale funds, $19 billion in internationally sourced funds, $13 billion in property funds, $9 billion in mastertrust funds and $4 billion in cash management funds.
Capital Management
At 30 June 2004, the total Capital Adequacy ratio was 10.25% (well above the regulatory requirement of 8%) compared with 9.73% at 30 June 2003. The Bank's credit ratings have remained unchanged for the year. At 30 June 2004, the Bank's credit ratings were:
| Credit Ratings | Short term | Long term |
|---|---|---|
| Standard & Poor’s Corporation | A–1+ | AA– |
| Moody’s Investors Service, Inc. | P–1 | Aa3 |
| Fitch | F1+ | AA |
(1) Source: Bloomberg.
(2) Cash profit of $2,695 million less $101 million paid to holders of preference shares and other equity instruments.