Australia and New Zealand Banking Group Limited
ABN 11 005 357 522

Half Year
31 March 2019

Consolidated Financial Report
Dividend Announcement
and Appendix 4D

The Consolidated Financial Report and Dividend Announcement contains information required by Appendix 4D of the Australian Securities
Exchange (ASX) Listing Rules. It should be read in conjunction with ANZ’s 2018 Annual Report, and is lodged with the ASX under listing rule
4.2A.

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Name of Company:

APPENDIX 4D

Australia and New Zealand Banking Group Limited
ABN 11 005 357 522

Report for the half year ended 31 March 2019

Operating Results1

Statutory operating income from continuing operations



-9%

to

9,293

Statutory profit attributable to shareholders



-5%

to

3,173

Cash profit2



22%

to

3,514

Cash profit from continuing operations2



2%

to

3,564

AUD million



Dividends3

Proposed interim dividend

Cents

Frankedperamount4

share

per share

80

100%

Record date for determining entitlements to the proposed 2019 interim dividend

14 May 2019

Payment date for the proposed 2019 interim dividend

1 July 2019

Dividend Reinvestment Plan and Bonus Option Plan
Australia and New Zealand Banking Group Limited (ANZ) has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate inrespect of the proposed 2019 interim dividend. For the 2019 interim dividend, ANZ intends to provide shares under the DRP through an on-market
purchase and BOP through the issue of new shares. The 'Acquisition Price' to be used in determining the number of shares to be provided under the
DRP and BOP will be calculated by reference to the arithmetic average of the daily volume weighted average sale price of all fully paid ANZ ordinary
shares sold in the ordinary course of trading on the ASX and Chi-X during the ten trading days commencing on 17 May 2019, and then rounded to thenearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election
notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for the 2019 interim dividend must be received by
ANZ's Share Registrar by 5.00pm (Australian Eastern Standard Time) on 15 May 2019. Subject to receiving effective contrary instructions from theshareholder, dividends payable to shareholders with a registered address in the United Kingdom (including the Channel Islands and the Isle of Man) or
New Zealand will be converted to Pounds Sterling or New Zealand Dollars respectively at an exchange rate calculated on 17 May 2019.

1
2

3
4

Unless otherwise noted, all comparisons are to the half year ended 31 March 2018.
Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group. The non-core
items are calculated consistently period on period so as not to discriminate between positive and negative adjustments, and fall into one of the three categories: gains or losses includedin earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with the ongoing operations of the Group; treasury shares, revaluation ofpolicy liabilities, economic hedging and similar accounting items that represent timing differences that will reverse through earnings in the future; and accounting reclassifications between
individual line items that do not impact reported results, such as policyholders tax gross up. Cash profit is not a measure of cash flow or profit determined on a cash basis. The net after
tax adjustment was an increase to statutory profit of $341 million made up of several items. Refer pages 73 to 77 for further details.
There is no conduit foreign income attributed to the dividends.
It is proposed that the interim dividend will be fully franked for Australian tax purposes (30% tax rate) and carry New Zealand imputation credits of NZD 9 cents per ordinary share.

2

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4D
Half year ended 31 March 2019

CONTENTS

PAGE

Disclosure Summary5

Summary

7

Group Results

21

Divisional Results

49

Profit Reconciliation

73

Condensed Consolidated Financial Statements

79

Supplementary Information

123

Definitions

135

ASX Appendix 4D Cross Reference Index

138

Alphabetical Index

139

This Consolidated Financial Report, Dividend Announcement and Appendix 4D has been prepared for Australia and New Zealand Banking Group Limited(the “Company” or “Parent Entity”) together with its subsidiaries which are variously described as “ANZ”, “Group”, “ANZ Group”, “the consolidated entity”,“the Bank”, “us”, “we” or “our”.
All amounts are in Australian dollars unless otherwise stated. The Company has a formally constituted Audit Committee of the Board of Directors. The
Condensed Consolidated Financial Statements were approved by resolution of a Committee of the Board of Directors on 30 April 2019.
When used in this Results Announcement 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 theseforward-looking statements, which speak only as of the date hereof. 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 or to reflect the occurrence of unanticipated events.

3

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

This page has been left blank intentionally

4

DISCLOSURE SUMMARY
SUMMARY OF 2019 HALF YEAR RESULTS AND ASSOCIATED DISCLOSURE MATERIALSThe following disclosure items were lodged separately with the ASX and NZX and can be accessed via the ANZ Shareholder Centre on the Groupwebsite http://www.shareholder.anz.com within the disclosures for 2019 Half Year Results.

Consolidated Financial Report, Dividend Announcement and Appendix 4D

Half Year Results Investor Discussion PackNews Release

APS 330 Pillar III Disclosure as at 31 March 2019Key Financial Data Summary

United Kingdom Disclosure and Transparency Rules Submission

5

DISCLOSURE SUMMARY
This page has been left blank intentionally

6

SUMMARYCONTENTS

Page

Guide to Half Year Results

8

Statutory Profit Results

10

Cash Profit Results

11

Financial Performance Summary – Total and continuing operations

12

Key Balance Sheet Metrics

13

Large/Notable Items – continuing operations

14

Full Time Equivalent Staff

19

Other Non-Financial Information

19

7

SUMMARY
Guide to Half Year Results
ACCOUNTING STANDARDS ADOPTED
During the period, the Group adopted two new Accounting Standards, AASB 9 Financial Instruments (AASB 9) and AASB 15 Revenue from Contracts
with Customers (AASB 15):AASB 9 - the Group implemented an expected credit loss methodology for impairment of financial assets, and revised the classification andmeasurement of certain financial assets from 1 October 2018. Consequently, the Group increased its provision for credit impairment by $813 million
through opening retained earnings. Comparative information has not been restated.



AASB 15 - the main impact of adoption is that certain items previously netted are now presented gross in operating income and operating expenses.
Comparative information has been restated which increased total operating income for the September 2018 half by $91 million (Mar 18 half: $62
million) and increased total operating expenses by the same amount.

For further details on key requirements and impacts of the changes described above refer to Note 1 and 21 of the Condensed Consolidated Financial
Statements.
NON-IFRS INFORMATION
Statutory profit is prepared in accordance with recognition and measurement requirements of Australian Accounting Standards, which comply with
International Financial Reporting Standards (IFRS). The Group provides additional measures of performance in the Consolidated Financial Report &Dividend Announcement which are prepared on a basis other than in accordance with accounting standards. The guidance provided in Australian
Securities and Investments Commission (ASIC) Regulatory Guide 230 has been followed when presenting this information.
Cash Profit
Cash profit, a non-IFRS measure, represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers toassess Group and Divisional performance against prior periods and against peer institutions. The adjustments made in arriving at cash profit are included
in statutory profit which is subject to review within the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cashprofit is not subject to review by the external auditor. The external auditor has informed the Audit Committee that cash profit adjustments have been
determined on a consistent basis across each period presented.
Adjustments between statutory profit and cash profit - To calculate cash profit, the Group excludes non-core items from statutory profit. Refer topages 73 to 77 for adjustments between statutory and cash profit.



Large/Notable items within cash profit - The Group’s cash profit result from continuing operations includes a number of items collectively referred
to as Large/Notable items. While these items form part of cash profit, given their nature and significance, they have been presented separately withcomparative information, where relevant, to provide transparency and aid comparison. Refer to pages 14 to 18 for Large/Notable items.

DISCONTINUED OPERATIONS
The financial results of the Wealth Australia businesses being divested and associated Group reclassification and consolidation impacts are treated as
discontinued operations from a financial reporting perspective. These businesses qualify as discontinued operations, a subset of assets and liabilities
held for sale, as they represent a major line of business.
The Group Income Statement and Statement of Comprehensive Income show discontinued operations separately from continuing operations in a
separate line item ‘Profit/(Loss) from discontinued operations’. This impacts the current and comparative financial information for Wealth Australia andTechnology, Services & Operations (TSO) and Group Centre divisions.


Sale to IOOF Holdings Limited (IOOF)
On 17 October 2017, the Group announced it had agreed to sell its OnePath pensions and investments (OnePath P&I) business and aligned dealer
groups (ADG) businesses to IOOF. The sale of the aligned dealer groups business completed on 1 October 2018. The completion of the remaining
OnePath P&I business, which is dependent on the receipt of all necessary approvals, is expected to occur before the end of the March 2020 half.

Sale to Zurich Financial Services Australia (Zurich)
On 12 December 2017, ANZ announced that it had agreed to sell its life insurance business to Zurich and regulatory approval was obtained on 10
October 2018. The transaction is subject to closing conditions and ANZ expects it to complete in the first half of the 2019 calendar year.

Included in the ‘Loss from discontinued operations’ is:

A $632 million loss (pre and post-tax) recognised on the reclassification of Wealth Australia businesses to held for sale in the March 2018 half; andCustomer remediation for refunds to customers and related remediation costs for receiving inappropriate advice or services not provided including
the Group’s former aligned dealer groups.
Half Year

Customer remediation (pre-tax)

Mar 19$M75

Sep 18$M
181

Mar 18$M-

Customer remediation (post-tax)

53

127

-

8

SUMMARYCONTINUING OPERATIONSDivisional Performance
The presentation of divisional results has been impacted by a number of methodology and structural changes during the period. Prior period
comparatives have been restated as follows:

The methodology for allocating earnings on capital at a business unit level has changed from Economic Capital to Regulatory Capital. While neutral
at a Group level, this change has impacted net interest income at the divisional level;The residual Asia Retail and Wealth businesses have been transferred from the former Asia Retail and Pacific division to TSO and Group Centre
division. The remaining segment has been renamed Pacific division; and

ANZ’s lenders mortgage insurance, share investing and general insurance distribution businesses which were previously part of the continuing
operations of Wealth Australia now form part of the Australia division (ANZ’s financial planning business continues to be part of the continuing
operations of the Wealth Australia division).

Other than those described above, there have been no other significant changes impacting divisional performance.

9

SUMMARY
Statutory Profit Results
Half YearNet interest income

Mar 19$M
7,299

Sep 18$M
7,164

Movement
Mar 18$M
7,350

Mar 19Mar 19v. Sep 18 v. Mar 18
2%-1%

Other operating income

1,994

2,583

2,887

-23%

-31%

Operating income

9,293

9,747

10,237-5%-9%Operating expenses(4,365)(4,928)(4,473)-11%-2%

Profit before credit impairment and income tax

4,928

4,819

5,764

2%

-15%

Credit impairment charge

(392)

(280)

(408)

40%

-4%

Profit before income tax

4,536

4,539

5,356

0%

-15%

Income tax expense(1,284)(1,358)(1,426)

-5%

-10%

(9)

(9)

(7)

0%

29%

3,243

3,172

3,923

2%

-17%

(70)

(95)

(600)

-26%

-88%

3,173

3,077

3,323

3%

-5%

Non-controlling interests
Profit attributable to shareholders of the Company from continuing operations
Profit/(Loss) from discontinued operations
Profit attributable to shareholders of the Company

Earnings Per Ordinary Share (cents)

Half Year

Basic
DilutedReference
Page
95

Mar 19111.7

Sep 18
107.3

95

106.4

103.2

Movement
Mar 18114.2

Mar 19v. Sep 18
4%

Mar 19v. Mar 18
-2%

108.6

3%

-2%

Half Year
Reference Page
Ordinary Share Dividends (cents)
Interim - 100% franked1

Mar 19Sep 18Mar 18

94

80

-

80

Final - 100% franked1

94

-

80

-

1

Total - 100% franked

94

80

80

80

Ordinary share dividend payout ratio2

94

71.4%

74.6%

69.7%

Profitability Ratios
Return on average ordinary shareholders' equity3

10.8%

10.4%

11.3%

Return on average assets4

0.65%

0.64%

0.71%

Net interest margin

1.79%

1.82%

1.93%

Net interest income to average credit RWAs4

4.23%

4.21%

4.35%

Efficiency Ratios
Operating expenses to operating income

48.6%

52.0%

47.1%

Operating expenses to average assets4

0.94%

1.09%

1.01%

379

343

430

13

(63)

(22)

392

280

408

Individually assessed credit impairment charge as a % of average gross loans and advances4,5

0.12%

0.11%

0.15%

Total credit impairment charge as a % of average gross loans and advances4,5

0.13%

0.09%

0.14%

Credit Impairment Charge/(Release)
Individually assessed credit impairment charge ($M)
Collectively assessed credit impairment charge/(release) ($M)
Total credit impairment charge ($M)

100

1.

Fully franked for Australian tax purposes and carry New Zealand imputation credits of NZD 9 cents per ordinary share for the proposed 2019 interim dividend (2018 final dividend: NZD 10cents; 2018 interim dividend: NZD 9 cents).
Dividend payout ratio is calculated using the proposed 2019 interim, 2018 final and 2018 interim dividends.
3. Average ordinary shareholders’ equity excludes non-controlling interests.
4. Average assets, average gross loans and advances and average credit RWAs include assets held for sale.
5. Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.
2.

10

SUMMARY
Cash Profit Results1
Half Year

Movement

Net interest income

Mar 19$M
7,299

Sep 18$M
7,164

Mar 18$M
7,350

Mar 19v. Sep 18
2%

Mar 19v. Mar 18-1%

Other operating income

2,447

2,333

2,520

5%

-3%

Operating income

9,746

9,497

9,870

3%

-1%

Operating expenses(4,365)(4,928)(4,473)-11%-2%

Profit before credit impairment and income tax

5,381

4,569

5,397

18%

0%

Credit impairment charge

(393)

(280)

(408)

40%

-4%

Profit before income tax

4,988

4,289

4,989

16%

0%

Income tax expense(1,415)(1,286)(1,489)

10%

-5%

(9)

(9)

(7)

0%

29%

3,564

2,994

3,493

19%

2%

(50)

(65)

(617)

-23%

-92%

3,514

2,929

2,876

20%

22%

Mar 19v. Mar 18
25%
24%

Non-controlling interests
Cash profit from continuing operations
Cash profit/(loss) from discontinued operations
Cash profit

Earnings Per Ordinary Share (cents)

Half Year

Basic
DilutedMovement

Mar 19123.0

Sep 18
101.6

Mar 1898.3

Mar 19v. Sep 18
21%

116.8

97.9

94.2

19%

Half Year
Reference
Page

Mar 19Sep 18Mar 18

Ordinary Share Dividends
Ordinary share dividend payout ratio2

64.5%

78.4%

80.6%

Profitability Ratios
Return on average ordinary shareholders' equity3

11.9%

9.9%

9.8%

Return on average assets4

0.72%

0.61%

0.62%

Net interest margin

1.79%

1.82%

1.93%

Net interest income to average credit RWAs4

4.23%

4.21%

4.35%

Efficiency Ratios
Operating expenses to operating income

46.4%

54.4%

49.6%

Operating expenses to average assets4

0.94%

1.09%

1.01%

430

Credit Impairment Charge/(Release)
Individually assessed credit impairment charge ($M)

32

380

343

Collectively assessed credit impairment charge/(release) ($M)

32

13

(63)

(22)

Total credit impairment charge ($M)

32

393

280

408

Individually assessed credit impairment charge as a % of average gross loans and advances4,5

0.12%

0.11%

0.15%

Total credit impairment charge as a % of average gross loans and advances4,5

0.13%

0.09%

0.14%

Cash Profit/(Loss) By Division

Half Year

Movement

Australia

Mar 19$M
1,733

Institutional

1,012

713

767

42%

New Zealand

753

772

749

-2%

1%

Wealth Australia

(30)

(57)

(26)

-47%

15%

Pacific

33

39

33

-15%

0%

TSO and Group Centre

63

(199)

(13)

large

large

Discontinued Operations

(50)

(65)

(617)

-23%

-92%

3,514

2,929

2,876

20%

22%

Cash profit1.

Sep 18$M
1,726

Mar 18$M
1,983

Mar 19v. Sep 18
0%

Mar 19v. Mar 18-13%
32%

Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the results of the ongoing business activities of the Group. Refer to pages
73 to 77 for the reconciliation between statutory and cash profit. Refer to pages 14 to 18 for information on large/notable items included in continuing cash profit.
2. Dividend payout ratio is calculated using the proposed 2019 interim, 2018 final and 2018 interim dividends.
3. Average ordinary shareholders’ equity excludes non-controlling interests.
4. Average assets, average gross loans and advances and average credit RWAs include assets held for sale.
5. Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.

11

SUMMARY
Financial Performance Summary – Total and continuing operations
For financial reporting purposes the results of discontinued operations are shown in a separate line item ‘Profit/(Loss) from discontinued operations’. In the table below, Total cash profit - inclusive of discontinued operations and Cashprofit - continuing operations are shown. For the purpose of understanding the impact of discontinued operations across various Income Statement categories, Total cash profit - inclusive of discontinued operations is presented such thateach Income Statement line item is inclusive of discontinued operations.

Total cash profit - inclusive of discontinued
operations

Movement

Cash profit - continuing operations

Movement

Net interest income

Mar 19$M
7,242

Sep 18$M
7,164

Mar 18$M
7,350

Mar 19v. Sep 18
1%

Mar 19v. Mar 18-1%

Mar 19$M
7,299

Sep 18$M
7,164

Mar 18$M
7,350

Mar 19v. Sep 18
2%

Mar 19v. Mar 18-1%

Other operating income

2,651

2,449

2,152

8%

23%

2,447

2,333

2,520

5%

-3%

Operating income

9,893

9,613

9,502

3%

4%

9,746

9,497

9,870

3%

-1%

Operating expenses(4,586)(5,229)(4,716)-12%-3%(4,365)(4,928)(4,473)-11%-2%

Profit before credit impairment and income tax

5,307

4,384

4,786

21%

11%

5,381

4,569

5,397

18%

0%

Credit impairment charge

(392)

(280)

(408)

40%

-4%

(393)

(280)

(408)

40%

-4%

Profit before income tax

4,915

4,104

4,378

20%

12%

4,988

4,289

4,989

16%

0%

Income tax expense(1,392)(1,166)(1,495)19%-7%(1,415)(1,286)(1,489)10%-5%Non-controlling interests

(9)

(9)

(7)

0%

29%

(9)

(9)

(7)

0%

29%

3,514

2,929

2,876

20%

22%

3,564

2,994

3,493

19%

2%

Average interest earning assets

811,528

784,501

765,1863%

6%

811,528

784,501

765,186

3%

6%

Average deposits and other borrowings

635,822621,699612,2912%

4%

635,822621,699612,2912%

4%

Funds under management1

83,164

81,12280,1783%

4%33,81630,73430,596

10%

11%

21%

25%

20%

5%

-1%

-6%

Cash Profit

Earnings per share (basic)

123.0

101.6

98.3

124.8

103.9

119.4

Ordinary share dividend payout ratio

64.5%

78.4%

80.6%

63.6%

76.7%

66.3%

Profitability Ratios
Return on average ordinary shareholders' equity2

11.9%

9.9%

9.8%

12.0%

10.1%

11.9%

Return on average assets

0.72%

0.61%

0.62%

0.77%

0.66%

0.79%

Net interest margin

1.79%

1.82%

1.93%

1.80%

1.82%

1.93%

Net interest income to average credit RWAs

4.23%

4.21%

4.35%

4.35%

4.21%

4.26%

46.4%

54.4%

49.6%

44.8%

51.9%

45.3%

0.94%

1.09%

1.01%

0.94%

1.08%

1.01%

39,35939,924

41,58037,36437,86039,655

Efficiency Ratios
Operating expenses to operating income
Operating expenses to average assets
FTE3

1.
2.
3.

-1%

-5%

Funds under management for continuing operations relates to New Zealand Wealth and Private Bank in Australia division.
Average ordinary shareholders’ equity excludes non-controlling interests.
The actual FTE that will transfer to IOOF or Zurich on sale completion or at a later date is currently being determined. Discontinued FTE is based on an estimate using an allocation methodology.

12

SUMMARY
Key Balance Sheet Metrics1
As at

Movement

Reference
Page

Mar 19Sep 18Mar 18- APRA Basel 3

43

11.5%

11.4%

11.0%

- Internationally Comparable Basel 32

43

16.9%

16.8%

16.3%

Mar 19v. Sep 18

Mar 19v. Mar 18

Capital Management
Common Equity Tier 1

Credit risk weighted assets ($B)

126

345.5

337.6

342.8

2%

1%

Total risk weighted assets ($B)

43

396.3

390.8

395.8

1%

0%

APRA Leverage Ratio

45

5.4%

5.5%

5.4%

Balance Sheet: Key Items
Gross loans and advances ($B)

613.8

608.4

595.5

1%

3%

Net loans and advances ($B)

610.1

605.4

592.5

1%

3%

Total assets ($B)

980.2

943.2

935.7

4%

5%

Customer deposits ($B)

493.4

487.3

472.8

1%

4%

Total equity ($B)

60.0

59.4

59.5

1%

1%

Mar 19v. Mar 18
3%
0%

As at

Movement

Liquidity Risk
Liquidity Coverage Ratio3

Reference
Page
41

Mar 19137%

Sep 18142%

Mar 18134%

Mar 19v. Sep 18-5%

Net Stable Funding Ratio

42

115%

115%

115%

0%

Mar 19v. Mar 18

As at

Movement

Reference
Page

Mar 19Sep 18Mar 18Mar 19v. Sep 18

34

2,022

2,013

2,034

0%

-1%

0.33%

0.33%

0.34%

1,131

1,093

1,018

3%

11%

1.8%

1.8%

1.7%
-3%

-12%

34%

31%

Impaired Assets
Gross impaired assets ($M)
Gross impaired assets as a % of gross loans and advances
Net impaired assets ($M)

34

Net impaired assets as a % of shareholders' equity
Individually assessed provision ($M)

33

Individually assessed provision as a % of gross impaired assets
Collectively assessed provision ($M)433

Collectively assessed provision as a % of credit risk weighted assets

891

920

1,016

44.1%

45.7%

50.0%

3,378

2,523

2,579

0.98%

0.75%

0.75%

Net Tangible Assets
Net tangible assets attributable to ordinary shareholders ($B)5

53.7

53.1

53.0

1%

1%

Net tangible assets per ordinary share ($)

18.94

18.47

18.28

3%

4%

Net Loans And Advances By Division (Excluding Held for Sale)
Australia

Mar 19$B
336.6

Sep 18$B
341.3

Mar 18$B
340.4

Mar 19v. Sep 18-1%

Mar 19v. Mar 18-1%

Institutional

151.7

149.1

138.2

2%

10%

New Zealand

118.8

111.3

108.5

7%

9%

Pacific

2.1

2.1

2.2

0%

-5%

TSO and Group Centre

0.1

0.6

0.2

-83%

-50%

609.3

604.4

589.5

1%

3%

As at

Net loans and advances by division
1.
2.
3.
4.
5.

Movement

Balance Sheet amounts and metrics include assets and liabilities held for sale unless otherwise stated.
See page 43 for further details regarding the differences between APRA Basel 3 and Internationally Comparable Basel 3 standards.
Liquidity Coverage Ratio is calculated on a half year average basis.
On adoption of AASB 9 on 1 October 2018, the Group increased the collectively assessed provision by $813 million. Comparative information has not been restatedEquals total shareholders’ equity less total non-controlling interests, goodwill and other intangible assets.

13

SUMMARY
Large/Notable Items – continuing operations
Large/notable items included in cash profit from continuing operations are described below.
Divestment impacts (continuing operations)
The Group announced the following divestments in line with the Group’s strategy to create a simpler, better capitalised, better balanced and more agilebank. As these divestments do not qualify as discontinued operations under accounting standards they form part of continuing operations. The financial
impacts from these divestments are summarised below including the business results for those divestments that have completed:

Cash Profit Impact
Asia Retail and Wealth businesses

Gain/(Loss) on sale from divestments

Completed divestment business results

Half Year

Half Year

Sep 18$M-

Mar 19$M-

Mar 18$M
99

Mar 19$M-

Sep 18$M-

Mar 18
$M
30

SRCB

-

-

2

-

-

-

UDC

-

(7)

18

-

-

-

MCC

-

121

119

-

10

-

37

-

-

4

4

1

Paymark

-

(42)

-

-

-

-

197

(3)

-

14

43

47

-

(19)

-

-

-

-

Profit/(Loss) before income tax

234

50

238

18

57

78

Income tax benefit/(expense) and non-controlling interests

(47)

3

(100)

(4)

(12)

(19)

Cash profit/(loss) from continuing operations

187

53

138

14

45

59

Cambodia JV
OPL NZPNG Retail, Commercial and SMEAsia Retail and Wealth businesses
The Group completed the sale of Retail and Wealth businesses in Singapore, Hong Kong, China, Taiwan and Indonesia to Singapore’s DBS Bank in2017. The Group completed the sale of its Retail business in Vietnam to Shinhan Bank Vietnam during the March 2018 half and recognised a $99
million gain, net of costs associated with the sale.

Shanghai Rural Commercial Bank (SRCB)
On 3 January 2017, the Group announced it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB). The sale was completed
in the March 2018 half and the Group recognised a net gain of $2 million.



UDC Finance (UDC)
On 11 January 2017, the Group announced that it had entered into a conditional agreement to sell UDC to HNA Group (HNA). On 21 December
2017, the Group announced that it had been informed that New Zealand’s Overseas Investment Office had declined HNA’s application to acquire
UDC. The agreement with HNA was terminated in January 2018 and an $18 million cost recovery was recognised in respect of the terminatedtransaction process. The Group incurred transaction costs of $7 million in the September 2018 half. The assets and liabilities of UDC ceased beingclassified as held for sale in the September 2018 half.



Metrobank Card Corporation (MCC)
On 18 October 2017, the Group announced it had entered into a sale agreement with its joint venture partner Metropolitan Bank & Trust Company(Metrobank) in relation to its 40% stake in the Philippines based Metrobank Card Corporation (MCC). The Group sold its 40% stake in two equal
tranches in January and September 2018. The Group recognised a net gain on sale of $119 million and $121 million during the March and
September 2018 halves respectively, and a dividend of $10 million during the September 2018 half.

Paymark Limited (Paymark)On 17 January 2018, the Group entered into an agreement to sell its 25% shareholding in Paymark Limited to Ingenico Group. The transaction wascompleted on 11 January 2019. The Group recognised a net gain on sale of $37 million during the March 2019 half.

 ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)
On 17 May 2018, the Group announced it had reached an agreement to sell its 55% stake in Cambodia JV to J Trust, a Japanese diversified
financial holding company listed on the Tokyo Stock Exchange. The transaction is subject to closing conditions and regulatory approval and ANZ
expects it to close in the 2019 financial year. During the September 2018 half, the Group recognised a $42 million loss on the reclassification ofassets and liabilities to held for sale.
 OnePath Life (NZ) Ltd (OPL NZ)
On 30 May 2018, the Group announced that it had agreed to sell OPL NZ to Cigna Corporation. During the September 2018 half, the Group incurredtransaction costs of $3 million. The transaction completed on 30 November 2018 and the Group recognised a $197 million net gain on sale in the
March 2019 half, comprising a $115 million gain on the reversal of the life-to-date cash profit adjustments on the revaluation of policy liabilities sold, a$56 million gain on sale, and a $26 million of release from the foreign currency translation reserve.

14SUMMARY

Papua New Guinea Retail, Commercial and Small-Medium Sized Enterprise businesses (PNG Retail, Commercial and SME)
On 25 June 2018, the Group announced it had entered into an agreement to sell its Retail, Commercial and Small-Medium Sized Enterprise (SME)banking businesses in Papua New Guinea to Kina Bank. The transaction is subject to closing conditions and ANZ expects it to close by late 2019
calendar year. During the September 2018 half, the Group recognised a $19 million loss on the reclassification of assets and liabilities to held for
sale.

Other large/notable items (continuing operations)

Customer remediation
Customer remediation charges of $100 million have been recognised in the March 2019 half (Sep 18 half: $352 million; Mar 18 half: $67 million) for
expected refunds to customers and related remediation costs. $64 million relates to customer remediation impacting operating income (Sep 18 half:$196 million; Mar 18 half: $32 million), and $36 million relates to customer remediation and remediation project costs impacting operating expenses(Sep 18 half: $156 million; Mar 18 half: $35 million). These impacts were primarily identified from product reviews in the Australia division. These
reviews remain ongoing.



Accelerated software amortisation
During the September 2018 half, the Group accelerated the amortisation of certain software assets, predominantly relating to the Institutional division
following a review of the International business in light of divestments. An accelerated amortisation expense of $251 million was recognised in the
September 2018 half.

Royal Commission legal costs
External legal costs associated with responding to the Royal Commission were $13 million for the March 2019 half (Sep 18 half: $39 million; Mar 18
half: $16 million).



Restructuring
The Group recognised restructuring expenses of $51 million in the March 2019 half (Sep 18 half: $149 million; Mar 18 Half: $78 million) largely
relating to changes to the Group’s enablement functions announced during the period. The prior period largely related to the move of the Australia
division and technology to agile ways of working in the September and March 2018 halves.

15

SUMMARY
Large/Notable items - continuing operations
Cash Profit Results

March 2019 Half Year vs March 2018 Half Year

Mar 19$M

Large/
notables$M

Mar 19ex. Large/
notables$M

Mar 18$M

Large/
notables1$M

March 2019 Half Year vs September 2018 Half Year

Mar 18
ex. Large/
notables$M

Movt
ex. Large/
notables%Mar 19$M

Large/
notables$M

Mar 19ex. Large/
notables$M

Sep 18$M

Large/
notables1$M

Sep 18
ex. Large/
notables$M

Movt
ex. Large/
notables%Net interest income

7,299

(21)

7,320

7,350

36

7,314

0%

7,299

(21)

7,320

7,164

(84)

7,248

1%

Other operating income

2,447

214

2,233

2,520

324

2,196

2%

2,447

214

2,233

2,333

20

2,313

-3%

Operating income

9,746

193

9,553

9,870

360

9,510

0%

9,746

193

9,553

9,497

(64)

9,561

0%

Operating expenses(4,365)(105)(4,260)(4,473)(179)(4,294)-1%(4,365)(105)(4,260)(4,928)(620)(4,308)-1%

Profit before credit impairment and income tax

5,381

88

5,293

5,397

181

5,216

1%

5,381

88

5,293

4,569

(684)

5,253

1%

Credit impairment charge

(393)

-

(393)

(408)

(26)

(382)

3%

(393)

-

(393)

(280)

-

(280)

40%

Profit/(Loss) before income tax

4,988

88

4,900

4,989

155

4,834

1%

4,988

88

4,900

4,289

(684)

4,973

-1%

Income tax benefit/(expense) and non-controlling interests(1,424)(2)(1,422)(1,496)(69)(1,427)0%(1,424)(2)(1,422)(1,295)

195(1,490)-5%Cash profit/(loss) from continuing operations

3,564

86

3,478

3,493

86

3,407

2%

3,564

86

3,478

2,994

(489)

3,483

0%

Cash Profit/(Loss) By Division

March 2019 Half Year vs March 2018 Half Year

Mar 18Large/
notables1

Mar 18
ex. Large/
notablesMovt
ex. Large/
notables

$M

$M

$M

%

1,983

(75)

2,058

767

-

749

34

(26)
33

(97)

(13)

3,478

3,493

Mar 19Large/
notablesMar 19ex. Large/
notables

$M

$M

$M

Australia

1,733

(76)

1,809

Institutional

1,012

(5)

1,017

New Zealand

753

14

739

Wealth Australia

(30)

(7)

(23)

Pacific

33

-

33

63

160

3,564

86

TSO and Group Centre 2
Cash profit/(loss) from continuing operations
1.
2.

March 2019 Half Year vs September 2018 Half Year
Sep 18
ex. Large/
notablesMovt
ex. Large/
notablesMar 19Large/
notablesMar 19ex. Large/
notables

$M

$M

$M

$M

$M

$M

%

-12%

1,733

(76)

1,809

1,726

(233)

1,959

-8%

767

33%

1,012

(5)

1,017

713

(210)

923

10%

715

3%

753

14

739

772

21

751

-2%

(14)

(12)

92%

(30)

(7)

(23)

(57)

(43)

(14)

64%

-

33

0%

33

-

33

39

-

39

-15%

141

(154)

-37%

63

160

(97)

(199)

(24)

(175)

-45%

86

3,407

2%

3,564

86

3,478

2,994

(489)

3,483

0%

Sep 18Large/
notables1

Where applicable, comparative information has been restated for large/notable items included in the March 2019 half.
TSO and Group Centre includes the Gain/(Loss) on sale from divestments including SRCB, Paymark, UDC, MCC, Asia Retail and Wealth businesses, Cambodia JV, OPL NZ, PNG Retail, Commercial and SME. It also includes the divested business results for the completed sales of Paymark,
MCC and Asia Retail and Wealth businesses.

16

SUMMARY
Large/Notable items - continuing operations
Within continuing cash profit, the Group has recognised some large/notable items. These items are shown in the tables below.
March 2018 Half Year1

March 2019 Half Year
Large/notable items included in continuing cash profit
Gain/(Loss)on sale fromdivestments$M
Cash Profit
Net interest income

Divestedbusinessresults2$M

Customer
remediation$M

Large/notable items included in continuing cash profit

Royal
Commission
legal costs Restructuring
$M
$M

Total
$M

Gain/(Loss) on
sale fromdivestments$M

Divestedbusinessresults2$M

Customer
remediation
$M

Royal
Commission
legal costs$M

Restructuring
$M

Total
$M

-

1

(22)

-

-

(21)

-

55

(19)

-

-

36

Other operating income

234

22

(42)

-

-

214

238

99

(13)

-

-

324

Operating income

234

23

(64)

-

-

193

238

154

(32)

-

-

360

Operating expenses

-

(5)

(36)

(13)

(51)

(105)

-

(50)

(35)

(16)

(78)

(179)
181

234

18

(100)

(13)

(51)

88

238

104

(67)

(16)

(78)

Credit impairment charge

-

-

-

-

-

-

-

(26)

-

-

-

(26)

Profit before income tax

234

18

(100)

(13)

(51)

88

238

78

(67)

(16)

(78)

155

Income tax benefit/(expense) andnon-controlling interests

(47)

(4)

30

4

15

(2)

(100)

(19)

22

5

23

(69)

Cash profit from continuing operations

187

14

(70)

(9)

(36)

86

138

59

(45)

(11)

(55)

86

Profit before credit impairment and income tax

September 2018 Half Year1

March 2019 Half Year
Large/notable items included in continuing cash profit
Gain/(Loss)on sale fromdivestments$M
Cash Profit
Net interest income

Divestedbusinessresults2$M

Customer
remediation$M

Large/notable items included in continuing cash profit

Royal
Commission
legal costs Restructuring
$M
$M

Total
$M

Gain/(Loss)on sale fromdivestments$M

Divestedbusinessresults2$M

Customer
remediation$M

Accelerated
softwareamortisation
$M

Royal
Commission
legal costs Restructuring
$M
$M

Total
$M

-

1

(22)

-

-

(21)

-

2

(86)

-

-

-

Other operating income

234

22

(42)

-

-

214

60

70

(110)

-

-

-

20

Operating income

234

23

(64)

-

-

193

60

72

(196)

-

-

-

(64)

Operating expenses
Profit before credit impairment and income tax

(84)

-

(5)

(36)

(13)

(51)

(105)

(10)

(15)

(156)

(251)

(39)

(149)

(620)

234

18

(100)

(13)

(51)

88

50

57

(352)

(251)

(39)

(149)

(684)

Credit impairment charge

-

-

-

-

-

-

-

-

-

-

-

-

-

Profit before income tax

234

18

(100)

(13)

(51)

88

50

57

(352)

(251)

(39)

(149)

(684)

Income tax benefit/(expense) andnon-controlling interests

(47)

(4)

30

4

15

(2)

3

(12)

102

45

12

45

195

Cash profit from continuing operations

187

14

(70)

(9)

(36)

86

53

45

(250)

(206)

(27)

(104)

(489)

1.
2.

Where applicable, comparative information has been restated for large/notable items included in the March 2019 half.
Relates to business results for completed divestments.

17

SUMMARY
Large/Notable items - continuing operations
Within continuing cash profit, the Group has recognised some large/notable items. The impact of these items on the divisional results are shown in the tables below.
March 2018 Half Year1

March 2019 Half Year
Gain/(Loss)on sale fromdivestments$M

Large/notable items included in continuing cash profit
DivestedRoyalbusiness
Customer Commission2
results
remediation
legal costs Restructuring
$M
$M
$M
$M

Total
$M

Gain/(Loss)on sale fromdivestments$M

Large/notable items included in continuing cash profit
DivestedRoyalbusiness
CustomerCommission2
results
remediation
legal costs Restructuring
$M
$M
$M
$M

Total
$M

Profit before income tax
Australia

-

-

(92)

-

(17)

(109)

-

-

(50)

-

(57)

Institutional

-

-

-

-

(7)

(7)

-

-

5

-

(8)

(107)
(3)

New Zealand

-

20

-

-

(2)

18

-

55

(3)

-

(5)

47

Wealth Australia

-

-

(8)

-

(2)

(10)

-

-

(19)

-

(1)

(20)

Pacific

-

-

-

-

-

-

-

-

-

-

-

-

TSO and Group Centre3

234

(2)

-

(13)

(23)

196

238

23

-

(16)

(7)

238

Profit before income tax

234

18

(100)

(13)

(51)

88

238

78

(67)

(16)

(78)

155

Income tax benefit/(expense) and noncontrolling interests

(47)

(4)

30

4

15

(2)

(100)

(19)

22

5

23

(69)

Cash profit from continuing operations

187

14

(70)

(9)

(36)

86

138

59

(45)

(11)

(55)

86

September 2018 Half Year1

March 2019 Half Year
Large/notable items included in continuing cash profit
Gain/(Loss)
DivestedRoyal
on sale frombusiness
Customer Commission2
divestments
results
remediation
legal costs Restructuring
$M
$M
$M
$M
$M

Total
$M

Gain/(Loss)on sale fromdivestments$M

Large/notable items included in continuing cash profit
Divested
Accelerated
Royalbusiness
Customersoftware Commission2
results
remediation amortisation
legal costs Restructuring
$M
$M
$M
$M
$M

Total
$M

Profit before income tax
Australia

-

-

(92)

-

(17)

(109)

-

-

(254)

(29)

-

(53)

(336)

Institutional

-

-

-

-

(7)

(7)

-

-

(12)

(222)

-

(17)

(251)

New Zealand

-

20

-

-

(2)

18

-

54

(24)

-

-

(4)

26

Wealth Australia

-

-

(8)

-

(2)

(10)

-

-

(62)

-

-

-

(62)

Pacific

-

-

-

-

-

-

-

-

-

-

-

TSO and Group Centre3

234

(2)

-

(13)

(23)

196

50

3

-

-

(39)

(75)

(61)

Profit before income tax

234

18

(100)

(13)

(51)

88

50

57

(352)

(251)

(39)

(149)

(684)

Income tax benefit/(expense) andnon-controlling interests

(47)

(4)

30

4

15

(2)

3

(12)

102

45

12

45

195

Cash profit from continuing operations

187

14

(70)

(9)

(36)

86

53

45

(250)

(206)

(27)

(104)

(489)

1.
2.
3.

-

Where applicable, comparative information has been restated for large/notable items included in the March 2019 half.
Relates to business results for completed divestments.
TSO and Group Centre includes the Gain/(Loss) on sale from divestments including SRCB, Paymark, UDC, MCC, Asia Retail and Wealth businesses, Cambodia JV, OPL NZ, PNG Retail, Commercial and SME. It also includes the divested business results for the completed sales of Paymark,
MCC and Asia Retail and Wealth businesses.

18

SUMMARY
Full Time Equivalent Staff
As at 31 March 2019, ANZ employed 39,359 staff (Sep 18: 39,924; Mar 18: 41,580) on a full-time equivalent (FTE) basis.
As at

Division

Movement

Australia

Mar 1913,020

Sep 1813,039Mar 1813,914

Mar 19v. Sep 18
0%

Institutional

6,085

6,188

6,505

-2%

-6%

New Zealand

6,003

6,165

6,319

-3%

-5%

Wealth Australia

1,991

2,161

2,175

-8%

-8%

Pacific

1,096

1,125

1,172

-3%

-6%

TSO and Group Centre

11,164

11,246

11,495-1%-3%

Total FTE

39,35939,924

41,580-1%-5%

Continuing operations1

37,36437,86039,655-1%-6%Discontinued operations1

1,995

2,064

1,925

-3%

4%

Average FTE

39,571

40,76044,029-3%-10%

Mar 19v. Sep 18
0%

As at

Geography

Mar 19v. Mar 18-6%

Movement
Mar 19v. Mar 18-4%

Australia

Mar 1918,652

Sep 1818,671

Mar 1819,351

Asia, Pacific, Europe & America

13,396

13,742

14,511-3%-8%

New Zealand

7,311

7,511

7,718

-3%

-5%

Total FTE

39,35939,924

41,580

-1%

-5%

1.

The actual FTE that will transfer to IOOF and Zurich on sale completion or at a later date is currently being determined. The discontinued operations FTE is an estimate based on an
allocation methodology.

Other Non-Financial Information
Half Year

Movement

Mar 19Sep 18Mar 18Mar 19v. Sep 18- high

28.36

30.39

30.80

-7%

-8%

- low

22.98

26.08

26.81

-12%

-14%

- closing

26.03

28.18

26.86

-8%

-3%

Closing market capitalisation of ordinary shares ($B)

73.7

81.0

77.9

-9%

-5%

Total shareholder returns (TSR)

-4.8%

8.0%

-6.8%

large

-29%

Shareholder value - ordinary shares
Share price ($)

Mar 19v. Mar 18

As at Mar 19
ShortTerm
P-1

LongTerm
Aa3

Outlook
StableStandard & Poor's

A-1+

AA-

Negative

Fitch Ratings

F1+

AA-

StableCredit Ratings
Moody's Investor Services

19

SUMMARYThis page has been left blank intentionally20

GROUP RESULTSCONTENTS

Page

Cash Profit

22Group Performance – continuing operations

23

Net Interest Income - continuing operations

24

Other Operating Income - continuing operations

26

Operating Expenses - continuing operations

29

Software Capitalisation - continuing operations

31

Credit Risk - continuing operations

32

Income Tax Expense - continuing operations

36

Impact of Foreign Currency Translation - continuing operations

37

Earnings Related Hedges - continuing operations

38

Earnings per Share - continuing operations

38

Dividends - continuing operations

39

Economic Profit - continuing operations

39

Condensed Balance Sheet - including discontinued operations

40

Liquidity Risk - including discontinued operations

41

Funding - including discontinued operations

42

Capital Management - including discontinued operations

43

Leverage Ratio - including discontinued operations

45

Capital Management - Other Regulatory Developments

46

21

GROUP RESULTS
Non-IFRS Information
Statutory profit is prepared in accordance with recognition and measurement requirements of Australian Accounting Standards, which comply with
International Financial Reporting Standards (IFRS). The Group provides additional measures of performance in the Consolidated Financial Report &Dividend Announcement which are prepared on a basis other than in accordance with accounting standards. The guidance provided in Australian
Securities and Investments Commission (ASIC) Regulatory Guide 230 has been followed when presenting this information.

Cash Profit
Cash profit, a non-IFRS measure, represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers toassess Group and Divisional performance against prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items
from statutory profit (refer to Definitions on pages 135 to 136 for further details). The adjustments made in arriving at cash profit are included in statutory
profit which is subject to review within the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cash profit is not
subject to review by the external auditor. The external auditor has informed the Audit Committee that cash profit adjustments have been determined on aconsistent basis across each period presented.
The Group Results section is reported on a cash profit basis for continuing operations unless otherwise stated. For information on
discontinued operations please refer to the Guide to Half Year Results on page 8.
Movement

Half Year

Statutory profit attributable to shareholders of the Company from continuing
operations

Adjustments between statutory profit and cash profit1
Revaluation of policy liabilities

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

3,243

3,172

3,923

2%

-17%

77

(4)

(10)

large

large

Economic hedges

185

(124)

(124)

large

large

Revenue and expense hedges

60

(49)

40

large

50%

Structured credit intermediation trades

(1)

(1)

(3)

0%

-67%

Sale of SRCB

-

-

(333)

n/a

-100%

Total adjustments between statutory profit and cash profit for continuing operations
Cash profit from continuing operations
1.

Mar 19
$M

321

(178)

(430)

large

large

3,564

2,994

3,493

19%

2%

Refer to pages 73 to 77 for analysis of the adjustments between statutory profit and cash profit.

Half Year

Group performance - cash profit

Movement

Net interest income

Mar 19$M
7,299

Sep 18$M
7,164

Mar 18$M
7,350

Mar 19v. Sep 18
2%

Mar 19v. Mar 18-1%

Other operating income

2,447

2,333

2,520

5%

-3%

Operating income

9,746

9,497

9,870

3%

-1%

Operating expenses(4,365)(4,928)(4,473)-11%-2%

Profit before credit impairment and income tax

5,381

4,569

5,397

18%

0%

Credit impairment charge

(393)

(280)

(408)

40%

-4%

Profit before income tax

4,988

4,289

4,989

16%

0%

Income tax expense(1,415)(1,286)(1,489)

10%

-5%

(9)

(9)

(7)

0%

29%

3,564

2,994

3,493

19%

2%

Non-controlling interests
Cash profit from continuing operations

Half Year

Cash profit/(loss) by Division
Australia

Mar 19$M
1,733

Movement

Sep 18$M
1,726

Mar 18$M
1,983

Mar 19v. Sep 18
0%

Mar 19v. Mar 18-13%

Institutional

1,012

713

767

42%

32%

New Zealand

753

772

749

-2%

1%

Wealth Australia

(30)

(57)

(26)

-47%

15%

Pacific

33

39

33

-15%

0%

TSO and Group Centre

63

(199)

(13)

large

large

3,564

2,994

3,493

19%

2%

Cash profit from continuing operations

22

GROUP RESULTSGroup Performance – continuing operations
Group Cash Profit - March 2019 Half Year v March 2018 Half YearMarch 2019 v March 2018
Cash profit from continuing operations increased $71 million (+2%) compared with the March 2018 half. Excluding foreign currency translation
movements, cash profit increased $42 million (+1%).
Net interest income decreased $51 million (-1%) largely due to a 13 basis point decrease in the net interest margin, partially offset by 6% growthin average interest earning assets. The lower net interest margin reflects growth in lower margin Markets Balance Sheet trading activities, higher
funding costs, changes in asset mix, asset price competition, and the sale of the Asia Retail and Wealth businesses. This was partially offset byhigher deposit margins and home loans re-pricing. The increase in average interest earning assets reflects growth in ANZ’s home loans andInstitutional banking portfolios, partially offset by the sale of Asia Retail and Wealth businesses. Refer to pages 24 and 25 for further details on
key movements.

Other operating income decreased $73 million (-3%) largely as the result of net divestment impacts of $81 million, a $64 million decrease in net
fee and commission income, $60 million reduction in other, and a $29 million increase in customer remediation. This was partially offset byhigher Markets other operating income of $120 million and a $43 million increase in share of associate’s profit. Refer to pages 26 to 28 for further
details on key movements.



Operating expenses decreased $108 million (-2%) primarily due to lower FTE, a reduction in expenses following the sale of OnePath Life (NZ)
and Asia Retail and Wealth businesses of $45 million, lower restructuring expenses of $27 million and software amortisation charges. This waspartially offset by inflation. Refer to pages 29 to 30 for further details on key movements.

Credit impairment charges decreased $15 million (-4%) largely due to lower individually assessed credit impairment charges, partially offset byhigher collectively assessed credit impairment charges. Refer to pages 32 and 33 for further details on key movements.

Excluding large/notable items, cash profit increased $71 million (+2%).
March 2019 v September 2018
Cash profit from continuing operations increased $570 million (+19%) compared with the September 2018 half. Excluding foreign currency translation
movements, cash profit increased $566 million (+19%).


Net interest income increased $135 million (+2%) largely due to 3% growth in average interest earning assets, partially offset by a 2 basis point
decrease in the net interest margin. The lower net interest margin reflects growth in lower margin Markets Balance Sheet trading activities,changes in asset mix, and asset price competition. This was partially offset by higher deposit margins, home loans re-pricing and lower customer
remediation charges of $64 million. The increase in average interest earning assets reflects growth in ANZ’s home loans in New Zealand andgrowth in Institutional banking portfolios. This was partially offset by a reduction in lending in the Australia division. Refer to pages 24 and 25 forfurther details on key movements.

Other operating income increased $114 million (+5%) largely the result of net divestment impacts of $126 million, higher Markets other operating
income of $79 million, lower customer remediation of $68 million, and a $36 million increase in share of associate’s profit. This is partially offset
by a $105 million reduction in net fee and commission income and a $71 million reduction in other primarily due to lower dividend income. Referto pages 26 to 28 for further details on key movements.



Operating expenses decreased $563 million (-11%) primarily due to an accelerated software amortisation charge in the prior period of $251
million, lower customer remediation of $120 million, restructuring expenses of $98 million, Royal Commission legal costs of $26 million, andlower FTE. This was partially offset by inflation. Refer to pages 29 to 30 for further details on key movements.

Credit impairment charges increased $113 million (+40%) largely due to higher individually assessed and collectively assessed credit impairment
charges. Refer to pages 32 and 33 for further details on key movements.

Excluding large/notable items, cash profit decreased $5 million (flat).

23

GROUP RESULTSNet Interest Income - continuing operations
Half Year

Movement

Mar 19$M
7,299

Sep 18$M
7,164

Mar 18$M
7,350

Mar 19v. Sep 18
2%

Mar 19v. Mar 18-1%

Average interest earning assets2

811,528

784,501

765,186

3%

6%

Average deposits and other borrowings2

635,822621,699612,291

2%

4%

1.80

1.82

1.93

-2 bps-13 bps

7,019

6,861

6,995

2%

0%

563,579

549,398

538,9683%

5%459,478456,936455,946

1%

1%

2.50

2.49

2.60

1 bps

-10 bpsGroup
Cash net interest income1

Net interest margin (%) - cash

Group (excluding Markets business unit)
Cash net interest income1,3
Average interest earning assets

2

Average deposits and other borrowings2
Net interest margin (%) - cash3

Half Year

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

Net interest margin (%) - cash3

2.61

2.60

2.78

1 bps

-17 bps

Average interest earning assets

314,215315,614

312,473

0%

1%

Average deposits and other borrowings

202,765

202,530

203,239

0%

0%

0.85

0.86

0.89

-1 bps-4 bps372,270

349,090

333,9197%

11%281,770

269,578

257,874

5%

9%

2.39

2.41

2.43

-2 bps-4 bps116,201

111,092

108,0085%

8%

86,244

81,214

79,669

6%

8%

Cash profit net interest margin by major division1
Australia

Institutional
Net interest margin (%) - cash3
Average interest earning assets

2

Average deposits and other borrowings2

New Zealand
Net interest margin (%) - cash3
Average interest earning assets

2

Average deposits and other borrowings2
1.

2.
3.

Includes large/notable items of -$21 million for the March 2019 half (Sep 18 half: -$84 million; Mar 18 half: $36 million). Refer to pages 14 to 18 for further details on large/notable items.
Also includes the major bank levy of -$178 million for the March 2019 half (Sep 18 half: -$178 million; Mar 18 half: -$177 million).
Average balance sheet amounts include assets and liabilities reclassified as held for sale from continuing operations.
In the March 2019 half, the methodology for allocating earnings on capital at a business unit level has changed from being based on Economic Capital to Regulatory Capital. While neutral
at a Group level, this change has impacted net interest income at the divisional level and comparative information has been restated accordingly.

Group net interest margin - March 2019 Half Year v March 2018 Half Year

1.

Markets Balance Sheet activities includes the impact of growth in discretionary liquid assets and other Balance Sheet activities.



March 2019 v March 2018
Net interest margin (-13 bps)Asset mix and funding mix (-4 bps): unfavourable asset mix from the impacts of customer switching from interest only to principal and interest
home loans in the Australia division, customer switching from variable to fixed home loans in the New Zealand division and unfavourable mix
impacts from a lower proportion of lending in the Australia division.



Funding costs (-3 bps): unfavourable basis risk and broadly flat spreads on wholesale funding.

Deposits (+2 bps): improved deposit margins in the Australia and Institutional divisions.



Assets (-1 bps): adverse impact of home loan competition in the Australia division, partially offset by favourable impact of home loans re-pricing.

24

GROUP RESULTS

Treasury (0 bps): broadly flat earnings on capital.

Markets Balance Sheet activities (-6 bps): growth in lower margin Markets Balance Sheet trading activities.



Asia Retail and Wealth (-1 bps): adverse margin impact following the sale of Asia Retail and Wealth businesses.

Average interest earning assets (+$46.3 billion or +6%)


Average net loans and advances (+$24.5 billion or +4%): increase driven by growth in Institutional lending, home loan growth in the Australia and
New Zealand divisions, and foreign currency translation movements.



Average trading and investment securities/available-for-sale assets (+$2.4 billion or +2%): increase driven mostly by the impact of foreign
currency translation movements.



Average cash and other liquids (+$19.4 billion or +21%): increase driven by higher central bank cash balances and reverse repurchaseagreements, and the impact of foreign currency translation movements.

Average deposits and other borrowings (+$23.5 billion or +4%)


Average deposits and other borrowings (+$23.5 billion or +4%): increase driven by growth in the Institutional and New Zealand divisions, and theimpact of foreign currency translation movements. This has been partly offset by the loss of deposits following the sale of Asia Retail and Wealthbusinesses.

Group net interest margin - March 2019 Half Year v September 2018 Half Year1.

Markets Balance Sheet activities includes the impact of growth in discretionary liquid assets and other Balance Sheet activities.

March 2019 v September 2018
Net interest margin (-2 bps)Asset mix and funding mix (-2 bps): unfavourable asset mix from the impacts of customer switching from interest only to principal and interest
home loans, lower unsecured lending, and a higher proportion of Institutional lending.



Funding costs (0 bps): broadly flat basis risk, and broadly flat wholesale funding spreads.



Deposits (+1 bps): improved deposit margins in the Institutional division from rising US rates and deposit optimisation.



Assets (+1 bps): impact of re-pricing of home loans in the Australia division, partially offset by increased competition in all divisions.

Treasury (0 bps): broadly flat earnings on capital.

Markets Balance Sheet activities (-4 bps): growth in lower margin Markets Balance Sheet trading activities.



Customer remediation (+2 bps): the impact of higher customer remediation in the September 2018 half.

Average interest earning assets (+$27.0 billion or +3%)


Average net loans and advances (+$13.4 billion or +2%): increase driven by growth in Institutional lending, home loans in the New Zealanddivision, and the impact of foreign currency translation movements. This was partially offset by a reduction in lending in the Australia division.



Average trading and investment securities/available-for-sale assets (+$5.1 billion or +5%): increase is mainly driven by an increase in investment
and trading securities, and by the impact of foreign currency translation movements.



Average cash and other liquids (+$8.5 billion or +8%): increase driven by higher central bank cash balances, and the impact of foreign currencytranslation movements.

Average deposits and other borrowings (+$14.1 billion or +2%)


Average deposits and other borrowings (+$14.1 billion or +2%): increase driven by growth in the Institutional and New Zealand divisions, and theimpact of foreign currency translation movements.

25

GROUP RESULTS
Other Operating Income - continuing operations

Half Year1
Mar 19$M
1,218

Net fee and commission income2

Movement

Sep 18$M
1,289

Mar 18$M
1,335

Mar 19v. Sep 18-6%

Mar 19v. Mar 18-9%

Net income from insurance business2

70

127

126

-45%

-44%

Markets other operating income

667

577

552

16%

21%

Share of associates' profit2

131

95

88

38%

49%

2,3

Other

Total cash other operating income from continuing operations4

361

245

419

47%

-14%

2,447

2,333

2,520

5%

-3%

Half Year1

Movement

Mar 19$M280

Sep 18$M
303

Mar 18$M
355

Mar 19v. Sep 18-8%

Mar 19v. Mar 18-21%

Other operating income

667

577

552

16%

21%

Total cash Markets income from continuing operations

947

880

907

8%

4%

Markets income
Net interest income

Half Year1

Movement

Other operating income by division
Australia

Mar 19$M625

Sep 18$M
722

Mar 18$M
728

Mar 19v. Sep 18-13%

Mar 19v. Mar 18-14%

Institutional

1,126

1,035

1,031

9%

9%

New Zealand

302

328

343

-8%

-12%

Wealth Australia

26

12

48

large

-46%

Pacific

50

53

47

-6%

6%

TSO and Group Centre

318

183

323

74%

-2%

2,447

2,333

2,520

5%

-3%

Mar 18$M
1,322

Mar 19v. Sep 18-8%

Total cash other operating income from continuing operations4

Other operating income - March 2019 Half Year v March 2018 Half Year

Half Year1

Other operating income (excluding large/notable items)
Mar 19$M
1,258

Net fee and commission income2

Sep 18$M
1,363

Movement
Mar 19v. Mar 18-5%

Net income from insurance business2

52

71

54

-27%

-4%

Markets other operating income

667

588

547

13%

22%

Share of associates' profit2

131

95

88

38%

49%

2,3

Other

Total cash other operating income from continuing operations
1.

125

196

185

-36%

-32%

2,233

2,313

2,196

-3%

2%

On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has
been restated accordingly which increased total operating income by $91 million for the September 2018 half and $62 million for the March 2018 half.
2. Excluding Markets.
3. Includes foreign exchange earnings and net funds management income previously reported under net funds management and insurance income.
4. Includes large/notable items of $214 million for the March 2019 half (Sep 18 half: $20 million; Mar 18 half: $324 million). Refer to items on pages 14 to 18 for further details on large/notable
items.

26

GROUP RESULTS
March 2019 v March 2018
Other operating income decreased by $73 million (-3%). Excluding foreign currency translation movements, other operating income decreased $93
million (-4%).
Net fee and commission income (-$117 million or -9%)


$85 million decrease in the Australia division primarily as the result of lower fee income due to the removal of fees, lower volume, and higher
customer remediation ($20 million).

$21 million decrease in the Wealth Australia division primarily due to lower financial planning volumes, and higher customer remediation ($9million).

$20 million decrease in the TSO and Group Centre division primarily due to the loss of income following the sale of Asia Retail and Wealthbusinesses.

$14 million increase in the New Zealand division as the result of higher funds under management income, credit card incentives/rebates, andfavourable foreign currency translation movements.

Net income from insurance business (-$56 million or -44%)$42 million decrease in the New Zealand division primarily due to the sale of the OnePath Life (NZ) business.

$10 million decrease in the TSO and Group Centre division due to the loss of income following the sale Asia Retail and Wealth businesses.

$5 million decrease in the Australia division primarily due to a reduction in lenders mortgage insurance net premium income as the result of lower
volumes ($8 million).

Markets income (+$40 million or +4%)


$49 million increase in Franchise Trading primarily attributable to favourable market conditions in international rate markets and a morefavourable trading environment in Australia and New Zealand rates ($70 million). This was partially offset by adverse derivative valuation
adjustments ($21 million).

$27 million increase in Franchise Sales due to growth initiatives in North East Asia and improved Institutional client flow in Asia on the back of
US China trade tensions sparking volatility in the region.

$36 million decrease in Balance Sheet trading driven by reduced net interest income from Australia and Asia liquidity desks on reduced average
holdings.

Share of associates’ profit (+$43 million or +49%)$43 million increase in profits from associates of which $25 million relates to P.T. Bank Pan Indonesia and $14 million relates to AmBank.

Other (-$58 million or -14%)

$14 million decrease in the Australia division primarily due to lower brokerage income from ANZ share investing.

$16 million decrease in the New Zealand division largely as the result of a one-off insurance recovery in the March 2018 half.

$12 million decrease in the Institutional division primarily driven by fair value losses on loans measured at fair value through profit and loss.

$14 million decrease in the TSO and Group Centre division primarily due to realised losses on economic hedges against larger foreign exchange
denominated revenue streams as the result of the NZD strengthening against the AUD. These offset foreign currency translation gains elsewherein the Group.



Net $4 million decrease as the result of the Asia Retail and Wealth gain on sale ($99 million), MCC gain on sale ($119 million), UDC cost
recovery in respect of the terminated transaction process ($18 million) and SRCB ($2 million) recognised in the March 2018 half, offset against
OnePath Life (NZ) business divestment impacts ($197 million) and Paymark gain on sale ($37 million) recognised in the March 2019 half.

Excluding large/notable items, other operating income increased $37 million (+2%).

March 2019 v September 2018
Other operating income increased by $114 million (+5%). Excluding foreign currency translation movements, other operating income increased $115
million (+5%).
Net fee and commission income (-$71 million or -6%)


$90 million decrease in the Australia division primarily as the result of lower fee income due to timing, the removal of fees, and lower volumes.
This was partially offset by lower customer remediation ($13 million).

$13 million increase in the Wealth Australia division primarily due to lower customer remediation ($21 million), partially offset by lower financial
planning volumes.

$11 million increase in the New Zealand division primarily due to higher credit card incentives/rebates and merchant fees as the result of
seasonality, and favourable foreign currency translation movements.

Net income from insurance business (-$57 million or -45%)

$39 million decrease in the New Zealand division primarily due to the sale of the OnePath Life (NZ) business.

27

GROUP RESULTS$18 million decrease in the Australia division primarily due to a reduction in lenders mortgage insurance net premium income as the result of
lower volume ($13 million).

Markets income (+$67 million or +8%)


$75 million increase in Franchise Trading primarily attributable to favourable market conditions in international rates markets and tighter credit
spreads in the second quarter of FY19 benefitting the Franchise Trading businesses ($137 million). This was partially offset by adverse
derivative valuation adjustments primarily from falling AUS and NZD swap rates ($62 million).

$10 million increase in Franchise Sales primarily attributable to customer activity in Asia driven by volatility triggered by US China Tradetensions, declining US yields which reduced Asia yields, and franchise growth initiatives in North East Asia.

$18 million decrease in Balance Sheet trading attributable to reduced net interest income from Australia liquidity desks on reduced average
holdings.

Share of associates’ profit (+$36 million or +38%)$36 million increase in profits from associates of which $26 million relates to P.T. Bank Pan Indonesia and $8 million relates to AmBank.

Other (+$116 million or +47%)
Net $184 million increase as the result of OnePath Life (NZ) business divestment impacts ($197 million) and Paymark gain on sale ($37 million)
recognised in the March 2019 half, partially offset by divestment impacts recognised in the September 2018 half: MCC gain on sale ($121
million), a net charge recognised on reclassification of Cambodia JV and PNG Retail, Commercial and SME to held for sale (-$61 million), UDC
and OnePath Life (NZ) transaction costs (-$7 million and -$3 million respectively).

$9 million increase in the Australia division as the result of lower customer remediation ($21 million), partially offset by lower brokerage income
from ANZ share investing.

$38 million decrease due to dividend income received from Bank of Tianjin of $28 million and MCC of $10 million in the September 2018 half.

$29 million decrease in the TSO and Group Centre division primarily due to realised losses on economic hedges against larger foreign exchange
denominated revenue streams as the result of the NZD strengthening against the AUD. These offset foreign currency translation gains elsewherein the Group.

Excluding large/notable items, other operating income decreased $80 million (-3%).

28

GROUP RESULTS
Operating Expenses - continuing operations
Half Year1
Sep 18$M
2,356

Movement
Mar 18$M
2,402

Mar 19v. Sep 18
1%

Mar 19v. Mar 18-1%

Personnel expenses

Mar 19$M
2,370

Premises expenses

406

416

395

-2%

3%

Technology expenses

764

1,084

815

-30%

-6%
-35%

Restructuring expenses

51

149

78

-66%

Other expenses

774

923

783

-16%

-1%

Total cash operating expenses from continuing operations2

4,365

4,928

4,473

-11%

-2%

Full time equivalent staff (FTE) from continuing operations

37,36437,86039,655-1%-6%

Average full time equivalent staff (FTE) from continuing operations

37,55838,463

41,568-2%-10%

Half Year1

Movement

Expenses by division
Australia

Mar 19$M
1,843

Sep 18$M
1,990

Mar 18$M
1,905

Mar 19v. Sep 18-7%

Mar 19v. Mar 18-3%

Institutional

1,320

1,575

1,373

-16%

-4%

New Zealand

612

613

592

0%

3%

Wealth Australia

70

95

85

-26%

-18%
11%

Pacific

70

65

63

8%

TSO and Group Centre

450

590

455

-24%

-1%

4,365

4,928

4,473

-11%

-2%

Total cash operating expenses from continuing operations2

Half Year

Movement

Australia

Mar 19$M
13,020

Sep 18$M
13,039Mar 18$M
13,914

Mar 19v. Sep 18
0%

Mar 19v. Mar 18-6%

Institutional

6,085

6,188

6,505

-2%

-6%

New Zealand

6,003

6,165

6,319

-3%

-5%

Wealth Australia

640

692

759

-8%

-16%

Pacific

1,096

1,125

1,172

-3%

-6%

TSO and Group Centre

10,52010,651

10,986-1%-4%

Total FTE

37,36437,86039,655-1%-6%

Average FTE

37,55838,463

41,568-2%-10%

FTE by division

Operating expenses - March 2019 Half Year v March 2018 Half Year

Half Year1

Expenses (excluding large/notable items)

Movement

Personnel expenses

Mar 19$M
2,361

Sep 18$M
2,260

Premises expenses

406

416

395

-2%

3%

Technology expenses

764

829

814

-8%

-6%

Restructuring expenses
Other expenses
Total cash operating expenses from continuing operations1.

2.

Mar 18$M
2,355

Mar 19v. Sep 18
4%

Mar 19v. Mar 18
0%

-

-

-

n/a

n/a

729

803

730

-9%

0%

4,260

4,308

4,294

-1%

-1%

On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has
been restated accordingly which increased total operating expenses by $91 million for the September 2018 half and $62 million for the March 2018 half.
Includes large/notable items of $105 million for the March 2019 half (Sep 18 half: $620 million; Mar 18 half: $179 million). Refer to items on pages 14 to 18 for further details on large/notable
items.

29

GROUP RESULTS
March 2019 v March 2018
Operating expenses decreased by $108 million (-2%).
Personnel expenses decreased $32 million (-1%) largely driven by lower FTE, a decrease in customer remediation ($17 million) and lower
personnel expenses following the sale of OnePath Life (NZ) and Asia Retail and Wealth businesses ($21 million). This was partially offset bywage inflation, the insourcing of technology services and higher long service leave accruals.

Premises expenses increased $11 million (+3%) primarily driven by higher spend on property projects.

Technology expenses decreased $51 million (-6%) largely due to lower software amortisation charges and the insourcing of technology services.



Restructuring expenses decreased $27 million (-35%) due to higher spend in the prior period associated with the move to agile ways of working
in the Australia and Technology divisions.



Other expenses decreased $9 million (-1%) largely due to lower expenses following the sale of OnePath Life (NZ) and Asia Retail and Wealthbusinesses ($23 million) and a reduction in Royal Commission legal costs ($3 million), partly offset by higher customer remediation ($18 million).

Excluding large/notable items, operating expenses decreased $34 million (-1%).

March 2019 v September 2018
Operating expenses decreased by $563 million (-11%).
Personnel expenses increased $14 million (+1%) largely driven by wage inflation, the insourcing of technology services, higher long service
leave accruals, and the normalisation of incentives. This was offset by lower FTE, a decrease in customer remediation ($80 million) and lower
personnel expenses following the sale of OnePath Life (NZ) ($6 million).

Premises expenses decreased $10 million (-2%) primarily driven by the consolidation of our property portfolio in Australia and Asia.

Technology expenses decreased $320 million (-30%) largely due to the accelerated amortisation charge in prior period ($251 million), ongoing
lower software amortisation charges and the insourcing of technology services.



Restructuring expenses decreased $98 million (-66%) due to higher spend in the prior period associated with the move to agile ways of working
in the Australia and Technology divisions.



Other expenses decreased $149 million (-16%) largely related to lower Royal Commission legal costs ($26 million), customer remediation ($40
million), expenses following the sale of OnePath Life (NZ) ($5 million) and lower consultancy spend and lower marketing spend which is typicallyhigher in the September half.

Excluding large/notable items, operating expenses decreased $48 million (-1%).

30

GROUP RESULTS
Software Capitalisation - continuing operations
As at 31 March 2019, the Group’s intangible assets included $1,368 million of costs incurred to acquire and develop software. Details are set out in thetable below:
Half Year

Movement

Mar 19$M
1,421

Sep 18$M
1,775

Mar 18$M
1,856

Mar 19v. Sep 18-20%

Mar 19v. Mar 18
-23%

199

195

198

2%

1%

- Current period amortisation

(252)

(288)

(281)

-13%

-10%

- Accelerated amortisation1

-

(251)

-

-100%

n/a

(3)

(12)

(5)

-75%

-40%

Balance at start of period
Software capitalised during the period
Amortisation during the period

Software impaired/written-off
Foreign currency translation movements
Total capitalised software from continuing operations

3

2

7

50%

-57%

1,368

1,421

1,775

-4%

-23%

Net book value by Division

As at

Movement

Australia

Mar 19$M300

Sep 18$M
334

Mar 18$M
413

Mar 19v. Sep 18-10%

Mar 19v. Mar 18-27%

Institutional

246

277

542

-11%

-55%

New Zealand

14

17

20

-18%

-30%

Wealth Australia

6

10

13

-40%

-54%

802

783

787

2%

2%

1,368

1,421

1,775

-4%

-23%

TSO and Group Centre
Total from continuing operations
1.

During the September 2018 half, the Group accelerated the amortisation of certain software assets, predominantly relating to its Institutional division following a review of the International
business in light of divestments. Accelerated amortisation expense of $251 million ($206 million post-tax) was recorded in the September 2018 half.

31

GROUP RESULTS
Credit Risk – continuing operations
The Group has adopted AASB 9 Financial Instruments effective from 1 October 2018 which has resulted in key changes to the classification andmeasurement of financial assets, including the impairment of financial assets. Under the new standard, provision for credit impairment is based on an
expected credit loss model (ECL) incorporating forward looking information. The presentation of credit risk information for the March 2019 half has been
amended accordingly. Comparative information has not been restated and continues to reflect the requirements of the previous standard AASB 139
Financial Instruments: Recognition and Measurement. For further details on key requirements and impacts of the changes described above refer to Note
1 and 21 of the Condensed Consolidated Financial Statements.
Credit impairment charge/(release)
Half Year

Half Year

Movement

Mar 19Mar 18Mar 19 v. Mar 18

Collectively
assessed$M(25)

Individuallyassessed$M
337

Collectively
assessed$M
46

Individuallyassessed
$M
350

Total
charge$M
396

Institutional

(23)

(12)

(35)

21

28

New Zealand

(5)

35

30

(14)

34

Pacific

(6)

8

2

2

-

Division
Australia

Totalcharge$M
312

Collectively
assessed%large

Individuallyassessed
%
4%

Total
charge
%
27%

49

large

large

large

20

-64%

3%

50%

2

large

n/a

0%

TSO and Group Centre

1

(1)

-

(6)

31

25

large

large

-100%

Total

13

380

393

(22)

430

408

large

-12%

-4%

Half Year

Half Year

Movement

Mar 19Sep 18Mar 19 v. Sep 18

Collectively
assessed$M
46

Individuallyassessed
$M
350

Total
charge$M
396

Collectively
assessed$M
11

Individuallyassessed
$M
375

Total
charge$M
386

Collectively
assessed%large

Individuallyassessed
%
-7%

Total
charge%3%

Institutional

(23)

(12)

(35)

(41)

(52)

(93)

-44%

-77%

-62%

New Zealand

(5)

35

30

(29)

15

(14)

-83%

large

large

Pacific

(6)

8

2

(4)

5

1

50%

60%

100%

Division
Australia

TSO and Group Centre

1

(1)

-

-

-

-

n/a

n/a

n/a

Total

13

380

393

(63)

343

280

large

11%

40%

Half Year - Mar 19

Individually Assessed

Collectively AssessedStage 3 Recoveries
and writebacks
$M

Total
$M

Total
$M

Stage 1
$M

Stage 2
$M

Stage 3
$M

Total
$M

Stage 3 New andincreased
$M

(21)

43

24

46

536

(186)

350

396

Institutional

19

(35)

(7)

(23)

18

(30)

(12)

(35)

New Zealand

(4)

(5)

4

(5)

60

(25)

35

30

Pacific

(1)

(4)

(1)

(6)

11

(3)

8

2

TSO and Group Centre

1

-

-

1

-

(1)

(1)

-

Total

(6)

(1)

20

13

625

(245)

380

393

Division
Australia

Individually assessed credit impairment charge/(release) under AASB 139
New and increased

Recoveries and write-backs

Total

Half Year

Half Year

Half Year

Sep 18$M
581

Mar 18$M
528

Sep 18$M(206)

Mar 18$M(191)

Sep 18$M
375

Mar 18$M
337

Institutional

51

92

(103)

(64)

(52)

28

New Zealand

76

67

(61)

(33)

15

34

Pacific

8

5

(3)

(5)

5

-

TSO and Group Centre

-

36

-

(5)

-

31

716

728

(373)

(298)

343

430

Division
Australia

Total

32

GROUP RESULTS
Collectively assessed credit impairment chargeMarch 2019 v March 2018
The increase in the collectively assessed credit impairment charge of $35 million was primarily driven by an increase of $71 million in the Australia
division due to the weakening Australian economic outlook increasing expected credit loss. This was partially offset by a reduction of $44 million in
the Institutional division as a result of fewer large customer downgrades relative to the prior period, and also the partial release of a temporary
economic overlay.

March 2019 v September 2018
The increase in the collectively assessed credit impairment charge of $76 million was primarily driven by an increase of $35 million in the Australia
division, $18 million in the Institutional division and $24 million in the New Zealand division. The increase in Australia division was due to theweakening Australian economic outlook increasing expected credit loss. The increase in Institutional division was a result of fewer large customer
upgrades relative to the September 2018 half, partly offset by the partial release of a temporary economic overlay. The increase in New Zealanddivision was primarily the result of lower September 2018 half provisions due to a release of the Agri overlay.

Individually assessed credit impairment chargeMarch 2019 v March 2018
The individually assessed credit impairment charge decreased by $50 million (-12%) primarily due to lower new and increased individually assessed
credit impairment charges in the Institutional division combined with the sale of the Asia Retail and Wealth businesses. This was partially offset by
Australia division which experienced higher provisions in Business & Private Bank.

March 2019 v September 2018
The individually assessed credit impairment charge increased by $37 million (+11%) driven by significant write-backs and recoveries in theInstitutional and New Zealand divisions in the September 2018 half. This was partially offset by a $25 million decrease in the Australia division due todecreased provisions predominantly in the personal loan and credit card portfolios.

Allowance for expected credit losses1,2
As at

As at

Movement

Mar 19Mar 18Mar 19 v. Mar 18

Collectively
assessed$M
1,834

Individuallyassessed
$M
586

Total
provision$M
2,420

Collectively
assessed$M
1,113

Individuallyassessed
$M
577

Total
provision$M
1,690

Institutional

1,132

208

1,340

1,101

320

New Zealand

369

73

442

317

104

Pacific

43

24

67

45

-

-

-

3,378

891

4,269

Division
Australia

TSO and Group Centre
Total

3

Collectively
assessed%65%

Individuallyassessed
%
2%

Total
provision
%
43%

1,421

3%

-35%

-6%

421

16%

-30%

5%

14

59

-4%

71%

14%

3

1

4

-100%

-100%

-100%

2,579

1,016

3,595

31%

-12%

19%

As at

As at

Movement

Mar 19Sep 18Mar 19 v. Sep 18

Collectively
assessed$M
1,834

Individuallyassessed
$M
586

Total
provision$M
2,420

Collectively
assessed$M
1,125

Individuallyassessed
$M
569

Total
provision$M
1,694

Institutional

1,132

208

1,340

1,073

251

New Zealand

369

73

442

279

81

Pacific

43

24

67

43

18

61

0%

33%

10%

-

-

-

3

1

4

-100%

-100%

-100%

3,378

891

4,269

2,523

920

3,443

34%

-3%

24%

Division
Australia

TSO and Group Centre
Total3

Collectively
assessed%63%

Individuallyassessed
%
3%

Total
provision
%
43%

1,324

5%

-17%

1%

360

32%

-10%

23%

As at Mar 19
Individually
Assessed

Collectively Assessed
Division
Australia

Stage 1
$M
384

Stage 2$M
1,150

Stage 3
$M
300

Total
$M
1,834

Stage 3
$M
586

Total
$M
2,420

Institutional

859

234

39

1,132

208

1,340

New Zealand

152

173

44

369

73

442

Pacific

20

11

12

43

24

67

Total3

1,415

1,568

395

3,378

891

4,269

1.

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.
Balance Sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.
3. On adoption of AASB 9 on 1 October 2018, the Group increased the collectively assessed provision by $813 million. Comparative information has not been restated.
2.

33

GROUP RESULTS
Long-Run Loss Rates
Management believe that disclosure of modelled expected loss data using average long-run loss rates for individually assessed provisions assists inassessing the longer term expected loss rates of the lending portfolio as it removes the volatility of reported earnings created by the use of accounting
losses. The expected loss methodology is used for economic profit as an internal measure and is not based on the credit loss provision principles of
AASB 9 Financial Instruments which were effective from 1 October 2018.
As at
Long-run loss as a % of gross lending assets

Mar 19Sep 18Mar 18Australia division

0.29%

0.29%

0.31%

New Zealand division

0.19%

0.19%

0.21%

Institutional division

0.27%

0.27%

0.32%

Total Group

0.27%

0.27%

0.30%

Gross Impaired Assets1
As at

Movement

Mar 19$M
1,697

Sep 18$M
1,676

Restructured items2

264

269

76

-2%

large

Non-performing commitments and contingencies

61

68

95

-10%

-36%

2,022

2,013

2,034

0%

-1%

Impaired loans

(865)

(894)

(990)

-3%

-13%

Non-performing commitments and contingencies

(26)

(26)

(26)

0%

0%

Net impaired assets

1,131

1,093

1,018

3%

11%

Gross impaired assets by division
Australia

Impaired loans

Gross impaired assets

Mar 18$M
1,863

Mar 19v. Sep 18
1%

Mar 19v. Mar 18-9%

Individually assessed provisions

1,357

1,285

1,114

6%

22%

Institutional

373

442

626

-16%

-40%

New Zealand

238

236

244

1%

-2%

Pacific

53

46

43

15%

23%

TSO and Group Centre

1

4

7

-75%

-86%

Gross impaired assets

2,022

2,013

2,034

0%

-1%

Gross impaired assets by size of exposure
Less than $10 million

1,505

1,489

1,487

1%

1%

328

335

547

-2%

-40%

$10 million to $100 million
Greater than $100 million

189

189

-

0%

n/a

Gross impaired assets

2,022

2,013

2,034

0%

-1%

1.
2.



Balance sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.
Restructured items are facilities where the original contractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring may consist of
reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those typically offered to new facilities with similar risk.

March 2019 v March 2018
Gross impaired assets decreased $12 million (-1%) driven by the Institutional division (-$253 million) with repayments reducing a number of large
impaired assets. This was partially offset by an increase in the Australia division ($243 million) primarily driven by a single name restructured loan
and an increase in the home loan portfolio. The Group’s individually assessed provision coverage ratio on impaired assets was 44.1% at 31 March
2019 (Mar 18: 50.0%).

March 2019 v September 2018
Gross impaired assets increased $9 million driven by the Australia division ($72 million) due to a single name exposure in business banking and anincrease in the home loan portfolio. This was partially offset by a decrease in the Institutional division (-$69 million) driven by repayments and writeoffs. The Group’s individually assessed provision coverage ratio on impaired assets was 44.1% at 31 March 2019 (Sep 18: 45.7%).

34

GROUP RESULTS
New Impaired Assets1
Half Year

Movement

Mar 19$M857

Sep 18$M
929

Mar 18$M
917

Mar 19v. Sep 18-8%

Mar 19v. Mar 18-7%

Restructured items

13

203

21

-94%

-38%

Non-performing commitments and contingencies

20

13

25

54%

-20%

Total new impaired assets

890

1,145

963

-22%

-8%

New impaired assets by division
Australia

715

905

699

-21%

2%

Institutional

41

45

124

-9%

-67%

New Zealand

120

191

101

-37%

19%

Pacific

14

4

7

large

100%

Impaired loans

TSO and Group Centre
Total new impaired assets
1.



-

-

32

n/a

-100%

890

1,145

963

-22%

-8%

Balance sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.

March 2019 v March 2018
New impaired assets decreased $73 million (-8%) primarily driven by the Institutional division as the result of an improved risk profile due to portfolio
rebalancing, combined with a benign credit environment. In addition, new impaired assets decreased due to lending reductions following the sale of
Asia Retail and Wealth businesses.

March 2019 v September 2018
New impaired assets decreased by $255 million (-22%) driven by the Australia division primarily due to a single name restructured loan recorded in
the September 2018 half, combined with decreases in the New Zealand Commercial and Agri business.

Ageing analysis of net loans and advances that are past due but not impaired1
As at

Movement

1-29 days

Mar 19$M
9,560

Sep 18$M
8,958

Mar 18$M
8,974

Mar 19v. Sep 18
7%

Mar 19v. Mar 18
7%30-59 days

2,997

2,240

2,576

34%

16%

60-89 days

1,437

1,268

1,233

13%

17%

>90 days

3,396

2,998

3,038

13%

12%

Total

17,39015,464

15,821

12%

10%

1.



Balance sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.

March 2019 v March 2018
Net loans and advances past due but not impaired increased $1,569 million due to portfolio deterioration across Australia division home loans($1,286 million) and New Zealand division home loans ($118 million) and Agri portfolios ($127 million).

March 2019 v September 2018
Net loans and advances past due but not impaired increased $1,926 million due to portfolio deterioration across Australia division home loans($1,675 million) and New Zealand division home loans ($184 million) and Commercial and Agri portfolios ($186 million).

35

GROUP RESULTS
Income Tax Expense - continuing operations
Half Year

Movement

Income tax expense on cash profit

Mar 19$M
1,415

Sep 18$M
1,286

Mar 18$M
1,489

Effective tax rate (cash profit)

28.4%

30.0%

29.8%



Mar 19v. Sep 18
10%

Mar 19v. Mar 18-5%

March 2019 v March 2018
The effective tax rate has decreased from 29.8% to 28.4%. The decrease of 140 bps was primarily due to the inclusion in the March 2018 half of a
non-tax deductible net loss on completion of the sale of Shanghai Rural Commercial Bank (-176 bps), partially offset by non-taxable profit on thedisposal of the Group’s stake in Metrobank Card Corporation (+74 bps) and tax provisions no longer required (+46 bps), while the March 2019 half
included a net non-assessable gain on the sale of OnePath Life (NZ) (-20 bps), a non-assessable gain on the sale of Paymark (-20 bps) and higher
offshore earnings which attracted a lower average tax rate (-46 bps).

March 2019 v September 2018
The effective tax rate has decreased from 30.0% to 28.4%. The decrease of 160 bps was primarily due to higher offshore earnings which attracted alower average tax rate (-118 bps), a net non-assessable gain on the sale of OnePath Life (NZ) (-20 bps) and a non-assessable gain on the sale of
Paymark (-20 bps) in the March 2019 half.

36

GROUP RESULTS
Impact of Foreign Currency Translation - continuing operations
The following tables present the Group’s cash profit results and net loans and advances neutralised for the impact of foreign currency translation
movements. Comparative data has been adjusted to remove the translation impact of foreign currency movements by retranslating prior period
comparatives at current period foreign exchange rates.
Cash Profit - March 2019 Half Year vs March 2018 Half Year
Half Year

Movement

Net interest income

ActualMar 19$M
7,299

FX
unadjusted
Mar 18$M
7,350

FX
impactMar 18$M
91

FX
adjustedMar 18$M
7,441

FX
unadjusted
Mar 19v. Mar 18-1%

FX
adjustedMar 19v. Mar 18-2%

Other operating income

2,447

2,520

20

2,540

-3%

-4%

Operating income

9,746

9,870

111

9,981

-1%

-2%

Operating expenses(4,365)(4,473)(70)(4,543)-2%-4%

Profit before credit impairment and income tax

5,381

5,397

41

5,438

0%

-1%

Credit impairment charge

(393)

(408)

(3)

(411)

-4%

-4%

Profit before income tax

4,988

4,989

38

5,027

0%

-1%

Income tax expense(1,415)(1,489)(8)(1,497)

-5%

-5%

(9)

(7)

(1)

(8)

29%

13%

3,564

3,493

29

3,522

2%

1%

610,143592,469

5,822

598,291

3%

2%

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
adjusted

Net interest income

Mar 19$M
7,299

Sep 18$M
7,164

Sep 18$M
57

Sep 18$M
7,221

Mar 19v. Sep 18
2%

Mar 19v. Sep 18
1%

Other operating income

2,447

2,333

(1)

2,332

5%

5%

Operating income

9,746

9,497

56

9,553

3%

2%

Operating expenses(4,365)(4,928)(57)(4,985)

-11%

-12%

Profit before credit impairment and income tax

5,381

4,569

(1)

4,568

18%

18%

Credit impairment charge

(393)

(280)

5

(275)

40%

43%

Profit before income tax

4,988

4,289

4

4,293

16%

16%

Income tax expense(1,415)(1,286)(1)(1,287)

10%

10%

(9)

(9)

1

(8)

0%

13%

3,564

2,994

4

2,998

19%

19%

610,143

605,437

6,638

612,0751%0%Non-controlling interests
Cash profit from continuing operations
Balance Sheet
Net loans and advances1

Cash Profit - March 2019 Half Year vs September 2018 Half Year
Half Year

Non-controlling interests
Cash profit from continuing operations

Movement

Balance Sheet
Net loans and advances1
1.

Balance sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.

37

GROUP RESULTS
Earnings Related Hedges – continuing operations
Where it is considered appropriate, the Group takes out economic hedges against larger foreign exchange denominated revenue streams (primarily New
Zealand Dollar, US Dollar and US Dollar correlated). New Zealand Dollar exposure relates to the New Zealand geography and USD exposures relate toAsia, Pacific, Europe & America. Details of these hedges are set out below.
Half Year
Mar 19$M
3,361

Sep 18$M
2,076

Mar 18$M
2,669

Amount taken to income (pre-tax statutory basis)2

(105)

63

(50)

Amount taken to income (pre-tax cash basis)3

(25)

(2)

7

USD Economic hedges
Net open USD position (notional principal)1

NZD Economic hedges
Net open NZD position (notional principal)1

561

174

-

Amount taken to income (pre-tax statutory basis)2

(2)

2

-

Amount taken to income (pre-tax cash basis)3

-

-

-

1.
2.
3.

Value in AUD at contracted rate.
Unrealised valuation movement plus realised revenue from matured or closed out hedges.
Realised revenue from closed out hedges.

As at 31 March 2019, the following hedges were in place to partially hedge future earnings against adverse movements in exchange rates:

NZD 3.6 billion at a forward rate of approximately NZD 1.06/AUD.



USD 0.4 billion at a forward rate of approximately USD 0.71/AUD.

During the March 2019 half:

NZD 0.9 billion of economic hedges matured and a realised loss of $24.5 million (pre-tax) was recorded in cash profit.



USD 0.1 billion of economic hedges matured and a realised gain of $0.2 million (pre-tax) was recorded in cash profit.

An unrealised loss of $82 million (pre-tax) on the outstanding NZD and USD economic hedges were recorded in the statutory Income Statement
during the year. This unrealised loss has been treated as an adjustment to statutory profit in calculating cash profit as these are hedges of future
NZD and USD revenues.

Earnings per Share - continuing operations
Half Year

Movement
Mar 19Mar 19v. Sep 18 v. Mar 18

Mar 19Sep 18Mar 18

Basic

124.8

103.9

119.4

20%

5%

Diluted

118.4

100.0

113.4

18%

4%

Basic

2,856.9

2,882.2

2,924.6-1%-2%

Diluted3,125.8

3,132.3

3,204.3

0%-2%

Cash profit from continuing operations ($M)

3,564

2,994

3,493

19%

2%

Cash profit from continuing operations used in calculating diluted cash earnings per share ($M)

3,701

3,132

3,634

18%

2%

Cash earnings per share (cents) from continuing operations

Cash weighted average number of ordinary shares (M)1

1.

Cash weighted average number of ordinary shares includes treasury shares held in Wealth Australia, which will form part of continuing operations post completion of the Successor FundTransfer (SFT) performed in preparation for the disposal of discontinued operations.

38

GROUP RESULTS
Dividends - continuing operations
Half Year
Dividend per ordinary share (cents) - continuing operations
Interim (fully franked)1
Final (fully franked)
Ordinary share dividends used in payout ratio ($M)2

Movement

Mar 1980

Sep 18-Mar 1880

Mar 19v. Sep 18
n/a

Mar 19v. Mar 18
0%

-

80

-

n/a

n/a

2,267

2,295

2,317

-1%

-2%

19%

2%

Cash profit from continuing operations ($M)

3,564

2,994

3,493

Ordinary share dividend payout ratio (cash basis)2

63.6%

76.7%

66.3%

1.
2.

Interim dividend for 2019 is proposed.
Dividend payout ratio is calculated using proposed 2019 interim dividend of $2,267 million, which is based on the forecast number of ordinary shares on issue at the dividend record date.
Dividend payout ratios for the September and March 2018 halves were calculated using actual dividend paid of $2,295 million and $2,317 million respectively.

The Directors propose an interim dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2019. The proposed 2019 interim
dividend will be fully franked for Australian tax purposes. New Zealand imputation credits of NZD 9 cents per ordinary share will also be attached.

Economic Profit - continuing operations
Half Year

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

3,243

3,172

3,923

2%

-17%

321

(178)

(430)

large

large

Cash profit from continuing operations

3,564

2,994

3,493

19%

2%

Economic credit cost adjustment

(316)

(434)

(369)

-27%

-14%

Statutory profit attributable to shareholders of the Company from continuing
operations
Adjustments between statutory profit and cash profit from continuing operations

Imputation credits

601

529

600

14%

0%

Economic return from continuing operations

3,849

3,089

3,724

25%

3%

Cost of capital(2,862)(2,825)(2,762)

1%

4%

987

264

962

large

3%

Economic profit from continuing operations

Economic profit is a risk adjusted profit measure used to evaluate business unit performance. This is used for internal management purposes and is not
subject to review.
Economic profit is calculated via a series of adjustments to cash profit. The economic credit cost adjustment replaces the accounting credit loss charge
with internal expected loss based on the average long-run loss rate per annum on the portfolio over an economic cycle. The benefit of imputation credits
is recognised, measured at 70% of Australian tax. The cost of capital is a major component of economic profit. At an ANZ Group level, this is calculatedusing average ordinary shareholders’ equity (excluding non-controlling interests), multiplied by the cost of capital rate (currently 10% and applied acrosscomparative periods). At a business unit level, capital is allocated based on Regulatory Capital, whereby higher risk businesses attract higher levels ofcapital. The basis of allocation was changed from Economic Capital to Regulatory Capital in the current period and comparative information has been
restated. This method is designed to help drive appropriate risk management and ensure business returns align with the level of risk. Key risks covered
include credit risk, operational risk, market risk and other risks.
Economic profit increased $25 million (+3%) against the March 2018 half driven by higher cash profit and lower economic credit costs, partly offset byhigher cost of capital.
Economic profit increased $723 million against the September 2018 half mainly driven by higher cash profit, lower economic credit costs and higher
imputation credits on higher Australian profits, partly offset by higher cost of capital.

39

GROUP RESULTS
Condensed Balance Sheet - including discontinued operations
Movement

As at
Mar 19
$B
109.9
121.8

Sep 18$B
98.0

Mar 18
$B
98.0

112.0

115.3

9%

6%

Derivative financial instruments

79.4

68.4

70.9

16%

12%

Net loans and advances

609.3

604.4

589.5

1%

3%

Assets held for sale

43.5

45.2

45.3

-4%

-4%

Other

16.4

15.2

16.7

8%

-2%

Total assets

980.3

943.2

935.7

4%

5%

Settlement balances owed by ANZ / Collateral received

18.1

18.3

20.0

-1%

-9%

AssetsCash / Settlement balances owed to ANZ / Collateral paid
Trading and investment securities/available-for-sale assets1

Mar 19v. Sep 18
12%

Mar 19v. Mar 18
12%

Liabilities
Deposits and other borrowings

635.0

618.2

616.2

3%

3%

Derivative financial instruments

80.9

69.7

70.6

16%

15%
13%

Debt issuances

129.7

121.2

114.9

7%

Liabilities held for sale

46.6

47.2

44.8

-1%

4%

Other

10.0

9.2

9.7

9%

3%

Total liabilities

920.3

883.8

876.2

4%

5%

Total equity

60.0

59.4

59.5

1%

1%

1.





On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases toexist under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 for further details. Comparative information has not been restated.

March 2019 v March 2018

Cash/Settlement balances owed to ANZ/Collateral paid increased $11.9 billion (+12%) primarily driven by an increase in short term reverse
repurchase agreements in Markets, increased overnight bank deposits in Treasury, and the impact of foreign currency translation movements.

Trading and investment securities/available-for-sale assets increased $6.5 billion (+6%) primarily driven by an increase in liquid assets inMarkets and the impact of foreign currency translation movements.



Derivative financial assets and liabilities increased $8.5 billion (+12%) and $10.3 billion (+15%) respectively as interest rate movements resulted
in higher derivative volumes and fair values, particularly in interest rate swap products.

Net loans and advances increased $19.8 billion (+3%) primarily driven by lending growth in the Institutional division (+$10.9 billion), growth inhome loans in the New Zealand division (+$5.2 billion), UDC net loans and advances no longer being classified as held for sale (+3.3 billion) andthe impact of foreign currency translation movements, partially offset by the decrease in home loans in the Australia division (-$3.9 billion).



Assets held for sale decreased $1.8 billion primarily driven by UDC no longer being classified as held for sale, partially offset by reclassificationof Cambodia JV and PNG Retail, Commercial & SME to held for sale. Liabilities held for sale increased $1.8 billion primarily due to thereclassification of Cambodia JV and PNG Retail, Commercial & SME to held for sale and an increase of $0.8 billion in payables relating to the
IOOF secured note, partially offset by UDC no longer being classified as held for sale.

Deposits and other borrowings increased $18.8 billion (+3%) primarily driven by increase in deposits from banks and repurchase agreements(+$19.6 billion), growth in customer deposits in the New Zealand division (+$4.5 billion) and the impact of foreign currency translation
movements. This was partially offset by reduction in certificates of deposit and commercial paper issued (-$16.6 billion).



Debt issuances increased $14.8 billion (+13%) primarily driven by senior debt issuances and the impact of foreign currency translation
movements.

March 2019 v September 2018

Cash/Settlement balances owed to ANZ/Collateral paid increased $11.9 billion (+12%) primarily driven by an increase in short term reverse
repurchase agreements in Markets, increased overnight bank deposits in Treasury, and the impact of foreign currency translation movements.

Trading and investment securities/available-for-sale assets increased $9.8 billion (+9%) primarily driven by an increase in liquid assets inMarkets and the impact of foreign currency translation movements.



Derivative financial assets and liabilities increased $11.0 billion (+16%) and $11.2 billion (+16%) respectively as interest rate movements
resulted in higher derivative volumes and fair values, particularly in interest rate swap products.

Net loans and advances increased $4.9 billion (+1%) primarily driven by growth in home loans in the New Zealand division (+2.4 billion), lending
growth in the Institutional division (+$1.0 billion) and the impact of foreign currency translation movements, partially offset by a decrease in homeloans in the Australia division (-$4.7 billion).



Assets and liabilities held for sale decreased $1.7 billion and $0.6 billion respectively, primarily driven by the sale completion of OnePath Life
(NZ). The decrease in liabilities held for sale was partially offset by an increase in payables relating to the IOOF secured note.



Deposits and other borrowings increased $16.8 billion (+3%) primarily driven by increase in deposits from banks and repurchase agreements(+$20.0 billion), growth in customer deposits in the New Zealand division (+$1.9 billion) and the impact of foreign currency translation
movements. This was partially offset by reduction in customer deposits in the Institutional division (-$21.7 billion) and commercial paper issued(-$2.5 billion).



Debt issuances increased $8.5 billion (+7%) primarily driven by senior debt issuances and the impact of foreign currency translation movements.

40

GROUP RESULTS
Liquidity Risk - including discontinued operations
Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due, including repaying depositors or maturing wholesaledebt, or that the Group has insufficient capacity to fund increases in assets. The timing mismatch of cash flows and the related liquidity risk is inherent inall banking operations and is closely monitored by the Group and managed in accordance with the risk appetite set by the Board.
The Group’s approach to liquidity risk management incorporates two key components:


Scenario modelling of funding sources
ANZ’s liquidity risk appetite is defined by the ability to meet a range of regulatory requirements and internal liquidity metrics mandated by the Board.
The metrics cover a range of scenarios of varying duration and level of severity. The objective of this framework is to:Provide protection against shorter term extreme market dislocation and stress.



Maintain structural strength in the balance sheet by ensuring that an appropriate amount of longer-term assets are funded with longer-term
funding.

Ensure that no undue timing concentrations exist in the Group’s funding profile.

A key component of this framework is the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario mandated by banking
regulators including APRA. As part of meeting LCR requirements, ANZ has a Committed Liquidity Facility (CLF) with the Reserve Bank of Australia(RBA). The CLF has been established to offset the shortage of available High Quality Liquid Assets (HQLA) in Australia and provides an alternative
form of contingent liquidity. The total amount of the CLF available to a qualifying ADI is set annually by APRA. From 1 January 2019, ANZ’s CLF is$48.0 billion (2018 calendar year end: $46.9 billion).


Liquid assets
The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed
environment, as well as to meet regulatory requirements. High Quality Liquid Assets comprise three categories, with the definitions consistent with
Basel 3 LCR:Highest-quality liquid assets (HQLA1): Cash, highest credit quality government, central bank or public sector securities eligible for repurchasewith central banks to provide same-day liquidity.

High-quality liquid assets (HQLA2): High credit quality government, central bank or public sector securities, high quality corporate debt securities
and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.



Alternative liquid assets (ALA): Assets qualifying as collateral for the CLF and other eligible securities listed by the Reserve Bank of New
Zealand (RBNZ).

The Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory requirements andthe risk appetite set by the Board.
Half Year Average

Movement

Mar 19$B

Sep 18$B

Mar 18
$B

HQLA1

134.5

137.0

131.8

-2%

2%

HQLA2

7.6

5.1

4.9

49%

55%

Internal Residential Mortgage Backed Securities2

34.2

38.9

37.8

-12%

-10%

Other ALA3

12.9

13.1

13.8

-2%

-7%

Total liquid assets

189.2

194.1

188.3

-3%

0%

Cash outflows

176.3

177.5

180.5

-1%

-2%

Cash inflows

38.6

41.2

40.4

-6%

-4%

Mar 19v. Sep 18

Mar 19v. Mar 18

Market Values Post Discount1

Cash flows modelled under stress scenario

Net cash outflows

137.7

136.3

140.1

1%

-2%

Liquidity Coverage Ratio4

137%

142%

134%

-5%

3%

1.
2.

3.

4.

Half year average basis, calculated as prescribed per APRA Prudential Regulatory Standard (APS 210 Liquidity) and consistent with APS 330 requirements.
In accordance with APRA requirement, March 2019 NZD denominated liquid asset balances beyond that required to achieve 100% NZD LCR must be considered not transferrable and thus
excluded from Level 2 LCR.
Comprised of assets qualifying as collateral for the CLF, excluding internal RMBS, up to approved facility limit; and any liquid assets contained in the RBNZ's Liquidity Policy - Annex:
Liquidity Assets - Prudential Supervision Department Document BS13A12.
All currency Level 2 LCR.

41

GROUP RESULTS
Funding - including discontinued operations
ANZ targets a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency.
$15.3 billion of term wholesale debt with a remaining term greater than one year as at 31 March 2019 was issued during the half year ended 31 March
2019.
The following table shows the Group’s total funding composition:
As at

Movement

Mar 19$B

Sep 18$B

Mar 18$B

Mar 19v. Sep 18

Mar 19v. Mar 18

Customer deposits and other liabilities
Australia

203.4

202.7

204.2

0%

0%

Institutional

205.4

205.8

190.7

0%

8%

New Zealand

85.4

79.8

79.2

7%

8%

Pacific

3.5

3.5

3.4

0%

3%

TSO and Group Centre1

(4.3)

(4.5)

(4.7)

-4%

-9%

493.4

487.3

472.8

1%

4%

8.6

8.6

8.5

0%

1%

Total customer liabilities (funding)

502.0

495.9

481.3

1%

4%

Wholesale funding
Debt issuances

113.4

105.3

97.5

8%

16%

Subordinated debt

16.3

15.9

17.2

3%

-5%

Certificates of deposit

43.6

42.7

50.3

2%

-13%

Commercial paper

14.7

17.0

24.1

-14%

-39%

Other wholesale borrowings4,5

100.1

86.8

84.4

15%

19%

Customer deposits
Other funding liabilities2,3

Total wholesale funding

288.1

267.7

273.5

8%

5%

Shareholders' equity

60.0

59.4

59.5

1%

1%

Total funding

850.1

823.0

814.3

3%

4%

1.
2.
3.
4.
5.

Includes term deposits, other deposits and an adjustment recognised in Group Centre to eliminate Wealth Australia investments in ANZ deposit products.
Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in Wealth Australia.
Excludes liability for acceptances as they do not provide net funding.
Includes borrowings from banks, securities sold under repurchase agreements, net derivative balances, special purpose vehicles and other borrowings.
Includes RBA open repo arrangement netted down by the exchange settlement account cash balance.

Net Stable Funding Ratio
The following table shows the Level 2 Net Stable Funding Ratio (NSFR) composition:
As at

Movement

Mar 19$B

Sep 18$B

Required Stable Funding1
Retail & small and medium enterprises, corporate loans <35% risk weight2

182.9

Retail & small and medium enterprises, corporate loans >35% risk weight2

189.1

Other lending3

23.2

Liquid assets

10.7

9.8

Other assets4

40.2

36.6

446.1

436.1

428.4

Retail & small and medium enterprise customer deposits

236.6

231.7

233.4

2%

1%

Corporate, public sector entities & operational deposits

91.5

91.8

83.4

0%

10%
45%

Total Required Stable Funding

Mar 18$B

Mar 19v. Sep 18

Mar 19v. Mar 18

183.9

184.0

-1%

-1%

182.6

177.2

4%

7%

23.2

19.1

0%

21%

9.7

9%

10%

38.4

10%

5%

2%

4%

1

Available Stable Funding

Central bank & other financial institution deposits
Term funding
Short term funding & other liabilities

6.1

5.3

4.2

15%

101.2

96.3

94.0

5%

8%

3.7

1.3

2.7

large

37%

Capital

73.9

73.3

74.4

1%

-1%

Total Available Stable Funding

513.0

499.7

492.1

3%

4%

Net Stable Funding Ratio

115%

115%

115%

0%

0%

1.
2.
3.
4.

NSFR factored balance as per APRA Prudential Regulatory Standard APS 210 Liquidity.
Risk weighting as per APRA Prudential Regulatory Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk.
Includes financial institution and central bank loans.
Includes off-balance sheet items, net derivatives and other assets.

42

GROUP RESULTS
Capital Management - including discontinued operations
As at
Internationally Comparable Basel 31

APRA Basel 3
Mar 19Sep 18Mar 18Mar 19Sep 18Mar 18

Common Equity Tier 1

11.5%

11.4%

11.0%

16.9%

16.8%

16.3%

Tier 1

13.4%

13.4%

12.9%

19.3%

19.2%

18.7%

Total capital

15.3%

15.2%

14.9%

21.7%

21.6%

21.3%

Risk weighted assets ($B)

396.3

390.8

395.8

310.9

305.6

311.5

Capital Ratios

1.

Internationally Comparable methodology aligns with APRA’s information paper entitled “International Capital Comparison Study” (13 July 2015)

APRA Basel 3 Common Equity Tier 1 (CET1 ratio) - March 2019 v September 2018

1.
2.



Excludes large/notable items for the purposes of Regulatory Capital Management attribution. Refer to pages 14 to 18.
Capital deductions represent the movement in retained earnings in deconsolidated entities, capitalised software, expected losses in excess of eligible provision shortfall and other intangibles
in the period.

March 2019 v September 2018
ANZ’s CET1 ratio increased 5 bps to 11.5% during the March 2019 half. Key drivers of the movement in the CET1 ratio were:

Net organic capital generation of 84 bps. This was primarily driven by cash profit (excluding large/notable items), a net reduction in underlying
RWA (excluding foreign currency translation movements, regulatory changes and other one-offs), partially offset by growth in other businesscapital deductions.



Payment of the September 2018 final dividend (net of BOP issuance, neutralised DRP) reduced the CET1 ratio by 58 bps.



Capital benefits from asset disposals (OnePath Life (NZ) and Paymark) increased the CET1 ratio by 17 bps.

Group on-market share buy-back of $1.1 billion decreased the CET1 ratio by 29 bps.



Other impacts include RWA modelling changes, large/notable items affecting the March 2019 half cash earnings, movements in non-cash
earnings, impact of AASB 9 transition and net foreign currency translation movements.

Total Risk Weighted Assets

As at

Credit RWA
Market risk and IRRBB RWA

Movement

Mar 19$B
345.5

Sep 18$B
337.6

Mar 18$B
342.8

Mar 19v. Sep 18
2%

Mar 19v. Mar 18
1%

13.1

15.6

15.6

-16%

-16%

Operational RWA

37.7

37.6

37.4

0%

1%

Total RWA

396.3

390.8

395.8

1%

0%

43

GROUP RESULTS

Total Risk Weighted Assets (RWA) - March 2019 v September 2018

March 2019 v September 2018
Total RWA increased by $5.5 billion. Excluding the impact of foreign currency translation movements and other non-recurring CRWA changes,
underlying CRWAs (divisional lending and risk migration) increased by $1.6 billion, mainly driven by lending growth in the Institutional division. Other
CRWA changes reflect net impacts from RWA modelling changes. The decrease in non-CRWA of $2.4 billion was mainly driven by a lower risk
profile for Market Risk & IRRBB RWA.

APRA to Internationally Comparable1 Common Equity Tier 1 (CET1 ratio) as at 31 March 2019

1. ANZ’s interpretation of the regulations documented in the Basel Committee publications: “Basel 3: A global regulatory framework for more resilient banks and banking systems” (June 2011)and “International Convergence of Capital Measurement and Capital Standards” (June 2006). Also includes differences identified in APRA’s information paper entitled “International CapitalComparison Study” (13 July 2015).

The above provides a reconciliation of the CET1 ratio under APRA’s Basel 3 prudential capital standards to Internationally Comparable Basel 3
standards. APRA views the Basel 3 reforms as a minimum requirement and hence has not incorporated some of the concessions proposed in the Basel3 rules and has also set higher requirements in other areas. As a result, Australian banks’ Basel 3 reported capital ratios will not be directly comparablewith international peers. The International Comparable Basel 3 CET1 ratio incorporates differences between APRA and both the Basel Committee Basel
3 framework (including differences identified in the March 2014 Basel Committee’s Regulatory Consistency Assessment Programme (RCAP) on Basel 3
implementation in Australia) and its application in major offshore jurisdictions.
The material differences between APRA Basel 3 and Internationally Comparable Basel 3 ratios include:
Deductions

Investments in insurance and banking associates - APRA requires full deduction against CET1. On an Internationally Comparable basis, theseinvestments are subject to a concessional threshold before a deduction is required.



Deferred tax assets - A full deduction is required from CET1 for deferred tax assets (DTA) relating to temporary differences. On an Internationally
Comparable basis, this is first subject to a concessional threshold before the deduction is required.

Risk Weighted Assets (RWA)Mortgages RWA - APRA imposes a floor of 20% on the downturn Loss Given Default (LGD) used in credit RWA calculations for residential
mortgages. The Internationally Comparable Basel 3 framework requires a downturn LGD floor of 10%. Additionally, from July 2016, APRA requires ahigher correlation factor than the Basel framework.



IRRBB RWA - APRA requires inclusion of Interest Rate Risk in the Banking Book (IRRBB) within the RWA base for the CET1 ratio calculation. This
is not required on an Internationally Comparable basis.

Specialised lending - APRA requires the supervisory slotting approach to be used in determining credit RWA for specialised lending exposures. The
Internationally Comparable basis allows for the advanced internal ratings based approach to be used when calculating RWA for these exposures.



Unsecured Corporate Lending LGD - an adjustment to align ANZ’s unsecured corporate lending LGD to 45% to be consistent with banks in otherjurisdictions. The 45% LGD rate is also used in the Foundation Internal Ratings-Based approach (FIRB).



Undrawn Corporate Lending Exposure at Default (EAD) - an adjustment to ANZ’s credit conversion factors (CCF) for undrawn corporate loan
commitments to 75% (used in FIRB approach) to align with banks in other jurisdictions.

44

GROUP RESULTS
Leverage Ratio - including discontinued operations
At 31 March 2019, the Group’s APRA Leverage Ratio was 5.4% which is above the 3.5% APRA proposed minimum for internal ratings-based approach
ADI (IRB ADI) which includes ANZ. The following table summarises the Group’s Leverage Ratio calculation:

As at

Movement

Mar 19$M
53,075

Sep 18$M
52,218Mar 18$M
51,125

Mar 19v. Sep 18
2%

Mar 19v. Mar 18
4%On-balance sheet exposures (excluding derivatives and securities financing transaction
exposures)

810,915

785,405780,272

3%

4%

Tier 1 Capital (net of capital deductions)1

Derivative exposures

31,43930,67632,747

2%-4%

Securities financing transaction exposures

37,28736,06629,351

3%

27%

Other off-balance sheet exposures

105,942

102,81099,921

3%

6%

Total exposure measure985,583

954,957

942,291

3%

5%

APRA Leverage Ratio

5.4%

5.5%

5.4%

Internationally Comparable Leverage Ratio

6.0%

6.1%

6.1%

1.



Prior period numbers have not been restated for the impact of AASB 15 to align with previously reported regulatory returns.

March 2019 v September 2018
APRA leverage ratio decreased 8 bps in the March 2019 half. Key drivers of the movement were:

Net organic capital generation of 10 bps from cash profit (excluding large/notable items) less dividends paid.

Exposure growth primarily from growth in liquids, trading securities, and securities financing transactions decreased the leverage ratio by 11 bps.

Benefits from asset divestments increased the leverage ratio by 7 bps (cash settlement of OnePath Life (NZ) and Paymark). This was offset by
the impact of $1.1 billion Group on-market share buy-back during the March 2019 half (-12 bps).



Other impacts (-2 bps) mainly driven by non-cash adjustments (-3 bps), large/notable items affecting the March 2019 half cash earnings (-2 bps),
offset by deferred tax asset benefits (+2 bps) and other (+1 bps).

45

GROUP RESULTS
Capital Management - Other Regulatory Developments
Financial System Inquiry (FSI)The Australian Government completed a comprehensive inquiry into Australia’s financial system in 2014 which included a number of key
recommendations that may have an impact on regulatory capital levels. APRA initiatives in support of the FSI are:

In July 2017, APRA released an information paper outlining its assessment on the additional capital required for the Australian banking sector tobe considered ‘unquestionably strong’ as originally outlined in the FSI final report in December 2014. APRA indicated that “in the case of the four
major Australian banks, this equated to a benchmark CET1 capital ratio, under the current capital adequacy framework, of at least 10.5 percent.
APRA also stated that the major banks should meet this benchmark by 1 January 2020 at the latest”.



In February 2018, APRA released a discussion paper that commenced their consultation on the revisions to the capital framework that willproduce ‘unquestionably strong’ capital ratios. The discussion paper summarises APRA’s proposal regarding risk-based capital approach forcredit, market and operational risk following finalisation of these requirements by the BCBS in December 2017. While the final forms of these
proposals will only be determined later in 2020, the Group expects the implementation of any revisions to the current requirements will result infurther changes to the risk weighting framework for certain asset classes and other risk types (such as market and operational risks). APRA has
announced that it does not expect that the changes to the risk weights will necessitate further increases in capital for ADIs, although this could
vary by ADI depending on the final requirements.



APRA released a discussion paper in August 2018 on adjustments to the overall design of the capital framework to improve transparency,
international comparability and flexibility of the ADI capital framework. The focus of the proposals is on the presentation of the capital ratios tofacilitate comparability whilst recognising the relative capital strength of ADIs and measures to enhance supervisory flexibility in times of financial
stress. APRA’s consultation for the above is currently taking place with final prudential standards planned to be made available by 2020.



In relation to Leverage Ratio, APRA released draft prudential standards in November 2018 proposing to set the Leverage Ratio minimum forInternal Ratings-Based (IRB) ADI at 3.5%, in addition to other changes to the calculation of the Exposure Measure. These changes are notexpected to have a material impact to the Group.

APRA’s consultation for the above is currently taking place with target implementation by 2022 without any phase-in arrangements.
On 8 November 2018, APRA released a discussion paper titled “Increasing the loss-absorbing capacity of ADIs to support orderly resolution”. The
paper is in response to recommendation three of the final report of the FSI. The paper proposes an increase in loss-absorbing capacity of between
4% and 5% of RWA for domestic systemically important banks (D-SIBs), and therefore includes ANZ. The Group is currently consulting with APRA
on the proposals.
Given the number of items that are currently open for consultation with APRA, the final outcome of the FSI including any further changes to APRA’s
prudential standards or other impacts on the Group remains uncertain.


Level 3 Conglomerates (Level 3)
APRA is extending its prudential supervision framework to Conglomerate Groups via the Level 3 framework which will regulate a bancassurancegroup such as ANZ as a single economic entity with minimum capital requirements and additional monitoring of risk exposure levels.
In August 2016, APRA confirmed the deferral of capital requirements for Conglomerate Groups. This is to allow for the final capital requirements
arising from FSI recommendations and from international initiatives to be determined.
The non-capital components of the Level 3 framework relating to group governance, risk exposures, intragroup transactions and other risk
management and compliance requirements came into effect on 1 July 2017. These have had no material impact on the Group’s capital position.



The Reserve Bank of New Zealand (RBNZ) review of capital requirements
In December 2018, the Reserve Bank of New Zealand (RBNZ) released a consultation paper titled “Capital Review Paper 4”. This paper relates topossible additional RBNZ capital requirements in relation to ANZ’s New Zealand assets, which are separate to the Group’s capital measurement andminimum requirements set by APRA. The consultation paper sets out amongst other things:


potential increases in the risk weighting applied to the assets of banks in New Zealand; andpotential increases to the percentage of capital held against those risk weights in New Zealand.

The proposed implementation period is five years from the date the requirements are finalised. Based on the potential changes set out in the
consultation paper, and ANZ Bank New Zealand Limited’s (ANZ New Zealand) balance sheet as at 30 September 2018, the changes imply apotential capital increase in New Zealand of NZ$6 billion to NZ$8 billion (A$5.7 billion to A$7.7 billion). ANZ New Zealand currently has
approximately NZ$12.5 billion of Tier 1 capital (A$11.9 billion).
The overall impact on the Group depends on a number of factors. These include the outcome of the consultation, ANZ New Zealand’s balance sheet
at the time of implementation, and the outcome of other reviews currently underway by APRA.
Responses to the consultation paper are due on 17 May 2019. ANZ will engage with RBNZ and APRA on these throughout the consultation period.

46

GROUP RESULTS


Revisions to the related entities framework for ADI (APS222)
In July 2018, APRA released a consultation paper and draft prudential standards on proposed revisions to its existing related entities framework,
which also incorporated changes to its large exposures framework finalised and published in December 2017. APRA’s proposals include revisions to:

The definition of related entities;

The measurement of exposures to related entities by aligning with requirements in the revised large exposures framework;The prudential limits on exposures to related entities. APRA is proposing to align the capital base used in limit calculations to Level 1 Tier 1
Capital (capital base used in the revised large exposures framework) and to reduce the individual and aggregate limits of exposures to individual
related ADIs; andThe extended licensed entity (ELE) framework by amending the criteria for a subsidiary to be consolidated in an ADI’s ELE.

APRA is currently consulting on the proposed changes. The impact on the Group and its subsidiaries will not be known until APRA finalises its
review. APRA intends to have the revised related entities framework implemented by in the first half of 2020.

47

GROUP RESULTS
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DIVISIONAL RESULTSCONTENTS

Page

Divisional Performance - continuing operations

50

Australia - continuing operations

55

Institutional - continuing operations

59

New Zealand - continuing operations

66

Wealth Australia - continuing operations71

Pacific - continuing operations

71

Technology, Services & Operations (TSO) and Group Centre - continuing operations

71

49

DIVISIONAL RESULTS
Divisional Performance - continuing operations
The Group operates on a divisional structure with six continuing divisions: Australia, Institutional, New Zealand, Wealth Australia, Pacific, andTechnology, Services & Operations (TSO) and Group Centre. For further information on the composition of divisions, refer to the Definitions on page 137.
The presentation of divisional results has been impacted by a number of methodology and structural changes during the period. Prior period
comparatives have been restated as follows:

The methodology for allocating earnings on capital at a business unit level has changed from Economic Capital to Regulatory Capital. While neutral
at a Group level, this change has impacted net interest income at the divisional level;The residual Asia Retail and Wealth businesses have been transferred from the former Asia Retail and Pacific division to TSO and Group Centre
division. The remaining segment has been renamed Pacific division; and

ANZ’s lenders mortgage insurance, share investing and general insurance distribution businesses which were previously part of the continuing
operations of Wealth Australia now form part of the Australia division (ANZ’s financial planning business continues to be part of the continuing
operations of the Wealth Australia division).

The divisional results were also impacted by the adoption of two new accounting standards:


AASB 9 - the Group implemented an expected credit loss methodology for impairment of financial assets, and revised the classification andmeasurement of certain financial assets from 1 October 2018. Consequently, the Group increased its provision for credit impairment by $813 million
through opening retained earnings. Comparative information has not been restated.



AASB 15 - the main impact of adoption is that certain items previously netted are now presented gross in operating income and operating expenses.
Comparative information has been restated which increased total operating income for the September 2018 half by $91 million (Mar 18 half: $62
million) and increased total operating expenses by the same amount.

Other than those described above, there have been no other significant changes.
The Divisional Results section is reported on a cash profit basis for continuing operations. For information on discontinued operations pleaserefer to the Guide to Half Year Results on page 8.
The divisions reported are consistent with internal reporting provided to the chief operating decision maker, being the Chief Executive Officer.

50

DIVISIONAL RESULTS
Cash profit by division - March 2019 Half Year v March 2018 Half Year

March 2019 Half YearNet interest income

Australia$M
4,091

Institutional
$M
1,579

New Zealand
$M
1,385

WealthAustralia$M
1

Pacific$M
68

TSO andGroup
Centre
$M
175

Group
$M
7,299
2,447

625

1,126

302

26

50

318

Operating income

4,716

2,705

1,687

27

118

493

9,746

Operating expenses(1,843)(1,320)

(612)

(70)

(70)

(450)

(4,365)

Profit before credit impairment and income tax

2,873

1,385

1,075

(43)

48

43

5,381

Other operating income

Credit impairment (charge)/release

(396)

35

(30)

-

(2)

-

(393)

Profit/(Loss) before income tax

2,477

1,420

1,045

(43)

46

43

4,988

Income tax expense and non-controlling interests

(744)

(408)

(292)

13

(13)

20

(1,424)

Cash profit/(loss) from continuing operations

1,733

1,012

753

(30)

33

63

3,564

New Zealand
$M
1,309

WealthAustralia$M
1

Pacific$M
65

TSO andGroup
Centre
$M
170

Group
$M
7,350

March 2018 Half YearNet interest income
Other operating income

Australia$M
4,325

Institutional
$M
1,480

728

1,031

343

48

47

323

2,520

Operating income

5,053

2,511

1,652

49

112

493

9,870

Operating expenses(1,905)(1,373)

(592)

(85)

(63)

(455)

(4,473)

Profit before credit impairment and income tax

3,148

1,138

1,060

(36)

49

38

5,397

Credit impairment (charge)/release

(312)

(49)

(20)

-

(2)

(25)

(408)

Profit/(Loss) before income tax

2,836

1,089

1,040

(36)

47

13

4,989

Income tax expense and non-controlling interests

(853)

(322)

(291)

10

(14)

(26)

(1,496)

Cash profit/(loss) from continuing operations

1,983

767

749

(26)

33

(13)

3,493

Pacific
5%

TSO andGroup
Centre
3%

Group
-1%

6%

-2%

-3%

March 2019 Half Year vs March 2018 Half YearNet interest income
Other operating income

Australia-5%Institutional
7%

New Zealand
6%

WealthAustralia
0%

-14%

9%

-12%

-46%

Operating income

-7%

8%

2%

-45%

5%

0%

-1%

Operating expenses

-3%

-4%

3%

-18%

11%

-1%

-2%

Profit before credit impairment and income tax

-9%

22%

1%

19%

-2%

13%

0%

Credit impairment charge/(release)

27%

large

50%

n/a

0%

-100%

-4%

Profit/(Loss) before income tax

-13%

30%

0%

19%

-2%

large

0%

Income tax expense and non-controlling interests

-13%

27%

0%

30%

-7%

large

-5%

Cash profit/(loss) from continuing operations

-13%

32%

1%

15%

0%

large

2%

51

DIVISIONAL RESULTS
Cash profit by division - March 2019 Half Year v September 2018 Half Year

Pacific$M
68

TSO andGroup
Centre
$M
175

Group
$M
7,299

318

2,447

March 2019 Half YearNet interest income

Australia$M
4,091

Institutional
$M
1,579

New Zealand
$M
1,385

WealthAustralia$M
1

Other operating income

625

1,126

302

26

50

Operating income

4,716

2,705

1,687

27

118

493

9,746

Operating expenses(1,843)(1,320)

(612)

(70)

(70)

(450)

(4,365)

Profit before credit impairment and income tax

2,873

1,385

1,075

(43)

48

43

5,381

Credit impairment (charge)/release

(396)

35

(30)

-

(2)

-

(393)

Profit/(Loss) before income tax

2,477

1,420

1,045

(43)

46

43

4,988

Income tax expense and non-controlling interests

(744)

(408)

(292)

13

(13)

20

(1,424)

Cash profit/(loss) from continuing operations

1,733

1,012

753

(30)

33

63

3,564

New Zealand
$M
1,342

WealthAustralia$M
1

Pacific$M
66

TSO andGroup
Centre
$M
120

Group
$M
7,164
2,333

September 2018 Half YearNet interest income
Other operating income

Australia$M
4,122Institutional
$M
1,513

722

1,035

328

12

53

183

Operating income

4,844

2,548

1,670

13

119

303

9,497

Operating expenses(1,990)(1,575)

(613)

(95)

(65)

(590)

(4,928)

Profit before credit impairment and income tax

2,854

973

1,057

(82)

54

(287)

4,569

Credit impairment (charge)/release

(386)

93

14

-

(1)

-

(280)

Profit/(Loss) before income tax

2,468

1,066

1,071

(82)

53

(287)

4,289

Income tax expense and non-controlling interests

(742)

(353)

(299)

25

(14)

88

(1,295)

Cash profit/(loss) from continuing operations

1,726

713

772

(57)

39

(199)

2,994

Institutional
4%

New Zealand3%

WealthAustralia
0%

Pacific
3%

TSO andGroup
Centre
46%

Group
2%

March 2019 Half Year vs September 2018 Half YearNet interest income

Australia-1%

Other operating income

-13%

9%

-8%

large

-6%

74%

5%

Operating income

-3%

6%

1%

large

-1%

63%

3%

Operating expenses

-7%

-16%

0%

-26%

8%

-24%

-11%

Profit before credit impairment and income tax

1%

42%

2%

-48%

-11%

large

18%

Credit impairment charge/(release)

3%

-62%

large

n/a

100%

n/a

40%

Profit/(Loss) before income tax

0%

33%

-2%

-48%

-13%

large

16%

Income tax expense and non-controlling interests

0%

16%

-2%

-48%

-7%

-77%

10%

Cash profit/(loss) from continuing operations

0%

42%

-2%

-47%

-15%

large

19%

52

DIVISIONAL RESULTS
Cash profit by division (excluding large/notable items1) - March 2019 Half Year v March 2018 Half Year
The Group cash profit results include a number of items collectively referred to as large/notable items. While these items form part of cash profit they
have been excluded from the tables below given their nature and significance.

1.

Refer to pages 14 to 18 for a description of large/notable items.

March 2019 Half YearNet interest income

Australia$M
4,113

Institutional
$M
1,579

New Zealand
$M
1,381

WealthAustralia$M
1

Pacific$M
68

TSO andGroup
Centre
$M
178

Group
$M
7,320
2,233

656

1,126

280

37

50

84

Operating income

4,769

2,705

1,661

38

118

262

9,553

Operating expenses(1,787)(1,313)

(604)

(71)

(70)

(415)

(4,260)

Profit before credit impairment and income tax

2,982

1,392

1,057

(33)

48

(153)

5,293

Credit impairment (charge)/release

(396)

35

(30)

-

(2)

-

(393)

Profit/(Loss) before income tax

2,586

1,427

1,027

(33)

46

(153)

4,900

Income tax expense and non-controlling interests

(777)

(410)

(288)

10

(13)

56

(1,422)

Cash profit/(loss) from continuing operations

1,809

1,017

739

(23)

33

(97)

3,478

New Zealand
$M
1,302

WealthAustralia$M
1

Pacific$M
65

TSO andGroup
Centre
$M
124

Group
$M
7,314
2,196

Other operating income

March 2018 Half YearNet interest income
Other operating income

Australia$M
4,342

Institutional
$M
1,480

744

1,026

282

50

47

47

Operating income

5,086

2,506

1,584

51

112

171

9,510

Operating expenses(1,831)(1,365)

(571)

(67)

(63)

(397)

(4,294)

Profit before credit impairment and income tax

3,255

1,141

1,013

(16)

49

(226)

5,216

Credit impairment (charge)/release

(312)

(49)

(20)

-

(2)

1

(382)

Profit/(Loss) before income tax

2,943

1,092

993

(16)

47

(225)

4,834

Income tax expense and non-controlling interests

(885)

(325)

(278)

4

(14)

71

(1,427)

Cash profit/(loss) from continuing operations

2,058

767

715

(12)

33

(154)

3,407

WealthAustralia
0%

Pacific
5%

TSO andGroup
Centre
44%

Group
0%
2%

March 2019 Half Year vs March 2018 Half Year

Australia-5%Institutional
7%

New Zealand
6%

Other operating income

-12%

10%

-1%

-26%

6%

79%

Operating income

-6%

8%

5%

-25%

5%

53%

0%

Operating expenses

-2%

-4%

6%

6%

11%

5%

-1%

Net interest income

Profit before credit impairment and income tax

-8%

22%

4%

large

-2%

-32%

1%

Credit impairment charge/(release)

27%

large

50%

n/a

0%

-100%

3%

Profit/(Loss) before income tax

-12%

31%

3%

large

-2%

-32%

1%

Income tax expense and non-controlling interests

-12%

26%

4%

large

-7%

-21%

0%

Cash profit/(loss) from continuing operations

-12%

33%

3%

92%

0%

-37%

2%

53

DIVISIONAL RESULTS
Cash profit by division (excluding large/notable items1) - March 2019 Half Year v September 2018 Half Year

1.

Refer to pages 14 to 18 for a description of large/notable items.

March 2019 Half YearNet interest income

Australia$M
4,113

Institutional
$M
1,579

New Zealand
$M
1,381

WealthAustralia$M
1

Pacific$M
68

TSO andGroup
Centre
$M
178

Group
$M
7,320
2,233

656

1,126

280

37

50

84

Operating income

4,769

2,705

1,661

38

118

262

9,553

Operating expenses(1,787)(1,313)

(604)

(71)

(70)

(415)

(4,260)

Profit before credit impairment and income tax

2,982

1,392

1,057

(33)

48

(153)

5,293

Credit impairment (charge)/release

(396)

35

(30)

-

(2)

-

(393)

Profit/(Loss) before income tax

2,586

1,427

1,027

(33)

46

(153)

4,900

Income tax expense and non-controlling interests

(777)

(410)

(288)

10

(13)

56

(1,422)

Cash profit/(loss) from continuing operations

1,809

1,017

739

(23)

33

(97)

3,478

New Zealand
$M
1,345

WealthAustralia$M
1

Pacific$M
66

TSO andGroup
Centre
$M
127

Group
$M
7,248

Other operating income

September 2018 Half YearNet interest income
Other operating income

Australia$M
4,196

Institutional
$M
1,513

787

1,046

270

44

53

113

2,313

Operating income

4,983

2,559

1,615

45

119

240

9,561

Operating expenses(1,794)(1,335)

(583)

(65)

(65)

(466)

(4,308)

Profit before credit impairment and income tax

3,189

1,224

1,032

(20)

54

(226)

5,253

Credit impairment (charge)/release

(386)

93

14

-

(1)

-

(280)

Profit/(Loss) before income tax

2,803

1,317

1,046

(20)

53

(226)

4,973

Income tax expense and non-controlling interests

(844)

(394)

(295)

6

(14)

51

(1,490)Cash profit/(loss) from continuing operations

1,959

923

751

(14)

39

(175)

3,483

New Zealand3%

WealthAustralia
0%

Pacific
3%

TSO andGroup
Centre
40%

Group
1%
-3%

March 2019 Half Year vs September 2018 Half YearNet interest income

Australia-2%

Institutional
4%

Other operating income

-17%

8%

4%

-16%

-6%

-26%

Operating income

-4%

6%

3%

-16%

-1%

9%

0%

Operating expenses

0%

-2%

4%

9%

8%

-11%

-1%

Profit before credit impairment and income tax

-6%

14%

2%

65%

-11%

-32%

1%

Credit impairment (charge)/release

3%

-62%

large

n/a

100%

n/a

40%

Profit/(Loss) before income tax

-8%

8%

-2%

65%

-13%

-32%

-1%

Income tax expense and non-controlling interests

-8%

4%

-2%

67%

-7%

10%

-5%

Cash profit/(loss) from continuing operations

-8%

10%

-2%

64%

-15%

-45%

0%

54

DIVISIONAL RESULTS
Australia - continuing operations
Mark Hand
Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details.
Half Year
Mar 19$M
4,091

Net interest income

722

728

-13%

-14%

4,844

5,053

-3%

-7%

Operating expenses(1,843)(1,990)(1,905)-7%-3%

Profit before credit impairment and income tax

2,873

2,854

3,148

1%

-9%

Credit impairment charge

(396)

(386)

(312)

3%

27%

Profit before income tax

2,477

2,468

2,836

0%

-13%

Income tax expense and non-controlling interests

(744)

(742)

(853)

0%

-13%

Cash profit

1,733

1,726

1,983

0%

-13%

Balance Sheet
Net loans and advances

336,584

341,310

340,446-1%-1%

Other external assets

4,120

4,097

4,519

1%

-9%

External assets

340,704

345,407344,965-1%-1%

Customer deposits

203,366

202,732

204,165

0%

0%

9,603

10,387

10,869-8%-12%External liabilities

212,969

213,119

215,034

0%-1%

Risk weighted assets

159,279

159,281

161,283

0%-1%

Average gross loans and advances

341,282

342,757

339,6310%0%

Average deposits and other borrowings

202,765

202,530

203,2390%0%

RatiosReturn on average assets

1.01%

1.00%

1.16%

Net interest margin

2.61%

2.60%

2.78%

Operating expenses to operating income

39.1%

41.1%

37.7%

Operating expenses to average assets

1.08%

1.15%

1.12%

350

375

337

-7%

4%

0.21%

0.22%

0.20%
large

large

6%

22%

0%

-6%

Individually assessed credit impairment charge/(release) as a % of average GLA
Collectively assessed credit impairment charge/(release)Collectively assessed credit impairment charge/(release) as a % of average GLA1

11

(25)

0.01%

(0.01%)

Gross impaired assets

1,357

1,285

1,114

0.40%

0.37%

0.33%

Total full time equivalent staff (FTE)

13,02013,03913,914Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.

Cash Profit March 2019 v March 2018

Performance March 2019 v March 2018
Lending volumes decreased from lower system credit growth, asset
competition and more conservative home loan origination risk settings. Thiswas partly offset by growth in Business & Private Bank.
Net interest margin decreased as a result of increased funding costs, homeloan mix changes and higher discounting, the regulatory impact on credit
card pricing, and higher customer remediation. This was partially offset byhigher deposit margins and home loans re-pricing.
Other operating income decreased as the result of higher customer
remediation, and lower fee income due to the removal of fees and lower
volumes.
Operating expenses decreased due to a reduction in FTE and related
costs, lower redundancy expenses and consultancy spend. This waspartially offset by higher customer remediation and inflation.


46
0.03%

Gross impaired assets as a % of GLA1.

Mar 19v. Mar 18-5%625

Individually assessed credit impairment charge/(release)Mar 19v. Sep 18
-1%

4,716

Other external liabilities

Mar 18$M
4,325

Operating income

Other operating income

Sep 18$M
4,122

Movement

Credit impairment charges increased as a result of a weakening Australianeconomic outlook, and an increase in individually assessed provisions forbusiness and small business banking.

55

DIVISIONAL RESULTS
Australia - continuing operations
Mark Hand
Collectively assessed credit impairment charge/(release)

Half Year

Movement

Mar 19$M
35

Sep 18$M(27)

Mar 18$M(10)

Mar 19v. Sep 18
large

Mar 19v. Mar 18
large

Home Loans

49

21

8

large

large

Cards and Personal Loans

(16)

(45)

(18)

-64%

-11%

Deposits and Payments1

2

(3)

-

large

n/a

Business & Private Bank

11

38

(15)

-71%

large

Business Banking

4

43

(8)

-91%

large

Small Business Banking

5

(5)

(7)

large

large

Private Bank

2

-

-

n/a

n/a

46

11

(25)

large

large

Mar 18$M
198

Mar 19v. Sep 18-15%

RetailCollectively assessed credit impairment charge/(release)

Individually assessed credit impairment charge/(release)

Movement

Half Year
Mar 19$M
195

Retail

Sep 18$M
229

Mar 19v. Mar 18-2%

Home Loans

45

55

44

-18%

2%

Cards and Personal Loans

147

167

144

-12%

2%

Deposits and Payments1

3

7

10

-57%

-70%

Business & Private Bank

155

146

139

6%

12%

Business Banking

57

50

44

14%

30%

Small Business Banking

98

96

95

2%

3%

-

-

-

n/a

n/a

350

375

337

-7%

4%

Private Bank
Individually assessed credit impairment charge/(release)

Net loans and advances

As at

RetailHome Loans
Cards and Personal Loans

Movement

Mar 19$M
279,483

Sep 18$M
283,088

Mar 18$M
282,748

Mar 19v. Sep 18-1%

Mar 19v. Mar 18-1%

269,020

272,007271,146

-1%

-1%

9,574

10,128

10,595-5%-10%Deposits and Payments1

42

62

67

-32%

-37%

Wealth

847

891

940

-5%

-10%

Business & Private Bank

57,101

58,222

57,698-2%-1%

Business Banking

40,80541,277

40,777-1%0%

Small Business Banking

14,26515,002

15,345-5%-7%

Private Bank
Net loans and advances

2,031

1,943

1,576

5%

29%

336,584

341,310

340,446-1%-1%

Customer deposits

As at

RetailHome Loans2

Movement

Mar 19$M
117,374

Sep 18$M
119,763

Mar 18$M
120,990

Mar 19v. Sep 18-2%

Mar 19v. Mar 18-3%

26,91527,63927,488-3%-2%

Cards and Personal Loans

240

263

242

-9%

-1%
-3%

Deposits and Payments

90,21991,861

93,260-2%

Business & Private Bank

85,99282,96983,175

4%

3%

Business Banking

19,797

19,191

19,5583%

1%

Small Business Banking

40,61439,97638,9202%

4%Private Bank

25,581

23,802

24,697

7%

4%

Customer deposits

203,366

202,732

204,165

0%

0%

1.
2.

Net loans and advances for the deposits and payments business represent amounts in overdraft.
Customer deposit amounts for the home loans business represent balances in offset accounts.

56

DIVISIONAL RESULTS
Australia - continuing operations
Mark Hand

Retail$M
2,738

March 2019 Half YearNet interest income
Other operating income

B&PB
$M
1,353

Australia
Total
$M
4,091

400

225

625

Operating income

3,138

1,578

4,716

Operating expenses(1,243)(600)(1,843)
2,873

Profit before credit impairment and income tax

1,895

978

Credit impairment (charge)/release

(230)

(166)

(396)

Profit before income tax

1,665

812

2,477

Income tax expense and non-controlling interests

(500)

(244)

(744)

Cash profit

1,165

568

1,733

Individually assessed credit impairment charge/(release)

(195)

(155)

(350)

Collectively assessed credit impairment charge/(release)

(35)

(11)

(46)

Net loans and advances

279,483

57,101

336,584

Customer deposits

117,374

85,992

203,366

Risk weighted assets

107,257

52,022

159,279

March 2018 Half YearNet interest income

2,984

1,341

4,325

Other operating income

484

244

728

Operating income

3,468

1,585

5,053

Operating expenses(1,338)(567)(1,905)

Profit before credit impairment and income tax

2,130

1,018

3,148

Credit impairment (charge)/release

(188)

(124)

(312)

Profit before income tax

1,942

894

2,836

Income tax expense and non-controlling interests

(583)

(270)

(853)

Cash profit

1,359

624

1,983

Individually assessed credit impairment charge/(release)

(198)

(139)

(337)

Collectively assessed credit impairment charge/(release)

10

15

25

Net loans and advances

282,748

57,698340,446

Customer deposits

120,990

83,175204,165

Risk weighted assets

107,51453,769161,283

March 2019 Half Year vs March 2018 Half YearNet interest income

-8%

1%

-5%

Other operating income

-17%

-8%

-14%

Operating income

-10%

0%

-7%

Operating expenses

-7%

6%

-3%

Profit before credit impairment and income tax

-11%

-4%

-9%

Credit impairment (charge)/release

22%

34%

27%

Profit before income tax

-14%

-9%

-13%

Income tax expense and non-controlling interests

-14%

-10%

-13%

Cash profit

-14%

-9%

-13%

Individually assessed credit impairment charge/(release)

-2%

12%

4%

Collectively assessed credit impairment charge/(release)

large

large

large

Net loans and advances

-1%

-1%

-1%

Customer deposits

-3%

3%

0%

Risk weighted assets

0%

-3%

-1%

57

DIVISIONAL RESULTS
Australia - continuing operations
Mark Hand

Retail$M
2,738

March 2019 Half YearNet interest income
Other operating income

B&PB
$M
1,353

Australia
Total
$M
4,091

400

225

625

Operating income

3,138

1,578

4,716

Operating expenses(1,243)(600)(1,843)
2,873

Profit before credit impairment and income tax

1,895

978

Credit impairment (charge)/release

(230)

(166)

(396)

Profit before income tax

1,665

812

2,477

Income tax expense and non-controlling interests

(500)

(244)

(744)

Cash profit

1,165

568

1,733

Individually assessed credit impairment charge/(release)

(195)

(155)

(350)

Collectively assessed credit impairment charge/(release)

(35)

(11)

(46)

Net loans and advances

279,483

57,101

336,584

Customer deposits

117,374

85,992

203,366

Risk weighted assets

107,257

52,022

159,279

2,746

1,376

4,122

493

229

722

Operating income

3,239

1,605

4,844

Operating expenses(1,385)(605)(1,990)

Profit before credit impairment and income tax

1,854

1,000

2,854

Credit impairment (charge)/release

(202)

(184)

(386)

Profit before income tax

1,652

816

2,468

Income tax expense and non-controlling interests

(496)

(246)

(742)

Cash profit

1,156

570

1,726

Individually assessed credit impairment charge/(release)

(229)

(146)

(375)

September 2018 Half YearNet interest income
Other operating income

Collectively assessed credit impairment charge/(release)

27

(38)

(11)

Net loans and advances

283,088

58,222

341,310

Customer deposits

119,763

82,969202,732

Risk weighted assets

105,889

53,392

159,281

March 2019 Half Year vs September 2018 Half YearNet interest income
Other operating income

0%

-2%

-1%

-19%

-2%

-13%

Operating income

-3%

-2%

-3%

Operating expenses

-10%

-1%

-7%

Profit before credit impairment and income tax

2%

-2%

1%

Credit impairment (charge)/release

14%

-10%

3%

Profit before income tax

1%

0%

0%

Income tax expense and non-controlling interests

1%

-1%

0%

Cash profit

1%

0%

0%

Individually assessed credit impairment charge/(release)

-15%

6%

-7%

Collectively assessed credit impairment charge/(release)

large

-71%

large

Net loans and advances

-1%

-2%

-1%

Customer deposits

-2%

4%

0%

Risk weighted assets

1%

-3%

0%

58

DIVISIONAL RESULTS
Institutional - continuing operations
Mark Whelan
Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details.
Half Year

Movement

Net interest income

Mar 19$M
1,579

Sep 18$M
1,513

Mar 18$M
1,480

Mar 19v. Sep 18
4%

Mar 19v. Mar 18
7%

Other operating income

1,126

1,035

1,031

9%

9%

Operating income

2,705

2,548

2,511

6%

8%

Operating expenses(1,320)(1,575)(1,373)-16%-4%

Profit before credit impairment and income tax

1,385

973

1,138

42%

22%

35

93

(49)

-62%

large

Profit before income tax

1,420

1,066

1,089

33%

30%

Income tax expense and non-controlling interests

(408)

(353)

(322)

16%

27%

Cash profit

1,012

713

767

42%

32%

Balance Sheet
Net loans and advances

152,522150,108

138,179

2%

10%

Other external assets

307,198

276,607

281,079

11%

9%

External assets

459,720426,715

419,258

8%

10%

Customer deposits

205,364

205,809

190,733

0%

8%

Other deposits and borrowings

79,14867,374

68,19017%

16%

Deposits and other borrowings

284,512273,183

258,923

4%

10%

Other external liabilities

119,327

104,836

109,032

14%

9%

External liabilities

403,839

378,019

367,955

7%

10%

Risk weighted assets

167,406

163,713

165,614

2%

1%

Average gross loans and advances

153,982

144,488

137,864

7%

12%

Average deposits and other borrowings

281,770

269,578

257,874

5%9%

Ratios1
Return on average assets

0.44%

0.32%

0.36%

Net interest margin

0.85%

0.86%

0.89%

Net interest margin (excluding Markets)

2.10%

2.12%

2.09%

Operating expenses to operating income

48.8%

61.8%

54.7%

Operating expenses to average assets

0.58%

0.72%

0.65%

(12)

(52)

28

-77%

large

(0.02%)(0.07%)

0.04%

(23)

(41)

21

-44%

large

(0.03%)(0.06%)

0.03%
-16%

-40%

-2%

-6%

Credit impairment (charge)/release1

Individually assessed credit impairment charge/(release)2

Individually assessed credit impairment charge/(release) as a % of average GLA
Collectively assessed credit impairment charge/(release)Collectively assessed credit impairment charge/(release) as a % of average GLA2

373

442

626

Gross impaired assets as a % of GLA

Gross impaired assets

0.24%

0.29%

0.45%

Total full time equivalent staff (FTE)

6,085

6,188

6,505

1.
2.

Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.
Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.

Performance March 2019 v March 2018


Cash Profit March 2019 v March 2018

Lending volumes grew across Loans & Specialised Finance andTransaction Banking. Customer deposits grew in Markets andTransaction Banking.



Net interest margin ex-Markets increased due to higher deposit margins,partially offset by a reduction in lending margins.



Other operating income increased as a result of higher Markets income
from Franchise Sales and Trading, partially offset by lower Balance
Sheet income.



Operating expenses decreased due to a reduction in FTE and related
costs, and lower ongoing software amortisation charges. This waspartially offset by inflation.

Credit impairment charges decreased primarily due to a reduction incollectively and individually assessed provisions in Loans & Specialised
Finance, partially offset by lower write-backs.

59

DIVISIONAL RESULTS
Institutional - continuing operations
Mark Whelan

Institutional by Geography1
Half Year
Mar 19$M
874

Australia
Net interest income

Sep 18$M
843

Movement
Mar 18$M
821

Mar 19v. Sep 18
4%

Mar 19v. Mar 18
6%
7%

484

511

453

-5%

Operating income

1,358

1,354

1,274

0%

7%

Operating expenses

(606)

(625)

(616)

-3%

-2%

Profit before credit impairment and income tax

752

729

658

3%

14%

5

66

(18)

-92%

large

Other operating income

Credit impairment (charge)/release
Profit before income tax

757

795

640

-5%

18%

Income tax expense and non-controlling interests

(227)

(238)

(190)

-5%

19%

Cash profit

530

557

450

-5%

18%

Individually assessed credit impairment charge/(release)

(1)

(28)

(18)

-96%

-94%

Collectively assessed credit impairment charge/(release)

(4)

(38)

36

-89%

large

Net loans and advances

84,63485,24378,197-1%

8%

Customer deposits

71,62378,562

77,466-9%-8%

Risk weighted assets

84,61782,99385,181

2%

-1%

546

520

515

5%

6%

Asia, Pacific, Europe, and America
Net interest income

535

414

444

29%

20%

Operating income

1,081

934

959

16%

13%

Operating expenses

(633)

(864)

(675)

-27%

-6%

Profit before credit impairment and income tax

448

70

284

large

58%

Credit impairment (charge)/release

31

25

13

24%

large
61%

Other operating income

Profit before income tax

479

95

297

large

Income tax expense and non-controlling interests

(129)

(65)

(90)

98%

43%

Cash profit

350

30

207

large

69%

Individually assessed credit impairment charge/(release)

(6)

(25)

3

-76%

large

Collectively assessed credit impairment charge/(release)

(25)

-

(16)

n/a

56%

Net loans and advances

60,45658,282

52,760

4%

15%

Customer deposits

116,080

111,717

97,8694%

19%

Risk weighted assets

71,24870,456

69,565

1%

2%

New Zealand
Net interest income

159

150

144

6%

10%

Other operating income

107

110

134

-3%

-20%

Operating income

266

260

278

2%

-4%

Operating expenses

(81)

(86)

(82)

-6%

-1%

Profit before credit impairment and income tax

185

174

196

6%

-6%

(1)

2

(44)

large

-98%

184

176

152

5%

21%

Credit impairment (charge)/release
Profit before income tax
Income tax expense and non-controlling interests

(52)

(50)

(42)

4%

24%

Cash profit

132

126

110

5%

20%

Individually assessed credit impairment charge/(release)

(5)

1

43

large

large

Collectively assessed credit impairment charge/(release)

6

(3)

1

large

large

Net loans and advances

7,432

6,583

7,222

13%

3%

Customer deposits

17,661

15,53015,398

14%

15%

Risk weighted assets

11,541

10,264

10,868

12%

6%

1.

Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

60

DIVISIONAL RESULTS
Institutional - continuing operations
Mark Whelan
Half Year

Individually assessed credit impairment charge/(release)

Transaction Banking
Loans & Specialised FinanceMarkets
Central Functions
Individually assessed credit impairment charge/(release)

Movement

Mar 19$M(3)

Sep 18$M(6)

Mar 18
$M
11

(10)

(45)

17

-78%

large

-

(3)

(1)

-100%

-100%

Mar 19v. Sep 18-50%

Mar 19v. Mar 18
large

1

2

1

-50%

0%

(12)

(52)

28

-77%

large

Half Year

Collectively assessed credit impairment charge/(release)

Movement

Mar 19$M
6

Sep 18$M(5)

Mar 18$M(7)

Mar 19v. Sep 18
large

Mar 19v. Mar 18
large

Loans & Specialised Finance

(22)

(35)

26

-37%

large

Markets

(6)

-

1

n/a

large

Central Functions

(1)

(1)

1

0%

large

Collectively assessed credit impairment charge/(release)

(23)

(41)

21

-44%

large

Transaction Banking

As at

Net loans and advances1

Transaction Banking

Mar 19$M
18,177

Sep 18$M
17,318Loans & Specialised Finance

107,759

101,157

Markets

25,902

31,201

Central Functions
Net loans and advances

Movement
Mar 18$M
16,701

Mar 19v. Sep 18
5%

Mar 19v. Mar 18
9%94,4167%

14%

26,612

-17%

-3%

684

432

450

58%

52%

152,522150,108

138,179

2%

10%

As at

Customer deposits1
Mar 19$M
99,479Transaction Banking
Loans & Specialised FinanceSep 18$M
99,519Movement
Mar 18$M
95,707

Mar 19v. Sep 18
0%

Mar 19v. Mar 18
4%

925

1,289

1,336

-28%

-31%

102,411

102,490

91,2370%

12%Central Functions

2,549

2,511

2,453

2%

4%

Customer deposits

205,364

205,809

190,733

0%8%Markets

1.

Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

61

DIVISIONAL RESULTS
Institutional - continuing operations
Mark Whelan

Loans &
Specialised
Finance$M742

Markets$M
280

Central
Functions$M
26

Institutional
Total
$M
1,579
1,126

March 2019 Half Year1
Net interest income

Transaction
Banking$M
531

Other operating income

363

77

667

19

Operating income

894

819

947

45

2,705

Operating expenses

(406)

(322)

(550)

(42)

(1,320)

Profit/(Loss) before credit impairment and income tax

488

497

397

3

1,385

(3)

32

6

-

35

Profit/(Loss) before income tax

485

529

403

3

1,420

Income tax expense and non-controlling interests

(133)

(142)

(120)

(13)

(408)

Cash profit/(loss)

352

387

283

(10)

1,012

Individually assessed credit impairment charge/(release)

(3)

(10)

-

1

(12)

Collectively assessed credit impairment charge/(release)

6

(22)

(6)

(1)

(23)

Net loans and advances

18,177

107,759

25,902

684

152,522

Customer deposits

99,479925

102,4112,549

205,364

Risk weighted assets

25,47593,19847,902

831

167,406

March 2018 Half YearNet interest income

452

644

355

29

1,480

Credit impairment (charge)/release

Other operating income

362

90

552

27

1,031

Operating income

814

734

907

56

2,511

Operating expenses

(407)

(322)

(619)

(25)

(1,373)

Profit/(Loss) before credit impairment and income tax

407

412

288

31

1,138

(4)

(43)

-

(2)

(49)

Credit impairment (charge)/release
Profit/(Loss) before income tax

403

369

288

29

1,089

Income tax expense and non-controlling interests

(116)

(101)

(77)

(28)

(322)

Cash profit

287

268

211

1

767

Individually assessed credit impairment charge/(release)

11

17

(1)

1

28

Collectively assessed credit impairment charge/(release)

(7)

26

1

1

21

Net loans and advances

16,701

94,416

26,612450

138,179

Customer deposits

95,707

1,336

91,2372,453

190,733

Risk weighted assets

25,726

87,881

51,084923

165,614

March 2019 Half Year vs March 2018 Half YearNet interest income

17%

15%

-21%

-10%

7%

Other operating income

0%

-14%

21%

-30%

9%

Operating income

10%

12%

4%

-20%

8%

Operating expenses

0%

0%

-11%

68%

-4%

Profit/(Loss) before credit impairment and income tax

20%

21%

38%

-90%

22%

Credit impairment (charge)/release

-25%

large

n/a

-100%

large

Profit/(Loss) before income tax

20%

43%

40%

-90%

30%

Income tax expense and non-controlling interests

15%

41%

56%

-54%

27%

Cash profit/(loss)

23%

44%

34%

large

32%

Individually assessed credit impairment charge/(release)

large

large

-100%

0%

large

Collectively assessed credit impairment charge/(release)

large

large

large

large

large

Net loans and advances

9%

14%

-3%

52%

10%

Customer deposits

4%

-31%

12%

4%

8%

Risk weighted assets

-1%

6%

-6%

-10%

1%

1.

Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

62

DIVISIONAL RESULTS
Institutional - continuing operations
Mark Whelan

Loans &
Specialised
Finance$M742

Markets$M
280

Central
Functions$M
26

Institutional
Total
$M
1,579
1,126

1

March 2019 Half YearNet interest income

Transaction
Banking$M
531

Other operating income

363

77

667

19

Operating income

894

819

947

45

2,705

Operating expenses

(406)

(322)

(550)

(42)

(1,320)

Profit/(Loss) before credit impairment and income tax

488

497

397

3

1,385

(3)

32

6

-

35

Profit/(Loss) before income tax

485

529

403

3

1,420

Income tax expense and non-controlling interests

(133)

(142)

(120)

(13)

(408)

Cash profit/(loss)

352

387

283

(10)

1,012

Individually assessed credit impairment charge/(release)

(3)

(10)

-

1

(12)

Collectively assessed credit impairment charge/(release)

6

(22)

(6)

(1)

(23)

Net loans and advances

18,177

107,759

25,902

684

152,522

Customer deposits

99,479925

102,4112,549

205,364

Risk weighted assets

25,47593,19847,902

831

167,406

September 2018 Half Year1
Net interest income

475

710

303

25

1,513

Other operating income

359

82

577

17

1,035

Credit impairment (charge)/release

Operating income

834

792

880

42

2,548

Operating expenses

(418)

(316)

(561)

(280)

(1,575)

Profit/(Loss) before credit impairment and income tax

416

476

319

(238)

973

Credit impairment (charge)/release

11

80

3

(1)

93

Profit/(Loss) before income tax

427

556

322

(239)

1,066

Income tax expense and non-controlling interests

(121)

(147)

(82)

(3)

(353)

Cash profit/(loss)

306

409

240

(242)

713

Individually assessed credit impairment charge/(release)

(6)

(45)

(3)

2

(52)

Collectively assessed credit impairment charge/(release)

(5)

(35)

-

(1)

(41)

Net loans and advances

17,318101,157

31,201

432

150,108

Customer deposits

99,5191,289

102,490

2,511

205,809

Risk weighted assets

25,71787,47249,658866

163,713

March 2019 Half Year vs September 2018 Half YearNet interest income

12%

5%

-8%

4%

4%

Other operating income

1%

-6%

16%

12%

9%

Operating income

7%

3%

8%

7%

6%

Operating expenses

-3%

2%

-2%

-85%

-16%

Profit/(Loss) before credit impairment and income tax

17%

4%

24%

large

42%

Credit impairment (charge)/release

large

-60%

100%

-100%

-62%

Profit/(Loss) before income tax

14%

-5%

25%

large

33%

Income tax expense and non-controlling interests

10%

-3%

46%

large

16%

Cash profit/(loss)

15%

-5%

18%

-96%

42%

Individually assessed credit impairment charge/(release)

-50%

-78%

-100%

-50%

-77%

Collectively assessed credit impairment charge/(release)

-44%

large

-37%

n/a

0%

Net loans and advances

5%

7%

-17%

58%

2%

Customer deposits

0%

-28%

0%

2%

0%

Risk weighted assets

-1%

7%

-4%

-4%

2%

1.

Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

63

DIVISIONAL RESULTS
Institutional - continuing operations
Mark Whelan

Analysis of Markets operating income1
Half Year

Movement

Mar 19$M465

Sep 18$M
455

Mar 18$M
438

Mar 19v. Sep 18
2%

Franchise Trading3

226

151

177

50%

28%

Balance Sheet4

256

274

292

-7%

-12%

Markets operating income

947

880

907

8%

4%

(10)

52

11

large

large

Composition of Markets operating income by business activity
Franchise Sales2

Mar 19v. Mar 18
6%

Includes:Derivative valuation adjustments
1.
2.
3.

4.

Markets operating income includes net interest income and other operating income.
Franchise Sales represents direct client flow business on core products such as fixed income, foreign exchange, commodities and capital markets.
Franchise Trading primarily represents management of the Group’s strategic positions and those taken as part of direct client sales flow. Franchise Trading also includes the impact ofvaluation adjustments made when determining the fair value of derivatives (includes credit and funding adjustments, bid-offer adjustments and associated hedges).
Balance Sheet represents hedging of interest rate risk on the Group’s loan and deposit books and the management of the Group’s liquidity portfolio.

Half Year
Composition of Markets operating income by geography
Australia

Movement

Mar 19$M312

Sep 18$M
347

Mar 18$M
306

Mar 19v. Sep 18-10%

Mar 19v. Mar 18
2%

Asia, Pacific, Europe & America

507

408

456

24%

11%

New Zealand

128

125

145

2%

-12%

Markets operating income

947

880

907

8%

4%

64

DIVISIONAL RESULTS
Institutional - continuing operations
Mark Whelan
Market risk
Traded market risk
Below are aggregate Value at Risk (VaR) exposures at 99% confidence level covering both physical and derivatives trading positions for the Bank’s
principal trading centres.
99% confidence level (1 day holding period)

As atHigh for
periodLow forperiodAvg forperiodAs at

High foryear

Low foryear

Avg foryear

Mar 19$M

Mar 19$M

Mar 19$M

Mar 19$M

Sep 18$M

Sep 18$M

Sep 18$M

Sep 18$M
4.2

Value at Risk at 99% confidence
Foreign exchange

3.6

9.5

2.0

4.8

3.7

10.3

1.7

Interest rate

5.1

10.4

4.3

6.6

8.4

16.0

4.9

7.9

Credit

4.1

4.4

1.2

2.4

2.5

6.5

2.3

4.0

Commodities

2.3

3.9

1.4

2.1

3.7

4.5

1.4

3.1

-

-

-

-

-

-

-

-

(8.3)

n/a

n/a

(7.5)

(10.5)

n/a

n/a

(8.1)

6.8

13.4

5.8

8.4

7.8

19.9

6.9

11.1

EquityDiversification benefit
Total VaR

Non-traded interest rate risk
Non-traded interest rate risk is managed by Markets and relates to the potential adverse impact of changes in market interest rates on future net interest
income for the Group. Interest rate risk is reported using various techniques including VaR and scenario analysis based on a 1% shock.
99% confidence level (1 day holding period)

As atHigh for
periodLow forperiodAvg forperiodAs at

High foryear

Low foryear

Avg foryear

Mar 19$M

Mar 19$M

Mar 19$M

Mar 19$M

Sep 18$M

Sep 18$M

Sep 18$M

Sep 18$M
23.6

Value at Risk at 99% confidence
Australia

17.2

18.3

16.4

17.4

21.9

32.7

20.3

New Zealand

8.1

8.1

7.1

7.6

6.8

7.1

5.6

6.6

Asia, Pacific, Europe & America

16.9

17.7

12.9

15.5

15.1

15.1

12.5

13.7

Diversification benefit(14.1)

n/a

n/a(14.0)(16.1)

n/an/a(14.4)

28.1

28.1

25.2

26.5

27.7

36.4

26.0

29.5

Total VaR

Impact of 1% rate shock on the next 12 months’ net interest income margin
As at
As at period end

Mar 190.45%

Sep 18 1
1.21%

Maximum exposure

0.94%

1.79%

Minimum exposure

0.32%

0.77%

Average exposure (in absolute terms)

0.63%

1.11%

1.

Prior period numbers have been restated to reflect IRR model enhancements.

65

DIVISIONAL RESULTS
New Zealand - continuing operations
David Hisco
Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details (in AUD).
Table reflects NZD for New Zealand (AUD results shown on page 70)
Half Year

Movement

Mar 19
NZD M
1,464

Sep 18
NZD M
1,455

Mar 18
NZD M
1,430

Other operating income1

300

293

308

2%

-3%

Net income from insurance business2

19

62

66

-69%

-71%

Operating income

1,783

1,810

1,804

-1%

-1%

Operating expenses

(647)

(664)

(646)

-3%

0%

Profit before credit impairment and income tax

1,136

1,146

1,158

-1%

-2%

Net interest income

Credit impairment (charge)/release

Mar 19v. Sep 18
1%

Mar 19v. Mar 18
2%

(31)

16

(22)

large

41%

Profit before income tax

1,105

1,162

1,136

-5%

-3%

Income tax expense and non-controlling interests

(309)

(325)

(318)

-5%

-3%

Cash profit

796

837

818

-5%

-3%

Balance Sheet3
Net loans and advances

124,024

121,550

118,596

2%

5%

Other external assets

3,549

4,515

4,910

-21%

-28%

External assets

127,573

126,065

123,506

1%

3%

Customer deposits

89,096

87,101

84,372

2%

6%

Other deposits and borrowings

2,240

2,486

2,555

-10%

-12%

Deposits and other borrowings

91,33689,58786,927

2%

5%

Other external liabilities

23,554

24,591

22,939-4%

3%

External liabilities

114,890

114,178

109,866

1%

5%

Risk weighted assets

62,26062,463

61,3320%

2%

Average gross loans and advances

123,000

120,587

118,091

2%

4%

Average deposits and other borrowings

91,231

88,05287,027

4%

5%

113

113

108

0%

5%

Funds under management

31,40330,66529,185

2%

8%

Average funds under management

30,38930,132

29,195

1%

4%

Ratios3
Return on average assets

1.26%

1.34%

1.35%

Net interest margin

2.39%

2.41%

2.43%

Operating expenses to operating income

36.3%

36.7%

35.8%

Operating expenses to average assets

1.03%

1.06%

1.07%
large

3%

-81%

-57%

-3%

-4%

-3%

-5%

Net funds management income

Individually assessed credit impairment charge/(release)
Individually assessed credit impairment charge/(release) as a % of average GLA4
Collectively assessed credit impairment charge/(release)Collectively assessed credit impairment charge/(release) as a % of average GLA4
Gross impaired assets

37

16

36

0.06%

0.03%

0.06%

(6)

(32)

(14)

(0.01%)(0.05%)(0.02%)

249

258

260

Gross impaired assets as a % of GLA

0.20%

0.21%

0.22%

Total full time equivalent staff (FTE)

6,003

6,165

6,319

1.

Includes net funds management income previously reported under net funds management and insurance income.
Relates to OnePath Life (NZ) Limited, a controlled entity, which was sold on 30 November 2018.
3. Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.
4. Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.
2.

Performance March 2019 v March 2018


Lending and customer deposit volumes grew across all portfolios and funds

Net interest margin decreased as a result of home loan and deposit portfolio

Cash Profit March 2019 v March 2018

under management increased during the period.
mix changes.
Operating income decreased primarily due to the loss of income as the resultof the OnePath Life (NZ) divestment, and a one-off insurance recovery in theprior period.

Operating expenses remained flat due to increased business investment andinflation, mostly offset by lower expenses as the result of the OnePath Life (NZ)
divestment and reduced FTE driven by customer migration to lower costchannels.

Credit impairment charges increased marginally, primarily due to the Agrieconomic cycle release in the prior period.

66

DIVISIONAL RESULTS
New Zealand - continuing operations
David Hisco
Individually assessed credit impairment charge/(release)

Half Year

RetailMovement

Mar 19NZD M

Sep 18NZD M

Mar 18
NZD M

24

27

-

2

Home Loans

Mar 19v. Sep 18

Mar 19v. Mar 18

23

-11%

4%

-

100%

-

Other

24

25

23

-4%

4%

Commercial

13

(11)

13

large

0%

Individually assessed credit impairment charge/(release)

37

16

36

large

3%

Collectively assessed credit impairment charge/(release)

Movement

Half Year

RetailMar 19NZD M

Sep 18NZD M

Mar 18NZD M

Mar 19v. Sep 18

Mar 19v. Mar 18
-38%

5

(10)

8

large

Home Loans

4

(1)

3

large

33%

Other

1

(9)

5

large

-80%

Commercial

(11)

(22)

(22)

-50%

-50%

Collectively assessed credit impairment charge/(release)

(6)

(32)

(14)

-81%

-57%

As at

Net loans and advances1

Movement

Mar 19
NZD M
81,108

Sep 18
NZD M
79,090Mar 18
NZD M
77,106

Home Loans

77,85175,68573,651

3%

6%

Other

3,257

3,405

3,455

-4%

-6%

RetailMar 19v. Sep 18
3%

Mar 19v. Mar 18
5%

Commercial

42,91642,46041,4901%

3%

Net loans and advances

124,024

121,550

118,596

2%

5%

As at

Customer deposits1

Movement

RetailMar 19NZD M
71,882

Sep 18
NZD M
70,260Mar 18
NZD M
67,735

Mar 19v. Sep 18
2%

Mar 19v. Mar 18
6%

Commercial

17,214

16,841

16,637

2%

3%

Customer deposits

89,096

87,101

84,372

2%

6%

1.

Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

67

DIVISIONAL RESULTS
New Zealand - continuing operations
David Hisco

March 2019 Half YearNet interest income

Retail
NZD M
940

Commercial
NZD M
517

Central
Functions
NZD M
7New Zealand
Total
NZD M
1,464

Other operating income1

291

10

(1)

300

Net income from insurance business2

19

-

-

19
1,783

Operating income

1,250

527

6

Operating expenses

(514)

(128)

(5)

(647)

Profit before credit impairment and income tax

736

399

1

1,136

Credit impairment (charge)/release

(29)

(2)

-

(31)

Profit before income tax

707

397

1

1,105

Income tax expense and non-controlling interests

(197)

(111)

(1)

(309)

Cash profit

510

286

-

796

Individually assessed credit impairment charge/(release)

24

13

-

37

Collectively assessed credit impairment charge/(release)

5

(11)

-

(6)

Net loans and advances

81,10842,916-124,024

Customer deposits

71,882

17,214-89,096

Risk weighted assets

29,89731,344

1,019

62,260March 2018 Half YearNet interest income

929

495

6

1,430

Other operating income1

280

10

18

308

Net income from insurance business2

67

-

(1)

66

Operating income

1,276

505

23

1,804

Operating expenses

(516)

(126)

(4)

(646)

Profit before credit impairment and income tax

760

379

19

1,158

Credit impairment (charge)/release

(31)

9

-

(22)

Profit before income tax

729

388

19

1,136

Income tax expense and non-controlling interests

(204)

(109)

(5)

(318)

Cash profit

525

279

14

818

Individually assessed credit impairment charge/(release)

23

13

-

36

Collectively assessed credit impairment charge/(release)

8

(22)

-

(14)

77,106

41,490-118,596

Net loans and advances3
3

Customer deposits

67,735

16,637-

84,372

Risk weighted assets3

29,44130,7481,143

61,332

March 2019 Half Year vs March 2018 Half YearNet interest income

1%

4%

17%

2%

Other operating income1

4%

0%

large

-3%

Net income from insurance business2

-72%

n/a

-100%

-71%

Operating income

-2%

4%

-74%

-1%

Operating expenses

0%

2%

25%

0%

Profit before credit impairment and income tax

-3%

5%

-95%

-2%

Credit impairment (charge)/release

-6%

large

n/a

41%

Profit before income tax

-3%

2%

-95%

-3%

Income tax expense and non-controlling interests

-3%

2%

-80%

-3%

Cash profit

-3%

3%

-100%

-3%

Individually assessed credit impairment charge/(release)

4%

0%

n/a

3%

Collectively assessed credit impairment charge/(release)

-38%

-50%

n/a

-57%

Net loans and advances3

5%

3%

n/a

5%

Customer deposits3

6%

3%

n/a

6%

Risk weighted assets3

2%

2%

-11%

2%

1.
2.
3.

Includes net funds management income previously reported under net funds management and insurance income.
Relates to OnePath Life (NZ) Limited, a controlled entity, which was sold on 30 November 2018.
Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

68

DIVISIONAL RESULTS
New Zealand - continuing operations
David Hisco

March 2019 Half YearNet interest income

Retail
NZD M
940

Commercial
NZD M
517

Central
Functions
NZD M
7New Zealand
Total
NZD M
1,464

Other operating income1

291

10

(1)

300

Net income from insurance business2

19

-

-

19

Operating income

1,250

527

6

1,783

Operating expenses

(514)

(128)

(5)

(647)

Profit/(Loss) before credit impairment and income tax

736

399

1

1,136

Credit impairment (charge)/release

(29)

(2)

-

(31)

Profit/(Loss) before income tax

707

397

1

1,105

Income tax expense and non-controlling interests

(197)

(111)

(1)

(309)

Cash profit/(Loss)

510

286

-

796

Individually assessed credit impairment charge/(release)

24

13

-

37

Collectively assessed credit impairment charge/(release)

5

(11)

-

(6)

Net loans and advances

81,10842,916-124,024

Customer deposits

71,882

17,214-89,096

Risk weighted assets

29,89731,344

1,019

62,260

September 2018 Half YearNet interest income

943

509

3

1,455

Other operating income1

284

10

(1)

293

2

63

-

(1)

62

Operating income

1,290

519

1

1,810

Operating expenses

(523)

(132)

(9)

(664)

Profit/(Loss) before credit impairment and income tax

767

387

(8)

1,146

Credit impairment (charge)/release

(17)

33

-

16

Net income from insurance businessProfit/(Loss) before income tax

750

420

(8)

1,162

Income tax expense and non-controlling interests

(209)

(118)

2

(325)

Cash profit/(Loss)

541

302

(6)

837

Individually assessed credit impairment charge/(release)

27

(11)

-

16

Collectively assessed credit impairment charge/(release)

(10)

(22)

-

(32)

Net loans and advances

79,09042,460-121,550

Customer deposits

70,26016,841-

87,101

Risk weighted assets

30,04331,264

1,156

62,463

1%

March 2019 Half Year vs September 2018 Half YearNet interest income

0%

2%

large

Other operating income1

2%

0%

0%

2%

-70%

n/a

-100%

-69%

Net funds management and insurance income2
Operating income

-3%

2%

large

-1%

Operating expenses

-2%

-3%

-44%

-3%

Profit/(Loss) before credit impairment and income tax

-4%

3%

large

-1%

Credit impairment (charge)/release

71%

large

n/a

large

Profit/(Loss) before income tax

-6%

-5%

large

-5%

Income tax expense and non-controlling interests

-6%

-6%

large

-5%

Cash profit/(Loss)

-6%

-5%

-100%

-5%

Individually assessed credit impairment charge/(release)

-11%

large

n/a

large

Collectively assessed credit impairment charge/(release)

large

-50%

n/a

-81%

Net loans and advances3

3%

1%

n/a

2%

Customer deposits3

2%

2%

n/a

2%

Risk weighted assets3

0%

0%

-12%

0%

1.
2.
3.

Includes net funds management income previously reported under net funds management and insurance income.
Relates to OnePath Life (NZ) Limited, a controlled entity, which was sold on 30 November 2018.
Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

69

DIVISIONAL RESULTS
New Zealand - continuing operations
David Hisco
Table reflects AUD for New Zealand
NZD results shown on page 66
Half Year

Movement

Mar 19$M
1,385

Sep 18$M
1,342

Mar 18$M
1,309

Other operating income1

284

271

283

5%

0%

Net income from insurance business2

18

57

60

-68%

-70%

Net interest income

Mar 19v. Sep 18
3%

Mar 19v. Mar 18
6%

Operating income

1,687

1,670

1,652

1%

2%

Operating expenses

(612)

(613)

(592)

0%

3%

Profit before credit impairment and income tax

1,075

1,057

1,060

2%

1%

(30)

14

(20)

large

50%

Profit before income tax

1,045

1,071

1,040

-2%

0%

Income tax expense and non-controlling interests

(292)

(299)

(291)

-2%

0%

Cash profit

753

772

749

-2%

1%

Consisting of:Retail

482

498

481

-3%

0%

Commercial

271

279

255

-3%

6%

-

(5)

13

-100%

-100%

753

772

749

-2%

1%

Balance Sheet3
Net loans and advances

118,840

111,333

111,360

7%

7%

Other external assets

3,401

4,136

4,611

-18%

-26%

External assets

122,241

115,469

115,971

6%

5%

Customer deposits

85,372

79,78079,225

7%

8%

Other deposits and borrowings

2,146

2,277

2,398

-6%

-11%

Credit impairment (charge)/release

Central Functions
Cash profit

Deposits and other borrowings

87,51882,057

81,623

7%

7%

Other external liabilities

22,57022,524

21,5400%5%External liabilities

110,088

104,581

103,163

5%

7%

Risk weighted assets

59,65857,21357,590

4%

4%

Average gross loans and advances

116,278

111,218

108,107

5%

8%

Average deposits and other borrowings

86,244

81,214

79,669

6%

8%

107

105

99

2%

8%

Funds under management

30,09028,087

27,404

7%

10%

Average funds under management

29,11927,791

26,727

5%

9%

Ratios3
Return on average assets

1.26%

1.34%

1.35%

Net interest margin

2.39%

2.41%

2.43%

Operating expenses to operating income

36.3%

36.7%

35.8%

Operating expenses to average assets

1.03%

1.06%

1.07%

35

15

34

large

3%

Individually assessed credit impairment charge/(release) as a % of average GLA4

0.06%

0.03%

0.06%

Collectively assessed credit impairment charge/(release)Collectively assessed credit impairment charge/(release) as a % of average
GLA4
Gross impaired assets

(5)

(29)

(14)

-83%

-64%

(0.01%)(0.05%)(0.03%)

238

236

244

1%

-2%

Gross impaired assets as a % of GLA

0.20%

0.21%

0.22%

Total full time equivalent staff (FTE)

6,003

6,165

6,319

-3%

-5%

Net funds management income

Individually assessed credit impairment charge/(release)1.

Includes net funds management income previously reported under net funds management and insurance income.
Relates to OnePath Life (NZ) Limited, a controlled entity, which was sold on 30 November 2018.
3. Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.
4. Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.
2.

70

DIVISIONAL RESULTS
Wealth Australia - continuing operations
Alexis George
Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details.
Half Year

Movement

Mar 19$M1

Sep 18$M
1

Mar 18$M
1

Mar 19v. Sep 18
0%

Mar 19v. Mar 18
0%

Other operating income

26

12

48

large

-46%

Operating income

27

13

49

large

-45%

Operating expenses

(70)

(95)

(85)

-26%

-18%

Profit before credit impairment and income tax

(43)

(82)

(36)

-48%

19%

-

-

-

n/a

n/a

Profit before income tax

(43)

(82)

(36)

-48%

19%

Income tax expense and non-controlling interests

13

25

10

-48%

30%

Net interest income

Credit impairment (charge)/releaseCash profit from continuing operations

(30)

(57)

(26)

-47%

15%

Total full time equivalent staff (FTE)1

640

692

759

-8%

-16%

1.

FTE are allocated between continuing and discontinued operations. The actual FTE that will transfer to IOOF or Zurich on sale completion or at a later date is currently being determined.

Pacific - continuing operations
David Hisco
Half Year
Mar 19$M
68

Net interest income

Sep 18$M
66

Movement
Mar 18$M
65

Mar 19v. Sep 18
3%

Mar 19v. Mar 18
5%

Other operating income

50

53

47

-6%

6%

Operating income

118

119

112

-1%

5%

Operating expenses

(70)

(65)

(63)

8%

11%

Profit/(Loss) before credit impairment and income tax

48

54

49

-11%

-2%

Credit impairment (charge)/release

(2)

(1)

(2)

100%

0%

Profit/(Loss) before income tax

46

53

47

-13%

-2%

Income tax expense and non-controlling interests

(13)

(14)

(14)

-7%

-7%

Cash profit/(loss)

33

-15%

0%

33

39

Balance Sheet
Net loans and advances

2,135

2,114

2,166

1%

-1%

Customer deposits

3,474

3,467

3,370

0%

3%

Risk weighted assets

3,840

3,915

3,827

-2%

0%

Total full time equivalent staff (FTE)

1,096

1,125

1,172

-3%

-6%

TSO and Group Centre - continuing operations
Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details of these items.
Half Year

Movement

Share of associates profit

Mar 19$M
126

Sep 18$M
92

Operating income (other)

367

211

Operating income

493

303

Operating expenses

(450)

(590)

43
-

Profit/(Loss) before income tax

43

(287)

13

large

large

Income tax expense and non-controlling interests

20

88

(26)

-77%

large

Cash profit/(loss)

63

(199)

(13)

large

large

Profit/(Loss) before credit impairment and income tax
Credit impairment (charge)/release

Mar 18$M
87

Mar 19v. Sep 18
37%

Mar 19v. Mar 18
45%

406

74%

-10%

493

63%

0%

(455)

-24%

-1%

(287)

38

large

13%

-

(25)

n/a

-100%

Risk weighted assets

5,594

6,230

7,033

-10%

-20%

Total full time equivalent staff (FTE)1

10,52010,651

10,986

-1%

-4%

1.

FTE are allocated between continuing and discontinued operations. The actual FTE that will transfer to IOOF or Zurich on sale completion or at a later date is currently being determined.

71

DIVISIONAL RESULTS
This page has been left blank intentionally72

PROFIT RECONCILIATIONCONTENTS

Page

Adjustments between statutory profit and cash profit

74

Explanation of adjustments between statutory profit and cash profit - continuing operations

74

Explanation of adjustments between statutory profit and cash profit - discontinued operations

75

Reconciliation of statutory profit to cash profit

76

73

PROFIT RECONCILIATION
Non-IFRS information
The Group provides additional measures of performance in the Consolidated Financial Report & Dividend Announcement which are prepared on a basis
other than in accordance with accounting standards. The guidance provided in ASIC’s Regulatory Guide 230 has been followed when presenting thisinformation.

Adjustments between statutory profit and cash profit
Cash profit represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group andDivisional performance against prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory
profit (refer to Definitions for further details). The adjustments made in arriving at cash profit are included in statutory profit which is subject to review
within the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cash profit is not subject to review by theexternal auditor. The external auditor has informed the Audit Committee that cash profit adjustments have been determined on a consistent basis acrosseach period presented.
Movement

Half Year

Statutory profit attributable to shareholders of the Company from continuing
operations

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

3,243

3,172

3,923

2%

-17%

Adjustments between statutory profit and cash profit from continuing operations
Revaluation of policy liabilities

77

(4)

(10)

large

large

Economic hedges

185

(124)

(124)

large

large

Revenue and expense hedges

60

(49)

40

large

50%

Structured credit intermediation trades

(1)

(1)

(3)

0%

-67%

-

-

(333)

n/a

-100%

321

(178)

(430)

large

large

3,564

2,994

3,493

19%

2%

(70)

(95)

(600)

-26%

-88%

Treasury shares adjustment

(18)

30

(23)

large

-22%

Revaluation of policy liabilities

38

-

6

n/a

large

Total adjustments between statutory profit and cash profit from discontinued operations

20

30

(17)

-33%

large

Cash profit/(loss) from discontinued operations

(50)

(65)

(617)

-23%

-92%

3,514

2,929

2,876

20%

22%

Sale of SRCB
Total adjustments between statutory profit and cash profit from continuing operations
Cash profit from continuing operations
Statutory profit attributable to shareholders of the Company from discontinued
operations
Adjustments between statutory profit and cash profit from discontinued operations

Cash profit

Explanation of adjustments between statutory profit and cash profit - continuing operations


Revaluation of policy liabilities - New Zealand division
When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of the obligation,with the impact of changes in the market discount rate each period being reflected in the Income Statement. ANZ includes the impact on the remeasurement of the insurance contract attributable to changes in market discount rates as an adjustment to statutory profit to remove the volatility
attributable to changes in market interest rates which reverts to zero over the life of the insurance contract. With the sale completion of the OnePath
Life (NZ) Ltd business, the March 2019 half includes the reversal of the life-to-date cash profit adjustments on the revaluation of policy liabilities sold.



Economic and revenue and expense hedges
The Group enters into economic hedges to manage its interest rate and foreign exchange risk which, in accordance with accounting standards, resultin fair value gains and losses being recognised within the Income Statement. ANZ removes the fair value adjustments from cash profit since the profit
or loss resulting from the hedge transactions will reverse over time to match with the profit or loss from the economically hedged item as part of cash
profit. This includes gains and losses arising from approved classes of derivatives not designated in accounting hedge relationships but which areconsidered to be economic hedges, including hedges of larger foreign exchange denominated revenue and expense streams, primarily NZD and
USD (and USD correlated), as well as ineffectiveness from designated accounting hedges.
Economic hedges comprise:Funding related swaps (primarily cross currency interest rate swaps) used to convert the proceeds of foreign currency debt issuances into
floating rate Australian dollar and New Zealand dollar debt. As these swaps do not qualify for hedge accounting, movements in the fair values
are recorded in the Income Statement. The main drivers of these fair values are currency basis spreads and Australian dollar and New Zealanddollar fluctuations against other major funding currencies.



Economic hedges of select structured finance and specialised leasing transactions that do not qualify for hedge accounting. The main drivers ofthese fair value adjustments are movements in the Australian and New Zealand term structure of interest rates.



Ineffectiveness from designated accounting hedge relationships.

74

PROFIT RECONCILIATIONIn the March 2019 half, the majority of the loss on economic hedges adjusted from cash profit relates to funding related swaps, principally fromnarrowing basis spreads on NZD/USD and USD/EUR currency pairs.
The loss on revenue and expense hedges adjusted from cash profit in the March 2019 half was due to the weakening of the AUD against the NZD.
Half Year
Mar 19$M260

Sep 18$M(174)

Mar 18
$M
(175)

85

(69)

57

Increase/(decrease) to cash profit before tax

345

(243)

(118)

Increase/(decrease) to cash profit after tax

245

(173)

(84)

Economic hedges
Revenue and expense hedges

Structured credit intermediation trades
ANZ entered into a series of structured credit intermediation trades prior to the Global Financial Crisis with eight US financial guarantors. This
involved selling credit default swaps (CDSs) as protection over specific debt structures and purchasing CDS protection over the same structures.
ANZ has subsequently exited its positions with six US financial guarantors and is monitoring the remaining two portfolios with a view to reducing theexposures when ANZ deems it cost effective relative to the perceived risk associated with a specific trade or counterparty.
The notional value of outstanding bought and sold CDSs at 31 March 2019 amounted to $0.3 billion (Sep 18: $0.3 billion; Mar 18: $0.3 billion). Whileboth the bought and sold CDSs are measured at fair value through profit and loss, the associated fair value movements do not fully offset due to theimpact of credit risk on the bought CDSs which is driven by market movements in credit spreads and AUD/USD and NZD/USD rates. The fair valueof the CDSs (excluding CVA) is $20 million (Sep 18: $26 million; Mar 18: $27 million) with CVA on the bought protection of $4 million (Sep 18: $4
million; Mar 18: $5 million).
The profit and loss associated with the bought and sold protection is included as an adjustment to cash profit as it relates to a legacy business where,
unless terminated early, the fair value movements are expected to reverse to zero in future periods.

Sale of Shanghai Rural Commercial Bank (SRCB)
On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB).
The impact of SRCB has been treated as an adjustment between statutory profit to cash profit. The rationale being the loss on reclassification to held
for sale was expected to be largely offset by the release of reserve gains on sale completion within the 2017 full year. The transaction was
subsequently completed in the March 2018 half and the entire impact of the transaction was recognised in cash profit.



Credit risk on impaired derivatives (nil profit after tax impact)
Derivative credit valuation adjustments on defaulted and impaired derivative exposures are reclassified to cash credit impairment charges to reflect
the manner in which the defaulted and impaired derivatives are managed.

Explanation of adjustments between statutory profit and cash profit - discontinued operations
Treasury shares adjustment
ANZ shares held by the Group in Wealth Australia (Mar 19: 15.5 million shares; Sep 18: 15.5 million shares; Mar 18: 14.8 million shares) are deemed
to be Treasury shares for accounting purposes. Dividends and realised and unrealised gains and losses from these shares are reversed as these are
not permitted to be recognised as income for statutory reporting purposes. In deriving cash profit, these earnings are included to ensure there is no
asymmetrical impact on the Group’s profits because the Treasury shares are held to support policy liabilities which are revalued through the Income
Statement.



Revaluation of policy liabilities - Wealth Australia division
When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of the obligation,with the impact of changes in the market discount rate each period being reflected in the Income Statement. ANZ includes the impact on the remeasurement of the insurance contract attributable to changes in market discount rates as an adjustment to statutory profit to remove the volatility
attributable to changes in market interest rates which reverts to zero over the life of the insurance contract.

75

PROFIT RECONCILIATION
Adjustments to statutory profit

March 2019 Half YearNet interest income

Economic
hedges

Revenue andexpensehedges

Structured
creditintermediation
trades

$M

$M

$M

$M

$M

$M

$M

$M

-

-

-

-

-

-

-

7,299

Statutory profit

Treasurysharesadjustment

Revaluationof policy
liabilities

$M

$M

7,299

-

Sale of
Credit risk Shanghai Rural
Total
on impaired
Commercial adjustments toderivatives
Bank statutory profit

Cash profit

77

-

(7)

-

-

-

-

-

(7)

70

Other

1,917

-

115

260

85

(1)

1

-

460

2,377
2,447

Net income from insurance business
Other operating income

1,994

-

108

260

85

(1)

1

-

453

Operating income

9,293

-

108

260

85

(1)

1

-

453

9,746

Operating expenses(4,365)

-

-

-

-

-

-

-

-

(4,365)

Profit before credit impairment and tax

4,928

-

108

260

85

(1)

1

-

453

5,381

Credit impairment charge

(392)

-

-

-

-

-

(1)

-

(1)

(393)

Profit before income tax

4,536

-

108

260

85

(1)

-

-

452

4,988

Income tax expense(1,284)

-

(31)

(75)

(25)

-

-

-

(131)

(1,415)

(9)

-

-

-

-

-

-

-

-

(9)

3,243

-

77

185

60

(1)

-

-

321

3,564

(70)

(18)

38

-

-

-

-

-

20

(50)

Profit after tax

3,173

(18)

115

185

60

(1)

-

-

341

3,514

September 2018 Half YearNet interest income

7,164

-

-

-

-

-

-

-

-

7,164

133

-

(6)

-

-

-

-

-

(6)

127

2,450

-

-

(174)

(69)

(1)

-

-

(244)

2,206

Non-controlling interests
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations

Net income from insurance business
Other
Other operating income

2,583

-

(6)

(174)

(69)

(1)

-

-

(250)

2,333

Operating income

9,747

-

(6)

(174)

(69)

(1)

-

-

(250)

9,497

Operating expenses(4,928)

-

-

-

-

-

-

-

-

(4,928)

Profit before credit impairment and tax

4,819

-

(6)

(174)

(69)

(1)

-

-

(250)

4,569

Credit impairment charge

(280)

-

-

-

-

-

-

-

-

(280)

Profit before income tax

4,539

-

(6)

(174)

(69)

(1)

-

-

(250)

4,289

Income tax expense(1,358)

-

2

50

20

-

-

-

72

(1,286)

(9)

-

-

-

-

-

-

-

-

(9)

3,172

-

(4)

(124)

(49)

(1)

-

-

(178)

2,994

Non-controlling interests
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit after tax

(95)

30

-

-

-

-

-

-

30

(65)

3,077

30

(4)

(124)

(49)

(1)

-

-

(148)

2,929

76

PROFIT RECONCILIATION
Adjustments to statutory profit

March 2018 Half YearNet interest income
Net income from insurance business
Other

Economic
hedges

Revenue andexpensehedges

Structured
creditintermediation
trades

$M

$M

$M

$M

$M

$M

$M

$M

-

-

-

-

-

-

-

-

7,350

140

-

(14)

-

-

-

-

-

(14)

126

2,747

-

-

(175)

57

(4)

-

(231)

(353)

2,394

Statutory profit

Treasurysharesadjustment

Revaluationof policy
liabilities

$M

$M

7,350

Sale of
Credit risk Shanghai Rural
Total
on impaired
Commercial adjustments toderivatives
Bank statutory profit

Cash profit

Other operating income

2,887

-

(14)

(175)

57

(4)

-

(231)

(367)

2,520

Operating income

10,237

-

(14)

(175)

57

(4)

-

(231)

(367)

9,870

Operating expenses(4,473)

-

-

-

-

-

-

-

-

(4,473)

Profit before credit impairment and tax

5,764

-

(14)

(175)

57

(4)

-

(231)

(367)

5,397

Credit impairment charge

(408)

-

-

-

-

-

-

-

-

(408)

Profit before income tax

5,356

-

(14)

(175)

57

(4)

-

(231)

(367)

4,989

Income tax expense(1,426)

-

4

51

(17)

1

-

(102)

(63)

(1,489)

(7)

-

-

-

-

-

-

-

-

(7)
3,493

Non-controlling interests
Profit after tax from continuing operations

3,923

-

(10)

(124)

40

(3)

-

(333)

(430)

Profit/(Loss) after tax from discontinued operations

(600)

(23)

6

-

-

-

-

-

(17)

(617)

Profit after tax

3,323

(23)

(4)

(124)

40

(3)

-

(333)

(447)

2,876

77

PROFIT RECONCILIATIONThis page has been left blank intentionally78

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - TABLE OF CONTENTSCONTENTS

Page

Condensed Consolidated Income Statement

81

Condensed Consolidated Statement of Comprehensive Income

82

Condensed Consolidated Balance Sheet83

Condensed Consolidated Cash Flow Statement

84

Condensed Consolidated Statement of Changes in Equity

85

Notes to Condensed Consolidated Financial Statements

86

Directors’ Declaration

120

Auditor’s Review Report and Independence Declaration

121

79

DIRECTORS’ REPORTThe Directors present their report on the Condensed Consolidated Financial Statements for the half year ended 31 March 2019.
Directors
The names of the Directors of the Company who held office during and since the end of the half year are:
Mr DM Gonski, AC

Chairman

Mr SC Elliott

Director and Chief Executive Officer

Ms IR Atlas

Director

Ms PJ Dwyer

Director

Ms SJ Halton, AO PSM

Director

Mr Lee Hsien Yang

Director, retired on 19 December 2018

Mr GR Liebelt

Director

Rt Hon Sir JP Key, GNZM AC

Director

Mr JT MacFarlane

Director

Result
The consolidated profit attributable to shareholders of the Company was $3,173 million, and consolidated profit attributable to shareholders of theCompany from continuing operations was $3,243 million. Further details are contained in Group Results on pages 21 to 47 which forms part of this report,
and in the Condensed Consolidated Financial Statements.
Review of operations
A review of the operations of the Group during the half year and the results of those operations are contained in the Group Results on pages 21 to 47
which forms part of this report.
Lead auditor’s independence declaration
The lead auditor’s independence declaration given under section 307C of the Corporations Act 2001 (as amended) is set out on page 121 which forms
part of this report.
Rounding of amounts
The amounts contained in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except whereotherwise indicated, as permitted by ASIC Corporations Instrument 2016/191.
Significant events since balance date
There have been no significant events from 31 March 2019 to the date of signing of this report.
Signed in accordance with a resolution of the Directors.

David M Gonski, AC
ChairmanShayne C Elliott
Director

30 April 201980

CONDENSED CONSOLIDATED INCOME STATEMENT

Australia and New Zealand Banking Group Limited
Half Year1
Note
Interest income
Interest expense

Movement

Mar 19$M
15,970

Sep 18$M
15,478Mar 18$M
14,849Mar 19v. Sep 18
3%

Mar 19v. Mar 18
8%
16%(8,671)(8,314)(7,499)4%

Net interest income

2

7,299

7,164

7,350

2%

-1%

Other operating income

2

1,786

2,355

2,659

-24%

-33%

Net income from insurance business
Share of associates' profit

2

77

133

140

-42%

-45%

2, 17

131

95

88

38%

49%

9,293

9,747

10,237

-5%

-9%

3

(4,365)(4,928)(4,473)

-11%

-2%

4,928

4,819

5,764

2%

-15%

(392)

(280)

(408)

40%

-4%

4,536

4,539

5,356

0%

-15%

(1,284)(1,358)(1,426)

-5%

-10%

3,252

3,181

3,930

2%

-17%

(70)

(95)

(600)

-26%

-88%

3,182

3,086

3,330

3%

-4%

3,173

3,077

3,323

3%

-5%

9

9

7

0%

29%

Operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment charge

9Profit before income tax
Income tax expense

4

Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations

11

Profit for the period
Comprising:
Profit attributable to shareholders of the Company
Profit attributable to non-controlling interests
Earnings per ordinary share (cents) including discontinued
operations
Basic

6

111.7

107.3

114.2

4%

-2%

Diluted

6

106.4

103.2

108.6

3%

-2%

Basic

6

114.1

110.6

134.8

3%

-15%

Diluted

6

108.7

106.2

127.4

2%

-15%

5

80

80

80

0%

0%

Earnings per ordinary share (cents) from continuing operations

Dividend per ordinary share (cents)
1.

On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has
been restated accordingly which increased total operating income and total operating expenses by $91 million for the September 2018 half and $62 million for the March 2018 half.

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

81CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Australia and New Zealand Banking Group Limited
As at
Mar 19$M
3,252

Profit for the period from continuing operations

Movement

Sep 18$M
3,181

Mar 18$M
3,930

Mar 19v Sep 18
2%

Mar 19v Mar 18
-17%

Other comprehensive income

Items that will not be reclassified subsequently to profit or loss
Investment securities - equity securities at FVOCI1

176

-

-

n/a

n/a

Other reserve movements

11

5

27

large

-59%

Foreign currency translation reserve2

834

(238)

460

large

81%

Other reserve movements1

517

(37)

174

large

large

Income tax attributable to the above items

(187)

3

(121)

large

55%

13

30

(5)

-57%

large

1,364

(237)

535

large

large

(70)

(95)

(600)

-26%

-88%

Items that may be reclassified subsequently to profit or loss

Share of associates' other comprehensive income3
Other comprehensive income after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Other comprehensive income after tax from discontinued operations
Total comprehensive income for the period

42

8

10

large

large

4,588

2,857

3,875

61%

18%

4,578

2,841

3,865

61%

18%

10

16

10

-38%

0%

Comprising total comprehensive income attributable to:Shareholders of the Company
Non-controlling interests
1.

2.
3.

On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist
under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 and Note 21 for further details. Comparative information has not been restated.
Includes foreign currency translation differences attributable to non-controlling interests of $1 million gain (Sep 18 half: $7 million gain; Mar 18 half: $3 million gain).
Share of associates’ other comprehensive income includes an FVOCI reserve gain of $5 million (available-for-sale revaluation reserve: Sep 18 half: $30 million gain; Mar 18 half: $2 million
loss), defined benefits gain of $7 million (Sep 18 half: nil; Mar18 half: nil) and a foreign currency translation reserve gain of $1 million (Sep 18 half: nil; Mar18 half: $3 million loss) that may
be reclassified subsequently to profit or loss.

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

82

CONDENSED CONSOLIDATED BALANCE SHEET

Australia and New Zealand Banking Group Limited

As At
AssetsCash and cash equivalents1

Note

Mar 19$M
93,996

Movement

Sep 18$M
84,636

Mar 18$M
82,071

Mar 19v. Sep 18
11%

Mar 19v. Mar 18
15%-20%

Settlement balances owed to ANZ

4,041

2,319

5,037

74%

Collateral paid

11,86011,043

10,863

7%

9%

Trading securities

42,85737,72245,05814%-5%

Derivative financial instruments

79,37568,42370,91516%

12%Investment securities2

78,882

-

-

n/a

n/a

-

74,284

70,239

-100%

-100%

609,255

604,438

589,468

1%

3%

944

882

1,229

7%

-23%

43,54945,24845,278-4%-4%

Available-for-sale assets2
Net loans and advances3

8

Regulatory deposits
Assets held for sale11

Investment in associates

2,737

2,553

2,481

7%

10%

Current tax assets

500

268

15

87%

large

Deferred tax assets

1,146

900

840

27%

36%

Goodwill and other intangible assets

5,017

4,930

5,338

2%

-6%

Premises and equipment

1,863

1,833

1,892

2%

-2%

Other assets

4,222

3,677

4,946

15%

-15%

Total assets

980,244

943,156

935,6704%

5%

12,371

11,810

10,577

5%

17%
-39%

Liabilities
Settlement balances owed by ANZ
Collateral received

5,726

6,542

9,395

-12%

634,989

618,150

616,2303%

3%80,871

69,67670,624

16%

15%

Current tax liabilities

159

300

371

-47%

-57%

Deferred tax liabilities

48

69

268

-30%

-82%

46,55547,15944,773-1%

4%

Payables and other liabilities

7,641

6,894

7,542

11%

1%

Provisions

2,221

1,972

1,532

13%

45%
13%

Deposits and other borrowings

10

Derivative financial instruments

Liabilities held for sale

11

Debt issuances

12

129,692

121,179

114,836

7%

Total liabilities

920,273883,751

876,148

4%

5%

Net assets

59,971

59,40559,522

1%

1%

Shareholders' equity
Ordinary share capital

15

26,04827,20527,933-4%-7%

Reserves

15

1,709

323

541

large

large

Retained earnings

15

32,06431,73730,922

1%

4%59,821

59,26559,396

1%

1%

150

140

126

7%

19%

59,971

59,40559,522

1%

1%

Share capital and reserves attributable to shareholders of the Company
Non-controlling interests

15

Total shareholders' equity
1.
2.

3.

Includes settlement balances owed to ANZ that meet the definition of cash and cash equivalents.
On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist
under AASB 9 and a new classification of investment securities was introduced. Refer Note 1 and 21 for further details. Comparative information has not been restated.
On adoption of AASB 9 on 1 October 2018, the Group increased the collectively assessed provisions by $813 million. Comparative information has not been restated. Refer to Note 1 and 21 forfurther details.

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

83CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Australia and New Zealand Banking Group Limited
The Condensed Consolidated Cash Flow Statement includes discontinued operations. Please refer to Note 11 for cash flows associated with discontinued
operations and cash and cash equivalents reclassified as held for sale.
Half Year1
Mar 19$M

Sep 18$M

Mar 18
$M

3,182

3,086

3,330

Provision for credit impairment charge

391

280

408

Depreciation and amortisation

428

714

485

(1)

(4)

-

Net derivatives/foreign exchange adjustment

1,614

5,818

903

(Gain)/loss on sale from divestments

(118)

(125)

(469)

-

61

632

(61)

52

(107)

Profit after income tax
Adjustments to reconcile to net cash flow from operating activities:(Profit)/loss on sale of premises and equipment(Gain)/loss on reclassification of businesses to held for sale
Other non-cash movements
Net (increase)/decrease in operating assets:
Collateral paid

(643)

77

(1,725)

Trading securities(5,525)9,713(1,148)Loans and advances

1,071(13,808)(11,431)

Investments backing policy liabilities2(211)(3,033)(881)(1,103)

(330)

(643)
14,023

Other assets
Net increase/(decrease) in operating liabilities:

9,056(1,816)

Settlement balances owed by ANZ

Deposits and other borrowings

443

1,257

596

Collateral received(924)(3,114)3,300

Life insurance contract policy liabilities2

110

3,133

1,130

Other liabilities

(126)

(292)

494

Total adjustments

4,401(1,417)

5,567

Net cash inflows/(outflows) from operating activities3

7,583

1,669

8,897

Purchases(16,999)(10,323)(13,483)

Proceeds from sale or maturity

13,508

7,922

12,670

706

104

2,044

-

1,000

-

Cash flows from investing activities
Investment securities/available-for-sale assets:4

Proceeds from divestments
Proceeds from Zurich reinsurance arrangement
Proceeds from IOOF secured notes

800

-

-

Other assets

(396)

(162)

394

(2,381)(1,459)1,625

Issue proceeds

16,982

10,383

14,692

Redemptions(10,781)(6,154)(9,744)(2,242)(2,267)(2,296)

(112)

-

(114)
(1,132)

Net cash inflows/(outflows) from investing activities
Cash flows from financing activities
Debt issuances:5

Dividends paid6
On market purchase of treasury shares
6(1,120)(748)

Net cash inflows/(outflows) from financing activities

2,727

1,214

1,406

Net increase in cash and cash equivalents

7,929

1,424

11,928Cash and cash equivalents at beginning of period

84,964

82,076

68,048

Effects of exchange rate changes on cash and cash equivalents

1,370

1,464

2,100

Cash and cash equivalents at end of period7

94,26384,964

82,076

Share buy-back1.

As a result of restatements impacting prior period balance sheet items, certain items in the Cash Flow Statement have restated accordingly. Refer Note 21 for further information.
Investments backing policy liabilities and life insurance contract policy liabilities have been reclassified as held for sale.
3. Net cash inflows/(outflows) from operating activities includes income taxes paid of $1,935 million (Sep 18 half: $1,858 million; Mar 18 half: $1,515 million).
4. On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist
under AASB 9 and a new classification of investment securities was introduced. Refer Note 1 and 21 for further details.
5. Non-cash changes in debt issuances includes fair value hedging loss of $1,459 million (Sep 18 half: $570 million gain; Mar 18 half: $873 million gain) and foreign exchange losses of $1,104
million (Sep 18 half: $2,732 million loss; Mar 18 half: $2,980 million loss).
6. Shares purchased to satisfy the dividend reinvestment plan in the March 2018 half were reclassified from Share buy-back to Dividends paid to conform with current period presentation.
7. Includes cash and cash equivalents recognised on the face of balance sheet of $93,996 million (Sep 18: $84,636 million; Mar 18: $82,071 million) and amounts recorded as part of assets
held for sale of $267 million (Sep 18: $328 million; Mar 18: $5 million).
2.

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

84

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Australia and New Zealand Banking Group Limited

As at 1 October 2017

Share capitaland reserves
attributable toshareholders of
the Company$M

Noncontrollinginterests$M

Total
shareholders'equity$M

Ordinary
share
capital 1$M

Reserves$M

Retainedearnings$M

29,08837

29,83458,959116

59,075

-

-

22

22

-

22

Impact on transition to AASB 15
Profit or loss from continuing operations

-

-

3,923

3,923

7

3,930

Profit or loss from discontinued operations

-

-

(600)

(600)

-

(600)

Other comprehensive income for the period from continuing operations

-

511

21

532

3

535

Other comprehensive income for the period from discontinued operations

-

10

-

10

-

10

-

521

3,344

3,865

10

3,875

Total comprehensive income for the period
Transactions with equity holders in their capacity as equity holders:2
Dividends paid
Dividend income on treasury shares held within the Group's
life insurance statutory funds
Group share buy-back3--(2,308)(2,308)-(2,308)

-

-

12

12

-

12

(1,132)--(1,132)-(1,132)

Treasury shares Wealth Australia adjustment

20

-

-

20

-

20

Group employee share acquisition scheme

(43)

-

-

(43)

-

(43)

Other equity movements:2

Other items
As at 31 March 2018

-

(17)

18

1

-

1

27,933541

30,92259,396

126

59,522
3,181

Profit or loss from continuing operations

-

-

3,172

3,172

9

Profit or loss from discontinued operations

-

-

(95)

(95)

-

(95)

Other comprehensive income for the period from continuing operations

-

(247)

3

(244)

7

(237)

Other comprehensive income for the period from discontinued operations

-

8

-

8

-

8

-

(239)

3,080

2,841

16

2,857

Dividends paid--

(2,277)(2,277)(2)(2,279)Dividend income on treasury shares held within the Group's
life insurance statutory funds

-

-

12

12

-

12

(748)

-

-

(748)

-

(748)

Treasury shares Wealth Australia adjustment

(22)

-

-

(22)

-

(22)

Group employee share acquisition scheme

42

-

-

42

-

42

-

21

-

21

-

21

27,205323

31,73759,265140

59,405

Total comprehensive income for the period
Transactions with equity holders in their capacity as equity holders:2

Group share buy-back3
Other equity movements:2

Other items
As at 30 September 2018
Impact on transition to AASB 9

-

14

(624)

(610)

-

(610)

Profit or loss from continuing operations

-

-

3,243

3,243

9

3,252

Profit or loss from discontinued operations

-

-

(70)

(70)

-

(70)

Other comprehensive income for the period from continuing operations

-

1,351

12

1,363

1

1,364

Other comprehensive income for the period from discontinued operations

-

42

-

42

-

42

-

1,393

3,185

4,578

10

4,588

-

-

(2,254)(2,254)-(2,254)

-

-

12

12

-

12

(1,120)--(1,120)-(1,120)Treasury shares Wealth Australia adjustment

-

-

-

-

-

-

Group employee share acquisition scheme

(37)

-

-

(37)

-

(37)

-

(21)

8

(13)

-

(13)

26,0481,709

32,064

59,821

150

59,971

Total comprehensive income for the period
Transactions with equity holders in their capacity as equity holders:2
Dividends paid
Dividend income on treasury shares held within the Group's
life insurance statutory funds
Group share buy-back3

Other equity movements:2

Other items
As at 31 March 2019
1.

2.
3.

No new shares were issued under the Dividend Reinvestment Plan (DRP) for the 2018 final dividend (nil shares for the 2018 Interim dividend; nil shares for the 2017 final dividend) as theshares were purchased on-market and provided directly to the shareholders participating in the DRP. On-market share purchases for the DRP in the March 2019 half were $199 million (Sep
18 half: $200 million; Mar 18 half: $192 million).
Current period and prior periods include discontinued operations.
The Company has completed its $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million worth of shares in the March 2019 half (Sep 18 half: $748 million;
Mar 18 half: $1,132 million) resulting in 42.0 million shares being cancelled in the March 2019 half (Sep 18 half: 26.6 million; Mar 18 half: 40.1 million).

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

85

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.

Basis of preparation

These Condensed Consolidated Financial Statements:

have been prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards (AASs);

should be read in conjunction with ANZ’s Annual Financial Statements for the year ended 30 September 2018 and any public announcements madeby the Parent Entity and its controlled entities (the Group) for the half year ended 31 March 2019 in accordance with the continuous disclosure
obligations under the Corporations Act 2001 and the ASX Listing Rules;

do not include all notes of the type normally included in ANZ’s Annual Financial Report;

are presented in Australian dollars unless otherwise stated; andwere approved by the Board of Directors on 30 April 2019.

i)Statement of Compliance

These Condensed Consolidated Financial Statements have been prepared in accordance with the Corporations Act 2001 and AASB 134 Interim
Financial Reporting which ensures compliance with IAS 34 Interim Financial Reporting.
ii) Accounting policies
These Condensed Consolidated Financial Statements have been prepared on the basis of accounting policies and using methods of computationconsistent with those applied in the 2018 ANZ Annual Financial Report with the exception of policies associated with new standards adopted during theperiod as discussed below.
Discontinued operations are excluded from the results of the continuing operations and are presented as a single line item ‘profit/(loss) after tax fromdiscontinued operations’ in the Condensed Consolidated Income Statement. Notes to the Condensed Consolidated Income Statement have beenpresented on a continuing basis. Assets and liabilities of discontinued operations have been presented as held for sale in the Condensed Consolidated
Balance Sheet as at 31 March 2019.
New standards adopted during the period
AASB 9 Financial Instruments (AASB 9)
The Group has applied AASB 9 effective from 1 October 2018 (with the exception of the ‘own credit’ requirements relating to financial liabilities
designated as measured at fair value, which were early adopted by the Group effective from 1 October 2013). In addition the Group chose to early adopt
AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with Negative Compensation (AASB 2017-6) effective from 1
October 2018.
AASB 9 and AASB 2017-6 stipulate new requirements for the impairment of financial assets, classification and measurement of financial assets andfinancial liabilities and general hedge accounting. Details of the key new requirements are outlined below, and a reconciliation of the transitional impact at
1 October 2018 is set out in Note 21.
Impairment
AASB 9 introduces a new impairment model based on expected credit losses (ECL). This model is applied to:Financial assets measured at amortised cost;

Debt instruments measured at fair value through other comprehensive income (FVOCI);

Lease receivables; andLoan commitments and financial guarantees not measured at fair value through profit or loss (FVTPL).

Expected credit loss impairment model
The measurement of expected credit losses reflects an unbiased, probability weighted prediction which evaluates a range of scenarios and takes into
account the time value of money, past events, current conditions and forecasts of future economic conditions.
Expected credit losses are either measured over 12 months or the expected lifetime of the financial asset, depending on credit deterioration sinceorigination, according to the following three-stage approach:Stage 1: At the origination of a financial asset, and where there has not been a significant increase in credit risk since origination, a provisionequivalent to 12 months ECL is recognised reflecting the expected credit losses resulting from default events that are possible within the next 12months from the reporting date. For instruments with a remaining maturity of less than 12 months, expected credit losses are estimated based on
default events that are possible over the remaining time to maturity.

Stage 2: Where there has been a significant increase in credit risk since origination, a provision equivalent to lifetime ECL is recognised reflecting
expected credit losses resulting from all possible default events over the expected life of a financial instrument. If credit risk were to improve in a
subsequent period such that the increase in credit risk since origination is no longer considered significant, the exposure returns to a Stage 1classification and a 12 month ECL applies.

Stage 3: Where there is objective evidence of impairment, a provision equivalent to lifetime ECL is recognised.

Expected credit losses are estimated on a collective basis for exposures in Stage 1 and Stage 2, and on either a collective or individual basis whentransferred to Stage 3.
Significant increase in credit risk (SICR)
Stage 2 assets are those that have experienced a significant increase in credit risk (SICR) since origination. In determining what constitutes a SICR, theBank considers both qualitative and quantitative information:

86

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
i.

Internal credit rating grade
For the majority of portfolios, the primary indicator of a SICR is a significant deterioration in the internal credit rating grade of a facility sinceorigination and is measured by application of thresholds.
For non-retail portfolios, a SICR is determined by comparing the Customer Credit Rating (CCR) applicable to a facility at reporting date to the CCR at
origination of that facility. A CCR is assigned to each borrower which reflects the probability of default of the borrower and incorporates bothborrower and non-borrower specific information, including forward looking information. CCRs are subject to review at least annually or more
frequently when an event occurs which could affect the credit risk of the customer.
For retail portfolios, a SICR is determined by comparing each facility’s scenario weighted lifetime probability of default at the reporting date to thescenario weighted lifetime probability of default at origination. The scenario weighted lifetime probability of default may increase significantly if:ii.

there has been a deterioration in the economic outlook, or an increase in economic uncertainty; orthere has been a deterioration in the customer’s overall credit position, or ability to manage their credit obligations.

Backstop criteria
The Bank uses 30 days past due arrears as a backstop criteria for both non-retail and retail portfolios. For retail portfolios only, facilities are required
to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.

Measurement of expected credit loss
ECL is calculated as the product of the following credit risk factors at a facility level, discounted to incorporate the time value of money:Probability of default (PD) - the estimate of the likelihood that a borrower will default over a given period;Exposure at default (EAD) - the expected balance sheet exposure at default taking into account repayments of principal and interest, expected
additional drawdowns and accrued interest; and

Loss given default (LGD) - the expected loss in the event of the borrower defaulting, expressed as a percentage of the facility's EAD, taking into
account direct and indirect recovery costs.

These credit risk factors are adjusted for current and forward looking information through the use of macro-economic variables.
Forward looking information
In applying forward looking information for estimating ECL, the Bank considers four probability-weighted forecast economic scenarios as follows:(i)Base case scenario
The base case scenario is ANZ’s view of the most likely future macro-economic conditions. It reflects management’s assumptions used for strategicplanning and budgeting, and also informs the Group Internal Capital Adequacy Assessment Process (ICAAP) which is the process the Bank applies
in strategic and capital planning over a 3 year time horizon;(ii) Upside and (iii) Downside scenarios
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based 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 events and uncertainty over long term horizons; and(iv) Severe downside scenario
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe impact of less likely
extremely adverse economic conditions. It reflects macro-economic conditions of a downturn economic event with a probability of occurrence once
every 25 years.
The four scenarios are described in terms of macro-economic variables used in the PD, LGD and EAD models (collectively the ECL models) dependingon the portfolio and country of the borrower. Examples of the variables include unemployment rates, GDP growth rates, house price indices, commercial
property price indices and consumer price indices.
Probability weighting each scenario is determined by management by considering risks and uncertainties surrounding the base case scenario, as well as
specific portfolio considerations where required. The Group’s Credit and Market Risk Committee (CMRC) is responsible for reviewing and approving
forecast economic scenarios and the associated probability weights applied to each scenario.
Where applicable, adjustments may be made to account for situations where known or expected risks have not been adequately addressed in themodelling process. CMRC is responsible for approving such adjustments.
Expected Life
When estimating ECL for exposures in Stage 2 and 3, the Bank considers the expected lifetime over which it is exposed to credit risk.
For non-retail portfolios, the Bank uses the maximum contractual period as the expected lifetime for non-revolving credit facilities. For non-retail revolving
credit facilities, such as corporate lines of credit, the expected life reflects the Bank’s contractual right to withdraw a facility as part of a contractuallyagreed annual review, after taking into account the applicable notice period.
For retail portfolios, the expected lifetime is determined using behavioural term, taking into account expected prepayment behaviour and substantial
modifications.
Definition of default, credit impaired and write-offs
The definition of default used in measuring expected credit losses is aligned to the definition used for internal credit risk management purposes across all
portfolios. This definition is also in line with the regulatory definition of default. Default occurs when there are indicators that a debtor is unlikely to fully
satisfy contractual credit obligations to the Group, or the exposure is 90 days past due.
Financial assets, including those that are well secured, are considered credit impaired for financial reporting purposes when they default.

87

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
When there is no realistic probability of recovery, loans are written off against the related impairment allowance on completion of the Bank’s internal
processes and when all reasonably expected recoveries have been collected. In subsequent periods, any recoveries of amounts previously written-off are
credited to credit impairment charge in the income statement.
Modified financial assets
If the terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit or commercial reasons, anassessment is made to determine if the changes to the terms of the existing financial asset are considered substantial. This assessment considers bothchanges in cash flows arising from the modified terms as well as changes in the overall instrument risk profile; for example, changes in the principal(credit limit), term, or type of underlying collateral. Where a modification is considered non-substantial, the existing financial asset is not derecognised
and its date of origination continues to be used to determine SICR. Where a modification is considered substantial, the existing financial asset isderecognised and a new financial asset is recognised at its fair value on the modification date, which also becomes the date of origination used todetermine SICR for this new asset.
Classification and measurement
Financial assets - general
There are three measurement classifications for financial assets under AASB 9: amortised cost, fair value through profit or loss (FVTPL) and fair value
through other comprehensive income (FVOCI). Financial assets are classified into these measurement classifications on the basis of two criteria:the business model within which the financial asset is managed; andthe contractual cash flow characteristics of the financial asset (specifically whether the contractual cash flows represent solely payments of principal
and interest).

The resultant financial asset classifications are as follows:

Amortised cost: Financial assets with contractual cash flows that comprise solely payments of principal and interest only and which are held in abusiness model whose objective is to collect their cash flows;

FVOCI: Financial assets with contractual cash flows that comprise solely payments of principal and interest only and which are held in a businessmodel whose objective is to collect their cash flows or to sell; and

FVTPL: Any other financial assets not falling into the categories above are measured at FVTPL.

Fair Value Option for Financial Assets
A financial asset may be irrevocably designated at fair value through profit or loss on initial recognition when the designation eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
Financial assets - equity instruments
Non-traded equity investments may be designated at FVOCI on an instrument by instrument basis. If this election is made, gains or losses are notreclassified from other comprehensive income to profit or loss on disposal of the investment. However, gains or losses may be reclassified within equity.
Financial liabilities
The classification and measurement requirements for financial liabilities under AASB 9 are largely consistent with AASB 139 Financial Instruments:
Recognition and Measurement (AASB 139) with the exception that for financial liabilities designated as measured at fair value, gains or losses relating tochanges in the entity’s own credit risk are included in other comprehensive income, except where doing so would create or enlarge an accounting
mismatch in profit or loss. This part of the standard was early adopted by the Group on 1 October 2013.
Financial liabilities are measured at amortised cost, or fair value through profit or loss (when they are held for trading). Additionally, financial liabilities canbe designated at FVTPL where:The designation eliminates or significantly reduces an accounting mismatch which would otherwise arise; orA group of financial liabilities are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk
management strategy; orThe financial liability contains one or more embedded derivatives unless:a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract, orb) the embedded derivative is closely related to the host financial liability.

General hedge accounting
AASB 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when hedging
financial and non-financial risks. The Group has exercised an accounting policy choice to continue to apply the AASB 139 hedge accounting
requirements until the International Accounting Standards Board’s ongoing Dynamic Risk Management (macro hedging) project is completed.
AASB 15 Revenue from Contracts with Customers (AASB 15)
The Group adopted AASB 15 from 1 October 2018 which resulted in changes in accounting policies and adjustments to amounts recognised in the halfyear condensed consolidated financial statements. The standard requires identification of distinct performance obligations within a contract, andallocation of the transaction price of the contract to those performance obligations. Revenue is then recognised as each performance obligation issatisfied. The standard also provides guidance on whether an entity is acting as a principal or an agent which impacts the presentation of revenue on agross or net basis. In accordance with the transitional provisions of AASB 15, the Group has adopted the full retrospective transition approach. Under thisapproach, the cumulative effect of initially applying the standard has been recognised as an adjustment to opening retained earnings as at 1 October
2017 and comparative information for the 2018 reporting period has been restated.
The adoption of AASB 15 resulted in the following changes in accounting policy:i)

Recognition of trail commission revenue: trail commission revenue previously recognised over time is now recognised at the time the Group initiallydistributes the underlying product to the customer where it is highly probable the revenue will not need to be reversed in future periods.

88

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
This policy change resulted in an adjustment to the opening balances of Other assets $32 million, Deferred tax liabilities $10 million and Retained
earnings $22 million as at 1 October 2017 to recognise revenue that qualifies for upfront recognition under AASB 15 but was not previously
recognised under AASB 118 Revenue (AASB 118). The change did not impact net profit or earnings per share in the comparative periods.
ii)

Presentation: Certain credit card loyalty costs and other costs will be presented as operating expenses where the Group has assessed that it isacting as principal (rather than an agent). Previously these costs were presented as a reduction of other operating income. In addition, certain
incentives received from card scheme providers related to card marketing activities will be presented as operating income where the Group has
assessed that it is acting as principal (rather than an agent). Previously these incentives were presented as a reduction of operating expenses.
The presentation of these costs under AASB 15 increased other operating income and operating expenses by $91 million and $62 million in thecomparative periods ending 30 September 2018 and 31 March 2018 respectively. The changes did not impact net profit or earnings per share in thecomparative periods.

iii) Basis of measurement
The financial information has been prepared in accordance with the historical cost basis except that the following assets and liabilities are stated at theirfair value:

derivative financial instruments as well as, in the case of fair value hedging, the fair value adjustment on the underlying hedged exposure;financial assets and liabilities held for trading;financial assets and liabilities designed at fair value through profit and loss;available-for-sale financial assets (applicable prior to 1 October 2018);

financial assets at fair value through other comprehensive income (applicable from 1 October 2018);

assets and liabilities held for sale (except those at carrying value as per Note 11).

In accordance with AASB 1038 Life Insurance Contracts, life insurance liabilities are measured using the Margin on Services model.
In accordance with AASB 119 Employee Benefits, defined benefit obligations are measured using the Projected Unit Credit method.
iv) Use of estimates, assumptions and judgements
The preparation of these Condensed Consolidated Financial Statements requires the use of management judgement, estimates and assumptions that
affect reported amounts and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include
complex or subjective decisions or assessments are provided in Note 1 of the 2018 ANZ Annual Financial Report. Such estimates and judgements arereviewed on an ongoing basis.
Investments in associates
At 31 March 2019, the impairment assessment of non-lending assets identified that one of the Group’s associate investments AMMB Holdings Berhad(AmBank) had indicators of impairment. Although its market value (based on share price) was below its carrying value, no impairment was recognised as
the carrying value was supported by its value in use (VIU).
The VIU calculation is sensitive to a number of key assumptions, including discount rates, long term growth rates, future profitability and capital levels. Achange in key assumptions could have an adverse impact on the recoverable amount of the investment. The key assumptions used in the VIU
calculations are outlined below:
As at 31 Mar 19
AmBank1,497

Carrying value supported by VIU calculation ($m)
Post-tax discount rate

11.2%

Terminal growth rate

4.8%
4.5%

Expected NPAT growth (compound annual growth rate - 5 years)

11.8% to 12.5%

Core equity tier 1 ratio

Investment securities (comparative information shown in available-for-sale assets)
As a result of persistent illiquidity of the quoted share price of Bank of Tianjin (BoT), the Group determines the fair value based on a valuation modelusing comparable bank pricing multiples. Judgement is required in both the selection of the model and inputs used.
Customer remediation provision
At 31 March 2019, the Group has recognised provisions of $698 million (Sep 18: $602 million; Mar 18: $141 million) in respect of customer remediation
and related costs.
Determining the amount of the provisions, which represent management’s best estimate of the cost of settling the identified matters, requires the exerciseof significant judgement. It will often be necessary to form a view on a number of different assumptions, including the number of impacted customers, theaverage refund per customer and the associated remediation costs.
Consequently, the appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant evidence,
and adjustments are made to the provisions where appropriate.
Assets and liabilities held for sale
When classifying assets and liabilities as held for sale, judgement is required when assessing whether it is highly probable that contracted sales willcomplete within 12 months after balance date, particularly when the sale is subject to third party approvals. Management constantly reviews the status ofeach sale transaction to ensure the classification remains appropriate.

89

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSManagement is required to exercise significant judgement when assessing the fair value less costs to sell for assets and liabilities held for sale. The
judgemental factors include determining: costs to sell, allocation of goodwill, indemnities provided under the sale contract and consideration received particularly where elements of consideration are contingent in nature. Any impairment we record is based on the best available evidence of fair value
compared to the carrying value before the impairment. The final sale price may be different to the fair value we estimate when recording the impairment.
Management regularly assess the appropriateness of the underlying assumptions against actual outcomes and other relevant evidence and adjustments
are made to fair value where appropriate.
Useful lives of software
Management judgement is used to assess the useful life of software assets. A number of factors can influence the useful lives of software assets,
including changes to business strategy, significant divestments and the underlying pace of technological change.
The Group reassess the useful lives of software assets on an annual basis. During the September 2018 half, certain software assets in the Institutionaland Australia divisions had their useful life reassessed.
iv) Rounding of amounts
The amounts contained in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except whereotherwise indicated, as permitted by Australian Securities and Investments Commission Corporations Instrument 2016/191.
v) Future accounting developments
General hedge accounting
AASB 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when hedging
financial and non-financial risks.
AASB 9 provides the Group with an accounting policy choice to continue to apply the AASB 139 Financial Instruments: Recognition and Measurement(AASB 139) hedge accounting requirements until the International Accounting Standards Board’s ongoing project on macro hedge accounting iscompleted.
AASB 16 Leases (AASB 16)
The final version of AASB 16 was issued in February 2016 and is not effective for the Group until 1 October 2019. AASB 16 requires a lessee torecognise its:

right to use the underlying leased asset, as a right-of-use asset; andobligation to make lease payments as a lease liability.

AASB 16 substantially carries forward the lessor accounting requirements in AASB 117 Leases.
The Group is in the process of assessing the impact of the application of AASB 16 and is not yet able to reasonably estimate the impact on its financial
statements.
AASB 17 Insurance Contracts (AASB 17)
The final version of AASB 17 was issued in July 2017 and is not effective for the Group until 1 October 2021. It will replace AASB 4 Insurance Contracts,
AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts. AASB 17 establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts.
The measurement, presentation and disclosure requirements under AASB 17 are significantly different from current accounting standards. Although theoverall profit recognised in respect of insurance contracts will not change, it is expected that the timing of profit recognition will change.
The Group anticipates that this standard will impact profit measurement of businesses being sold which form part of discontinued operations. This
standard is not expected to have a material impact on continuing operations.

90

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.

IncomeHalf Year1

Movement

Interest income

Mar 19$M
15,970

Sep 18$M
15,478Mar 18$M
14,849Mar 19v. Sep 18
3%

Mar 19v. Mar 18
8%

Interest expense(8,493)(8,136)(7,322)4%

16%

Major bank levy

(178)

(178)

(177)

0%

1%

Net interest income

7,299

7,164

7,350

2%

-1%

i) Fee and commission income
Lending fees2

303

309

343

-2%

-12%

1,507

1,529

1,525

-1%

-1%

Commissions

48

46

46

4%

4%

Funds management income

128

108

140

19%

-9%

Fee and commission income

1,986

1,992

2,054

0%

-3%

Non-lending fees

Fee and commission expense

(721)

(663)

(673)

9%

7%

Net fee and commission income

1,265

1,329

1,381

-5%

-8%

380

896

770

-58%

-51%

Sale of Asia Retail and Wealth businesses

-

-

99

n/a

-100%

Sale of SRCB

-

-

233

n/a

-100%

Sale of MCC

-

121

119

-100%

-100%

Sale of Cambodia JV

-

(42)

-

-100%

n/a

Sale of PNG Retail, Commercial & SME

-

(19)

-

-100%

n/a

Sale of OPL NZ

82

(3)

-

large

n/a

Sale of Paymark

37

-

-

n/a

n/a

ii) Other income
Net foreign exchange earnings and other financial instruments income3

Other4

22

73

57

-70%

-61%

Other income

521

1,026

1,278

-49%

-59%

1,786

2,355

2,659

-24%

-33%

Other operating incomeiii) Net income from insurance business

-

(1)

1

-100%

-100%

Insurance premium income

Investment income

91

155

141

-41%

-35%

Commission expense

4

2

6

100%

-33%
-16%

Claims

(26)

(36)

(31)

-28%

Changes in policy liabilities

8

13

23

-38%

-65%

Net income from insurance business

77

133

140

-42%

-45%

iv) Share of associates' profit
Operating income5
1.

131

95

88

38%

49%

9,293

9,747

10,237-5%-9%

On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has
been restated accordingly which increased total operating income by $91 million for the September 2018 half and $62 million for the March 2018 half.
Lending fees exclude fees treated as part of the effective yield calculation in interest income.
3. Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange risk
on funding instruments, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit and loss.
4. Other income includes external dividend income of nil (Sep 18 half: $39 million; Mar 18 half: nil).
5. Includes charges associated with customer remediation of $64 million for the March 2019 half (Sep 18 half: $196 million; Mar 18 half: $32 million).
2.

91

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3.

Operating expenses
Half Year1i) Personnel
Salaries and related costs
Superannuation costs
Other
Personnel expenses

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

2,127

2,092

2,133

2%

0%

146

141

149

4%

-2%

97

123

120

-21%

-19%

2,370

2,356

2,402

1%

-1%

ii) Premises
Rent

232

236

232

-2%

0%

Other

174

180

163

-3%

7%

Premises expenses

406

416

395

-2%

3%

Depreciation and amortisation

337

371

368

-9%

-8%

Licences and outsourced services

333

348

327

-4%

2%

-

251

-

-100%

n/a

iii) Technology

Accelerated amortisation2
Other

94

114

120

-18%

-22%

Technology expenses

764

1,084

815

-30%

-6%

iv) Restructuring

51

149

78

-66%

-35%

v) OtherAdvertising and public relations

97

140

108

-31%

-10%

Professional fees

229

286

244

-20%

-6%

Freight, stationery, postage and communication

107

107

116

0%

-8%

Royal Commission legal costs

13

39

16

-67%

-19%

Other

328

351

299

-7%

10%

Other expenses
Operating expenses3
1.

774

923

783

-16%

-1%

4,365

4,928

4,473

-11%

-2%

On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has
been restated accordingly which increased total operating expense by $91 million for the September 2018 half and $62 million for the March 2018 half.
Accelerated amortisation charge relates to certain software assets in the Institutional and Australia divisions following the reassessment of their useful lives.
3. Includes customer remediation expenses of $36 million for the March 2019 half (Sep 18 half: $156 million; Mar 18 half: $35 million).
2.

92

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4.

Income tax expense

Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in the profit and loss.
Half Year

Movement

Profit before income tax from continuing operations

Mar 19$M
4,536

Sep 18$M
4,539

Mar 18$M
5,356

Mar 19v. Sep 18
0%

Mar 19v. Mar 18-15%

Prima facie income tax expense at 30%

1,361

1,362

1,607

0%

-15%

Tax effect of permanent differences:
Sale of SRCB

-

-

(84)

n/a

-100%

Sale of MCC

-

(41)

(37)

-100%

-100%

Sale of Cambodia JV

-

13

-

-100%

n/a

Sale of PNG Retail, Commercial & SME

-

8

-

-100%

n/a

Sale of OPL NZ

(10)

-

-

n/a

n/a

Sale of Paymark

(10)

-

-

n/a

n/a

Share of associates' profit

(39)

(29)

(26)

34%

50%

Interest on convertible instruments

33

33

34

0%

-3%

Overseas tax rate differential

42%

(64)

(13)

(45)

large

Provision for foreign tax on dividend repatriation

9

27

5

-67%

80%

Tax provisions no longer required

-

(18)

(23)

-100%

-100%

Other

-

13

(5)

-100%

-100%

Subtotal

1,280

1,355

1,426

-6%

-10%

4

3

-

33%

n/a

Income tax (over)/under provided in previous years

1,284

1,358

1,426

-5%

-10%

Australia

771

850

949

-9%

-19%

Overseas

513

508

477

1%

8%

-5%

-10%

Income tax expense

Income tax expense

1,284

1,358

1,426

Effective tax rate

28.3%

29.9%

26.6%

93

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5.

Dividends
Half Year

Dividend per ordinary share (cents) - including discontinued operations
Mar 1980

Interim (fully franked)
Final (fully franked)
Total

Ordinary share dividend ($M)1
Interim dividend
Final dividend

Sep 18-

Movement
Mar 1880

Mar 19v. Sep 18
n/a

Mar 19v. Mar 18
0%

-

80

-

n/a

n/a

80

80

80

0%

0%

-

2,317

-

n/a

n/a

2,295

-

2,350

n/a

-2%

(41)

(40)

(42)

3%

-2%

Total

2,254

2,277

2,308

-1%

-2%

Ordinary share dividend payout ratio (%)2

71.4%

74.6%

69.7%

Bonus option plan adjustment

1.

2.

Dividends paid to ordinary equity holders of the Company. Excludes dividends paid by subsidiaries of the Group to non-controlling equity holders (Mar 19 half: nil, Sep 18 half: $1.6 million,
Mar 18 half: nil).
Dividend payout ratio is calculated using the proposed 2019 interim dividend of $2,267 million (not shown in the above table). The proposed 2019 interim dividend of $2,267 million is basedon the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the September 2018 and March 2018 halves were calculated using actual
dividend paid of $2,295 million and $2,317 million respectively.

Ordinary Shares
The Directors propose that an interim dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2019. The proposed 2019
interim dividend will be fully franked for Australian tax purposes. New Zealand imputation credits of NZ 9 cents per ordinary share will also be attached.
ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2019 interim dividend.

94

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6.

Earnings per share
Half Year

Movement
Mar 18Mar 19v. Sep 18

Mar 19v. Mar 18

Mar 19Sep 18

Earnings Per Share (cents)

111.7

107.3

114.2

4%

-2%

Earnings Per Share (cents) from continuing operations1

114.1

110.6

134.8

3%

-15%

Earnings Per Share (cents) from discontinued operations

(2.4)

(3.3)

(20.6)-27%-88%

Earnings Per Share (cents)

106.4

103.2

108.6

3%

-2%

Earnings Per Share (cents) from continuing operations1

108.7

106.2

127.4

2%

-15%

Earnings Per Share (cents) from discontinued operations

(2.3)

(3.0)

(18.8)

-23%

-88%

3,182

3,086

3,330

3%

-4%
29%

Earnings Per Share (EPS) - Basic

Earnings Per Share (EPS) - Diluted

Reconciliation of earnings used in earnings per share calculations
Basic:
Profit for the period ($M)

9

9

7

0%

Earnings used in calculating basic earnings per share ($M)

3,173

3,077

3,323

3%

-5%

Less: Profit/(Loss) after tax from discontinued operations ($M)

(70)

(95)

(600)

-26%

-88%

3,243

3,172

3,923

2%

-17%

3,173

3,077

3,323

3%

-5%

137

138

141

-1%

-3%

Earnings used in calculating diluted earnings per share ($M)

3,310

3,215

3,464

3%

-4%

Less: Profit/(Loss) after tax from discontinued operations ($M)

(70)

(95)

(600)

-26%

-88%

3,380

3,310

4,064

2%

-17%

2,841.3

2,867.1

2,909.6

-1%

-2%

260.5

240.6

269.7

8%

-3%

8.4

9.5

10.0

-12%

-16%

3,110.2

3,117.2

3,189.3

0%-2%

Less: Profit attributable to non-controlling interests ($M)

Earnings used in calculating basic earnings per share from continuing
operations ($M)
Diluted:Earnings used in calculating basic earnings per share ($M)
Add: Interest on convertible subordinated debt ($M)

Earnings used in calculating diluted earnings per share fromcontinuing operations ($M)

Reconciliation of weighted average number of ordinary shares(WANOS) used in earnings per share calculations1,2
WANOS used in calculating basic earnings per share (M)Add: Weighted average dilutive potential ordinary shares (M)Convertible subordinated debt (M)Share based payments (options, rights and deferred shares) (M)
WANOS used in calculating diluated earnings per share (M)1.

Post completion of the successor funds transfer performed in preparation for the sales of the Group’s wealth businesses to Zurich and IOOF (see Note 11), Treasury shares held in Wealth
Australia will cease to be eliminated in the Group’s consolidated financial statements and will be included in the denominator used in calculating earnings per share. If the weighted average
number of Treasury shares held in Wealth Australia was included in the denominator used in calculating earnings per share from continuing operations for the half year ended 31 March
2019, basic earnings per share from continuing operations would have been 113.5 cents (Sep 18 half: 110.1 cents; Mar 18 half: 134.1 cents) and diluted earnings per share from continuing
operations would have been 108.1 cents (Sep 18 half: 105.7 cents; Mar 18 half: 126.8 cents).
2. Weighted average number of ordinary shares excludes the weighted average number of Treasury shares held in ANZEST and Wealth Australia as summarised in the table below:
Mar 19 half
(Million)

Sep 18 half
(Million)

Mar 18 half
(Million)

ANZEST Pty Ltd

4.9

5.5

6.3

Wealth Australia

15.6

15.1

15.0

Total Treasury shares

20.5

20.6

21.3

95

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7.

Segment analysisi) Description of segments
The Group operates on a divisional structure with six continuing divisions: Australia, New Zealand, Institutional, Pacific, Wealth Australia, and TSO andGroup Centre. For further information on the composition of divisions refer to the Definitions on page 137.
The presentation of divisional results has been impacted by a number of methodology and structural changes during the period. Prior period
comparatives have been restated as follows:

The methodology for allocating earnings on capital at a business unit level has changed from Economic Capital to Regulatory Capital. While neutral
at a Group level, this change has impacted net interest income at the divisional level;The residual Asia Retail and Wealth businesses have been transferred from the former Asia Retail and Pacific division to TSO and Group Centre
division. The remaining segment has been renamed Pacific division; and

ANZ’s lenders mortgage insurance, share investing and general insurance distribution businesses which were previously part of the continuing
operations of Wealth Australia now form part of the Australia division (ANZ’s financial planning business continues to be part of the continuing
operations of the Wealth Australia division).

The divisional results were also impacted by the adoption of two new accounting standards:


AASB 9 - the Group implemented an expected credit loss methodology for impairment of financial assets, and revised the classification andmeasurement of certain financial assets from 1 October 2018. Consequently, the Group increased its provision for credit impairment by $813 million
through opening retained earnings. Comparative information has not been restated.



AASB 15 - the main impact of adoption is that certain items previously netted are now presented gross in operating income and operating expenses.
Comparative information has been restated which increased total operating income for the September 2018 half by $91 million (Mar 18 half: $62
million) and increased total operating expenses by the same amount.

Other than those described above, there have been no other significant changes. The divisions reported below are consistent with internal reporting
provided to the chief operating decision maker, being the Chief Executive Officer.
ii) Operating segments
ANZ measures the performance of continuing segments on a cash profit basis. To calculate cash profit, certain non-core items are removed fromstatutory profit. Details of these items are included in the ‘Other items’ section of this note. Transactions between divisions across segments within ANZ
are conducted on an arm’s-length basis and disclosed as part of the income and expenses of these segments.
For information on discontinued operations please refer to Note 11.

Australia Institutional
$M
$M

New
Zealand$M

WealthAustralia
$M

1,385

1

Pacific$M

TSO andGroup
Centre$M

Otheritems1
$M

Group
Total
$M

68

175

-

7,299

March 2019 Half YearNet interest income

4,091

1,579

Net fee and commission income- Lending fees

144

144

8

-

7

-

-

303

- Non-lending fees

708

435

354

-

20

(10)

-

1,507

- Commissions

22

-

21

18

-

(13)

-

48

- Funds management income

2

1

120

8

-

(3)

-

128
(721)

- Fee and commission expense

(322)

(168)

(227)

-

(4)

-

-

Net income from insurance business

52

-

18

-

-

-

7

77

Other income

18

714

4

-

27

218

(460)

521

1

-

4

-

-

126

-

131

Operating income2

4,716

2,705

1,687

27

118

493

(453)

9,293

Profit after tax from continuing operations

1,733

1,012

753

(30)

33

63

(321)

3,243

-

-

-

(17)

-

(33)

(20)

(70)

1,733

1,012

753

(47)

33

30

(341)

3,173

Share of associates’ profit

Profit/(Loss) after tax from discontinued operations
Profit after tax attributable to shareholders
1.

2.

In evaluating the performance of the operating segments, certain items are removed from statutory profit where they are not considered integral to the ongoing performance of the segment
and are evaluated separately.
On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has
been restated accordingly which increased total operating income by $91 million for the September 2018 half and $62 million for the March 2018 half.

96

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Australia Institutional
$M
$M

New
Zealand$M

WealthAustralia$M

Pacific$M

TSO andGroup
Centre$M

Otheritems1
$M

Group
Total
$M

September 2018 Half YearNet interest income

4,122

1,513

1,342

1

66

120

-

7,164

- Lending fees

158

136

8

-

7

-

-

309

- Non-lending fees

768

409

326

-

20

6

-

1,529

- Commissions

18

-

23

21

-

(16)

-

46

- Funds management income

-

2

118

(8)

-

(4)

-

108

- Fee and commission expense

(300)

(147)

(210)

-

(4)

(2)

-

(663)

Net income from insurance business

70

1

57

-

-

-

5

133

Other income

9

634

2

(1)

30

107

245

1,026

Share of associates’ profit

(1)

-

4

-

-

92

-

95

Operating income2

4,844

2,548

1,670

13

119

303

250

9,747

Profit after tax from continuing operations

1,726

713

772

(57)

39

(199)

178

3,172

-

-

-

(51)

-

(14)

(30)

(95)

1,726

713

772

(108)

39

(213)

148

3,077

4,325

1,480

1,309

1

65

170

-

7,350

- Lending fees

195

133

7

-

7

1

-

343

- Non-lending fees

726

423

331

-

19

26

-

1,525

- Commissions

21

-

19

23

-

(17)

-

46

Net fee and commission income

Profit/(Loss) after tax from discontinued operations
Profit after tax attributable to shareholders
March 2018 Half YearNet interest income
Net fee and commission income- Funds management income

6

3

112

24

-

(5)

-

140

- Fee and commission expense

(309)

(142)

(207)

-

(4)

(11)

-

(673)

Net income from insurance business

57

-

60

(1)

-

10

14

140

Other income

32

614

20

2

25

232

353

1,278

-

-

1

-

-

87

-

88

Share of associates’ profit
Operating income

2

Profit after tax from continuing operations

5,053

2,511

1,652

49

112

493

367

10,237

1,983

767

749

(26)

33

(13)

430

3,923

-

-

-

(585)

-

(32)

17

(600)

1,983

767

749

(611)

33

(45)

447

3,323

Profit/(Loss) after tax from discontinued operations
Profit after tax attributable to shareholders
1.

2.

In evaluating the performance of the operating segments, certain items are removed from statutory profit where they are not considered integral to the ongoing performance of the segment
and are evaluated separately.
On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has
been restated accordingly which increased total operating income by $91 million for the September 2018 half and $62 million for the March 2018 half.

iii) Other items
The table below sets out the profit after tax impact of other items which are removed from statutory profit to reflect the cash profit of each segment.
Half Year

Movement

Related segment
New Zealand, TSO and Group Centre

Mar 19$M(77)

Sep 18$M
4

Mar 18$M
10Economic hedges

Institutional, TSO and Group Centre

(185)

124

Revenue and expense hedges

TSO and Group Centre

(60)

49

Structured credit intermediation trades

Institutional

1

Sale of SRCBTSO and Group Centre-

Item gains/(losses)
Revaluation of policy liabilities

Total profit after tax from continuing operations

Mar 19v. Sep 18
large

Mar 19v. Mar 18
large

124

large

large

(40)

large

51%

1

3

0%

-67%

-

333

n/a

-100%

(321)

178

430

large

large

Treasury shares adjustment

Wealth Australia

18

(30)

23

large

-22%

Revaluation of policy liabilities

Wealth Australia

(38)

-

(6)

n/a

large

Total profit after tax from discontinued operations

(20)

(30)

17

-33%

large

Total profit after tax

(341)

148

447

large

large

97

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8.

Net loans and advances
As at

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

Australia
Overdrafts

5,832

5,741

5,843

2%

0%

Credit cards outstanding

8,168

8,372

8,629

-2%

-5%

Commercial bills outstanding

6,441

6,861

7,467

-6%

-14%

Term loans - housing

268,766

271,554

270,631-1%-1%

Term loans - non-housing

132,733

134,503125,901

-1%

5%

966

1,059

1,080

-9%

-11%

Lease receivables

561

548

893

2%

-37%

423,467

428,638

420,444-1%

1%

Overdrafts

611

491

538

24%

14%

Credit cards outstanding

12

12

13

0%

-8%

Term loans - housing

770

767

729

0%

6%
14%

Hire purchase contracts
Total Australia
Asia, Pacific, Europe & America

Term loans - non-housing

61,40559,44653,971

3%

Lease receivables

305

180

210

69%

45%

Other

13

14

17

-7%

-24%

63,11660,91055,478

4%

14%

29%

Total Asia, Pacific, Europe & America
New Zealand
Overdrafts

1,040

829

809

25%

Credit cards outstanding

1,552

1,506

1,558

3%

0%

Term loans - housing

79,41073,83373,751

8%

8%

Term loans - non-housing

42,93040,456

41,306

6%

4%

162

168

182

-4%

-11%

Lease receivables

1,592

1,473

1,411

8%

13%

Total New Zealand

126,686

118,265

119,017

7%

6%

Sub-total

613,269

607,813594,939

1%

3%

(446)

(430)

(441)

4%

1%

Hire purchase contracts

Unearned income
Capitalised brokerage/mortgage origination fees

1

Gross loans and advances (including assets reclassified as held for sale)
Allowance for expected credit losses (refer to Note 9)2,3,4
Net loans and advances (including assets reclassified as held for sale)
Net loans and advances held for sale (refer to Note 11)
Net loans and advances
1.

947

997

1,044

-5%

-9%

613,770

608,380

595,5421%

3%(3,627)(2,943)(3,073)23%

18%

610,143

605,437

592,469

1%

3%

(888)

(999)

(3,001)

-11%

-70%

609,255

604,438

589,468

1%

3%

Capitalised brokerage/mortgage origination fees are amortised over the expected life of the loan.
On adoption of AASB 9 on 1 October 2018, the Group increased the collectively assessed provision by $813 million. Comparative information has not been restated. Refer to Note 21 forfurther details.
3. $500 million of collectively assessed provisions for credit impairment attributable to off-balance sheet credit related commitments at 30 September 2018 (Mar 18: $522 million) werereclassified from Net loans and advances at amortised cost to Other provisions to enhance comparability with current period presentation.
4. Provision for credit impairment includes individually assessed provisions against off balance-sheet credit exposures of $26 million as at 31 March 2019 (Sep 18: $26 million; Mar 18: $26
million).
2.

98

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.

Allowance for expected credit losses

As described in Note 1, the Group adopted AASB 9 effective from 1 October 2018 which resulted in the application of an expected credit loss (ECL)
model for measuring impairment of financial assets and amendments to the presentation of credit impairment information for the March 2019 half.
Comparative information has not been restated.
The following tables present the movement in the allowance for ECL (including allowance for ECL reclassified as held for sale) for the March 2019 half.
Net loans and advances - at amortised cost
Allowance for ECL is included in Net loans and advances.

Stage 3
Stage 1$M

As at 1 October 2018

Collectively
Stage 2
assessed$M$M

Individuallyassessed
$M

Total
$M
3,564

920

1,391

359

894

Transfer between stages

133

(228)

(53)

148

-

New and increased provisions (net of releases)

(124)

244

74

475

669

Write-backs

-

-

-

(152)

(152)

Bad debts written off (excluding recoveries)

-

-

-

(498)

(498)

Foreign currency translaton and other movements

11

8

1

(2)

18

As at 31 March 2019

940

1,415

381

865

3,601

Individuallyassessed
$M

Total
$M

Investment securities - debt securities at amortised cost
Allowance for ECL is included in Investment securities.

Stage 3
Stage 1
$M

Collectively
Stage 2
assessed$M$M

As at 1 October 2018

9

2

-

-

11

Transfer between stages

-

-

-

-

-

New and increased provisions (net of releases)

2

(1)

-

-

1

Write-backs

-

-

-

-

-

Bad debts written off (excluding recoveries)

-

-

-

-

-

Foreign currency translation and other movements

-

-

-

-

-

11

1

-

-

12

As at 31 March 2019

Investment securities - debt securities at FVOCIAllowance for ECL does not change the carrying amount which remains at fair value. Instead, the allowance for ECL is recognised in Other
Comprehensive Income (OCI), with a corresponding charge to profit or loss.
Stage 3
Stage 1
$M

Collectively
Stage 2
assessed$M$M

Individuallyassessed
$M

Total
$M
14

As at 1 October 2018

14

-

-

-

Transfer between stages

-

-

-

-

-

New and increased provisions (net of releases)

(3)

-

-

-

(3)

Write-backs

-

-

-

-

-

Bad debts written off (excluding recoveries)

-

-

-

-

-

-

-

-

-

-

11

-

-

-

11

Foreign currency translation and other movements
As at 31 March 2019Off-balance sheet commitments - undrawn and contingent facilities
The collectively assessed allowance for ECL is included in Provisions. The individually assessed allowance for ECL is included in Net loans andadvances.
Stage 3
Stage 1$M
As at 1 October 2018

Collectively
Stage 2
assessed$M$M
15

Individuallyassessed
$M

Total
$M

26

681

474

166

Transfer between stages

19

(19)

-

-

-

New and increased provisions (net of releases)

(34)

3

(1)

1

(31)
-

Write-backs

-

-

-

-

Bad debts written off (excluding recoveries)

-

-

-

-

-

Foreign currency translation and other movements

5

2

-

(1)

6

464

152

14

26

656

As at 31 March 201999

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.

Allowance for expected credit losses, cont’d

2018 Provision for credit impairment disclosures under AASB 139
The below disclosure does not reflect the adoption of AASB 9 and are prepared under the requirements of the previous AASB 139.
Half Year
Sep 18$M

Mar 18
$M

1,016

1,136

Individually assessed provision
Balance at start of period
New and increased provisions

716

728

Write-backs

(234)

(191)

Adjustment for foreign currency translation movements and transfers

51Discount unwind

(10)

(7)

Bad debts written-off

(573)

(651)

Total individually assessed provision

920

1,016

2,579

2,662

(63)

(22)

Collectively assessed provision
Balance at start of period
Charge/(release) to Income Statement
Adjustment for foreign currency translation movements and transfers

718

Asia Retail and Wealth businesses divestment

-

(79)

Total collectively assessed provision

2,523

2,579

Unfunded portion reclassified to provisions1

(500)

(522)

Total collectively assessed provision

2,023

2,057

Total provision for credit impairment

2,943

3,073

1.

$500 million of collectively assessed provisions for credit impairment attributable to off-balance sheet credit related commitments at 30 September 2018 (Mar 18: $522 million) werereclassified from Net loans and advances at amortised cost to Other provisions to enhance comparability with current period presentation.

Half Year

Credit impairment charge/(release) analysis under AASB 9

Mar 19$M
New and increased provisions (net of releases)- Collectively assessed

12- Individually assessed

624

Write-backs(152)

Recoveries of amounts previously written off(93)

Total credit impairment charge391

Less: credit impairment charge/(release) from discontinued operations(1)

Total credit impairment charge from continuing operations

392

2018 Credit impairment charge/(release) analysis under AASB 139
The below disclosures do not reflect the adoption of AASB 9 and are prepared under the requirements of the previous AASB 139.
Half Year
Sep 18$M
716

Mar 18$M
728

Write-backs

(234)

(191)

Recoveries of amounts previously written off

(139)

(107)

Individually assessed credit impairment charge

343

430

Collectively assessed credit impairment charge/(release)

(63)

(22)

Credit impairment charge

280

408

New and increased individual provisions

100

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10.

Deposits and other borrowings
As at

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

Certificates of deposit

39,481

39,671

Term deposits

77,71475,551

43,1570%-9%75,1163%

On demand and short term deposits

180,863

189,287

190,473

3%

-4%

-5%

Deposits not bearing interest

12,202

11,931

11,3032%

8%

Deposits from banks and securities sold under repurchase agreements

49,964

41,48037,71820%

32%

Australia

Commercial paper

12,53014,742

21,658-15%-42%

Total Australia

372,754372,662

379,425

0%-2%

Certificates of deposit

3,215

2,242

5,234

43%

-39%

Term deposits

94,39692,14577,3352%

22%

On demand and short term deposits

19,93018,056

19,55710%2%

Deposits not bearing interest

5,234

4,993

4,362

5%

20%

Asia, Pacific, Europe & America

Deposits from banks and securities sold under repurchase agreements

34,70530,73830,75613%

13%

Total Asia, Pacific, Europe & America

157,480

148,174

137,244

6%

15%

New Zealand
874

833

1,897

5%

-54%

Term deposits

Certificates of deposit

50,89046,98644,8108%

14%

On demand and short term deposits

41,011

38,106

39,5808%

4%Deposits not bearing interest

10,383

9,365

9,334

11%

11%

Deposits from banks and securities sold under repurchase agreements
Commercial paper and other borrowings

245

473

1,543

-48%

-84%

2,896

3,130

3,297

-7%

-12%

Total New Zealand

106,299

98,893

100,4617%

6%

Total deposits and other borrowings (including liabilities reclassified as held for sale)636,533

619,729

617,1303%3%Deposits and other borrowings held for sale (refer to Note 11)
Total deposits and other borrowings

101(1,544)(1,579)

(900)

-2%

72%

634,989

618,150

616,230

3%

3%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11.

Discontinued operations and assets and liabilities held for salei)

Discontinued operations

On 17 October 2017, the Group announced it had agreed to sell its OnePath pensions and investments (OnePath P&I) business and aligned dealer
groups (ADG) businesses to IOOF Holdings Limited (IOOF). The sale of the aligned dealer groups business completed on 1 October 2018. The
completion of the remaining OnePath P&I business, which is dependent on the receipt of all necessary approvals, is expected to occur before the end of
the March 2020 half.
On 12 December 2017, ANZ announced that it had agreed to the sale of its life insurance business to Zurich Financial Services Australia (Zurich) andregulatory approval was obtained on 10 October 2018. The transaction is subject to closing conditions and ANZ expects it to complete in the first half ofthe 2019 calendar year.
As a result of the sale transactions outlined above, the financial results of the businesses to be divested and associated Group reclassification andconsolidation impacts are treated as discontinued operations from a reporting perspective. This impacts the current and comparative financial information
for Wealth Australia and TSO and Group Centre divisions.
Details of the financial performance and cash flows of discontinued operations are shown below.

Income Statement
Movement

Half Year
Mar 19$M(57)

Sep 18$M-

Mar 18$M-

Mar 19v. Sep 18
n/a

Mar 19v. Mar 18
n/a

Other operating income1,2

199

310

(229)

-36%

large

Operating income

142

310

(229)

-54%

large

Operating expenses2

(221)

(301)

(243)

-27%

-9%

Profit/(Loss) before credit impairment and income tax

(79)

9

(472)

large

-83%

Net interest income

Credit impairment (charge)/release
Profit/(Loss) before income tax
Income tax expense 2
Profit/(Loss) for the period attributable to shareholders of the Company2
1.
2.

1

-

-

n/a

n/a

(78)

9

(472)

large

-83%

8

(104)

(128)

large

large

(70)

(95)

(600)

-26%

-88%

Includes a $632 million loss recognised on the reclassification of Wealth Australia businesses to held for sale in the March 2018 half.
Includes customer remediation of $53 million post-tax recognised in the March 2019 half (Sep 18 half: $127 million; Mar 18 half: nil) comprising $55 million of customer remediation
recognised in other operating income (Sep 18 half: $106 million; Mar 18 half: nil), $20 million of remediation costs recognised in operating expenses (Sep 18 half: $75 million; Mar 18 half:nil), and a $22 million benefit in income tax expense (Sep 18 half: $54 million; Mar 18 half: nil).

Cash Flow Statement
Half Year

Movement

Mar 19$M(589)

Sep 18$M
2,065

Mar 18$M924

Net cash provided by/(used in) investing activities

803(1,311)

Net cash provided by/(used in) financing activities

(219)

(754)

(5)

-

Net cash provided by/(used in) operating activities

Net increase/(decrease) in cash and cash equivalentsii)

Mar 19v. Sep 18
large

Mar 19v. Mar 18
large(1,133)

large

large

179

-71%

large

(30)

n/a

-83%

Assets and liabilities held for saleAt 31 March 2019, assets and liabilities held for sale were re-measured at the lower of their carrying amount and fair value less costs to sell, except for
assets such as deferred tax assets, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement
and continue to be recognised at their existing carrying value.
In addition to the assets and liabilities associated with the Group’s discontinued operations, assets and liabilities held for sale contain the assets andliabilities of other assets or disposal groups, subject to sale, which do not meet the criteria to classify as a discontinued operation under the accounting
standards.

102

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Assets and liabilities held for sale1
As at 31 March 2019
Discontinued
operations$M

As at 30 September 2018

PNG Retail,Commercial &Cambodia JV
SME
$M
$M

Total
$M

Discontinued
operations$M

Cambodia JV$MAs at 31 March 2018

PNG Retail,Commercial &OPL NZ
SME
$M
$M

Total
$M

Discontinued
operations$M

UDC
and Paymark$M

Metrobank
Card
Corporation
$M

Total
$M

Cash and cash equivalents

-

267

-

267

5

323

-

-

328

5

-

-

5

Derivative financial instruments

-

1

-

1

-

3

-

-

3

1

-

-

1
1,040

Available-for-sale assets

-

-

-

-

1,079

-

-

-

1,079

1,040

-

-

Investment securities

1,167

-

-

1,167

-

-

-

-

-

-

-

-

-

Net loans and advances

43

700

145

888

46

806

-

147

999

118

2,883

-

3,001

Regulatory deposits

-

145

-

145

-

146

-

-

146

-

-

-

-

Investment in associates

-

-

-

-

1

1

-

-

2

1

7

60

68

97

2

-

99

102

2

-

-

104

72

-

-

72

Goodwill and other intangible assets

1,138

-

-

1,138

1,155

-

93

-

1,248

946

124

-

1,070

Investments backing policy liabilities2

39,191--39,19140,054---40,05438,803--38,803

2

5

6

13

4

6

-

6

16

5

-

-

5

590

50

-

640

450

92

727

-

1,269

1,198

15

-

1,213

42,2281,170

151

43,54942,896

1,379

820

153

45,24842,1893,029

60

45,278Deposits and other borrowings

-

1,064

480

1,544

-

1,067

-

512

1,579

-

900

-

900

Derivative financial instruments

-

-

-

-

-

1

-

-

1

-

-

-

-

(192)

4

-

(188)

(33)

8

15

-

(10)

(158)

36

-

(122)

Deferred tax assets

Premises and equipment
Other assets
Total assets held for sale

Current tax liabilities
Deferred tax liabilities

338

1

-

339

160

1

160

-

321

387

(9)

-

378

Policy liabilities2

38,787--38,78739,607---39,60738,381--38,381

External unit holder liabilities2

4,590

-

-

4,590

4,712

-

-

-

4,712

4,618

-

-

4,618

Payables and other liabilities

1,349

53

-

1,402

644

98

130

-

872

560

28

-

588

35

42

4

81

28

43

-

6

77

29

1

-

30

44,9071,164

484

46,555

45,118

1,218

305

518

47,15943,817956-

44,773

Provisions
Total liabilities held for sale
1.
2.

Amounts in the table above are shown net of intercompany balances.
The Group completed the Successor Fund Transfer (SFT) on 13 April 2019 which separated the Life Insurance and Pensions and Investments businesses. On completion of the SFT, the Group reduced external unit holders liabilities by circa $4.6 billion, policy liabilities by circa $36.1 billion andinvestments backing policy liabilities by circa $37.1 billion within assets and liabilities held for sale. The Group also ceased elimination of intercompany balances increasing liabilities and equity not held for sale by circa $3.2 billion and circa $0.4 billion respectively.

103

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11.

Discontinued operations and assets and liabilities held for sale, cont’d

Other strategic divestments not classified as discontinued operations but have been presented as held for sale:

UDC Finance and Paymark Limited (UDC and Paymark) – New Zealand division
On 11 January 2017, the Group announced that it had entered into a conditional agreement to sell UDC to HNA Group (HNA). On 21 December
2017, the Group announced that it had been informed that New Zealand’s Overseas Investment Office had declined HNA’s application to acquire
UDC and the agreement with HNA was terminated in January 2018. The assets and liabilities of UDC were no longer classified as held for sale at
September 2018.
On 17 January 2018, the Group entered into an agreement to sell its 25% shareholding in Paymark to Ingenico Group. The transaction wascompleted on 11 January 2019.



Metrobank Card Corporation (MCC) – TSO and Group Centre division
On 18 October 2017, the Group announced it had entered into a sale agreement with its joint venture partner Metropolitan Bank & Trust Company(Metrobank) in relation to its 40% stake in the Philippines based Metrobank Card Corporation (MCC). The Group sold its 40% stake in two equal
tranches in January and September 2018.

ANZ Royal Bank (Cambodia) Ltd (Cambodia JV) – Institutional division
On 17 May 2018, the Group announced it had reached an agreement to sell its 55% stake in Cambodia JV ANZ Royal Bank to J Trust, a Japanesediversified financial holding company listed on the Tokyo Stock Exchange. The transaction is subject to closing conditions and regulatory approvaland ANZ expects it to close in the 2019 financial year.



OnePath Life (NZ) Ltd (OPL NZ) – New Zealand division
On 30 May 2018, the Group announced that it had agreed to sell OPL NZ to Cigna Corporation and the final regulatory approval was obtained on 29
October 2018. The transaction was completed on 30 November 2018.



Papua New Guinea Retail, Commercial and Small-Medium Sized Enterprise businesses (PNG Retail, Commercial & SME) – Institutional
division
On 25 June 2018, the Group announced it had entered into an agreement to sell its Retail, Commercial and Small-Medium Sized Enterprise (SME)banking businesses in Papua New Guinea to Kina Bank. The transaction is subject to closing conditions and ANZ expects it to close by late 2019
calendar year.

Income Statement impact relating to assets and liabilities held for sale
During the March 2019 half, the Group recognised the following impacts in relation to assets and liabilities held for sale:$69 million gain after tax relating to the sale of the OPL NZ business, comprising a $56 million gain on sale, a $26 million release from the foreign
currency translation reserve and a $13 million income tax expense. The gain was recognised in continuing operations.

$37 million gain after tax relating to the sale of the Paymark. The gain was recognised in continuing operations.

During the September 2018 half, the Group recognised the following impacts in relation to assets and liabilities held for sale:$42 million loss after tax relating to the reclassification of the Cambodia JV to held for sale, comprising a $27 million impairment and $15 million of
costs associated with the sale. The loss was recognised in continuing operations.

$21 million loss after tax relating to the reclassification of the PNG Retail, Commercial and SME businesses to held for sale, comprising a $12 million
impairment of goodwill, $7 million costs associated with the sale and a $2 million tax expense. The loss was recognised in continuing operations.

$3 million loss after tax relating to OPL NZ transaction costs. The loss was recognised in continuing operations.

$126 million gain after tax relating to MCC comprising a $138 million gain on sale of the second 20% stake, $14 million of foreign exchange losses,$3 million loss on release of reserves and a $5 million tax benefit. This gain was recognised in continuing operations.

During the March 2018 half, the Group recognised the following impacts in relation to assets and liabilities held for sale:

$632 million loss after tax recognised on the reclassification of the Wealth Australia businesses to held for sale. This loss was recognised indiscontinued operations.

$85 million gain after tax comprising $99 million relating to the sale of the remaining Asia Retail and Wealth businesses, net of costs associated withthe sale and a $14 million tax expense. This gain was recognised in continuing operations.

$18 million gain after tax relating to UDC comprising a cost recovery in respect of the terminated transaction process. This gain was recognised incontinuing operations.

$247 million gain after tax relating to SRCB comprising a $289 million gain on release of reserves, $56 million of foreign exchange losses and othercosts, and a $14 million tax benefit. This gain was recognised in continuing operations.

$121 million gain after tax relating to MCC comprising a $121 million gain on sale of the first 20% stake, $1 million of foreign exchange gains, $3
million loss on release of reserves, and a $2 million tax benefit. This gain was recognised in continuing operations.

The impacts on continuing operations are shown in the relevant Income Statement categories and items relating to discontinued operations are includedin Profit/(Loss) after tax from discontinued operations.

104

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12.

Debt issuances
Half Year

Movement

Mar 19$M
113,424

Sep 18$M
105,271

Mar 18$M
97,576

Mar 19v. Sep 18
8%

Mar 19v. Mar 18
16%

ANZ CN1

1,118

1,117

1,117

0%

0%

ANZ CN2

1,606

1,605

1,604

0%

0%

ANZ CN3

965

965

961

0%

0%

ANZ CN4

1,611

1,610

1,609

0%

0%

ANZ CN5

925

924

924

0%

0%

ANZ Capital Securities3

1,336

1,240

1,188

8%

12%

ANZ NZ Capital Notes4

478

456

467

5%

2%

Total unsubordinated debt
Additional Tier 1 Capital (perpetual subordinated securities)1
ANZ Capital Notes (ANZ CN)2

Tier 2 Capital
Perpetual subordinated notes5

423

416

1,174

2%

-64%

Term subordinated notes6

7,806

7,575

8,216

3%

-5%

Total subordinated debt

16,26815,90817,2602%-6%Total debt issuances

129,692

121,179

114,836

7%

13%

1.
2.

ANZ Capital Notes, ANZ Capital Securities and the ANZ NZ Capital Notes are Basel 3 compliant instruments.
Each of the ANZ Capital Notes will convert into a variable number of ANZ ordinary shares on a specified mandatory conversion date at a 1% discount (subject to certain conditions being
satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will immediately convert into ANZ
ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, the notes are redeemable or convertible to ANZ ordinary shares (on similar terms
to mandatory conversion) by ANZ at its discretion on early redemption or conversion date.
IssuerIssue dateIssue Amount$M

Early redemption or conversion date

Mandatory conversion date

CN1

ANZ

7 Aug 2013

1,120

1 Sep 2021

1 Sep 2023

CN2

ANZ

31 Mar 2014

1,610

24 Mar 2022

24 Mar 2024

CN3

ANZ, acting through its New Zealand branch

5 Mar 2015

970

24 Mar 2023

24 Mar 2025

CN4

ANZ

27 Sep 2016

1,622

20 Mar 2024

20 Mar 2026

CN5

ANZ

28 Sep 2017931

20 Mar 2025

20 Mar 2027

3.

On 15 June 2016, ANZ acting through its London branch issued fully-paid perpetual subordinated contingent convertible securities (ANZ Capital Securities). If ANZ’s Common Equity Tier 1
capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the securities will immediately convert into ANZ ordinary shares at a 1% discountsubject to a maximum conversion number. Subject to certain conditions, on the First Reset Date (15 June 2026) and each 5 year anniversary, ANZ has the right to redeem all of the
securities at its discretion.
4. On 31 March 2015, ANZ Bank New Zealand Limited (ANZ Bank NZ) issued convertible notes (ANZ NZ Capital Notes) which will convert into ANZ ordinary shares on 25 May 2022 at a 1%
discount (subject to certain conditions being satisfied). If ANZ or ANZ Bank NZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, ANZ receives a notice of non-viability
from APRA, ANZ Bank NZ receives a direction from RBNZ or a statutory manager is appointed to ANZ Bank NZ and makes a determination, then the notes will immediately convert into
ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 25 May 2020 the notes are redeemable or convertible into ANZ ordinary
shares (on similar terms to the mandatory conversion) by ANZ Bank NZ.
5. The USD 300 million perpetual subordinated notes have been granted Basel 3 transitional capital treatment until the end of the transition period in December 2021.
6. All the term subordinated notes are convertible and are Basel 3 compliant instruments, except ANZ’s EUR 750 million subordinated notes due in September 2019 which have been granted
Basel 3 transitional capital treatment until their maturity. If ANZ receives a notice of non-viability from APRA, then the convertible subordinated notes will immediately convert into ANZ
ordinary shares at a 1% discount subject to a maximum conversion number.

105

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13.

Credit risk

The Group has adopted AASB 9 effective from 1 October 2018 which has resulted in changes to the classification and measurement of financial assets,
including the impairment of financial assets. The presentation of credit risk information for the March 2019 half has been amended with no restatement ofcomparatives. For further details on key requirements and impacts of the changes described above refer to Note 1.
Maximum exposure to credit risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may bedifferences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these differences
arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject to market risk, orbank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum
exposure to credit risk is the maximum amount the group would have to pay if the instrument is called upon.
The table below shows the maximum exposure to credit risk of on-balance sheet, and off-balance sheet, positions before taking account of any collateral
held or other credit enhancements:

On-balance sheet positions3
Net loans and advances

Mar 19$M
610,143

Reported

Excluded/Other1,2Maximum Exposure to Credit Risk

As at

As at

As at

Sep 18$M
605,437

Mar 18$M
592,469

Mar 19$M(26)

Sep 18$M(26)

Mar 18$M(26)

Mar 19$M
610,169

Sep 18$M
605,463

Mar 18$M
592,495

Investment securities4- debt securities at amortised cost

6,176

-

-

-

-

-

6,176

-

-

- debt securities at FVOCI

72,555

-

-

-

-

-

72,555--- equity securities at FVOCI

1,318

-

-

1,318

-

-

-

-

-

-

75,363

71,279

-

1,095

1,052

-

74,26870,227

Other financial assets

276,973

249,406

258,086

49,46647,43449,472

227,507

201,972

208,614

Total on-balance sheet positions

967,165

930,206

921,834

50,75848,50350,498916,407881,703871,336

Available-for-sale assets

Off-balance sheet commitments
Undrawn and contingent facilities5
Total

245,311244,608

233,005

26

26

26

245,285

244,582

232,979

1,212,476

1,174,814

1,154,839

50,784

48,52950,524

1,161,692

1,126,285

1,104,315

1.

Excluded comprises bank notes and coins and cash at bank within liquid assets, investments relating to the insurance business where the credit risk is passed onto the policy holder. Equity
securities and precious metal exposures recognised as trading securities have been excluded as they do not have credit exposure. Equity securities within investment securities – equity
securities at FVOCI/available-for-sale financial assets were also excluded as they do not have credit exposure.
2. Other relates to the transfer of individual provisions related to off-balance sheet facilities held in net loans and advances. The provisions are transferred for the purposes of showing the
maximum exposure to credit risk by relevant facility type in this and the following tables.
3. On-balance sheet position includes assets and liabilities reclassified as held for sale.
4. On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist
under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 for further details. Comparative information has not been restated.
5. Undrawn facilities and contingent facilities includes guarantees, letters of credit and performance related contingencies, net of collectively assessed allowance for expected credit losses.

106

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13.

Credit risk, cont’dCredit Quality
The Group’s internal Customer Credit Rating (CCR) is used to manage the credit quality of financial assets. To enable wider comparisons, the Group’s
CCRs are mapped to external rating agency scales as follows:
Moody'sRatingStandard &Poor'sRatingDemonstrated superior stability in their operating and financial performance over the
long-term, and whose earnings capacity is not significantly vulnerable to foreseeable
events.

Aaa – Baa3

AAA – BBB-CCR 5+ to 6-

Demonstrated sound operational and financial stability over the medium to long termeven though some may be susceptible to cyclical trends or variability in earnings.

Ba1 – B1

BB+ – B+Weak

CCR 7+ to 8=

Demonstrated some operational and financial instability, with variability anduncertainty in profitability and liquidity projected to continue over the short andpossibly medium term.

B2 - Caa

B - CCC

Defaulted

CCR8- to 10

When doubt arises as to the collectability of a credit facility, the financial instrument(or ‘the facility’) is classified as defaulted.

N/A

N/A

Individuallyassessed
$M

Total
$M

Credit Quality
Description

Internal CCR

ANZ Customer Requirement

Strong

CCR 0+ to 4-

Satisfactory

Net loans and advances
As at Mar 19
Stage 3
Stage 1
$M

Stage 2
$M

Collectively
assessed$M

Strong444,556

10,273--454,829

Satisfactory

112,984

19,843--

132,827

8,808

9,775

-

-

18,583

-

-

4,078

1,961

6,039

566,348

39,891

4,078

1,961

612,278

940

1,415

381

865

3,601

565,408

38,476

3,697

1,096

608,677

0.17%

3.55%

9.34%

44.11%

0.59%

Weak
Defaulted
Gross loans and advances at amortised cost
Provision for credit impairment
Net loans and advances at amortised cost
Coverage ratio
Loans and advances at fair value through profit or loss

991

Unearned income

(446)
947

Capitalised brokerage/mortgage origination fees

610,169

Net carrying amount

Investment securities - debt securities at amortised cost
As at Mar 19
Stage 3
Stage 2
$M

Collectively
assessed$M

Individuallyassessed
$M

Total
$M

4,751

-

-

-

4,751

666

771

-

-

1,437

Weak

-

-

-

-

-

Defaulted

-

-

-

-

-

5,417

771

-

-

6,188

Stage 1
$M
StrongSatisfactory

Gross investment securities - debt securities at amortised cost

11

1

-

-

12

Net investment securities - debt securities at amortised cost

Provision for credit impairment

5,406

770

-

-

6,176

Coverage ratio

0.20%

0.13%

-

-

0.19%

107

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13.

Credit risk, cont’d

Investment securities - debt securities at FVOCI
As at Mar 19
Stage 3
Stage 1
$M

Stage 2
$M

Collectively
assessed$M

72,401---

72,401

154

-

-

-

154

Weak

-

-

-

-

-

Defaulted

-

-

-

-

-

72,555---72,555

11

-

-

-

11

0.02%

-

-

-

0.02%

StrongSatisfactory

Investment securities - debt securities at FVOCILoss allowances recognised in other comprehensive income
Coverage ratio

Individuallyassessed
$M

Total
$M

Other financial assets
As at Mar 19
Total$M
Strong215,464

Satisfactory

11,596
447

Weak

-

Defaulted

227,507

Total carrying amountOff-balance sheet commitments - undrawn and contingent facilities
As at Mar 19
Stage 3
Stage 1
$M

Stage 2
$M

Collectively
assessed$M

Strong158,599

1,977

-

-

160,576

Satisfactory

23,519

3,894

-

-

27,413

395

957

-

-

1,352

-

-

96

61

157

182,513

6,828

96

61

189,498

464

152

14

26

656

Weak
Defaulted
Gross undrawn and contingent facilities subject to ECLAllowance for ECL included in Provisions
Net undrawn and contingent facilities subject to ECL
Coverage ratio
1

Individuallyassessed
$M

Total
$M

182,049

6,676

82

35

188,842

0.25%

2.23%

14.58%

42.62%

0.35%

Undrawn and contingent facilities not subject to ECL

56,443Net undrawn and contingent facilities

245,2851.

Commitments that can be unconditionally cancelled at any time without notice.

108

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13.

Credit risk, cont’d

2018 Credit Risk Disclosures
The below disclosures do not reflect the adoption of AASB 9 and have been prepared under the requirements of the previous AASB 139.
Credit Quality
The table below provides an analysis of the credit quality of the maximum exposure to credit risk split by:Neither past due nor impaired assets by credit quality
The credit quality of financial assets is managed by the Group using internal customer credit ratings (CCRs) based on their current probability ofdefault. The Group’s masterscales are mapped to external rating agency scales, to enable wider comparisons.



Past due but not impaired assets by ageing
Ageing analysis of past due loans is used by the Group to measure and manage emerging credit risks. Financial assets that are past due but not
impaired include those which are assessed, approved and managed on a portfolio basis within a centralised environment (for example credit cards
and personal loans) that can be held on a productive basis until they are 180 days past due, as well as those which are managed on an individual
basis. A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the value of supporting collateralis sufficient to cover amounts outstanding.



Restructured and impaired assets presented as gross amounts and net of individually assessed provisions
ANZ regularly reviews its portfolio and monitors adherence to contractual terms. When doubt arises as to the collectability of a credit facility, thefinancial instrument (or ‘the facility’) is classified and reported as individually impaired and an individually assessed provision is allocated against it.
As described in the summary of significant accounting policies in the 2018 Annual Financial Report, impairment provisions are created for financial
instruments that are reported on the balance sheet at amortised cost. For instruments reported at fair value, impairment provisions are treated as partof overall change in fair value and directly reduce the reported carrying amounts.

Loan advances
As at
Sep 18$M

Other financial assets
As at

Off balance sheet credit
related commitments
As at

Total
As at

Mar 18$M

Sep 18$M

Mar 18$M

Sep 18$M

Mar 18$M

Sep 18$M

Mar 18$M

Neither past due nor impaired
Strong credit profile

445,997427,729

272,110274,815

206,859

194,393924,966

896,937

Satisfactory risk

127,384

131,229

4,014

3,859

36,03736,756

167,435

171,844

Sub-standard but not past due or impaired

15,567

16,767

116

167

1,644

1,761

17,327

18,695

Subtotal

588,948575,725

276,240

278,841

244,540

232,910

1,109,728

1,087,476

1-29 days

8,958

8,974

-

-

-

-

8,958

8,974

30-59 days

2,240

2,576

-

-

-

-

2,240

2,576
1,233

Past due but not impaired

60-89 days

1,268

1,233

-

-

-

-

1,268

>90 days

2,998

3,038

-

-

-

-

2,998

3,038

Subtotal

15,464

15,821----

15,464

15,821

1,676

1,863

-

-

-

-

1,676

1,863

269

76

-

-

-

-

269

76

-

-

-

-

68

95

68

95

1,945

1,939

-

-

68

95

2,013

2,034

Individually assessed provisions

(894)

(990)

-

-

(26)

(26)

(920)

(1,016)

Subtotal

1,051

949

-

-

42

69

1,093

1,018

605,463592,495

276,240

278,841

244,582

232,979

1,126,285

1,104,315

Restructured and impaired
Impaired loans
Restructured items

1

Non-performing commitment and contingencies
Gross impaired financial assets

Total
1.

Restructured items are facilities in which the original contractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring may consist of
reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those typically offered for new facilities with similar risk.

109

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14.

Fair value measurement

The Group carries a significant number of financial instruments on the balance sheet at fair value. In addition, the Group also holds assets classified asheld for sale which are measured at fair value less costs to sell. The fair value is the best estimate of the price that would be received to sell an asset, or
paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
i) Assets and liabilities measured at fair value on the balance sheeta)Valuation

The Group has an established control framework, including appropriate segregation of duties, to ensure that fair values are accurately determined,
reported and controlled. The framework includes the following features:

products are approved for transacting with external customers and counterparties only where fair values can be appropriately determined;

when using quoted prices to value an instrument, these are independently verified from external pricing providers;

fair value methodologies and inputs are evaluated and approved by a function independent of the party that undertakes the transaction;



movements in fair values are independently monitored and explained by reference to underlying factors relevant to the fair value; andvaluation adjustments (such as funding valuation adjustments, credit valuation adjustments and bid-offer adjustments) are independently validated
and monitored.

If the Group holds offsetting risk positions, then the Group uses the portfolio exception in AASB 13 Fair Value Measurement (AASB 13) to measure thefair value of such groups of financial assets and financial liabilities. We measure the portfolio based on the price that would be received to sell a net longposition (an asset) for a particular risk exposure, or to transfer a net short position (a liability) for a particular risk exposure.
b)

Fair value approach and valuation techniques

We use valuation techniques to estimate the fair value of assets and liabilities for recognition, measurement and disclosure purposes where no quoted
price in an active market for that asset or liability exists. This includes the following:
Asset or Liability

Fair Value Approach

Financial instruments classified as:- trading securities- securities sold short- derivative financial assets and liabilities- investment securities (under AASB 9)- available-for-sale assets (under AASB 139)- other assets

Valuation techniques are used that incorporate observable market inputs for securities
with similar credit risk, maturity and yield characteristics. Equity instruments that are nottraded in active markets may be measured using comparable company valuation
multiples.

Financial instruments classified as:- net loans and advances- deposits and other borrowings- debt issuances

Discounted cash flow techniques are used whereby contractual future cash flows of the
instrument are discounted using discount rates incorporating wholesale market interest
rates, or market borrowing rates for debt with similar maturities or with a yield curve
appropriate for the remaining term to maturity.

Assets and liabilities held for sale

Valuation based on the agreed sale price before transaction costs.

Details of significant unobservable inputs used in measuring fair values are described in (ii)(a).
c)

Fair value hierarchy categorisation

The Group categorises financial assets and liabilities carried at fair value into a fair value hierarchy as required by AASB 13 based on the observability of
inputs used to measure the fair value:

Level 1 - valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly or
indirectly; andLevel 3 - valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.

d)

Fair value hierarchy disclosure

The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:

110

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14.

Fair value measurement, cont’d
Fair value measurements
Level 1$M

As at March 2019
AssetsTrading securities1

Level 2
$M

Level 3
$M

Total
$M

35,967

6,890-

42,857

331

78,991

53

79,37571,001393

1,312

72,706Net loans and advances (measured at fair value)

-

991

-

991

Assets held for sale3-

43,673-

43,673

107,299

130,938

1,365

239,602

Derivative financial instruments
Investment securities2

Total
Liabilities
Deposits and other borrowings (designated at fair value)
Derivative financial instruments
Liabilities held for sale3
Payables and other liabilities4
Debt issuances (designated at fair value)
Total

-

2,169

-

2,169

508

80,3204380,871-

46,538-46,538

2,125

42

-

2,167

-

2,414

-

2,414

2,633

131,48343

134,159

As at September 2018
AssetsTrading securities
Derivative financial instruments
230,855

6,867-

37,722647

67,71759

68,42374,28469,508

3,695

1,081

Net loans and advances (measured at fair value)

-

133

-

133

Assets held for sale3-

44,623-44,623101,010123,0351,140

225,185

-

2,332

-

2,332

1,680

67,952

44

69,676-46,829-46,829

1,159

12

-

1,171

-

1,442

-

1,442

2,839

118,56744

121,450

45,058Available-for-sale assets

Total
Liabilities
Deposits and other borrowings (designated at fair value)
Derivative financial instruments
Liabilities held for sale3
Payables and other liabilities4
Debt issuances (designated at fair value)
Total
As at March 2018
AssetsTrading securities

38,517

6,541

-

259

70,59363

70,91563,283

5,921

1,035

70,239

-

145

-

145

Assets held for sale-42,544-42,544

Other assets

4

139

-

143

102,063

125,883

1,098

229,044

Derivative financial instruments
Available-for-sale assets2
Net loans and advances (measured at fair value)3

Total
Liabilities
Deposits and other borrowings (designated at fair value)
Derivative financial instruments
Liabilities held for sale3
Payables and other liabilities4
Debt issuances (designated at fair value)
Total
1.

2.

3.

4.

-

2,470

-

2,470

1,008

69,57046

70,624-

43,817-43,817

1,884

161

-

2,045

-

1,785

-

1,785

2,892

117,80346

120,741

During the March 2019 half, there were no material transfers from Level 2 to Level 1 (Sep 18: $200 million, Mar 18: $753 million) in Trading securities. Transfers from Level 1 to Level 2 forMarch 2019 half and previous periods are immaterial. Transfers into and out of levels are measured at the beginning of the reporting period in which the transfer occurred.
On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets was revised. The available-for-sale classification used in comparative periods no longer
exists under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 for further details about the adoption of AASB 9. Comparative information has notbeen restated.
The amounts reclassified as assets and liabilities held for sale relate to assets and liabilities measured at fair value less costs to sell in accordance with AASB 5 Non-current Assets Held forSale and Discontinued Operations. The amounts presented reflect fair value excluding cost to sell but including intercompany eliminations.
Payables and other liabilities relates to securities sold short which are classified as held for trading are measured at fair value through profit or loss.

111

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14.

Fair value measurement, cont’dii) Details of fair value measurements that incorporate unobservable market dataa)Level 3 fair value measurements

The net balance of Level 3 financial instruments is an asset of $1,322 million (Sep 18: $1,096 million; Mar 18: $1,052 million). The assets and liabilities
which incorporate significant unobservable inputs primarily include:

equities for which there is no active market or traded prices cannot be observed;



structured credit products for which credit spreads and default probabilities relating to the reference assets and derivative counterparties cannot be
observed; andother derivatives referencing market rates that cannot be observed primarily due to lack of market activity.

Movements in the Level 3 balance are due to the revaluation of the Group’s investment in Bank of Tianjin.
There were no other material transfers in or out of Level 3 during the period.
Bank of Tianjin (BoT)The investment is valued based on comparative price-to-book (P/B) multiples (a P/B multiple is the ratio of the market value of equity to the book value ofequity). The extent of judgment applied in determining the appropriate multiple and comparator group from which the multiple is derived are nonobservable inputs which have resulted in the Level 3 classification.
b) Sensitivity to Level 3 data inputs
When we make assumptions due to significant inputs not being directly observable in the market place (Level 3 inputs), then changing these assumptions
changes the Group’s estimate of the instrument’s fair value. Favourable and unfavourable changes are determined by changing the primary
unobservable parameter used to derive the valuation.
Bank of Tianjin (BoT)The valuation of the BoT investment is sensitive to the selected unobservable input, being the P/B multiple. If the P/B multiple was increased or
decreased by 10% it would result in a $121 million increase or decrease to the fair value of the investment (Sep 18: $102 million; Mar 18: $98 million),
which would be recognised in shareholders’ equity.
Other
The remaining Level 3 balance is immaterial and changes in the Level 3 inputs have a minimal impact on net profit and net assets of the Group.
c)

Deferred fair value gains and losses

When fair values are determined using unobservable inputs significant to the fair value of a financial instrument, the Group does not immediately
recognise the difference between the transaction price and the amount we determine based on the valuation technique (day one gain or loss) in profit orloss. After initial recognition, we recognise the deferred amount in profit or loss over the life of the transaction on a straight line basis or until all inputs
become observable.
The day one gains and losses deferred are not material.
iii) Financial assets and liabilities not measured at fair value
The classes of financial assets and liabilities listed in the table below are generally carried at amortised cost on the Group’s balance sheet. Whilst this isthe value at which we expect the assets will be realised and the liabilities settled, the Group provides an estimate of the fair value of these financial
assets and liabilities at balance date in the table below.

112

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14.

Fair value measurement, cont’d
Carrying amount in the balance sheet
At amortisedcost$M

As at March 2019
Financial assets

Fair Value

At fair
value
$M

Total
$M

$M
610,983

Net loans and advances1

608,264

1,879

610,143

Investment securities1, 2

6,176

73,87380,04980,044614,440

75,752

690,192

691,027

Deposits and other borrowings1

632,820

3,713

636,533

637,009

Debt issuances

127,278

2,414

129,692

130,558

Total

760,098

6,127

766,225

767,567

604,305

1,132

605,437

605,911

Deposits and other borrowings1

615,818

3,911

619,729

619,895

Debt issuances

119,737

1,442

121,179

122,060

Total

735,555

5,353

740,908

741,955592,206

263

592,469

592,875

Total
Financial liabilities

As at September 2018
Financial assets
Net loans and advances1
Financial liabilities

As at March 2018
Financial assets
Net loans and advances1
Financial liabilities
Deposits and other borrowings1

614,660

2,470

617,130

617,254

Debt issuances

113,051

1,785

114,836

115,811

Total

727,711

4,255

731,966

733,065

1.
2.

Net loans and advances, investment securities and deposits and other borrowings include amounts reclassified to assets and liabilities held for sale. Refer to Note 11.
Investment securities under AASB 9 includes securities measured at amortised cost, fair value through other comprehensive income and fair value through P&L. Refer to Note 1.

113

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
15.

Shareholders’ equity
Half Year

Issued and quoted securities
Ordinary shares
Closing balanceIssued/(Repurchased) during the period1
1.

Mar 19No.
2,833,175,579

Sep 18No.
2,873,618,118

Mar 18
No.
2,898,758,978(40,442,539)(25,140,860)(38,656,349)

The Company issued 1.6 million shares under the Bonus Option Plan (BOP) for the 2018 final dividend (1.4 million shares for the 2018 interim dividend; 1.5 million shares for the 2017 final
dividend). No new shares were issued under the Dividend Reinvestment Plan (DRP) for the 2018 final dividend (nil shares for the 2018 interim dividend; nil shares for the 2017 final
dividend) as the shares were purchased on-market and provided directly to the shareholders participating in the DRP. On-market purchases for the DRP in the March 2019 half were $199
million (Sep 18 half: $200 million, Mar 18 half: $192 million). The Company has completed its $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million in the
March 2019 half (Sep 18 half: $748 million, Mar 18 half: $1,132 million) resulting in 42.0 million ANZ ordinary shares being cancelled in the March 2019 half (Sep 18 half: 26.6 million; Mar
18 half: 40.1 million).

Half Year
Shareholders' equity
Ordinary share capital
Reserves
Foreign currency translation reserve
Share option reserve
Available-for-sale revaluation reserve1

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18-4%

Mar 19v. Mar 18-7%

26,04827,20527,933

846
71

12
92

257
70

large

large

-23%

1%

-

113

119

-100%

-100%

FVOCI reserve1

370

-

-

n/a

n/a

Cash flow hedge reserve

444

127

117

large

large

Transactions with non-controlling interests reserve

(22)

(21)

(22)

5%

0%

Total reserves

1,709

323

541

large

large

Retained earnings

32,06431,73730,922

1%

4%

Share capital and reserves attributable to shareholders of the Company

59,821

59,26559,3961%

1%

Non-controlling interests
Total shareholders' equity
1.

150

140

126

7%

19%

59,971

59,40559,522

1%

1%

On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist
under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 for further details. Comparative information has not been restated.

16.

Changes in composition of the GroupThe Group disposed of the aligned dealer groups and OnePath Life (NZ) Ltd in the half year ended 31 March 2019. There were no other acquisitions or
disposals of material controlled entities during the period.

17.

Investments in Associates
Half Year
Mar 19131

Share of associates' profit

Contributions to profit1

Movement

Sep 1895

Mar 19v. Sep 18
38%

Mar 1888

Mar 19v. Mar 18
49%

Contribution toGroup profit after tax

Ownership interest
held by Group

Half Year

As at

Associates

P.T. Bank Pan Indonesia

Mar 19$M70

Sep 18$M
44

Mar 18$M
45

Mar 19%39

Sep 18%39

Mar 18%39

AMMB Holdings Berhad

56

48

42

24

24

24

n/a

n/a

n/a

Other associates
Share of associates' profit
1.

5

3

1

131

95

88

Contributions to profit reflect the IFRS equivalent results adjusted to align with the Group’s financial year end which may differ from the published results of these entities. Excludes gains orlosses on disposal or valuation adjustments.

18.

Related party disclosure

There have been no transactions with related parties that are significant to understanding the changes in financial position and performance of the Groupsince 30 September 2018.

114

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
19.

Contingent liabilities and contingent assets

There are outstanding court proceedings, claims and possible claims for and against the Group. Where relevant, expert legal advice has been obtained
and, in the light of such advice, provisions and/or disclosures as deemed appropriate have been made. In some instances we have not disclosed theestimated financial impact of the individual items either because it is not practicable to do so or because such disclosure may prejudice the interests of
the Group.
Refer to note 33 of the 2018 ANZ Annual Financial Report for a description of contingent liabilities and contingent assets as at 30 September 2018. A
summary of some of those contingent liabilities and new contingent liabilities that have arisen during the current reporting period is set out below.
Bank fees litigation
A litigation funder commenced a class action against the Company in 2010, followed by a second similar class action in March 2013. The applicants
contended that certain exception fees (honour, dishonour and non-payment fees on transaction accounts and late payment and over-limit fees on
credit cards) were unenforceable penalties and that various of the fees were also unenforceable under statutory provisions governing unconscionableconduct, unfair contract terms and unjust transactions. The claims in the March 2013 class action failed and have been dismissed.
The original claims in the 2010 class action have been dismissed. In 2017, a new claim was added to the 2010 class action, in relation to theCompany’s entitlement to charge certain periodical payment non-payment fees. An agreement to settle the claim was reached in December 2018.
The settlement is subject to court approval.

Benchmark/rate actions
In July and August 2016, class action complaints were brought in the United States District Court against local and international banks, including theCompany - one action relating to the bank bill swap rate (BBSW), and one action relating to the Singapore Interbank Offered Rate (SIBOR) and theSingapore Swap Offer Rate (SOR). The class actions are expressed to apply to persons and entities that engaged in US-based transactions infinancial instruments that were priced, benchmarked, and/or settled based on BBSW or SIBOR. The claimants seek damages or compensation inamounts not specified, and allege that the defendant banks, including the Company, violated US anti-trust laws and (in the BBSW case only) antiracketeering laws, the Commodity Exchange Act, and unjust enrichment principles. The Company is defending the proceedings. The matters are at
an early stage.
In February 2017, the South African Competition Commission commenced proceedings against local and international banks including the Company
alleging breaches of the cartel provisions of the South African Competition Act in respect of trading in the South African rand. The potential civil
penalty or other financial impact is uncertain. The matter is at an early stage.



Capital raising actions
In June 2018, the Commonwealth Director of Public Prosecutions commenced criminal proceedings against the Company and a senior employee
alleging that they were knowingly concerned in cartel conduct by the joint lead managers of the Company’s August 2015 underwritten institutional
equity placement of approximately 80.8 million ordinary shares. The matter is at an early stage. The Company and its senior employee are defending
the allegations.
In September 2018, the Australian Securities and Investments Commission (ASIC) commenced civil penalty proceedings against the Company
alleging failure to comply with continuous disclosure obligations in connection with the Company’s August 2015 underwritten institutional equity
placement. ASIC alleges the Company should have advised the market that the joint lead managers took up approximately 25.5 million ordinary
shares of the placement. The matter is at an early stage. The Company is defending the allegations.

Franchisee litigation
In February 2018, two related class actions were brought against the Company alleging breaches of contract and unconscionable conduct in relation
to lending to 7-Eleven franchisees. An agreement to settle the claims against the Company was reached in March 2019. The settlement is subject tocourt approval.

Regulatory and customer exposures
In recent years there has been an increase in the number of matters on which ANZ engages with its regulators. There have been significant
increases in the nature and scale of regulatory investigations and reviews, civil and criminal enforcement actions (whether by court action orotherwise) and the quantum of fines issued by regulators, particularly against financial institutions both in Australia and globally. The nature of theseinteractions can be wide ranging and, for example, currently include a range of matters including responsible lending practices, product suitability anddistribution, interest and fees and the entitlement to charge them, wealth advice, insurance distribution, pricing, competition, conduct in financial
markets and capital market transactions, reporting and disclosure obligations and product disclosure documentation. ANZ has received various
notices and requests for information from its regulators as part of both industry-wide and ANZ-specific reviews and has also made disclosures to its
regulators at its own instigation. There may be exposures to customers which are additional to any regulatory exposures. These could include classactions, individual claims or customer remediation or compensation activities. The outcomes and total costs associated with such reviews andpossible exposures remain uncertain.

Royal Commission
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was established on 14 December 2017. The
Commission’s final report was released publicly on 4 February 2019. The Commission may result in additional costs and may lead to further
exposures, including exposures associated with further regulator activity or potential customer exposures such as class actions, individual claims orcustomer remediation or compensation activities. The outcomes and total costs associated with these possible exposures remain uncertain.

Security recovery actions
Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets. These claims will bedefended.

115

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Warranties and Indemnities
The Group has provided warranties, indemnities and other commitments in favour of the purchaser and other persons in connection with various
disposals of businesses and assets and other transactions, covering a range of matters and risks. It is exposed to potential claims under thosewarranties, indemnities and commitments.

20.

Significant Events Since Balance Date

There have been no significant events from 31 March 2019 to the date of signing this report.

21.

Adoption of new accounting standards and other changes to comparativesi)Changes to comparatives including the impact of AASB 15 Revenue from Contracts with Customers (AASB 15)

The following table summarises the changes to comparatives resulting from the application of AASB 15, and other reclassification adjustments toenhance comparability with current period presentation.

Reported as at
30 Sep 18$M
Net loans and advances 1
Other assets

2

Impact of
Otherapplication of reclassification
AASB 15
adjustment$M$M

603,938-

500

Restated as at
30 Sep 18$M604,438

3,645

32

-

3,677

Other non-impacted balance sheet line items

335,041--

335,041

Total assets

942,62432

500

943,156

Deferred tax liabilities

2

Payables and other liabilities3
Provisions1,3

59

10

-

69

6,788

106

-

6,894

1,578

(106)

500

1,972

Other non-impacted balance sheet line items

874,816--

874,816

Total liabilities

883,24110

500

883,751
31,737Retained earnings

2

31,71522-

Other non-impacted balance sheet line items

27,528--27,528

Share capital and reserves attributable to shareholders of the Company2

59,24322-

59,265

Non-controlling interests
Total shareholders’ equity2

140

-

-

140

59,38322-

59,405

Impact of
Otherapplication of reclassification
AASB 15
adjustment$M$M

Restated as at
31 Mar 18$M

Reported as at
31 Mar 18$M
Net loans and advances 1

588,946

-

522

4,914

32

-

4,946

Other non-impacted balance sheet line items

341,256--

341,256

Total assets

935,11632

522

935,670

258

10

-

7,442

100

Other assets2

Deferred tax liabilities2
Payables and other liabilities3
Provisions1,3

589,468

268
7,542

1,110

(100)

522

1,532

Other non-impacted balance sheet line items

866,806--

866,806

Total liabilities

875,61610522

876,148
30,922Retained earnings

230,900

22-

Other non-impacted balance sheet line items

28,474--28,474

Share capital and reserves attributable to shareholders of the Company2

59,37422-

59,396

126

-

-

126

59,50022-

59,522

Non-controlling interests
2

Total shareholders’ equity
1.

2.

3.

$500 million of collectively assessed provisions for credit impairment attributable to off-balance sheet credit related commitments at 30 September 2018 (Mar 18: $522 million) werereclassified from Net loans and advances at amortised cost to Other provisions to enhance comparability with current period presentation.
The Group adopted AASB 15 in this reporting period with comparatives restated. This policy change resulted in an adjustment to the opening balance of $32 million to Other assets, $10
million to Deferred tax liabilities and $22 million to Retained earnings as at 1 October 2017 to recognise revenue that qualifies for upfront recognition under AASB 15 but was not previously
recognised under AASB 118.
Upon adoption of AASB 15, certain liabilities associated with credit card loyalty programs have been reclassified from Provisions to Other Liabilities. In addition, certain items previously
netted are now presented gross in operating income and operating expenses. Comparative information has been restated which increased total operating income and total operating
expenses by $91 million for the September 2018 half and $62 million for the March 2018 half.

116

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ii)

Impact of the transition to AASB 9 Financial Instruments (AASB 9)

Allowance for expected credit losses
The table below reconciles the closing provisions for credit impairment for financial assets determined in accordance with AASB 139, and provisions forloan commitments and financial guarantee contracts determined in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets
as at 30 September 2018, and the opening provisions for credit impairment determined in accordance with AASB 9 as at 1 October 2018.

As at 30 Sep 18
As at 1 Oct 18
Provision for
credit impairment
Incremental
under AASB 139 allowance for ECL Allowance for ECL
or AASB 137
under AASB 9
under AASB 9$M$M$M
Loans and advances - at amortised cost

2,943

647

-

11

11

500

155

655

3,443

813

4,256

Investment securities - debt securities at FVOCI2

-

14

14

Total loss allowance recognised in other comprehensive income

-

14

14

Investment securities - debt securities at amortised cost
Off-balance sheet commitments - undrawn and contingent facilities1
Total provisions for credit impairment

3,590

Loss allowances recognised in other comprehensive income:1.
2.

The collectively assessed allowance for ECL is included in Provisions. The individually assessed allowance for ECL is included in Net loans and advances.
Allowance for ECL does not change the carrying amount which remains at fair value. Instead, the allowance for ECL is recognised in OCI, with a corresponding charge to profit or loss.

117

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarises the adjustments arising on adoption of AASB 9.
Consolidated balance sheet reconciliation

Trading securities

AASB 9Remeasurement
impact (excl.
impairment)$M

AASB 9credit impairment
impact$M

Revised carrying
amount as at
1 Oct 18
$M
36,729Reference

AASB 139
measurement
category

AASB 9measurement
category

Restated as at
30 Sep 18$M

AASB 9reclassification
impact
$M

1,2

FVTPL

FVTPL

37,722

(993)

-

-

Investment securities:
2,6,7

N/A

Amortised cost

-

6,158

2

(11)

6,149

- debt securities at FVOCI- debt securities at amortised cost

1, 2

N/A

FVOCI

-

70,938--70,938- equity securities at FVOCI

2

N/A

FVOCI

-

1,087

-

-

1,087

Available-for-sale assets (AFS)

2

AFS

N/A

74,284(74,284)---

3,6,7,8

Amortised cost

604,305(4,470)15(647)

599,2033,8

Loans andreceivables
FVTPL

FVTPL

133

1,564

(23)

-

1,674

5

N/A

N/A

2,553

-

-

(65)

2,488

1,2,4,6

N/A

N/A

900

-

15

234

1,149

N/A

N/A

Net loans and advances- at amortised cost
- at FVTPL
Investment in associates
Deferred tax assets
Other non-impacted balance sheet line items
Total assets
Current tax liabilities

223,259---

223,259

943,156

-

9

(489)

942,676

1,3,4

N/A

N/A

300

-

30

-

330

6

N/A

N/A

1,972

-

-

155

2,127

- at amortised cost

4

Amortised cost

Amortised cost

119,737

(879)

-

-

118,858- at FVTPL

4

FVTPL

FVTPL

1,442

879

(55)

-

2,266

N/A

N/A

760,300---

760,300

Total liabilities

883,751

-

(25)

155

883,881

Ordinary share capital

27,205---27,205

1,2,6

323

1

3

10

337

1,2,3,4,5,6

31,737

(1)

31

(654)

31,11359,265

-

34

(644)

58,655

140

-

-

-

140

59,405

-

34

(644)

58,795

Provisions
Debt issuances:-

Other non-impacted balance sheet line items

Reserves
Retained earnings
Share capital and reserves attributable to shareholders of the Company
Non-controlling interests
Total shareholders’ equity

118

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Reference1.

On initial application of AASB 9, a portfolio of bonds with a fair value of $1,000 million was transferred from Trading securities to Investment securities - debt securities at FVOCI as the applicable business model was held to collectand sell. Cumulative fair value gains/(losses) on this portfolio of $2 million (after tax) were transferred from Retained earnings to the FVOCI reserve. Additionally, the reclassification resulted in a reduction in deferred tax assets andcurrent tax liabilities of $1 million.

2.

The Available-for-sale classification is no longer applicable under AASB 9. Accordingly, on transition:
$69,938 million of Available-for-sale debt instruments were reclassified to Investment securities – debt securities measured at FVOCI due to the business model being held to collect and sell. There was no re-measurement
impact associated with this reclassification;$3,252 million of Available-for-sale debt instruments were reclassified to Investment securities – debt securities at amortised cost due to the business model being held to collect at 1 October 2018. This reclassification resulted inre-measurement of a $2 million increase to the carrying amount arising from reversal of the previous available-for-sale revaluation reserve. Additionally, a deferred tax asset of $1 million associated with the previous available-forsale revaluation was reversed;

the Group made irrevocable elections to designate $1,087 million of non-traded Available-for-sale equity securities as Investment securities - equity securities at FVOCI; and

$7 million of Available-for-sale equity securities were reclassified to Trading securities and the related reserve balance of $1 million was reclassified to Retained earnings.

3.

Certain loans with contractual cash flow characteristics that are not solely payments of principal and interest were reclassified from Net loans and advances at amortised cost to Net Loans and advances at FVTPL. The loans had anamortised cost carrying amount of $224 million and a fair value of $201 million at 30 September 2018. The associated re-measurement of $23 million was recognised in Retained earnings offset by a decrease in current tax liabilities
of $7 million. In addition, one of the loans was previously in a fair value hedge relationship which was discontinued effective 1 October 2018. Accordingly, changes in the fair value due to changes in the hedged risk which werepreviously recognised as a reduction to the carrying value of the loan amounting to $15 million were written back to Retained earnings offset by an increase in current tax liabilities of $4 million.

4.

The Group elected to designate certain financial liabilities (bonds included within Debt issuances) as measured at fair value through profit or loss effective from 1 October 2018 to reduce an accounting mismatch. The bonds had anamortised cost carrying amount of $879 million and a fair value of $824 million at 30 September 2018. The difference of $55 million (comprising a $109 million decrease in fair value before own credit, offset by a $54 million increase infair value attributable to own credit) offset by a net tax impact of $17 million (increase in deferred tax asset of $17 million and an increase in current tax liability of $34 million) was recognised in Retained earnings.

5.

The Group recognised a decrease of $65 million to the carrying value of Investments in associates with a corresponding decrease to Retained earnings reflecting the Group’s share of the estimated initial application impact of IFRS 9(the international equivalent of AASB 9).

6.

The initial application of the expected credit loss requirements of AASB 9, resulted in increases in provisions for credit impairment attributable to the following:On-balance sheet loans and advances of $647 million reflected in the Net loans and advances at amortised cost;

Investment securities measured at amortised cost of $11 million reflected in the Investment securities – debt securities at amortised cost; andOff-balance sheet credit related commitments of $155 million reflected in the Provisions.

The total impact of $813 million was recognised as a reduction to Retained earnings, offset by an increase of $234 million related to deferred tax. Additionally, loss allowances of $10 million (after-tax) attributable to Investment
securities – debt securities at FVOCI have been recognised in Reserves with a corresponding adjustment to Retained earnings. The debt securities remain at fair value on the face of the Balance Sheet.
7.

On initial application of AASB 9, a portfolio of Negotiable Certificates of Deposit with a carrying amount of $2,906 million was reclassified from Net loans and advances at amortised cost to Investment Securities at amortised cost.
There was no re-measurement impact associated with this reclassification.

8.

On initial application of AASB 9, loans with a carrying amount and fair value of $1,340 million that were in the process of being syndicated were reclassified from Net loans and advances at amortised cost to Net Loans and advances
at FVTPL on the basis that the applicable business model is held-to-sell. There was no re-measurement impact associated with this reclassification.

119

DIRECTORS’ DECLARATION

Directors’ Declaration
The Directors of Australia and New Zealand Banking Group Limited declare that:1.

2.

in the Directors’ opinion the Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements are inaccordance with the Corporations Act 2001, including:

section 304, that they comply with the Australian Accounting Standards and any further requirements in the Corporations Regulations 2001;and

section 305, that they give a true and fair view of the financial position of the Group as at 31 March 2019 and of its performance for the halfyear ended on that date; andin the Directors’ opinion as at the date of this declaration there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.

Signed in accordance with a resolution of the Directors.

David M Gonski, AC
ChairmanShayne C Elliott
Director

30 April 2019120

AUDITOR’S REVIEW REPORT AND INDEPENDENCE DECLARATION

Independent Auditor’s Review Report to the shareholders of Australia and New Zealand Banking Group Limited
Report on the half year Condensed Consolidated Financial Statements
Conclusion
We have reviewed the accompanying Condensed Consolidated Financial Statements of Australia and New Zealand Banking Group Limited (the Group).
The Group comprises Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the half year’s end or from time totime during the half year.
The Condensed Consolidated Financial Statements comprise:
The condensed consolidated balance sheet as at 31 March 2019;
The condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statementof changes in equity, and condensed consolidated cash flow statement for the half year ended on that date;
Notes 1 to 21 comprising a summary of significant accounting policies and other explanatory information; and
The Directors’ Declaration.
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the Condensed Consolidated Financial
Statements of Australia and New Zealand Banking Group Limited are not in accordance with the Corporations Act 2001, including:i)giving a true and fair view of the Group’s financial position as at 31 March 2019 and of its performance for the half year ended on that date; andii)
complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.
Responsibilities of the Directors for the Condensed Consolidated Financial Statements
The Directors of the Company are responsible for:
the preparation of the Condensed Consolidated Financial Statements that give a true and fair view in accordance with Australian AccountingStandards and the Corporations Act 2001;
such internal control as the Directors determine is necessary to enable the preparation of the Condensed Consolidated Financial Statements thatare free from material misstatement, whether due to fraud or error.
Auditor’s responsibility for the review of the Condensed Consolidated Financial Statements
Our responsibility is to express a conclusion on the Condensed Consolidated Financial Statements based on our review. We conducted our review inaccordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity,
in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the Condensed
Consolidated Financial Statements are not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial
position as at 31 March 2019 and its performance for the half year ended on that date, and complying with Australian Accounting Standard AASB 134
Interim Financial Reporting and the Corporations Regulations 2001. As auditor of Australia and New Zealand Banking Group Limited, ASRE 2410 requiresthat we comply with the ethical requirements relevant to the audit of the annual financial report.
A review of Condensed Consolidated Financial Statements consists of making enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian
Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified
in an audit. Accordingly, we do not express an audit opinion.
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

Alison Kitchen
Partner

KPMG
Melbourne
30 April 2019

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To the Directors of Australia and New Zealand Banking Group Limited
I declare that, to the best of my knowledge and belief, in relation to the review of Australia and New Zealand Banking Group Limited for the half-year
ended 31 March 2019, there have been:(i)no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and(ii)

no contraventions of any applicable code of professional conduct in relation to the review.

Alison Kitchen
Partner

KPMG
Melbourne
30 April 2019

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (”KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.

121

AUDITOR’S REVIEW REPORT AND INDEPENDENCE DECLARATIONThis page has been left blank intentionally

122

SUPPLEMENTARY INFORMATIONCONTENTS

Page

Capital management - including discontinued operations

124

Average balance sheet and related interest - including discontinued operations

128

Select geographical disclosures – including discontinued operations

131

Exchange rates

132

Derivative financial instruments

133

123

SUPPLEMENTARY INFORMATION
Capital management - including discontinued operations

ANZ provides information as required under APRA’s prudential standard APS 330: Public Disclosure. This information is located in the Regulatory
Disclosures section of ANZ’s website: shareholder.anz.com/pages/regulatory-disclosure.
As at
Qualifying Capital

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

59,971

59,38359,500

1%

1%
-89%

Tier 1
Shareholders' equity and non-controlling interests1

(43)

(322)

(394)

-87%

59,92859,061

59,1061%

1%(14,400)(14,370)(15,399)0%-6%45,52844,691

43,707

2%

4%

7,547

7,527

7,418

0%

2%

53,07552,21851,125

2%

4%

7,569

7,291

8,040

4%

-6%

60,64459,50959,1652%

2%

Common Equity Tier 1

11.5%

11.4%

11.0%

Tier 1

13.4%

13.4%

12.9%

1%

0%

Prudential adjustments to shareholders' equity

Table 1Gross Common Equity Tier 1 capital
Deductions

Table 2

Common Equity Tier 1 capital
Additional Tier 1 capital

Table 3Tier 1 capital
Tier 2 capital

Table 4

Total qualifying capital
Capital adequacy ratios

Tier 2

1.9%

1.9%

2.0%

Total capital ratio

15.3%

15.2%

14.9%

396,291

390,820395,777

Risk weighted assets
1.

Table 5

Prior period numbers have not been restated for the impact of AASB 15 to align with previously reported regulatory returns.

124

SUPPLEMENTARY INFORMATION
Capital management - including discontinued operations, cont’d
As at

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

Treasury shares attributable to ANZ Wealth Australia policyholders

328

328

306

0%

7%

Accumulated retained profits and reserves of insurance and funds
management entities

(213)

(509)

(608)

-58%

-65%

Deferred fee revenue including fees deferred as part of loan yields

143

132

135

8%

6%

Reserves attributable to investment securities/
available-for-sale assets related to deconsolidated subsidiaries1

(139)

(99)

(91)

40%

53%

Other

(162)

(174)

(136)

-7%

19%

Total

(43)

(322)

(394)

-87%

-89%

Unamortised goodwill & other intangibles (excluding ANZ Wealth Australia and
New Zealand)(3,865)(3,776)(3,638)2%

6%Intangible component of investments in ANZ Wealth Australia and New
Zealand(1,494)(1,629)(1,634)-8%-9%

Capitalised software(1,360)(1,421)(1,745)-4%-22%

Capitalised expenses including loan and lease origination fees

(1,019)(1,077)(1,133)-5%-10%(1,162)(1,118)

(869)

4%

34%

(42)

(609)

(686)

-93%

-94%

Table 1: Prudential adjustments to shareholders' equity

Table 2: Deductions from Common Equity Tier 1 capital

Applicable deferred net tax assets
Expected losses in excess of eligible provisions

Table 8Investment in other insurance and funds management subsidiaries

(270)

(270)

(274)

0%

-1%

Investment in ANZ Wealth Australia and New Zealand

(735)

(750)

(1,751)-2%-58%

Investment in banking associates and minority interests(2,501)(2,333)(2,272)

7%

10%

Other deductions(1,952)(1,387)(1,397)

41%

40%

Total

(14,400)(14,370)(15,399)

0%-6%

ANZ Capital Notes 1

1,118

1,117

1,117

0%

0%

ANZ Capital Notes 2

1,606

1,605

1,604

0%

0%

Table 3: Additional Tier 1 capital

ANZ Capital Notes 3

965

965

961

0%

0%

ANZ Capital Notes 4

1,611

1,610

1,609

0%

0%

ANZ Capital Notes 5

925

924

924

0%

0%

ANZ Bank NZ Capital Notes

478

456

467

5%

2%

1,336

1,240

1,188

8%

12%

ANZ Capital Securities
Regulatory adjustments and deductions

(492)

(390)

(452)

26%

9%

Total

7,547

7,527

7,418

0%

2%

Table 4: Tier 2 capital
General reserve for impairment of financial assets

307

119

123

large

large

Perpetual subordinated notes

423

416

390

2%

8%

Term subordinated debt notes

7,806

7,575

8,216

3%

-5%

Regulatory adjustments and deductions

(967)

(819)

(689)

18%

40%

Total

7,569

7,291

8,040

4%

-6%

1.

On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist
under AASB 9 and a new classification of investment securities was introduced. Comparative information has not been restated.

125

SUPPLEMENTARY INFORMATION
Capital management - including discontinued operations, cont’d
As at

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

On balance sheet

264,405

255,196257,304

4%

3%

Commitments

53,07952,40853,644

1%-1%

Contingents

12,14911,93812,3332%-1%

Derivatives

15,89018,03819,541-12%-19%345,523

337,580

342,8222%

1%

Market risk - Traded

5,790

6,808

6,558

-15%

-12%

Market risk - IRRBB

7,245

8,814

9,019

-18%

-20%

Operational risk

37,73337,61837,3780%

1%

Total risk weighted assets

396,291

390,820395,777

1%0%

Table 5: Risk weighted assets

Total credit risk weighted assets

Table 6

As at

Movement

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

127,989

121,891

123,253

5%

4%

Table 6: Credit risk weighted assets by Basel asset class
Subject to Advanced IRB approach
Corporate
Sovereign

7,016

6,955

6,896

1%

2%

Bank

15,511

15,90815,129-2%

3%

Residential mortgage

101,469

97,76499,5604%

2%

Qualifying revolving retail (credit cards)

5,795

6,314

6,845

-8%

-15%

Other retail28,02929,37330,769-5%-9%Credit risk weighted assets subject to Advanced IRB approach

285,809278,205

282,452

3%

1%

Credit risk specialised lending exposures subject to slotting criteria

35,69633,11032,065

8%

11%

-19%

Subject to Standardised approach
Corporate

12,252

13,76015,105-11%

Residential mortgage

331

327

321

1%

3%

Other retail (includes credit cards)

81

88

102

-8%

-21%

Credit risk weighted assets subject to Standardised approach

12,664

14,175

15,528-11%-18%

Credit Valuation Adjustment and Qualifying Central Counterparties

6,217

7,344

7,864

-15%

-21%

Credit risk weighted assets relating to securitisation exposures

1,558

1,600

1,728

-3%

-10%

Other assets

3,579

3,146

3,185

14%

12%

345,523

337,580

342,8222%

1%

Total credit risk weighted assets

126

SUPPLEMENTARY INFORMATION
Capital management - including discontinued operations, cont’dCollectively and Individually
Assessed Provision

Table 7: Total provision for credit impairment and Basel expected
loss by division

Basel Expected Loss1

Australia

Mar 19$M
2,420

Sep 18$M
1,694

Mar 18$M
1,690

Mar 19$M
2,460

Sep 18$M
2,428

Mar 18$M
2,499

Institutional

1,340

1,324

1,421

1,041

1,052

1,097

New Zealand

442

360

421

696

664

725

Pacific

67

61

59

8

9

8

-

4

4

1

-

-

4,269

3,443

3,595

4,206

4,153

4,329

TSO and Group Centre
Total provision for credit impairment and expected loss
1.

Only applicable to Advanced Internal Ratings based portfolios.

As at

Movement

Table 8: APRA Expected loss in excess of eligible provisions

Mar 19$M

Sep 18$M

Mar 18$M

Mar 19v. Sep 18

Mar 19v. Mar 18

APRA Basel 3 expected loss: non-defaulted

2,675

2,664

2,826

0%

-5%

Less: Qualifying collectively assessed provisionCollectively assessed provision(3,378)(2,523)(2,579)34%

31%

Non-qualifying collectively assessed provision

395

307

312

29%

27%

Standardised collectively assessed provision

151

119

123

27%

23%

-

567

682

-100%

-100%

1,531

1,489

1,503

3%

2%

Individually assessed provision

(891)

(920)

(1,016)-3%-12%Additional individually assessed provision for partial write offs

(310)

(325)

(301)

-5%

3%

85

79

108

8%

-21%

(373)

(281)

(290)

33%

29%

42

42

4

0%

large

-

-

5

n/a

-100%

Non-defaulted excess included in deduction
APRA Basel 3 expected loss: defaulted
Less: Qualifying individually assessed provision

Standardised individually assessed provisionCollectively assessed provision on advanced defaulted

Shortfall in expected loss not included in deduction
Defaulted excess included in deduction

42

4

9

large

large

Gross deduction

42

609

686

-93%

-94%

127

SUPPLEMENTARY INFORMATION
Average balance sheet and related interest1, 2 – including discontinued operations
Half Year Mar 19
Avg bal$M

Int$M

Home loans

322,407

Consumer finance

17,876

Business lending

Half Year Sep 18
Rate%

Avg bal
$M

Int
$M

7,396

4.6%

319,241

887

10.0%

18,024

246,530

5,570

4.5%

(902)

-

n/a

585,911

13,853

Half Year Mar 18
Rate%

Avg bal
$M

Int
$M

Rate
%

7,336

4.6%

313,971

7,296

4.7%

930

10.3%

16,975944

11.2%

236,199

5,113

4.3%

231,556

4,739

4.1%

(959)

-

n/a

(1,057)

-

n/a

4.7%

572,505

13,3794.7%

561,445

12,9794.6%

Loans and advances

Individual provisions for credit impairment
Total (continuing operations)Non-lending interest earning assets
Cash and other liquid assets

110,337710

1.3%

101,825593

1.2%

90,591438

1.0%

Trading and investment securities/available-for-sale assets3

114,169

1,317

2.3%

109,101

1,392

2.5%

111,734

1,271

2.3%

1,111

91

n/a

1,070

114

n/a

1,416

161

n/a

Other assets
Total (continuing operations)

225,617

2,118

1.9%

211,996

2,099

2.0%

203,741

1,870

1.8%

Total interest earning assets (continuing operations)4

811,528

15,971

3.9%

784,501

15,4783.9%765,186

14,8493.9%

Non-interest earning assets (continuing operations)

120,099

126,817

126,546

Total average assets (continuing operations)931,627

911,318

891,732

Total average assets (discontinued operations)

42,56442,85942,263

Total average assets

974,191

954,177

933,995

Deposits and other borrowings
Certificates of deposit

43,592505

2.3%

47,855541

2.3%

51,748529

2.1%

Term deposits

217,887

2,783

2.6%

207,804

2,503

2.4%

200,255

2,185

2.2%

On demand and short term deposits

215,957

1,892

1.8%

218,847

1,883

1.7%

221,781

1,843

1.7%

Deposits from banks and securities sold under agreement torepurchase

81,748913

2.2%

71,952722

2.0%65,455508

1.6%

Commercial paper and other borrowings

22,127309

2.8%

22,653230

2.0%

21,359208

2.0%

Total (continuing operations)581,311

6,402

2.2%

569,111

5,879

2.1%

560,598

5,273

1.9%

Non-deposit interest bearing liabilities
Collateral received and settlement balances owed by ANZ

11,60351

0.9%

12,65255

0.9%

12,06048

0.8%

Debt issuances & subordinated debt

120,454

2,060

3.4%

116,634

2,070

3.5%

109,020

1,858

3.4%

2,465

159

n/a

1,977

310

n/a

4,050

320

n/a

Total (continuing operations)

134,522

2,270

3.4%

131,263

2,435

3.7%

125,130

2,226

3.6%

Total interest bearing liabilities (continuing operations)4

715,833

8,672

2.4%

700,374

8,314

2.4%

685,728

7,499

2.2%

Non-interest bearing liabilities (continuing operations)

153,751

150,335

145,695

Total average liabilities (continuing operations)

869,584

850,709

831,423

Total average liabilities (discontinued operations)45,412

44,46943,573

Total average liabilities

914,996

895,178874,996

Total average shareholders' equity

59,19558,99958,999Other liabilities

1.
2.
3.

4.

Averages used are predominantly daily averages.
Assets and liabilities held for sale are included in continuing operations balance sheet categories and discontinued operations.
On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods cease to exist
under AASB 9 and a new classification of investment securities was introduced. Comparative information has not been restated.
Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.

128

SUPPLEMENTARY INFORMATION
Average balance sheet and related interest1, 2 – including discontinued operations (cont’d)Half Year Mar 19

Half Year Sep 18

Avg bal
$M

Int
$M

Rate
%

Avg bal$M

Australia

401,296

9,507

4.8%

395,442

Asia, Pacific, Europe & America

61,248

1,456

4.8%

58,826

New Zealand

123,367

2,890

4.7%

118,237

585,911

13,853

4.7%

Australia

58,709684

Asia, Pacific, Europe & America

41,171New Zealand

14,289Int$M

Half Year Mar 18
Rate%

Avg bal
$M

Int
$M

Rate
%

9,404

4.7%

389,907

9,273

4.8%

1,158

3.9%

56,019

977

3.5%

2,817

4.8%

115,519

2,729

4.7%

572,505

13,3794.7%

561,445

12,9794.6%

2.3%

59,075833

2.8%

62,044

740

2.4%

455

2.2%

36,135379

2.1%

35,399

344

1.9%

178

2.5%

13,891180

2.6%

14,291187

2.6%

114,169

1,317

2.3%

109,101

1,392

2.5%

111,734

1,271

2.3%

Australia

505,654

10,633

4.2%

495,373

10,605

4.3%

484,628

10,346

4.3%

Asia, Pacific, Europe & America

163,810

2,206

2.7%

152,803

1,827

2.4%

146,690

1,533

2.1%

New Zealand

142,064

3,132

4.4%

136,325

3,046

4.5%

133,868

2,970

4.4%

811,528

15,971

3.9%

784,501

15,4783.9%765,186

14,849

3.9%

3,382

2.0%

Loans and advances

Total (continuing operations)
Trading and investment securities/available-for-saleassets3

Total (continuing operations)
Total interest earning assets4

Total (continuing operations)
Total average assets
Australia

588,469

583,016

571,245

Asia, Pacific, Europe & America

188,160

178,007172,390

New Zealand

154,998

150,295

148,097

Total average assets (continuing operations)931,627

911,318

891,732

Total average assets (discontinued operations)

42,56442,85942,263

Total average assets

974,191

954,177

933,995

Interest bearing deposits andother borrowings
Australia

334,952

3,716

2.2%

336,275

3,568

2.1%

334,390

Asia, Pacific, Europe & America

150,989

1,554

2.1%

142,316

1,237

1.7%

137,993855

1.2%

New Zealand

95,370

1,132

2.4%

90,520

1,074

2.4%

88,215

1,036

2.4%

581,311

6,402

2.2%

569,111

5,879

2.1%

560,598

5,273

1.9%

Australia

421,237

5,296

2.5%

417,551

5,306

2.5%

408,953

4,880

2.4%

Asia, Pacific, Europe & America

176,119

1,864

2.1%

168,840

1,536

1.8%

165,303

1,182

1.4%

New Zealand

118,477

1,512

2.6%

113,983

1,472

2.6%

111,472

1,437

2.6%

715,833

8,672

2.4%

700,374

8,314

2.4%

685,728

7,499

2.2%

Total (continuing operations)
Total interest bearing liabilities4

Total (continuing operations)
Total average liabilities
Australia

528,775

522,945

508,875

Asia, Pacific, Europe & America

201,315

193,712

191,147

New Zealand

139,494

134,052

131,401

Total average liabilities (continuing operations)

869,584

850,709

831,423

Total average liabilities (discontinued operations)45,412

44,46943,573

Total average liabilities

914,996

895,178874,996

Ordinary share capital, reserves, retained earnings and noncontrolling interests

59,19558,99958,999Total average shareholders' equity

59,19558,99958,999Total average liabilities and shareholder's equity

974,191

954,177

933,995

Total average shareholders' equity

1.
2.
3.

4.

Averages used are predominantly daily averages.
Assets and liabilities held for sale are included in continuing operations balance sheet categories and discontinued operations.
On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods cease to exist
under AASB 9 and a new classification of investment securities was introduced. Comparative information has not been restated.
Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.

129

SUPPLEMENTARY INFORMATION
Half Year
Mar 19%Sep 18%Mar 18%Australia

4.38

4.46

4.49

Asia, Pacific, Europe & America

2.71

2.41

2.12

New Zealand

4.42

4.46

4.45

Group

3.95

3.94

3.89

Gross earnings rate1

Net interest spread and net interest margin analysis as follows:
Half Year2
Australia1
Net interest spreadMar 19%Sep 18%Mar 18
%

1.75

1.81

1.99

Interest attributable to net non-interest bearing items

0.35

0.31

0.28

Net interest margin - Australia

2.10

2.12

2.27

Net interest spread

0.58

0.60

0.68

Interest attributable to net non-interest bearing items

0.13

0.10

0.08

Net interest margin - Asia, Pacific, Europe & America

0.71

0.70

0.76

Net interest spread

1.82

1.83

1.83

Interest attributable to net non-interest bearing items

0.35

0.33

0.33

Net interest margin - New Zealand

2.17

2.16

2.16

Net interest spread

1.50

1.57

1.70

Interest attributable to net non-interest bearing items

0.30

0.25

0.23

Net interest margin

1.80

1.82

1.93

Net interest margin (excluding Markets)

2.50

2.49

2.60

Asia, Pacific, Europe & America1

1

New Zealand

Group

1.

Geographic gross earnings rate, net interest spread and net interest margin are calculated gross of intra-group items (Intra-group interest earning assets and associated interest income andintra-group interest bearing liabilities and associated interest expense).
2. In the March 2019 half, the methodology for allocating earnings on capital at a business unit level has changed from Economic Capital to Regulatory Capital. While neutral at a Group level,
this change has impacted net interest income at the business unit level and comparative information has been restated accordingly.

130

SUPPLEMENTARY INFORMATION
Select geographical disclosures – including discontinued operations
The following divisions operate across the geographic locations illustrated below:•
Institutional division - International, New Zealand and Australia•
Pacific division - International•
New Zealand division - New Zealand
The International geography includes Asia, Pacific, Europe & America
Australia$M

New Zealand$M

International
$M

Total
$M
3,173

March 2019 Half Year
Statutory profit attributable to shareholders of the company

1,750

877

546

Cash profit

1,902

1,052

560

3,514

Net loans and advances1

421,261

126,279

62,603

610,143

Customer deposits1

270,779

103,034

119,560

493,373

Risk weighted assets1

249,777

71,32275,192396,291

September 2018 Half Year
Statutory profit attributable to shareholders of the company

1,890

939

248

3,077

Cash profit

1,804

885

240

2,929

1

427,097

117,927

60,413605,437

Customer deposits1

276,769

95,310115,194487,273

Risk weighted assets1

248,504

67,627

74,689390,820

March 2018 Half Year
Statutory profit attributable to shareholders of the company

1,984

880

459

3,323

Cash profit

1,583

860

433

2,876

418,916

118,61054,943

592,469

Net loans and advances

Net loans and advances1
Customer deposits1

276,892

94,623

101,249

472,764

Risk weighted assets1

253,491

68,55973,727395,777

1.

Balance Sheet amounts include assets and liabilities held for sale.

New Zealand geography (in NZD)
Half Year
Mar 19NZD M
1,626

Net interest income
Other operating income

Sep 18
NZD M
1,605

Movement
Mar 18
NZD M
1,572

Mar 19v. Sep 18
1%

Mar 19v. Mar 18
3%
21%

654

475

540

38%

Operating income

2,280

2,080

2,112

10%

8%

Operating expenses

(735)

(761)

(742)

-3%

-1%

Profit before credit impairment and income tax

1,545

1,319

1,370

17%

13%

(32)

17

(70)

large

-54%
16%

Credit impairment (charge)/release
Profit before income tax

1,513

1,336

1,300

13%

Income tax expense and non-controlling interests

(399)

(373)

(359)

7%

11%

Cash profit2

1,114

963

941

16%

18%

(185)

59

23

large

large

929

1,022

964

-9%

-4%

Adjustments between statutory profit and cash profit
Statutory profit

2

Individually assessed credit impairment charge/(release) - cash

32

17

84

88%

-62%

Collectively assessed credit impairment charge/(release) - cash

-

(34)

(14)

-100%

-100%

Net loans and advances1

131,788

128,749

126,316

2%

4%

Customer deposits1

107,528

104,055

100,771

3%

7%

Risk weighted assets1

74,43373,83373,014

1%

2%

Total full time equivalent staff (FTE)

7,311

7,511

7,718

-3%

-5%

1.
2.

Balance Sheet amounts include assets and liabilities held for sale from continuing operations.
Statutory profit for March 2019 half included a NZ$59 million gain on sale of OPL NZ, and a NZ$39 million gain on sale of Paymark. Cash profit also includes an after tax gain of NZ$86
million on the reversal of the life-to-date cash profit adjustments on the revaluation of OPL NZ policy liabilities sold.

131

SUPPLEMENTARY INFORMATION
Exchange rates
Major exchange rates used in the translation of foreign subsidiaries, branches, investments in associates and issued debt are as follows:
Balance Sheet

Profit & Loss Average

As atHalf Year

Chinese Renminbi

Mar 194.7700

Sep 184.9679Mar 184.8276

Mar 194.8805

Sep 184.8977

Mar 185.0410Euro

0.63130.62050.62210.6274

0.63150.6460Pound Sterling

0.54250.55200.54450.55200.55840.5718

Indian Rupee

48.99152.36349.86050.90650.95650.145Indonesian Rupiah

10,09910,743

10,556

10,32910,62010,534

Japanese Yen

78.55081.86381.66479.62981.95285.957

Malaysian Ringgit

2.89632.98582.96772.95262.98653.1401

New Taiwan Dollar

21.86322.01322.36222.02822.46023.087

New Zealand Dollar

1.0436

1.09181.06501.05781.0841

1.0924

Papua New Guinean Kina

2.39242.40522.49452.40512.44302.5060

United States Dollar

0.70940.72160.76710.71450.74280.7772132

SUPPLEMENTARY INFORMATION
Derivative financial instruments
Derivative financial instruments are contracts whose value is derived from one or more underlying variables or indices defined in the contract, require little
or no initial net investment and are settled at a future date. Derivatives include contracts traded on registered exchanges and contracts agreed between
counterparties. The use of derivatives and their sale to customers as risk management products is an integral part of the Group’s trading and sales
activities. Derivatives are also used to manage the Group’s own exposure to fluctuations in foreign exchange and interest rates as part of its asset andliability management activities.
The following table provides an overview of the Group’s foreign exchange, interest rate, commodity and credit derivatives. They include all trading andbalance sheet risk management contracts. The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations inmarket rates relative to the terms of the derivative.

Fair Values

AssetsLiabilities

AssetsLiabilities

AssetsLiabilities

Mar 19$M

Mar 19$M

Sep 18$M

Sep 18$M

Mar 18$M

Mar 18$MInterest rate contracts
Forward rate agreements

13

(14)

2

(2)

23

(22)

Futures contracts

66

(205)

101

(42)

26

(229)

Swap agreements

55,832(56,028)

36,935(38,808)

34,981(35,868)

Options purchased

1,111

-

782

-

749

-

-

(1,789)-(1,408)-(1,549)57,022(58,036)

37,820(40,260)

35,779(37,668)

Spot and forward contracts

11,303(10,419)

15,218(14,133)

19,681(19,347)

Swap agreements

9,288(11,087)

12,577(11,873)

13,357(11,437)

Options purchased

366

-

494

-

543

-

-

(506)

-

(669)

-

(527)

Total

20,957(22,012)28,289(26,675)

33,581(31,311)

Commodity contracts

1,328

(738)

2,260

(2,683)

1,486(1,567)

Options sold
Total
Foreign exchange contracts

Options sold

Credit default swaps
Structured credit derivatives purchased

16

-

22

-

22

-

Other credit derivatives purchased

14

(59)

8

(29)

6

(47)

30

(59)

30

(29)

28

(47)

-

(20)

-

(26)

-

(26)

Credit derivatives purchased
Structured credit derivatives sold
Other credit derivatives sold
Credit derivatives sold
Total
Derivative financial instruments

38

(6)

24

(3)

41

(5)

38

(26)

24

(29)

41

(31)

68

(85)

54

(58)

69

(78)

79,375(80,871)

68,423(69,676)

70,915(70,624)

133

SUPPLEMENTARY INFORMATIONThis page has been left blank intentionally134

DEFINITIONSAASB - Australian Accounting Standards Board. The term “AASB” is commonly used when identifying Australian Accounting Standards issued by theAASB.
APRA - Australian Prudential Regulation Authority.
APS - ADI Prudential Standard.
Cash and cash equivalents comprise coins, notes, money at call, balances held with central banks, liquid settlement balances (readily convertible to
known amounts of cash which are subject to insignificant risk of changes in value) and securities purchased under agreements to resell (reverse repos) inless than three months.
Cash profit is an additional measure of profit which is prepared on a basis other than in accordance with accounting standards. Cash profit represents
ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group and Divisional performanceagainst prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory profit as noted below.
These items are calculated consistently period on period so as not to discriminate between positive and negative adjustments.
Gains and losses are adjusted where they are significant, or have the potential to be significant in any one period, and fall into one of three categories:
1.

gains or losses included in earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with theongoing operations of the Group;2.

treasury shares, revaluation of policy liabilities, economic hedging impacts and similar accounting items that represent timing differences thatwill reverse through earnings in the future; and3.

accounting reclassifications between individual line items that do not impact reported results, such as policyholders tax gross up.

Cash profit is not a measure of cash flow or profit determined on a cash accounting basis.
Collectively assessed provision under AASB 139 is the provision for credit losses that are inherent in the portfolio but not able to be individually
identified. A collectively assessed provision may only be recognised when a loss event has already occurred. Losses expected as a result of future
events, no matter how likely, are not recognised.
Collectively assessed provision under AASB 9 represents the Expected Credit Loss (ECL). These incorporate forward looking information and do not
require an actual loss event to have occurred for an impairment provision to be recognised.
Covered bonds are bonds issued by an ADI to external investors secured against a pool of the ADI’s assets (the cover pool) assigned to a bankruptcy
remote special purpose entity. The primary assets forming the cover pool are mortgage loans. The mortgages remain on the issuer’s balance sheet. The
covered bond holders have dual recourse to the issuer and the cover pool assets. The mortgages included in the cover pool cannot be otherwise pledged
or disposed of but may be repurchased and substituted in order to maintain the credit quality of the pool. The Group issues covered bonds as part of its
funding activities.
Credit risk is the risk of financial loss resulting from the failure of ANZ’s customers and counterparties to honour or perform fully the terms of a loan orcontract.
Credit risk weighted assets (CRWA) represent assets which are weighted for credit risk according to a set formula as prescribed in APS 112/113.
Customer deposits represent term deposits, other deposits bearing interest, deposits not bearing interest and borrowing corporations’ debt excluding
securitisation deposits.
Derivative credit valuation adjustment (CVA) - Over the life of a derivative instrument, ANZ uses a model to adjust fair value to take into account the
impact of counterparty credit quality. The methodology calculates the present value of expected losses over the life of the financial instrument as afunction of probability of default, loss given default, expected credit risk exposure and an asset correlation factor. Impaired derivatives are also subject toa CVA.
Dividend payout ratio is the total ordinary dividend payment divided by profit attributable to shareholders of the Company.
Gross loans and advances (GLA) is made up of loans and advances, capitalised brokerage/mortgage origination fees less unearned income.
Impaired assets are those financial assets where doubt exists as to whether the full contractual amount will be received in a timely manner, or whereconcessional terms have been provided because of the financial difficulties of the customer. Financial assets are impaired if there is objective evidence ofimpairment as a result of a loss event that occurred prior to the reporting date, and that loss event has had an impact, which can be reliably estimated, on
the expected future cash flows of the individual asset or portfolio of assets.
Impaired loans comprise drawn facilities where the customer’s status is defined as impaired.
Individually assessed provision is assessed on a case-by-case basis for all individually managed impaired assets taking into consideration factors
such as the realisable value of security (or other credit mitigants), the likely return available upon liquidation or bankruptcy, legal uncertainties, estimatedcosts involved in recovery, the market price of the exposure in secondary markets and the amount and timing of expected receipts and recoveries.
Interest rate risk in the banking book (IRRBB) relates to the potential adverse impact of changes in market interest rates on ANZ’s future net interest
income. The risk generally arises from:1.

Repricing and yield curve risk - the risk to earnings or market value as a result of changes in the overall level of interest rates and/or the
relativity of these rates across the yield curve;

2.

Basis risk - the risk to earnings or market value arising from volatility in the interest margin applicable to banking book items; and3.

Optionality risk - the risk to earnings or market value arising from the existence of stand-alone or embedded options in banking book items.

Internationally comparable ratios are ANZ’s interpretation of the regulations documented in the Basel Committee publications: “Basel 3: A global
regulatory framework for more resilient banks and banking systems” (June 2011) and “International Convergence of Capital Measurement and CapitalStandards” (June 2006). They also include differences identified in APRA’s information paper entitled International Capital Comparison Study (13 July2015).
Level 1 in the context of APRA supervision, Australia and New Zealand Banking Group Limited consolidated with certain approved subsidiaries.
Level 2 in the context of APRA supervision, the consolidated ANZ Group excluding associates, insurance and funds management entities, commercial
non-financial entities and certain securitisation vehicles.
Net interest margin is net interest income as a percentage of average interest earning assets.
Net loans and advances represent gross loans and advances less allowance for credit losses.

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DEFINITIONSNet Stable Funding Ratio (NSFR) is the ratio of the amount of available stable funding (ASF) to the amount of required stable funding (RSF) defined by
APRA. The amount of ASF is the portion of an Authorised Deposit-taking Institutions (ADI) capital and liabilities expected to be a reliable source of funds
over a one year time horizon. The amount of RSF is a function of the liquidity characteristics and residual maturities of an ADI’s assets and off-balance
sheet activities. ADIs must maintain an NSFR of at least 100%.
Net tangible assets equal share capital and reserves attributable to shareholders of the Company less unamortised intangible assets (including goodwill
and software).
Regulatory deposits are mandatory reserve deposits lodged with local central banks in accordance with statutory requirements.
Restructured items comprise facilities in which the original contractual terms have been modified for reasons related to the financial difficulties of thecustomer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond thosetypically offered to new facilities with similar risk.
Return on average assets is the profit attributable to shareholders of the Company, divided by average total assets.
Return on average ordinary shareholders’ equity is the profit attributable to shareholders of the Company, divided by average ordinary shareholders’equity.
Risk weighted assets (RWA) are risk weighted according to each asset’s inherent potential for default and what the likely losses would be in the case ofdefault. In the case of non asset backed risks (i.e. market and operational risk), RWA is determined by multiplying the capital requirements for those risks
by 12.5.
Settlement balances owed to/by ANZ represent financial assets and/or liabilities which are in the course of being settled. These may include trade
dated assets and liabilities, vostro accounts and securities settlement accounts.

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DEFINITIONS
Description of divisions
The Group operates on a divisional structure with six continuing divisions: Australia, Institutional, New Zealand, Wealth Australia, Pacific, and TSO andGroup Centre.
The following structural changes have taken place during the period:The residual Asia Retail and Wealth businesses have been transferred from the former Asia Retail and Pacific division to TSO and Group Centre
division. The remaining segment has been renamed Pacific division; andANZ’s lenders mortgage insurance, share investing and general insurance distribution businesses which were previously part of the continuing
operations of Wealth Australia now form part of the Australia division. ANZ’s financial planning business continues to be part of the continuing
operations of the Wealth Australia division.

Australia
The Australia division comprises the Retail and Business & Private Banking (B&PB) business units.
Retail provides products and services to consumer customers in Australia via the branch network, mortgage specialists, contact centres and a variety
of self-service channels (internet banking, phone banking, ATMs, website, ANZ share investing and digital banking) and third party brokers.



B&PB provides a full range of banking products and financial services, including asset financing, across the following customer segments: medium tolarge commercial customers and agribusiness customers across regional Australia, small business owners and high net worth individuals and familygroups.

Institutional
The Institutional division services global institutional and corporate customers across three product sets: Transaction Banking, Loans & Specialised
Finance and Markets.
Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing, commodity financing aswell as cash management solutions, deposits, payments and clearing.



Loans & Specialised Finance provides loan products, loan syndication, specialised loan structuring and execution, project and export finance, debt
structuring and acquisition finance and corporate advisory.

Markets provide risk management services on foreign exchange, interest rates, credit, commodities and debt capital markets in addition to managing
the Group's interest rate exposure and liquidity position.

New Zealand
The New Zealand division comprises the Retail and Commercial business units.
Retail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We
deliver our services via our internet and app-based digital solutions and network of branches, mortgage specialists, relationship managers andcontact centres.

Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions through dedicatedmanagers focusing on privately owned medium to large enterprises and the agricultural business segment.

Wealth Australia
The retained Wealth Australia business is comprised of financial planning services provided by salaried financial planners.
Refer to Note 11 for details on Wealth Australia discontinued operations.

Pacific
The Pacific division provides products and services to retail customers, small to medium-sized enterprises, institutional customers and Governments
located in the Pacific Islands. Products and services include retail products provided to consumers, traditional relationship banking and sophisticatedfinancial solutions provided to business customers through dedicated managers.

TSO and Group Centre
TSO and Group Centre provide support to the operating divisions, including technology, group operations, shared services, property, risk management,
financial management, strategy, marketing, human resources and corporate affairs. The Group Centre includes Asia Retail and Wealth, Group Treasury,
Shareholder Functions and minority investments in Asia. Refer to Note 11 for details on TSO and Group Centre discontinued operations.

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ASX APPENDIX 4D - CROSS REFERENCE INDEX

Page
Details of the reporting period (4D Item 1) ...................................................................................................................................................... After front cover
Results for Announcement to the Market (4D Item 2) ..................................................................................................................................... After front cover
Net Tangible Assets per security (4D Item 3) ....................................................................................................................................................................... 13
Details of entities over which control has been gained or lost (4D Item 4) ......................................................................................................................... 114
Dividends and dividend dates (4D Item 5) ...................................................................................................................................................... After front cover
Dividend Reinvestment Plan (4D Item 6) ........................................................................................................................................................ After front cover
Details of associates and joint venture entities (4D Item 7) ................................................................................................................................................ 114

138

ALPHABETICAL INDEXPAGEAppendix 4D Cross Reference Index ................................................................................................................................................................................. 138
Appendix 4D Statement ......................................................................................................................................................................................................... 2
Auditor’s Review Report and Independence Declaration ................................................................................................................................................... 121
Average Balance Sheet and Related Interest .................................................................................................................................................................... 128
Basis of Preparation ............................................................................................................................................................................................................. 86
Capital Management .......................................................................................................................................................................................................... 124
Changes in Composition of the Group ............................................................................................................................................................................... 114
Condensed Consolidated Balance Sheet ............................................................................................................................................................................. 83
Condensed Consolidated Cash Flow Statement .................................................................................................................................................................. 84
Condensed Consolidated Income Statement ....................................................................................................................................................................... 81
Condensed Consolidated Statement of Changes in Equity.................................................................................................................................................. 85
Condensed Consolidated Statement of Comprehensive Income ......................................................................................................................................... 82
Contingent Liabilities and Contingent Assets ..................................................................................................................................................................... 115
Credit Risk.......................................................................................................................................................................................................................... 106
Definitions .......................................................................................................................................................................................................................... 135
Deposits and Other Borrowings ......................................................................................................................................................................................... 101
Derivative Financial Instruments ........................................................................................................................................................................................ 133
Directors’ Declaration ......................................................................................................................................................................................................... 120
Directors’ Report .................................................................................................................................................................................................................. 80
Discontinued Operations and Assets and Liabilities Held for Sale ..................................................................................................................................... 102
Dividends ............................................................................................................................................................................................................................. 94
Divisional Results ................................................................................................................................................................................................................. 49
Earnings Per Share .............................................................................................................................................................................................................. 95
Exchange Rates ................................................................................................................................................................................................................. 132
Fair Value Measurement .................................................................................................................................................................................................... 110
Full Time Equivalent Staff .................................................................................................................................................................................................... 19Group Results ...................................................................................................................................................................................................................... 21
Income ................................................................................................................................................................................................................................. 91
Income Tax Expense ........................................................................................................................................................................................................... 93
Investments In Associates.................................................................................................................................................................................................. 114
Net Loans and Advances ..................................................................................................................................................................................................... 98
Operating Expenses............................................................................................................................................................................................................. 92
Profit Reconciliation ............................................................................................................................................................................................................. 73
Allowance for Expected Credit Losses ................................................................................................................................................................................. 99
Related Party Disclosures .................................................................................................................................................................................................. 114
Segment Analysis ................................................................................................................................................................................................................ 96
Select Geographical Disclosures ....................................................................................................................................................................................... 131
Share Capital ..................................................................................................................................................................................................................... 114
Shareholders’ Equity .......................................................................................................................................................................................................... 114
Subordinated Debt ............................................................................................................................................................................................................. 105
Significant Events Since Balance Date .............................................................................................................................................................................. 116
Summary ................................................................................................................................................................................................................................ 7

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