ANZ is reaping the benefits of its many long-running investments in business improvement in Australia, New Zealand and Asia, with the bank justifying a rise in its dividend payout ratio on the promise of continued savings.The highlight of the bank's March half 2013 financial report, released yesterday, was the decline in expenses. Expenses of A$4.03 billion for the half were down two per cent on the previous corresponding period, and down eight per cent on the previous half.  Expenses fell in all divisions.Staff costs fell three per cent, with staff numbers (on an FTE basis) down four per cent. The bank said it had reduced staff numbers "across all divisions" and had spent less on temporary staff.IT expenses increased 11 per cent, with the bank spending more on IT contractors.In Australia, the ratio of operating expenses to operating income fell from 41.8 per cent in the March 2012 half to 37.9 per cent in the March 2013 half.In Asia, ANZ said cost savings from productivity initiatives and increased use of its hubs (in Bangalore, Manila and Chengdu) fostered investment in the region.Mike Smith, ANZ's chief executive, said the fall in the bank's cost-to-income ratio, to 44.4 per cent, "reflects a continuing commitment to growth while also delivering sustainable productivity outcomes that [will] provide us with ever greater earnings leverage over time."He said that "ongoing productivity improvements and capital management initiatives remain central to our strategy" in a climate of subdued credit growth.ANZ put its ratio of operating expenses to average assets at 1.18 per cent, down 16 basis points over one year. This level is still only in line with the average of its major bank peer group, based on APRA data.Examples of service improvements cited in yesterday's release include in a cut of 75 per cent in the time taken to process approvals for leases through Esanda; a cut to two hours, from 24 hours, to open travel card accounts; and a cut of 40 per cent in the time taken to reach the point of sending a letter of offer on a home loan application.ANZ adjusted its dividend payout policy. While, formally, the policy remains to target a full year dividend payout in the range of 65 to 70 per cent of cash earnings, ANZ now says it "believes that a full year payout ratio of between 65 per cent and 70 per cent is sustainable in the medium term, with a bias towards the upper end of the range in the near term."Asked to highlight which cost measures were most responsible for the better cost performance this half, Smith said: "It's not so much what we've been doing in the last six months as to what we've been doing in the last five years. "We're reaping the fruit of a fairly large investment commitment, and it's not only a significant capital investment but it was quite a significant cultural change for the organisation. "Changing the operating model to become a much more centralised [model], getting consistent processes,