2020
HALF YEAR RESULTS—HALF YEAR ENDED 31 MARCH 2020
AASB9 INFORMATION PACKOVERVIEW
ANZ’s application of AASB 9Our Provision Charge and Balance in the First Half of FY20•

The onset of COVID-19 had a significant impact on credit provisions in the First Half of FY20 - ANZ bolstered credit reserves by $1.4b. The total collective
provision balance now sits at $4.5b•

The Provision charge was $1.7b for the half with an annualised charge rate of 53 bps – double our through-the-cycle expected loss of 26 bps•The increased collective provision (CP) almost solely reflected our more negative view of economic forecasts rather than customer downgrades or increased
delinquencies.

AASB 9•ANZ commenced reporting under the accounting standard AASB 9 in the First Half of FY19. AASB 9 is very different to the former standard, including therequirement to be forward looking. Previously we accounted for losses as they were incurred. As conditions worsen under AASB 9 more of the portfolio isprovided for under a lifetime expected loss basis rather than a 12 month expected loss in more normal times.

•AASB 9 requires CP to be an unbiased, probability based measure. ANZ applies a probability weighting to 4 macro economic scenarios – including our base caserepresenting the current economic forecast as well as upside, downside and severe downside economic cases. Each of these is assessed differently in each of ourkey geographies.

•Our base case was set out in slide 23 of our 1H20 Results pack and is replicated on slide 8 of this pack. In this Base Case you can see a sharp deterioration in thenear term and a gradual improvement over time. As you can expect the outlook is subject to significant uncertainty including the duration of lockdowns, theimpacts of support measures and the extent and duration of the economic downturn.

•We’ve also provided on slide 8 the provision balance that would arise if 100% of weighting was applied to any of the economic scenarios. In 1H20 ANZ applied
most of our weighting to the Base Case and Downside scenarios. As part of the process, we gave careful consideration to pressures in certain geographies andsegments. Subsequently we applied a greater downside probability in New Zealand, in higher risk industries and on small business customers.

•On slide 9 we outline a scenario for Credit Risk Weight migration and the subsequent possible CET1 impact of that migration under our Base Case economic
forecasts. The estimated impacts to ECL, Risk Weight migration and capital estimated impacts are based on modelled outcomes under ANZ’s base case scenario
and the assumed impacts of that scenario.

2

ALLOWANCE FOR EXPECTED CREDIT LOSSES (ECL)
ANZ measures what is referred to as the allowance for expected credit losses (ECL) using an ECL impairment model per the standard, AASB 9 Financial Instruments.
For more information about ANZ’s accounting policy under the standard see the description in Note 1 of our Condensed Consolidated Financial Statements for 1H20and Note 13 in the same documents related to FY19. ECL is either individually assessed for a particular customer or collectively assessed for a portfolio of similar
credit exposures.

INDIVIDUALLY ASSESSED ALLOWANCE FOR ECLWhen estimating individually assessed ECL for Stage 3 exposures, the Group makes
judgements and assumptions in relation to expected repayments, the realisable value ofcollateral, the business prospects for the customer, competing claims and the likely cost andduration of the work-out process.

TOTAL ALLOWANCE FOR ECL
$m

5,594
1,093

Our judgements and assumptions were updated to reflect the potential impact of COVID-19.
3,595

COLLECTIVELY ASSESSED ALLOWANCE FOR ECLWhen we estimate the collectively assessed ECL, ANZ has to make judgements and assumptions
in relation to:• Selecting an estimation technique or modelling methodology, noting that the modelling of theGroup’s ECL estimates are complex; and• Selecting inputs for those models, and the interdependencies between those inputs.
The modelling methodology applied in estimating ECL in the Half Year 31 March 2020 isconsistent with that used in for the Full Year 2019.
The potential impacts of COVID-19 on the global economy and how governments, businesses
and consumers respond is uncertain and because of that our assessment of expected credit
losses in relation to the ANZ credit portfolio is subject to a number of management judgements
and estimates.

1,016

3,443

2.

4,190

891

814

920
4,501

2,579

2,523

Mar-18

Sep-18

3,378

3,376

Mar-19Sep-19Individually assessed
1.

4,269

Mar-20

Collectively assessed

Includes allowance for expected credit losses for Net loans and advances – at amortised cost, Investment securities – debt securities at amortised cost and Off-balance sheet
commitments - undrawn and contingent facilities
Includes assets and liabilities reclassified as held for sale from continuing and discontinued operations
3

COLLECTIVE PROVISION BALANCE & CHARGE UNDER AASB-9
The schematic below details key elements impacting the collective provision over the period from 30 September 2019 to 31 March 2020.

MOVEMENTBY DIVISION

$m$m
1,031

04,501
50541

4,501
-1

3,376

78

02,523

173,37638374

CP charge 1,048

1,169

1,795

Sep-18(preAASB 9)

Sep-19(AASB 9)FXCOVERAGE RATIO
IP / GIA1
CP / CRWA

1.
2.

2

GIA: Gross Impaired Assets
CRWA: Credit Risk Weighted Assets

Volume /Mix

Changein Risk

EconomicOutlook
Sensitivity

1,590

Model/ Meth.

OtherMar-20
Balance (AASB 9)
SheetmovementsMar-19

Sep-19Mar-20

42%

40%

42%

0.98%

0.94%

1.17%

Sep-192,320

Mar-20

Pacific

Institutional

New ZealandAustralia R&C4

JUDGEMENTS & ASSUMPTIONSECL ESTIMATES ARE INHERENTLY UNCERTAIN; ACTUAL RESULTS MAY DIFFER FROM ESTIMATES
Judgements and assumptions are applied in determining ECL and reflect historical experience and other factors that are considered to be relevant, including
expectations of future events that are believed to be reasonable under the circumstances including the:• extent & duration of pandemic • impacts of actions of gov. & other authorities • responses of businesses & consumers • associated impact on the global economy

KEY JUDGEMENTS & ASSUMPTIONS IN RELATION TO MODEL INPUTS
Judgement / Assumptions

Description1

Base case economic forecast

The Group derives a forward looking “base case” economic scenario which reflects ANZ’s view of the most likely future
macro-economic conditions.

Probability weighting of each scenario(base case, upside, downside and severe
downside scenarios)

Determined by management considering the risks and uncertainties surrounding the base case scenario.

Determining when a significant increasein credit risk (SICR) has occurred

Judgement is involved in setting the rules and trigger points to determine whether there has been a significant
increase in credit risk (SICR) since initial recognition of a loan, which would result in the financial asset moving from‘stage 1’ to ‘stage 2’.
Transition from stage 1 to stage 2 increases the ECL from an allowance for 12 month expected credit losses, to anallowance for lifetime expected credit losses. Subsequent decreases in credit risk resulting in transition from stage 2to stage 1 may similarly result in significant changes in the ECL allowance.

Measuring both 12-month and lifetime
credit losses

ECL is a function of the probability of default (PD), the loss given default (LGD) and the exposure at default (EAD)
which are point-in-time measures reflecting the relevant forward looking factors determined by management.
Judgement is involved in determining which forward looking factors are relevant for particular lending portfolios andfor determining the sensitivity of the parameters to movements in these forward looking factors.
Judgement is also required where behavioural characteristics are applied in estimating the lifetime of a facility.

Management temporary adjustments

1.

Adjustments are used in circumstances where it is judged that our existing inputs, assumptions and model techniques
do not capture all the risk factors relevant to our lending portfolios. Emerging local or global macroeconomic,
microeconomic or political events, and natural disasters that are not incorporated into our current parameters, risk
ratings, or forward-looking information are examples of such circumstances.

Refer to pages 85 & 86 of ANZ’s 1H20 Condensed Consolidated Financial Statements which describe the key changes and considerations to judgements and assumptions used in determining
the ECL in the first half of 2020

5

BASE CASE ECONOMIC FORECAST
The Group has modelled the ECL provision based on the economic factors which are most predictive of the level of default in the credit portfolio.
The uncertain evolution of the COVID-19 pandemic increases the risk of the forecast resulting in an understatement or overstatement of the ECL provision due touncertainties around:• The extent and duration of measures to stop or slow down the spread of COVID-19• The extent and duration of the economic down turn, along with the time required for economies to recover, and• The effectiveness of government stimulus measures, in particular their impact on the magnitude of economic downturn and the extent and duration of therecovery.
The Group’s base case economic forecast scenario reflects a sharp deterioration in economic conditions in the 2nd quarter 2020 with a gradual improvement
thereafter. It reflects a widespread shutdown in the 2nd quarter of calendar 2020 with a progressive recovery thereafter.
The economic drivers of the base case economic forecast at 31 March 2020 and those used at 30 September 2019 are set out below and on the next slide. Thesereflect ANZ’s view, at the respective reporting dates, of the most likely future macro-economic conditions for the major jurisdictions in which the Group operates.

Base case economic forecast – Australia
As at 31 Mar-20

As at 30 Sep-19

GDP

GDP is expected to contract 13% in the June 2020 quarter and to recover
thereafter resulting in calendar year 2020 GDP contracting 4.7% thengrowing by 4.1% in calendar year 2021

Expected to improve modestly

Unemployment rate

The unemployment rate is expected to reach 13% in the June 2020 quarter
before a moderate recovery in the September 2020 quarter. It is expected toaverage 9.0% for calendar year 2020 and 7.3% for calendar year 2021

Expected to remain essentially flat

Residential property values

Property prices are expected to fall progressively by 4.1% in calendar year
2020 (taking into account growth pre COVID-19) and to contract a further
6.3% in calendar year 2021

Expected to improve after a period of declineConsumer price index

CPI growth is forecast at 1.2% for calendar year 2020 and 1.6% for calendaryear 2021

Growth expected to rise from current levels

6BASE CASE ECONOMIC FORECAST (Continued)
Base case economic forecast – New Zealand
As at 31 Mar-20

As at 30 Sep-19

GDP

GDP is expected to contract by 17% in the June 2020 quarter, rebounding in
the September 2020 quarter once activity resumes, resulting in calendar year
2020 GDP contracting 6.7% then growing by 4.2% in calendar year 2021

Expected to improve modestly

Unemployment rate

Unemployment is expected to average 7.4% for calendar year 2020 and 7.7%
for calendar year 2021

Expected to remain stable

Residential property values

Property prices are expected to contract by 1.9% in calendar year in 2020,
followed by 6.0% growth in calendar year 2021

Expected to achieve modest levels ofgrowth

Consumer price index

CPI growth is forecast at 1.5% for calendar year 2020 and 1.5% for calendaryear 2021

Expected to rise modestly

Base case economic forecast – Rest of the world
As at 31 Mar-20

As at 30 Sep-19

GDP

GDP is expected to contract 3.6% over calendar year 2020 and then grow by
2.0% over calendar year 2021

Growth is forecast to taper lower in thenear term due to uncertainty in the global
outlookConsumer price index

Inflation is forecast at 0.9% for calendar year 2020 and 1.7% for calendaryear 2021

Expected to remain soft

7

BALANCE SHEET COLLECTIVE CREDIT PROVISIONBASE CASE ECONOMIC FORECAST (AS AT 31 MARCH 2020 POST COMMENCEMENT OF COVID-19)
Australia

BASE CASE ECONOMIC FORECAST1New ZealandJun-20 Qtr.

CY2020CY2021

Jun-20 Qtr.

CY2020CY2021

GDP change2-13.0%

-4.7%

4.1%

-17.0%

-6.7%

4.2%

Unemployment rate3

13.0%

9.0%

7.3%

8.6%

7.4%

7.7%

Residential Property price change2

-1.1%

-4.1%

-6.3%

-2.0%

-1.9%

6.0%

COLLECTIVE PROVISION BALANCE SCENARIOS4 (31 MARCH 2020)

Weightings are applied to provisioning scenarios to determine collective provision balance($m)

6,472

ECL SENSITIVITY
Weightings applied to forecast scenarios
Total ECL ($m)

Impact ($m)5

100% upside scenario

1,961-2,533

100% base scenario

4,319-183

100% downside scenario

5,293

791

100% severe downside scenario

6,472

1,970

5,293
4,319
1,969

100% upside

1.
2.
3.
4.
5.

100% base caseeconomic forecast

100% downside

100% severe

A subset of a range of economic indicators is shown
Jun-20 Qtr: Quarter on Quarter change; CY2020 & CY2021: Year on Year to December change
CY2020 & CY2021 are annual averages
Illustration of the impact on ANZ’s Expected Credit Loss (ECL) allowance where a 100% weighting is applied to each scenario
Impact compared with actual collective provision balance as at 31 Mar-208

SCENARIO PROBABILITY WEIGHTINGS AND CAPITAL SENSITIVITIES•Probability weights are assigned to 4 economic scenarios to arrive at the ECL provision.

•Probability weighting involves considering the risks and uncertainties surrounding the base case scenario, as well as any specific portfolio considerations required.

•The Group Asset and Liability Committee (GALCO) has responsibility for reviewing and approving the base case forecast and the Credit and Market Risk Committee(CMRC) approves the probability weights applied to each scenario.

•Where applicable, temporary adjustments may be made to account for situations where known or expected risks have not been adequately addressed in the modelling
process. CMRC approves such adjustments.
Scenario
Base case
UpsideDownside
Severe Downside

Weightings at
31 Mar-20

Description
Derived forward looking “base case” economic scenario which reflects ANZ’s current view of the most likely future
macro-economic conditions
Upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are notbased on the economic conditions prevailing at balance date) and are based on a combination of more optimistic(in the case of the upside) and pessimistic (in the case of the downside) economic conditions
Severe downside scenario is fixed by reference to average economic cycle conditions and accounts for thepotentially severe downside impact of less likely extremely adverse economic conditions

AN EXAMPLE OF POSSIBLE CREDIT RWA AND CET1 IMPACTS OF
PORTFOLIO CREDIT MIGRATION OVER 18 MONTHS TO SEP-21

Base Case Scenario

Scenario weights weredetermined bygeography. ANZ applied
the majority of itsweightings to the baseand downside scenarios

ANZ REPORTED CREDIT RWA INTENSITY$b

CRWA / EAD1

CET1 RATIO

930

Up ~4ppts~110bps

36.9%944968

35.8%

35.7%

Sep-18Mar-19977

36.7%

1,075

35.9%

CRWA/EAD and CET1 estimated impacts are based on modelled outcomes under
ANZ’s base case scenario and assumed impacts of that scenario.
Mar-181.
2.

Based on EAD as at 31 Mar-20
EAD excludes Securitisation and Other assets whereas CRWA is inclusive as per APS 330

CRWA/EAD %Sep-19Mar-20

EAD9AASB 9 OVERVIEW & STAGESThe ECL provision is categorised into 3 stages based on SICR and whether default has occurred;•Stage 1 - 12 months Expected Credit Loss (ECL)••

Stage 2 – Lifetime ECL••

On origination, Stage 1 for all facilities, remains unless significant increase in credit risk
Significant increase in credit risk since origination

Stage 3 – Non-performing: Lifetime ECL•

Includes both collectively and individually assessed provisions for impaired loans

Drivers between stages•

Retail: driven by Customer Behavioural Scores and delinquency•

Institutional & Commercial: driven by Customer Credit Rating (CCR) migration

PROVISION BALANCE/COVERAGE RATIO
By stages ($m) AASB-9
31 Mar-20

30 Sep-19

10.17%

Coverage ratio by stage1
2
2.40%

1,530

1,412

318.03%434

10.20%

1,815

Coverage ratio by stage1
2
3.04%

2,213

Stage 3 CP
1.

Stage 2

Stage 3

Stage 1473
1,093814
Stage 1

320.77%

Stage 2

Stage 3

Stage 3 IP

Coverage ratio calculated as Provision Balance to Gross Loans & Advances for on-balance sheet exposures
10FURTHER INFORMATIONOur Shareholder informationanz.com/shareholder/centre/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

Head of Debt Investor
Relations+61 3 8655 5683
+61 434 076 876
scott.gifford@anz.com

Harsh Vardhan

Manager
Investor Relations+61 3 8655 0878+61 466 848 027
harsh.vardhan@anz.com

Mary Makridis

Associate Director
Debt Investor Relations+61 3 8655 4318
mary.makridis@anz.com

DISCLAIMER & IMPORTANT NOTICE: The material in this presentation is general background information 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 upon as 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 beconsidered, with or without professional advice when deciding if an investment is appropriateThis presentation may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to ANZ’sbusiness and operations, market conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management practices.
When used in this presentation, the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate toANZ 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 date hereof. Such statements constitute “forward-looking statements” for the purposes of the United States Private
Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.

11