ANZ says it now expects to complete the formal integration by the end of calendar 2005. This will consist of combining head office activities, operational and functional support areas and the institutional, corporate and rural businesses. International systems are part of ANZ's global institutional franchise and will continue to be run from Australia, with disaster recovery capability in New Zealand.

ANZ says the payback on integration of the banks' retail banking platforms is less clar cut. In revising its plans, ANZ says it "avoids the cost and risk of combining very different legacy platforms that will not advance the business strategically".

As a result, the personal and small business segments in New Zealand will operate competitively under two brands, ANZ and NBNZ, and under separate management.

At some time in the future, ANZ says it may merge the technology and operational support for these segments, however the costs and benefits of this will be taken as business as usual and the development costs of any new platform will be spread across both Australia and New Zealand.

ANZ chief executive John McFarlane says: "The revised plans for New Zealand integration substantially reduce the management challenge and integration risk and allow management to focus on customer retention, growth and financial performance. Legal amalgamation and non-systems integration is largely completed, and we are confident that integration and systems transfers to New Zealand to meet regulatory requirements, will all be completed in 2005."

The reduction in merger costs from the revised plans will be partially offset by unanticipated regulatory costs for doing business in New Zealand, including the export of certain systems and operations, which support the ANZ retail brand, enterprise systems, and disaster recovery facilities from Australia. This will result in restructuring investment in 2005 of NZ$31 million, and ongoing running costs of NZ$12 million. Additionally an investment of NZ$14 million is anticipated in 2005 for essential infrastructure including Basel II and payments.

Taking all of these costs into account, the total cost of integration is expected to be NZ$220 million, with net synergies of NZ$76 million, consisting of cost savings of NZ$63 million and revenue benefits of $NZ47 million, offset by revenue attrition of $NZ34 million. This compares with original estimates of NZ$265 million integration costs, and net synergies of NZ$69 million, consisting of cost savings of NZ$126 million and revenue benefits of $NZ31 million, offset by revenue attrition of $NZ88 million.