ANZ MARKETS INCOME—PROPOSED CHANGES TO DISCLOSURES FOR 2021

25 MARCH 2021

Australia and New Zealand Banking Group Limited 9/833 Collins Street Docklands Victoria 3008 Australia
ABN 11 005 357 522

OVERVIEW – MARKETS INCOME DISCLOSURES

Rationale forchange

Benefits

Proposed
disclosurechanges•

ANZ’s Markets business is fundamentally a customer franchise, supported by risk
management – not proprietary trading•

Markets sales and risk management activities have become more integrated•

Markets’ income disclosures will better reflect the underlying nature of the business•Better insight as to how the solutions Markets provides to its customers contributes toANZ’s financial performance•From 1H21, Markets customer franchise income will be reported across four business /product lines: FX, Rates, Credit & Capital Markets and Commodities•No change to disclosure of Balance Sheet, Derivative Valuation Adjustments or VaR•

As a transitionary measure, we will provide Markets income under both approaches for1H21•

Categorisation of Markets customer franchise income into Sales and Trading will ceasefrom 2H21
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ANZ MARKETS IN CONTEXTInstitutionalCustomerActivitiesManage cash flow

Undertake global
activities

Expand business• Payments & cash • Payments & cash • Loansmanagement:
management:• Syndicatedcards,
international
Solutions offeredby ANZ
Institutionalmerchants,
liquidity
management,
payments• Domestic trade• Repurchase
Solutions offeredby ANZ
Institutional Markets

agreements

payments• Trade finance• Supply chain
financelending expertise• Advisory• Structured

Manage financial
risk• Payments & cash
management:
connectivity,
reconciliation

Undertakesophisticated risk
management

Interact with anintermediary• Correspondentbanking• Clearing forsmaller FinancialInstitutions

finance: asset,project,leveraged• Foreign exchange • Capital Markets: • FX, Rates, Credit, • Tailored solutions • Market making
conversion
DebtCommodities• Options & hybrids • Provide liquidity
underwriting andDerivatives (e.g.
distribution

FX forwards,interest rateswaps)

in difficult-toaccess markets,e.g. emerging
markets2

MARKETS INCOME CONTRIBUTIONFULL YEAR INCOME BASED ON 5 YEAR AVERAGE (FY16 – FY20)1

TOTAL MARKETS INCOME

INSTITUTIONAL INCOME

CUSTOMER FRANCHISE INCOME

1%
30%

7%

4%
15%

39%

47%

71%

26%31%22%

9%Markets

Corporate Finance

Customer Franchise income

Foreign Exchange

Credit & Capital Markets

TradeOtherBalance SheetRates

Commodities

PCM
1.

Derivative Valuation Adjustments

Average income over 5yrs per ANZ Results Announcements, adjusted for minor structure changes and disposals
3DISCLOSURE OF CUSTOMER FRANCHISE INCOME
FOUR BUSINESS UNITS IN PLACE OF SALES / TRADINGMARKETS INCOME COMPOSITION(DISCLOSURE AT FY20)1$m

1,164
24

(DISCLOSURE FROM 1H21)11,508

131$m

131
1,16424468

256
388

438
8740126
241459463

513471326-10
1H191.

468

238940

826
48190

235

1,508

238940256

MARKETS INCOME COMPOSITION

8264872103190
883551248289336181
437284274

-10
2H19

1H20

Franchise Sales

Balance SheetFranchise Trading

Derivative val/n adj.

2H20

1H19
Total customer franchise income

2H19

1H20

2H20

Foreign exchange

Credit & Capital Markets

Balance Sheet

Rates

Commodities

Derivative val/n adj.

Income per ANZ Investor Discussion Pack (excl. Large & Notables items)
4

SUPPLEMENTARY DISCLOSURES
ADDITIONAL DISCLOSURES TO EXPLAIN DRIVERS OF PERFORMANCE

Additional disclosures on Market
income / activity to be provided whereappropriate to address key trends &drivers of markets performance

Extract from FY20 Results Presentation andInvestor Discussion Pack – Slide 455CONSISTENCY OF MARKETS INCOME
MARKETS INCOME HAS HISTORICALLY FOLLOWED CLOSE TO A NORMAL DISTRIBUTION, WITH A POSITIVE SKEW

CHARACTERISTICS OF MONTHLY INCOME DISTRIBUTION

MARKETS HISTORICAL MONTHLY INCOME$m• Over the last 6 years, monthly Markets income has followed closeto a normal distribution, but with positive skew:15%o Under the risk and governance framework implemented by
the current management team (since March 2016),
approx. 3 in 4 months have delivered income >$150m andevery month has been >$100m+ 1 SD
Ave ~175m
75%- 1 SD
10%

Historical monthly
income distribution(FY15-FY20)

1.

o Average monthly income ~$175m with a standard
deviation of ~$50m. Stability is driven by a set of “core”
customers who deal with ANZ Markets on a regular basis
and across multiple geographies & products• Franchise income tends to be higher during a “risk-off1”

environment in financial markets and/or when “bid-offer spreads”
widen. This income is generated mainly on the back of increased
customer activity and from providing continued liquidity support
to customers during market dislocations• The historical tendency for Markets to outperform in theseenvironments has provided important diversification benefits togroup revenues

A risk off environment is broadly defined as one in which one in which credit spreads widen, risk free bond yields fall, equities sell off, volatility increases and USD strengthens
65 YEARS MARKETS INCOME1PRODUCT CONTRIBUTION TO MARKETS INCOME

Business units ($m)

FY16

FY17FY18

FY19FY20

Foreign exchange

787

736

680

610

711

Rates

532

440

285

422

625

Credit & Capital Markets

235

200

130

175

351

Commodities

166

106

5675

124

Total Franchise Income

1,721

1,481

1,151

1,282

1,810

Balance Sheet

377

625

566

446

706

Valuation Adjustments

-102

229

6238

155

Total Markets income

1,997

2,335

1,780

1,766

2,671

1.

Total Franchise Income and Total Markets Income per the Investor Discussion Pack (excl. Large & Notables items), adjusted for minor structure changes and disposals
7

GLOSSARY

Term

Description

Foreign Exchange

Supports customers manage foreign exchange conversion and hedging activities, with major products including
spot FX, FX forwards, FX swaps and FX options

Rates

Supports customers manage interest rate risk and liquidity requirements, with major products including interest
rate swaps, cross-currency swaps, repurchase agreements and interest rate options

Credit & Capital Markets

Assists customers with debt origination, underwriting and securitised lending, and supports financials
institutions with their credit portfolio management needs by making markets in investment grade bonds

Commodities

Provides price discovery and hedging solutions for customers across a limited number of precious metal, energy
and agricultural commodities

Balance Sheet

The liquidity desk manages the portfolio of high quality liquid assets that are held to meet ANZ’s liquidity needs
The mismatch desk manages interest rate risk across the ANZ Group’s balance sheet

Derivative Valuation
Adjustments

Adjustments made to the fair value of derivatives contracts to take into account credit risk (CVA) and fundingbenefit or cost (FVA)8

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Progress against
ourEnvironment,
Social &Governance(ESG) targets

Latestcommentary on
response to
COVID-19
pandemic

https://www.anz.com/shareholder/centre/investor-toolkit/

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DISCLAIMER & IMPORTANT NOTICE: The material in this presentation is general backgroundinformation about the Bank’s activities current at the date of the presentation. It is information
given in summary form and does not purport to be complete. It is not intended to be relied uponas advice to investors or potential investors and does not take into account the investment
objectives, financial situation or needs of any particular investor. These should be considered, withor without professional advice when deciding if an investment is appropriate.
This presentation may contain forward-looking statements including statements regarding ourintent, belief or current expectations with respect to ANZ’s business and operations, marketconditions, results of operations and financial condition, capital adequacy, specific provisions andrisk management practices. When used in this presentation, the words “estimate”, “project”,“intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to ANZ
and its management, are intended to identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak only as of the datehereof. Such statements constitute “forward-looking statements” for the purposes of the UnitedStates Private Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation topublicly release the result of any revisions to these forward-looking statements to reflect events orcircumstances after the date hereof to reflect the occurrence of unanticipated events.

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Equity Investors

Jill Campbell

Cameron Davis

Retail Investors

Debt Investors

Michelle Weerakoon

Scott Gifford

Group General Manager
Investor Relations+61 3 8654 7749
+61 412 047 448
jill.campbell@anz.com

Manager Shareholder
Services & Events+61 3 8654 7682
+61 411 143 090
michelle.weerakoon@anz.com

Executive Manager
Investor Relations+61 3 8654 7716
+61 421 613 819
cameron.davis@anz.com

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Senior Manager
Investor Relations+61 3 8655 0878
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Relations+61 3 8655 5683
+61 434 076 876
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9