ANZ National Bank Limited
General Short Form Disclosure Statement
FOR THE NINE MONTHS ENDED 30 JUNE 2010 | NUMBER 58 ISSUED AUGUST 2010

ANZ National Bank Limited

General Disclosures
This General Short Form Disclosure Statement has been
issued in accordance with the Registered Bank DisclosureStatement (Off-Quarter – New Zealand Incorporated
Registered Banks) Order 2008 (“the Order”).

For the nine months ended 30 June 2010

In this Disclosure Statement unless the context otherwise
requires:

Contents
General Disclosures
Income Statement
Statement of Comprehensive Income
Statement of Changes in Equity
Balance Sheet
Cash Flow Statement
Notes to the Financial Statements
Conditions of Registration
Credit Rating Information
Directors’ Statement
Independent Review Report

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9 - 2930 - 3233
3435a) “Banking Group” means ANZ National Bank Limited andall its subsidiaries;b) “Bank” means ANZ National Bank Limited;c) “Overseas Banking Group” means the worldwide
operations of Australia and New Zealand Banking Group
Limited including its controlled entities;d) “Overseas Bank” or “Ultimate Parent Bank” means theworldwide operations of Australia and New Zealand
Banking Group Limited excluding its controlled entities;e) “NZ Branch” means the New Zealand operations ofAustralia and New Zealand Banking Group Limited, as
conducted through the NZ Branch;f ) “RBNZ” means the Reserve Bank of New Zealand;g) “Immediate Parent Company” means ANZ Holdings(New Zealand) Limited;h) “APRA” means the Australian Prudential Regulation
Authority; andi) Any term or expression which is defined in, or in themanner prescribed by, the Registered Bank DisclosureStatement (Off-Quarter – New Zealand Incorporated
Registered Banks) Order 2008 shall have the meaning
given in or prescribed by that Order.

General Matters
The address for service for the Bank is Level 6,
1 Victoria Street, Wellington, New Zealand. The Bank
was incorporated under the Companies Act 1955 byvirtue of the ANZ Banking Group (New Zealand) Act 1979
on 23 October 1979, and was reregistered under theCompanies Act 1993 on 13 June 1997.
The Immediate Parent Company of the Bank is incorporated
in New Zealand and owned by ANZ Funds Pty Limited andthe Ultimate Parent Bank (both incorporated in Australia).
The address for service for the Ultimate Parent Bank is ANZCentre Melbourne, Level 9, 833 Collins Street, Docklands,
Victoria 3008, Australia.
The Bank is wholly owned by its Immediate Parent Company
and ultimately by the Ultimate Parent Bank. The Immediate
Parent Company has the power under the Bank’s Constitution
to appoint any person as a Director of the Bank either to filla casual vacancy or as an additional Director or to remove
any person from the office of Director, from time to time bygiving written notice to the Bank. No appointment of a new
Director may occur unless the RBNZ confirms that it does
not object to the appointment.
The NZ Branch was established on 5 January 2009. Its
address for service is Level 6, 1 Victoria Street, Wellington,
New Zealand.
On 30 November 2009, the Banking Group purchased
ING Groep’s 51% interest in ING (NZ) Holdings Limited(“ING NZ”), which was the holding company for the
ANZ-ING wealth management and life insurance joint
venture in New Zealand.

1

General Short Form
Disclosure Statement

ANZ National Bank Limited

General Disclosures (continued)

Pending Proceedings or Arbitration

Nature Of Business

Other than disclosed in the General Short Form DisclosureStatement, there are no pending proceedings or arbitration
concerning any member of the Banking Group that
may have a material adverse effect on the Bank or the
Banking Group as at the date of the General Short Form
Disclosure Statement.

The Banking Group provides a broad range of banking andfinancial products and services to retail, small business,rural, commercial and institutional clients.

Material Financial Support
In accordance with the requirements issued by APRA
pursuant to its Prudential Standards, the Ultimate Parent
Bank may not provide material financial support to the Bank
contrary to the following:
•

•

•

•

•

the Ultimate Parent Bank should not undertake any third
party dealings with the prime purpose of supporting
the business of the Bank;
the Ultimate Parent Bank should not hold unlimited
exposures (should be limited as to specified time andamount) in the Bank (e.g. not provide a general guarantee
covering any of the Bank’s obligations);
the Ultimate Parent Bank should not enter into crossdefault clauses whereby a default by the Bank on an
obligation (whether financial or otherwise) is deemed totrigger a default of the Ultimate Parent Bank in its
obligations;
the Board of the Ultimate Parent Bank in determining
limits on acceptable levels of exposure to the Bank
should have regard to:• the level of exposure that would be approved tothird parties of broadly equivalent credit status. In
this regard, prior consultation (and in some cases
approval) is required before entering exceptionallylarge exposures;• the impact on the Ultimate Parent Bank’s capital andliquidity position and its ability to continue operatingin the event of a failure by the Bank; andthe level of exposure to the Bank not exceeding:• 50% on an individual exposure basis; and• 150% in aggregate (being exposures to all similar
regulated entities related to the Ultimate ParentBank)of the Ultimate Parent Bank’s capital base.

Additionally, the Ultimate Parent Bank may not provide
material financial support in breach of the Australian
Banking Act (1959). This requires APRA to exercise its powers
and functions for the protection of a bank’s depositors andin the event of a bank becoming unable to meet its
obligations or suspending payment, the assets of the bankin Australia shall be available to meet that bank’s deposit
liabilities in Australia in priority to all other liabilities ofthe bank.
The Ultimate Parent Bank has not provided material
financial support to the Bank contrary to any of theabove requirements.

Further details on pending proceedings or arbitration are
set out in the Credit Related Commitments and Contingent
Liabilities note.

Other Material Matters
There are no matters relating to the business or affairs of the
Bank and the Banking Group which are not contained
elsewhere in the General Short Form Disclosure Statement
and which would, if disclosed, materially adversely affectthe decision of a person to subscribe for debt securities ofwhich the Bank or any member of the Banking Group is
the issuer.

Guarantors
The Bank has guarantees under the:a) New Zealand Deposit Guarantee Scheme (“Crown Retail
Guarantee”); andb) New Zealand Wholesale Funding Guarantee Facility(“Crown Wholesale Guarantee”).
This section provides a brief description of the Crown Retail
Guarantee and Crown Wholesale Guarantee and also setsout from where further information may be obtained. As at
the date of this General Short Form Disclosure Statement
the only material obligations of the Bank that are guaranteed
are the debt securities (as defined in the Retail Deed)guaranteed under the Crown Retail Guarantee and debt
securities for which the Crown has issued a Guarantee
Eligibility Certificate under the Crown Wholesale Guarantee(copies of which are available on the Treasury website
www.treasury.govt.nz).

Crown Retail Guarantee
The Crown Retail Guarantee is provided under a Deed
entered into by the Bank and the Crown on 18 December
2009 (“Retail Deed”).
The Crown Retail Guarantee does not extend to subordinateddebt securities issued by the Bank or debt securities that areissued by the Bank to Related Parties (as defined in the RetailDeed) of the Bank or to Financial Institutions.
As defined in the Retail Deed, “Financial Institutions” meansa financial institution, as defined in section 2 of the Reserve
Bank of New Zealand Act 1989 (being a person who carries
on the business of borrowing and lending money, or
providing financial services, or both, such as a life insurancecompany, a building society or a registered bank), and, as
set out in the Retail Deed, without limiting the generality of
the foregoing, includes:a) a “collective investment scheme” as that term is definedin section 157B of the Reserve Bank of New Zealand Act
1989 (including any “superannuation fund” or“superannuation scheme”) or an issuer, trustee ormanager of any such scheme acting in that capacity;b) an “insurer” as that term is defined in section 2 of the
Insurance Companies (Rating and Inspections) Act 1994
or any other person carrying on the business of providing
insurance cover (of whatever nature);ANZ National Bank Limitedc)a person carrying on business as a sharebroker, aninvestment adviser or a fund manager (to the extent
that person is acting in that capacity); ord) a person who is controlled by a financial institution as
defined above.
The Crown Retail Guarantee applies for a period commencing
on 12 October 2008 and expiring on 12 October 2010(“Guarantee Period”).
Under the Crown Retail Guarantee the Crown absolutely
and irrevocably guarantees:a) all obligations of the Bank to pay money to a creditor
under Debt Securities (“Indebtedness”) that becomedue and payable during the Guarantee Period; andb) if a Default Event, as defined in the Retail Deed, occurs
during the Guarantee Period, all Indebtedness that exists
on the date of that Default Event (whether or not that
Indebtedness is due and payable during the Guarantee
Period); andc) all interest accruing on the amounts referred to in b)
after the occurrence of the Default Event subject to the
Crown’s right to decline liability for interest as set out in
the Retail Deed.
The Crown undertakes that if the Bank does not pay anamount referred to in a), b) or c) above, the Crown will paythat amount to the creditor no later than 14 days after it isdue and payable.
The Crown’s obligation to pay any amount under the
Crown Retail Guarantee is subject to the Crown receivinga notice of claim from the creditor in respect of therelevant Indebtedness and to the Crown satisfying itself
as to the amount of the relevant Indebtedness andsuch other matters as the Crown reasonably considers
appropriate in order to ascertain the extent of its liability
under the Crown Retail Guarantee in respect of that
Indebtedness. Notice may be served on the Crown in respectof the Crown Retail Guarantee by service on The Treasury at
1 The Terrace, Wellington.
The maximum liability of the Crown to each creditor under
the Crown Retail Guarantee is one million New Zealanddollars ($1,000,000). For this purpose amounts owed
to creditors by the Bank under any debt security will
be aggregated with other amounts owed to the same
creditor by the Bank which are supported by the Crown
Retail Guarantee.
On 25 August 2009 the Government announced that it will
extend the Crown Retail Guarantee to 31 December 2011
and change some of its terms and conditions. The Reserve
Bank has stated that there is no need for banks to partake inthe scheme, and therefore at this stage the Bank does notintend to apply to be covered by it.

Crown Wholesale Guarantee
The Crown Wholesale Guarantee is provided under the
Crown Wholesale Funding Guarantee in respect of the Bank
entered into by the Crown on 23 December 2008 andsupplemented on 19 February 2009 (“Wholesale Deed”).
The Government closed the Crown Wholesale Guarantee to
new debt securities on 30 April 2010. The closure did notaffect debt securities previously issued with the benefit of
the Crown Wholesale Guarantee.
If a Guarantee Eligibility Certificate was issued in respect ofdebt securities, the Crown (subject to any special conditions
specified in a Guarantee Eligibility Certificate and provided
the debt securities are not varied, amended, waived,
released, novated, supplemented, extended or restated inany respect without the prior written consent of the Crown)
has irrevocably:a) guaranteed the payment by the Bank of any liability of
the Bank to pay principal and interest (excluding any
penalty interest or other amount only payable following
a default) in respect of the debt securities; andb) undertaken that if the Bank does not pay any suchliability on the date on which it becomes due andpayable, the Crown shall, within five Business Days of ademand being made in accordance with the Wholesale
Deed and following the expiry of any applicable grace
period, pay such liability.
The Crown Wholesale Guarantee does not extend to debt
securities held by a Related Party (as defined in the Wholesale
Deed) of the Bank.
In the event of a claim made on the Crown, the Crown will
only pay the interest and principal due to the holders ofdebt securities on the originally scheduled dates forpayment of interest and principal.
The Crown’s obligations in respect of any debt security
terminate on the date falling 30 days after the earlier of:a) the scheduled maturity date for the debt security underwhich the guaranteed liability arises; andb) the date falling five years after the date of issue of thedebt security under which the guaranteed liability
arises;unless valid demand has been made on the Crown prior tothat time.
Any demand on the Crown in respect of debt securities forwhich the Crown has issued a Guarantee Eligibility Certificate
must be made in the prescribed form and delivered by handto the Minister of Finance, Parliament Buildings, Wellington,
New Zealand or to one of the other addresses specified in
the Wholesale Deed.

Further information
Further information about the Crown Retail Guarantee
and the Crown Wholesale Guarantee, including a copyof the Retail Deed and Wholesale Deed, and any
Guarantee Eligibility Certificate issued by the Crown inrespect of the Bank, is available on The Treasury website
at www.treasury.govt.nz.
Further information about the Crown, including a copy of its
most recent audited financial statements can be obtainedat www.treasury.govt.nz.

2–3

General Disclosures (continued)

ANZ National Bank Limited

General Disclosures (continued)

Supplemental Disclosure Statement

The Crown’s credit ratings are available on the New Zealand
Debt Management Office website www.nzdmo.govt.nz.
The Crown’s long-term foreign-currency and domestic debt
credit ratings have not changed in the two years immediately
before the date of this General Short Form DisclosureStatement. The Crown’s credit ratings are:

The most recent Supplemental Disclosure Statement for thenine months ended 30 June 2010 is available at no charge:

Foreign Currency
Rating Agency

Current
Credit Rating

Qualification

Standard & Poor’s

AA+

Outlook Stable

Moody’s
Investors Service

Aaa

Outlook Stable

Fitch Ratings

AA+

Outlook Negativea) on the Bank’s websites www.anz.co.nz andwww.nationalbank.co.nz;b) immediately if request is made at the Bank’s registeredoffice, located at Level 6, 1 Victoria Street, Wellington,
New Zealand; andc) within five working days of a request, if a request is
made at any branch of the ANZ or The National Bank of
New Zealand.
The Bank’s most recent Supplemental Disclosure Statement
contains a copy of the bilateral netting agreement with the
Ultimate Parent Bank and copies of the Crown Retail
Guarantee and Crown Wholesale Guarantee.

Directorate

Domestic Currency
Rating Agency

Current
Credit Rating

Qualification

Standard & Poor’s

AAA

Outlook Stable

Moody’s
Investors Service

Aaa

Outlook Stable

Fitch RatingsAAA

Outlook Negative

Credit ratings are assigned to sovereigns and businesses by
the international credit rating agencies. Credit ratings
provide investors with an indication of the credit-worthinessof an entity in which they are considering investing. There
are three major internationally recognised credit rating
agencies: Standard & Poor’s, Moody’s Investors Service andFitch Ratings. AAA is the highest rating level while a rating in
the AA range is also seen as a very high level of creditworthiness. Refer to “Credit Rating Information” for a fulldescription of credit rating scales.

Since the authorisation date of the previous General
Disclosure Statement on 21 May 2010, there have been nochanges to Directors of the Bank.

ANZ National Bank Limited
4–5

Income Statement
For the nine months ended 30 June 2010
$millions

Note

Unaudited
9 months to
30/06/2010

Unaudited
9 months to
30/06/2009

AuditedYear to30/09/2009

Interest income

4,214

5,819

7,246

Interest expense

2,530

3,962

4,892

Net interest income

1,684

1,857

2,354

Net trading gains

47

191

187

Net funds management and insurance income

139

72

97

Other operating income

481

290

465

37

10

13

Operating income

2,388

2,420

3,116

Operating expenses

1,137

1,094

1,477

1,251

1,326

1,639

392

528

874

859

798

765

249

237

467

610

561

298

Unaudited
9 months to
30/06/2010

Unaudited
9 months to
30/06/2009

AuditedYear to30/09/2009

610

561

298

44

3

2

Share of profit of equity accounted associates and jointly controlled entities

Profit before provision for credit impairment and income tax
Provision for credit impairment

10

Profit before income tax
Income tax expense

3

Profit after income tax

Statement of Comprehensive Income
For the nine months ended 30 June 2010
$millions

Profit after income tax
Available-for-sale revaluation reserve:– Valuation gain before tax
Cash flow hedging reserve:– Valuation gain / (loss) before tax

53

(6)

(1)

– Transferred to income statement

23

(13)

(3)

Actuarial gain / (loss) on defined benefit schemes

14

(38)

(25)

Income tax credit / (expense) on items recognised directly in equity

(36)

19

10

Net income / (expense) recognised directly in equity

98

(35)

(17)

Total comprehensive income for the period

708

526

281

The notes on pages 9 to 29 form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited

Statement of Changes in Equity
For the nine months ended 30 June 2010
$millions

Note

Unaudited
9 months to
30/06/2010

Unaudited
9 months to
30/06/2009

AuditedYear to30/09/2009

Ordinary share capital
6,943

5,943

5,943

-

1,000

1,000

6,943

6,943

6,943

Balance at beginning of the period

25

23

23

Valuation gain recognised after tax

34

4

2

Balance at end of the period

59

27

25

Balance at beginning of the period

23

24

24

Valuation gain / (loss) recognised after tax

38

(4)

-

Balance at beginning of the period
Ordinary share capital issued during the period
Balance at end of the period
Available-for-sale revaluation reserve

Cash flow hedging reserve

Transferred to income statement

16

(8)

(1)

Balance at end of the period

77

12

23

Total reserves

136

39

48

3,097

3,817

3,817

610

561

298

3,707

4,378

4,115

10

(27)

(18)

-

(1,000)(1,000)

3,717

3,351

3,097

Retained earnings
Balance at beginning of the period
Profit after income tax attributable to parent
Total available for appropriation
Actuarial gain / (loss) on defined benefit schemes after tax
Ordinary dividend paid
Balance at end of the period
Non-controlling interests
-

-

-

1

-

-

1

-

-

10,088

9,807

9,807

708

526

281

Transactions with shareholders

-

-

-

Non-controlling interests

1

-

-

10,797

10,333

10,088

Balance at beginning of the period
Acquired in a business combination

23

Balance at end of the period
Total equity
Balance at beginning of the period
Total comprehensive income for the period

Balance at end of the period

The notes on pages 9 to 29 form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited
6–7

Balance Sheet
As at 30 June 2010
Note

Unaudited
30/06/2010

Liquid assets

4

Due from other financial institutions

5$millions

Unaudited
30/06/2009

Audited30/09/2009

1,906

2,076

2,762

1,103

5,460

4,514

AssetsTrading securities

6

7,164

2,950

4,166

Derivative financial instruments

21

9,020

12,185

11,408Available-for-sale assets

7

1,831

767

1,513

Net loans and advances

8

86,072

93,16988,259Investments relating to insurance business

34

-

-

Insurance policy assets

129

-

-

Due from immediate parent company

525

-

-

Shares in associates and jointly controlled entities

145

398

464

Current tax assets
Other assets
Deferred tax assets
Premises and equipment
Goodwill and other intangible assets
Total assets

43

108

65

1,055

925

1,137

359

272

-

307

258

278

3,565

3,328

3,325

113,258

121,896

117,891

Liabilities
Due to other financial institutions

11

1,076

5,064

3,725

Deposits and other borrowings

12

71,83970,846

71,764

-

971

930

21

8,977

11,668

10,762

1,669

1,791

1,809

-

-

17

325

370

283
15,917

Due to immediate parent company
Derivative financial instruments
Payables and other liabilities
Deferred tax liabilities
Provisions
Bonds and notes

13

16,207

17,986

Loan capital

14

2,368

2,867

2,596

Total liabilities

102,461

111,563

107,803

Net assets

10,797

10,333

10,088

6,943

6,943

6,943

EquityOrdinary share capital

136

39

48

Retained earnings

3,717

3,351

3,097

Parent shareholder's equity

10,796

10,333

10,0881--

10,797

10,333

10,088Reserves

Non-controlling interests
Total equity

The notes on pages 9 to 29 form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited

Cash Flow Statement
For the nine months ended 30 June 2010
$millions

Note

Unaudited
9 months to
30/06/2010

Unaudited
9 months to
30/06/2009

AuditedYear to30/09/2009

4,133

5,862

7,131

2

1

3

Cash flows from operating activities
Interest received
Dividends received
Net cash from funds management & insurance

83

49

97

Fees and other income received

649

642

920

Interest paid

(2,555)(3,974)(4,884)

Operating expenses paid

(1,480)(1,061)(1,032)

Income taxes paid

(612)

(420)

(425)

Cash flows from operating profits before changes in operating assets and liabilities

639

1,128

1,362

Change in due from other financial institutions – term

2,184

(1,835)(246)

Change in trading securities(3,011)(293)(1,505)

Change in derivative financial instruments

2,007(2,358)(3,936)

(65)

(651)

(1,388)Net changes in operating assets and liabilities:

Change in available-for-sale assets

14

-

-

Change in loans and advances(1,056)(422)(1,108)Proceeds from sale of loans and advances to NZ Branch

2,612

4,877

9,863
(164)

Change in insurance investment assets

55

(76)

Change in due to other financial institutions(2,707)

1,923

509

Change in deposits and other borrowings(715)(4,760)(3,965)

Change in other assets

Change in payables and other liabilities
Net cash flows used in operating activities

19

(108)

148

165

(151)

(2,319)(413)

Cash flows from investing activities
Proceeds from sale of shares in associates and jointly controlled entities

1

-

-

Proceeds from sale of premises and equipment

1

36

33

Proceeds from sale of software

-

-

1

Purchase of shares in associates and jointly controlled entities

-

(25)

(92)

(247)

-

-

Purchase of intangible assets

(38)

(20)

(20)

Purchase of premises and equipment

(61)

(61)

(95)

Net cash flows used in investing activities

(344)

(70)

(173)

Proceeds from bonds and notes

3,098

2,113

5,012

Redemptions of bonds and notes(7,751)

Purchase of shares in subsidiary entities

23

Cash flows from financing activities(3,209)(4,618)

Redemptions of loan capital

(200)

-

(225)

Proceeds from share issue

-

1,000

1,000
(1,000)-(1,000)Change in related party funding(1,455)567

526

Net cash flows used in financing activities(1,766)(1,938)(2,438)Net cash flows used in operating activities(151)(2,319)(413)

Net cash flows used in investing activities

(344)

(70)

(173)

Dividends paid

Net cash flows used in financing activities(1,766)(1,938)(2,438)Net decrease in cash and cash equivalents(2,261)(4,327)(3,024)

Cash and cash equivalents at beginning of the period

4,765

7,789

7,789

Cash and cash equivalents at end of the period

2,504

3,462

4,765

The notes on pages 9 to 29 form part of and should be read in conjunction with these financial statements

ANZ National Bank Limited

1. Accounting Policies(i) Basis of preparation
These financial statements have been preparedin accordance with NZ IAS 34 Interim Financial
Reporting and the Registered Bank DisclosureStatement (Off-Quarter – New Zealand Incorporated
Registered Banks) Order 2008. These financial
statements should be read in conjunction with theconsolidated financial statements for the year ended
30 September 2009.
(ii) Basis of measurement
The financial statements have been prepared on a going
concern basis in accordance with historical cost concepts
except that the following assets and liabilities are statedat their fair value:• derivative financial instruments, including in thecase of fair value hedging, the fair value of any
applicable underlying exposure,• financial instruments held for trading,• assets recognised as available-for-sale,• financial instruments designated at fair value
through profit or loss, and• defined benefit scheme asset or liability.
(iii) Changes in accounting policies
There have been no changes in accounting policies
since the authorisation date of the General DisclosureStatement for the year ended 30 September 2009, on
13 November 2009.
The following standards have been initially appliedby the Banking Group for the nine months ended
30 June 2010: NZ IFRS 8 Operating Segments(“NZ IFRS 8”), NZ IAS 1 Presentation of Financial
Statements (revised) (“NZ IAS 1”) and NZ IFRS 3 Business
Combinations (revised).

NZ IFRS 8 replaces NZ IAS 14 Segment Reporting andrequires the use of a “management approach” tosegment reporting. Segment information is therefore
presented on the same basis as that used for internalreporting purposes. Goodwill associated withthe acquisition of NBNZ Holdings Limited Group isallocated to the reportable segments in accordancewith NZ IFRS 8. The Banking Group’s reportable
operating segments did not change on adoption of
NZ IFRS 8.
In accordance with NZ IAS 1 a “statement ofcomprehensive income” has been disclosed showing
net profit or loss and revenues and expenses recognised
directly in equity. In addition the revised “statement ofchanges in equity” shows all changes in equity.
The application of these standards has not resulted in amaterial impact on the financial results or position of
the Banking Group(iv) Presentation currency and rounding
The amounts contained in the financial statements arepresented in millions of New Zealand dollars, unlessotherwise stated.
(v) Consolidation
These financial statements consolidate the financial
statements of the Bank and its subsidiaries.
(vi) Comparatives
To ensure consistency with the current period,
comparative figures have been reclassified whereappropriate.

2. Risk Management Policies
There has been no material change in the Banking
Group’s policies for managing risk, or material exposures
to new types of risk since the authorisation date of theprevious Disclosure Statement on 21 May 2010.

8–9

Notes to the
Financial Statements

ANZ National Bank Limited

Notes to the Financial Statements (continued)
3. Income Tax Expense$millions

Unaudited
9 months to
30/06/2010

Unaudited
9 months to
30/06/2009

AuditedYear to30/09/2009

Income tax expense before tax provisions and the effect of changes in tax legislation

249

237

227

Change in tax provisions

(44)

-

240

Effect of changes in tax legislation

44

-

-

249

237

467

Effective tax rate (%) before change in tax provisions and the effect ofchanges in tax legislation

29.0%

29.7%

29.7%

Effective tax rate (%)

29.0%

29.7%

61.0%

Income tax expense

Changes in tax legislation
In May 2010 legislation was passed to reduce the New Zealand corporate tax rate from 30% to 28% and to remove theability to claim tax depreciation on buildings with an estimated useful life greater than fifty years, effective for the 2011-2012
income tax year. The tax effect shown is the estimated impact on the value of deferred tax as a result of the changes from
1 October 2011.
Settlement with Inland Revenue Department
The New Zealand Inland Revenue Department (“IRD”) had been reviewing a number of structured finance transactions as partof an audit of the 2000 to 2005 tax years. The Bank has reached a settlement with the IRD in respect of all the transactions in
dispute. This liability, net of amounts receivable from Lloyds Banking Group plc, was met from existing tax provisions.

4. Liquid Assets
Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

1,602

1,617

2,373

Money at call

209

402

341

Bills receivable and remittances in transit

95

57

48

1,906

2,076

2,762

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009$millions

Cash and balances with central banks

Total liquid assets

5. Due from Other Financial Institutions$millions

Able to be withdrawn without prior notice

93

79

172

Securities purchased under agreement to resell

301

340

1,083

Securities purchased under agreement to resell with central banks

-

41

-

Security settlements

-

-

370

Certificates of deposit

538

4,041

2,338

Reserve Bank bills
Term loans and advances
Total due from other financial institutions

-

744

398

171

215

153

1,103

5,460

4,514

ANZ National Bank Limited
10 – 11

Notes to the Financial Statements (continued)
6. Trading Securities$millions

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

3,612

665

1,389

Certificates of deposit

361

458

191

Promissory notes

115

69

28

Other bank bonds

3,014

1,631

2,475

62

127

83

7,164

2,950

4,166

168

79

159

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

Government and local body stock and bonds

Other
Total trading securities
Included within trading securities is the following balance:
Assets encumbered through repurchase agreements

7. Available-For-Sale Assets$millions

1,539

634

1,394

Other debt securities

213

59

48

Equity securities

79

74

71

1,831

767

1,513

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

Overdrafts

2,217

2,016

2,087

Credit card outstandings

1,400

1,410

1,402

Term loans – housing1

44,06349,09544,763

Term loans – non-housing

39,09540,34840,231

Finance lease receivables

705

699

683

Gross loans and advances

87,48093,56889,166

Provision for credit impairment (Note 10)(1,462)(1,034)(1,272)

Unearned finance income

(265)

(279)

(262)

Government and local body stock and bonds

Total available-for-sale assets

8. Net Loans and Advances$millions

Fair value hedge adjustment

321

886

615

Deferred fee revenue and expenses

(50)

(52)

(51)

Capitalised brokerage / mortgage origination fees

48

80

63

86,072

93,16988,259Total net loans and advances1

As at 30 June 2010 the Banking Group has not entered into any repurchase agreements for residential mortgage-backed securities with the Reserve Bank of
New Zealand (“RBNZ”) (30/06/2009 repurchase agreements to the value of $1,806 million; 30/09/2009 $1,806 million). Therefore no underlying collateral has
been accepted by the RBNZ under this transaction (in previous periods mortgages to the value of 30/06/2009 $2,250 million; 30/09/2009 $2,250 million were
held by the RBNZ as collateral).
In February 2009 and July 2009, the Banking Group sold $4,877 million and $4,986 million, respectively, of residential mortgages to the NZ Branch. These
existing tranches of residential mortgages are regularly topped up with additional mortgages. Further sales of $2,612 million occurred in the nine months
ended 30 June 2010. Repurchases and repayments have resulted in the NZ Branch holding residential mortgages of $9,512 million as at 30 June 2010. Theseassets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets. Net loans and advances have decreased as aresult of selling these assets.

ANZ National Bank Limited

Notes to the Financial Statements (continued)
9. Impaired Assets, Past Due Assets and Other Assets Under Administration
Individually impaired assets$millions

Retailmortgages

Other retail
exposures

Corporate
exposures

Total

Unaudited 30/06/2010
Balance at beginning of the period

377

59

740

1,176

Transfers from productive

388

205

919

1,512

Transfers to productive

(9)

(1)

(74)

(84)

Assets realised or loans repaid

(232)

(84)

(308)

(624)

Write offs

(41)

(97)

(48)

(186)

Individually impaired asset balance at end of the period

483

82

1,229

1,794

Restructured items and other individually impaired assets

7

-

-

7

490

82

1,229

1,801

Balance at beginning of the period

83

30

214

327

Transfers from productive

371

188

470

1,029

Transfers to productive

(18)

(20)

(18)

(56)

Assets realised or loans repaid

(137)

(26)

(98)

(261)

Total impaired assets
Unaudited 30/06/2009

Write offs

(16)

(108)

(45)

(169)

Individually impaired asset balance at end of the period

283

64

523

870

Restructured items and other individually impaired assets

1

-

-

1

284

64

523

871

Total impaired assets
Audited 30/09/2009
Balance at beginning of the year

83

30

214

327

Transfers from productive

576

243

882

1,701

Transfers to productive

(22)

(20)

(25)

(67)
(507)

Assets realised or loans repaid

(232)

(45)

(230)

Write offs

(28)

(149)

(101)

(278)

Individually impaired asset balance at end of the year

377

59

740

1,176

Restructured items and other individually impaired assets
Total impaired assets

-

2

-

2

377

61

740

1,178

Restructured assets and other individually impaired assets
A restructured asset is an impaired asset for which the terms have been changed to grant the counterparty a concession thatwould not otherwise have been available, due to the counterparty’s difficulty in complying with the original terms, and where
the yield on the asset following restructuring is still above the Banking Group’s cost of funds. An asset is classified as an otherindividually impaired asset if, following the restructure, the yield on the asset is below the Banking Group’s cost of funds.
Assets acquired through enforcement of security
Assets acquired through enforcement of security are those assets which are legally owned by the Banking Group as a result of
enforcing security, other than any buildings occupied by the Banking Group. The Banking Group held no material assets
acquired through enforcement of security (30/06/2009 $nil; 30/09/2009 $nil).
Past due assets
A past due asset is any loan where the counterparty has failed to make a payment when contractually due, and which is not an
impaired asset. A 90 days past due asset is any past due asset which has not been operated by the counterparty within its key
terms for at least 90 days.
Other assets under administration
Other assets under administration are any loans, not being impaired or 90 days past due, where the customer is in any form ofvoluntary or involuntary administration, including receivership, liquidation, bankruptcy or statutory management.

ANZ National Bank Limited
12 – 13

Notes to the Financial Statements (continued)
9. Impaired Assets, Past Due Assets and Other Assets Under Administration (continued)
Retailmortgages

Other retail
exposures

Corporate
exposures

Total

159

44

149

352

Other assets under administration

-

-

1

1

Undrawn facilities with impaired customers

-

-

82

82

$millions

Unaudited 30/06/2010
Balance at end of period
Past due assets (90 days past due assets)1

Unaudited 30/06/2009
Balance at end of period
Past due assets (90 days past due assets)1

363

73

84

520

Other assets under administration

-

-

36

36

Undrawn facilities with impaired customers

-

-

32

32

Audited 30/09/2009
Balance at end of year
Past due assets (90 days past due assets)1

1

265

59

111

435

Other assets under administration

-

-

-

-

Undrawn facilities with impaired customers

-

-

32

32

90 day past due assets are not classified as impaired assets as they are either 90 days or more past due and well secured, or are portfolio managed facilities thatcan be held for up to 180 days past due.

ANZ National Bank Limited

Notes to the Financial Statements (continued)
10. Provision for Credit Impairment
Retailmortgages

Other retail
exposures

Corporate
exposures

Total

Balance at beginning of the period

121

159

518

798

Charge / (credit) to income statement

(11)

(8)

64

45

Balance at end of the period

110

151

582

843

Balance at beginning of the period

153

40

281

474

Charge to income statement

109

92

146

347

$millions

Unaudited 30/06/2010
Collective provision

Individual provision (individually impaired assets)

Recoveries of amounts previously written off
Bad debts written off

1

12

2

15

(41)

(97)

(48)

(186)

Discount unwind1

(11)

(2)

(18)

(31)

Balance at end of the period

211

45

363

619

Total provision for credit impairment

321

196

945

1,462

81

164

289

534

Unaudited 30/06/2009
Collective provision
Balance at beginning of the period
Charge / (credit) to income statement

19

(14)

92

97

Balance at end of the period

100

150

381

631

Individual provision (individually impaired assets)
Balance at beginning of the period

28

10

94

132

Charge to income statement

99

116

216

431

Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

1

13

-

14

(16)

(108)

(45)

(169)

-

-

(5)

(5)

Balance at end of the period

112

31

260

403

Total provision for credit impairment

212

181

641

1,034

81

164

289

534

Audited 30/09/2009
Collective provision
Balance at beginning of the year
Charge / (credit) to income statement

40

(5)

229

264

Balance at end of the year

121

159

518

798

Individual provision (individually impaired assets)
Balance at beginning of the year

28

10

94

132

Charge to income statement

152

161

297

610

1

18

1

20

(28)

(149)

(101)

(278)

-

-

(10)

(10)

Balance at end of the year

153

40

281

474

Total provision for credit impairment

274

199

799

1,272

Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

1

The impairment loss on an impaired asset is calculated as the difference between the asset’s carrying amount and the estimated future cash flows discounted
to its present value using the original effective interest rate for the asset. This discount unwinds over the period the asset is held as interest income.

ANZ National Bank Limited
14 – 15

Notes to the Financial Statements (continued)
10. Provision for Credit Impairment (continued)
Provision movement analysis
Retailmortgages

Other retail
exposures

New and increased provisions

145

122

249

516

Provision releases

(35)

(18)

(101)

(154)

110

104

148

362

$millions

Corporate
exposures

Total

Unaudited 30/06/2010

Recoveries of amounts previously written off

(1)

(12)

(2)

(15)

Individual provision charge

109

92

146

347

Collective provision charge / (credit)

(11)

(8)

64

45

Charge to income statement

98

84

210

392

103

131

221

455

(3)

(2)

(5)

(10)

100

129

216

445

Unaudited 30/06/2009
New and increased provisions
Provision releases
Recoveries of amounts previously written off

(1)

(13)

-

(14)

Individual provision charge

99

116

216

431

Collective provision charge / (credit)

19

(14)

92

97

Charge to income statement

118

102

308

528

162

182

316

660

(9)

(3)

(18)

(30)

153

179

298

630

Audited 30/09/2009
New and increased provisions
Provision releases
Recoveries of amounts previously written off

(1)

(18)

(1)

(20)

Individual provision charge

152

161

297

610

Collective provision charge / (credit)

40

(5)

229

264

Charge to income statement

192

156

526

874

ANZ National Bank Limited

Notes to the Financial Statements (continued)
11. Due to Other Financial Institutions
Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

Ultimate Parent Bank

10

2,462

497

Securities sold under agreements to repurchase from other financial institutions

168

79

159
1,806

$millions

-

1,806

Other financial institutions

898

717

1,263

Total due to other financial institutions

1,076

5,064

3,725

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

Certificates of deposit

3,278

5,072

4,441

Securities sold under agreements to repurchase from central banks

12. Deposits and Other Borrowings$millions

Amortised cost
Term deposits

33,04932,15332,997

Demand deposits bearing interest

19,151

21,93621,024

Deposits not bearing interest

4,675

4,424

4,373

Secured debenture stock

1,371

1,621

1,537

Total deposits and other borrowings recognised at amortised cost

61,52465,20664,372

Commercial paper

10,315

5,640

7,392

Total deposits and other borrowings recognised at fair value

10,315

5,640

7,392

Total deposits and other borrowings

71,83970,846

71,764

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

16,207

17,986

15,917

2,263

2,508

2,233

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

2,368

2,867

2,596

588

1,083

811

Fair value through profit or loss

13. Bonds and Notes$millions

Total bonds and notes
Included within bonds and notes are the following related party balances:
Subsidiaries of the Ultimate Parent Bank

14. Loan Capital$millions

Term and perpetual subordinated debt
Included within loan capital is the following related party balance:
Ultimate Parent BankANZ National Bank Limited
16 – 17

Notes to the Financial Statements (continued)
15. Capital Adequacy
Capital adequacy ratios under the Basel II internal models based approach
Unaudited
30/06/2010

Unaudited
30/06/2009

Unaudited
30/09/2009

Tier One Capital

10.12%

9.13%

9.03%

RBNZ minimum Tier One Capital ratio

4.00%

4.00%

4.00%

Total Capital

13.50%

12.93%

12.67%

RBNZ minimum Total Capital ratio

8.00%

8.00%

8.00%

$millions

Capital of the Banking Group as at 30 June 2010 (Unaudited)
Tier One Capital
Ordinary share capital

6,943

Revenue and similar reserves

3,243

Current period's profit after tax

610

Non-controlling interests

1

Less deductions from Tier One Capital– Goodwill– Software and other intangible assets

3,265
300

– Future income tax benefits

93– Cash flow hedging reserve77– 50% of expected loss to the extent greater than total eligible allowances for impairment

12

Total Tier One Capital

7,050

Tier Two Capital – Upper Level Tier Two Capital
Perpetual subordinated debt

1,161

Tier Two Capital – Lower Level Tier Two Capital
Term subordinated debt

1,207
2,368

Less deductions from Tier Two Capital– 50% of total expected loss to the extent greater than total eligible allowances for impairment

12

Total Tier Two Capital

2,356

Total Capital

9,406

Total required capital of the Banking Group as at 30 June 2010 (Unaudited)$millions

Exposures subject to internal ratings based approach

Risk weighted
exposure or
implied risk
Exposure atweighted Total capitaldefault
exposure2 requirement

119,853

50,508

4,042

6,543

6,636

531

Exposures subject to standardised approach

481

414

34

Equity exposures

226

875

70

Specialised lending exposures subject to slotting approach

Other exposures

2,283

722

58

Total credit risk

129,386

59,155

4,735

Operational risk

n/a

5,178

414

Market risk

n/a

3,816

305

Supervisory adjustment1

n/a

1,543

123

Total capital requirement

129,386

69,692

5,577

The supervisory adjustment includes an adjustment of 15% of risk-weighted retail mortgages and an adjustment, if required, in order to maintain the Basel II
minimum capital requirements at no less than 90% of the Basel I minimum capital requirements, in accordance with the Bank’s Conditions of Registration.
No adjustment was required to maintain the Basel II minimum capital requirements at no less than 90% of the Basel I minimum capital requirements at
30 June 2010.
2
The risk weighted exposures for credit risk include a scalar of 1.06 in accordance with the Bank’s conditions of registration.
1

ANZ National Bank Limited

Notes to the Financial Statements (continued)
15. Capital Adequacy (continued)
Capital adequacy ratios under the Basel I approach
Banking GroupBank

Unaudited
30/06/2010

Unaudited
30/06/2009

Unaudited
30/09/2009

Unaudited
30/06/2010

Unaudited
30/06/2009

Unaudited
30/09/2009

Tier One Capital

9.49%

8.44%

8.43%

9.69%

8.35%

8.34%

Total Capital

12.67%

12.02%

11.82%

12.02%

11.88%

11.66%

Total risk-weighted exposures ($m)

74,426

79,981

76,46772,418

78,106

74,665RBNZ minimum ratios:Tier One Capital

4.00%

4.00%

4.00%

4.00%

4.00%

4.00%

Total Capital

8.00%

8.00%

8.00%

8.00%

8.00%

8.00%

Basel I capital adequacy in respect of the Banking Group and Bank has been derived in accordance with the RBNZ document
entitled ‘Capital Adequacy Framework (Basel I Approach)’ (BS2) dated March 2008.
Implementation of the advanced internal ratings based approach to credit risk measurement
The Banking Group adheres to the standards of risk grading and risk quantification as set out for Internal Ratings Based(“IRB”) banks in the RBNZ document entitled ‘Capital Adequacy Framework (Internal Models Based Approach)’ (“BS2B”), dated
March 2008.
Under this IRB Framework, banks use their own measures for calculating the level of credit risk associated with customers andexposures, by way of the primary components of:
Probability of Default (“PD”) – an estimate of the level of risk of borrower default graded by way of rating models used bothat loan origination and for ongoing monitoring. For retail mortgage exposures the Banking Group is required to adopt the
RBNZ prescribed exposure weighted minimum PD of 1.25%;
Exposure at Default (“EAD”) – the expected facility exposure at default. Total credit risk-weighted exposures include a scalarof 1.06 in accordance with the Bank’s Conditions of Registration; andLoss Given Default (“LGD”) – an estimate of the potential economic loss on a credit exposure, incurred as a consequence ofobligor default and expressed as a percentage of the facility’s EAD. For Retail Mortgage exposures the Bank is required to apply
the downturn LGDs according to the Loan to Value (“LVR”) band as set out in BS2B. For rural banking exposures the Banking
Group is required to adopt RBNZ prescribed downturn LGDs which are more conservative than internal estimates.
For exposures classified under specialised lending, the Banking Group uses slotting tables supplied by the RBNZ rather thaninternal estimates.
The exceptions to IRB treatment are six minor portfolios where, due to systems constraints or other reasons, determining these
IRB risk estimates is not currently feasible or appropriate. Risk weights for these exposures are calculated under a separate
treatment as set out in the RBNZ document entitled ‘Capital Adequacy Framework (Standardised Approach)’ (BS2A).
Refer to the Banking Group’s 31 March 2010 General Disclosure Statement for a more detailed description of the Banking
Group’s implementation of the IRB approach.

ANZ National Bank Limited
18 – 19

Notes to the Financial Statements (continued)
15. Capital Adequacy (continued)
Credit exposures subject to the internal ratings based approach
The following tables analyse the capital requirements by asset class under the IRB approach:

As at 30/06/2010 (Unaudited)

Total
exposureor principal
amount$m

Exposureweighted LGD
used for the
Exposure at
capitaldefault
calculation$m%

Exposureweighted
risk
weight%Riskweighted
exposure$m

Total capitalrequirement$mOn-balance sheet exposures
Corporate

35,27535,27537

66

24,735

1,979

Sovereign

7,424

7,424

5

1

71

6

Bank

3,920

3,327

61

16

566

45

Retail mortgages

41,264

41,264

20

22

9,751

780

Other retail

4,313

4,313

62

79

3,613

289

Total on-balance sheet exposures

92,196

91,60329

40

38,736

3,099

Corporate

12,79910,758

47

54

6,102

488

Sovereign

46

46

5

-

-

-

Bank

879

714

45

16

122

10

Off-balance sheet exposures

Retail mortgages

5,309

4,918

20

22

1,150

92

Other retail

4,512

4,585

75

49

2,399

192

Total off-balance sheet exposures

23,54521,021

47

44

9,773

782

59,207

1,583

56

52

871

70

Market related contracts
Corporate
Sovereign

8,417

599

5

1

6

1

Bank

568,480

5,047

65

21

1,122

90

Total market related contracts

636,104

7,229

58

26

1,999

161

Total credit risk exposures subject to theinternal ratings based approach

751,845

119,85334

40

50,5084,042

ANZ National Bank Limited

Notes to the Financial Statements (continued)
15. Capital Adequacy (continued)

As at 30/06/2010 (Unaudited)
Customer Credit Rating

Probabilityof default%

Exposureweighted LGD
used for the
Exposure at
capitaldefault
calculation$m%

Exposureweighted
risk
weight%Riskweighted
exposure$m

Total capitalrequirement
$m

22

1,240

100
556

Corporates
0-2

0.06%

5,399

61

3-4
5

0.35%

18,676

36

35

6,952

1.01%

10,503

35

60

6,712

6

537

2.30%

6,702

39

84

6,000

480

7-8

7.42%

5,015

40

117

6,228

498

Default

100.00%

1,321

50

327

4,576

366

4.25%

47,61640

63

31,708

2,537

0

0.01%

8,069

5

1

77

7

1-8

n/a

-

-

-

-

-

Total corporate credit risk exposures
SovereignDefault
Total sovereign credit risk exposures

n/a

-

-

-

-

-

0.01%

8,069

5

1

77

7

Bank
0

0.01%

5,678

65

17

1,034

83

1

0.02%

2,898

56

18

548

44

2-4

0.09%

398

56

21

91

7

5-6

1.89%

95

65

132

133

11

7-8

5.06%

2

65

193

4

-

Default

100.00%

17

65

-

-

-

0.22%

9,088

62

19

1,810

145

0-3

0.20%

17,742

19

8

1,448

116

4

0.44%

9,142

20

14

1,389

111

5

0.96%

12,617

21

25

3,387

271

6

2.39%

3,423

21

47

1,688

135

7-8

11.84%

2,431

23

104

2,672

214

Default

100.00%

827

29

36

317

25

3.02%

46,18220

22

10,901

872

Total bank credit risk exposures
Retail mortgages

Total residential mortgage credit risk exposures
Other retail
0-2

0.10%

21

75

18

4

-

3-4

0.30%

4,512

72

36

1,699

136

5

1.12%

1,531

67

70

1,139

91

6

2.57%

1,583

61

82

1,370

110

7-8

11.46%

1,095

70

123

1,422

114

Default

100.00%

156

64

229

378

30

3.97%

8,898

69

64

6,012

481

Total other retail credit risk exposures

Credit risk exposures subject to the IRB approach have been derived in accordance with the RBNZ document BS2B and otherrelevant correspondence from the RBNZ setting out prescribed credit risk estimates.

ANZ National Bank Limited
20 – 21

Notes to the Financial Statements (continued)
15. Capital Adequacy (continued)
Specialised lending exposures subject to the slotting approach
Exposureamount$m

On-balance sheet exposures as at 30/06/2010 (unaudited)1

Total capitalrequirement$m

Strong

1,553

70

1,153

92

Good

2,554

90

2,437

195

Satisfactory

1,443

115

1,759

141

322

250

852

68

Weak
Default
Total on-balance sheet exposures subject to the slotting approach
1

Risk Risk weighted
weightexposure
%
$m

215

-

-

-

6,087

96

6,201

496

The supervisory categories of Specialised Lending above are associated with a specific risk-weight. These categories broadly correspond to the following
external credit assessments using the Standard & Poor’s rating scale: Strong BBB- or better, Good BB+ or BB, Satisfactory BB- or B+ and Weak B to C-.

Off-balance sheet exposures as at 30/06/2010 (unaudited)

Exposureamount$m

Exposure atdefault
$m

512

361

Undrawn commitments and other off balance sheet exposures

Average risk Risk weighted
weightexposure
%
$m

89

340

Total capitalrequirement$m27

Market related contracts

1,878

95

94

95

8

Total off-balance sheet exposures subject to the slotting approach

2,390

456

90

435

35

Specialised lending exposures subject to the slotting approach have been derived in accordance with the RBNZ document BS2B.
Credit risk exposures subject to the standardised approach
Exposureamount$m

On-balance sheet exposures as at 30/06/2010 (unaudited)197

Corporates

Risk Risk weighted
weightexposure
%
$m

100

209

Total capitalrequirement
$m

17

Banks

9

20

2

-

Residential mortgages

82

40

34

3

Other retail

20

100

22

2

2

150

3

-

310

82

270

22

Average risk Risk weighted
weightexposure%$m

Total capitalrequirement$m

Past due assets
Total on-balance sheet exposures subject to the standardised approachOff-balance sheet exposures
as at 30/06/2010 (unaudited)
Undrawn commitments and otheroff balance sheet exposures

Exposureamount$m

Average credit
conversion
factor%Creditequivalentamount
$m

505

34

171

80

144

12

Credit risk exposures subject to the standardised approach have been calculated in accordance with the RBNZ document BS2A.
Equity exposures
As at 30/06/2010 (unaudited)
All other equity holdings (not deducted from capital)

Exposureamount$m

226

Equity exposures have been calculated in accordance with the RBNZ document BS2B.

Risk Risk weighted
weightexposure
%
$m

365

875

Total capitalrequirement$m70

ANZ National Bank Limited

Notes to the Financial Statements (continued)
15. Capital Adequacy (continued)
Other exposures
Exposureamount$m

As at 30/06/2010 (Unaudited)
Cash and gold bullion
New Zealand dollar denominated claims on the Crown and the RBNZ
Other assets
Total other IRB credit risk exposures

Risk Risk weighted
weightexposure%$m

Total capitalrequirement
$m

175

-

-

1,427

-

-

-

681

100

722

58

2,283

30

722

58

Other exposures have been calculated in accordance with the RBNZ document BS2B.
A risk weight of 100% applies to premises and equipment and all other exposures not otherwise defined in the BS2B document,
except for cash, gold, New Zealand dollar denominated claims on the Crown and the RBNZ, which receive a 0% risk weight.
Market risk
The aggregate market risk exposures below have been calculated in accordance with the RBNZ document entitled ‘Market risk
guidance notes’ (BS6).
The peak end-of-day market risk exposures for the quarter are measured over equity at the end of the quarter and are calculated
separately for each category of exposure. The peak for all categories of exposure may not have occurred at the same time.
Implied risk
weighted exposure

Aggregate
capital charge

As a percentage of the
Bankings Group’s equity

Unaudited 30/06/2010

As at
$m

Peak forthe quarter
$m

As at
$m

Peak forthe quarter
$m

As at
$m

Peak forthe quarter$mInterest rate risk

3,678

4,851

294

388

2.7%

3.6%

59

91

5

7

0.0%

0.1%

79

96

6

8

0.1%

0.1%

Foreign currency risk
Equity risk

3,816

305

Unaudited 30/06/2009
Interest rate risk
Foreign currency risk
Equity risk

3,646

3,663

292

293

2.8%

2.8%

18

140

1

11

0.0%

0.1%

81

91

6

7

0.1%

0.1%

3,745

299

Audited 30/09/2009
Interest rate risk
Foreign currency risk
Equity risk

3,824

3,824

306

306

3.0%

3.0%

5

301

-

24

0.0%

0.2%

69

82

6

7

0.1%

0.1%

3,898

312

Operational risk
As at 30 June 2010 the Banking Group had an implied risk weighted exposure of $5,178 million for operational risk and an
operational risk capital requirement of $414 million. The Banking Group uses the Advanced Measurement Approach for
determining its regulatory capital requirement for operational risk calculated in accordance with the RBNZ document BS2B.
Credit risk mitigation
The Banking Group assesses the integrity and ability of counterparties to meet their contractual financial obligations for
repayment. The Banking Group generally takes collateral security in the form of real property or a security interest in personal
property, except for major government, bank and corporate counterparties of strong financial standing. Longer term consumer
finance, in the form of housing loans, is generally secured against real estate while short term revolving consumer credit isgenerally unsecured.
As at 30 June 2010, under the IRB approach, the Banking Group had $1,421 million of corporate exposures covered byguarantees, where the presence of the guarantees was judged to reduce the underlying credit risk of the exposures. Informationon the total value of exposures covered by financial guarantees and eligible financial collateral is not disclosed, as the effect ofthese guarantees and collateral on the underlying credit risk exposures is not considered to be material.

ANZ National Bank Limited
22 – 23

Notes to the Financial Statements (continued)
15. Capital Adequacy (continued)
Retail mortgages by loan-to-valuation ratio
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Bank’svaluation of the security property at origination of the exposure. The exposure amount used to calculate LVR excludes
commitments to lend.
Exposure amount
Unaudited
30/06/10$millions

LVR range
0% - 59%

21,537

60% - 69%6,757

70% - 79%8,187

80% - 89%

4,391Over 90%

4,106

Total retail mortgage exposures subject to the internal ratings based approach

44,978

Pillar II capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (“ICAAP”) which complies with the requirements of
the Bank’s Conditions of Registration.
Under the Banking Group’s ICAAP it identifies and measures all “other material risks”, which are those material risks that are notexplicitly captured in the calculation of the Banking Group’s tier one and total capital ratios. The other material risks identified
by the Banking Group include premises and equipment risk and capitalised origination fees risk.
The Banking Group’s internal capital allocation for these other material risks is $115 million (30/06/09: $146 million; 30/09/2009:$148 million).

16. Concentrations of Credit Risk
Concentrations of credit risk to individual counterparties
The number of individual counterparties (excluding OECD Governments and connected persons), where the quarter end andpeak end-of-day credit exposure equals or exceeds 10% of equity (as at the end of the quarter) in ranges of 10% of equity, on
the basis of limits:
Unaudited 30/06/2010
Number ofCounterparties

Unaudited 30/06/2009
Number ofCounterparties

Audited 30/09/2009
Number ofCounterparties

As at

Peak forthe quarter

As at

Peak forthe quarter

As at

Peak forthe quarter

1

1

1

1

1

1

10% to 20% of equity

2

2

-

1

3

2

20% to 30% of equity

-

-

2

2

1

2

Concentrations of credit risk to non bank counterparties
10% to 20% of equity
Concentrations of credit risk to bank counterparties

The number of individual counterparties disclosed within the various equity ranges and the total exposure as at the end of thequarter are gross exposures. No account is taken of collateral, security and/or netting agreements which the Banking Groupmay hold in respect of the various counterparty exposures.
The peak number is calculated separately for each individual counterparty and the peak for all counterparties may not haveoccurred at the same time.
Total period end exposures to counterparties where the individual counterparty’s exposure is greater than 10%of equity:$millions

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

Non banks

1,235

1,306

1,194

Banks

2,565

4,872

6,201

ANZ National Bank Limited

Notes to the Financial Statements (continued)
16. Concentrations of Credit Risk (continued)
Credit ratings of counterparties
All of the counterparties included in the preceding tables have an investment grade credit rating (30/06/2009: 100%; 30/09/2009100%). An investment grade credit rating means a credit rating of BBB or Baa3 or above, or its equivalent. In the case of a groupof closely related counterparties, the credit rating applicable is that of the entity heading the group of closely related
counterparties. The credit rating is applicable to an entity’s long term senior unsecured obligations payable in New Zealand, in
New Zealand dollars, or to an entity’s long term senior unsecured foreign currency obligations.
Concentrations of credit risk to connected persons
Credit exposures to connected persons reported in the table below have been calculated partially on a bilateral net basis, andpartially on a gross basis. Netting has occurred in respect of certain transactions which are the subject of a bilateral netting
agreement disclosed in the Bank’s most recent Supplemental Disclosure Statement for the period ended 30 June 2010. The
amount of gross credit exposures to connected persons netted off must not be greater than 125% of the Banking Group’s Tier
One Capital.
Unaudited 30/06/2010
Amount$m% of Tier
One Capital

Unaudited 30/06/2009

Audited 30/09/2009

Amount$m% of Tier
One Capital

Amount$m% of Tier
One Capital

Aggregate at end of period3
Other connected persons (on gross basis, before netting)1

3,941

55.9%

4,174

62.7%

4,503

69.9%

Other connected persons (amount netted off)1

3,035

43.0%

3,023

45.4%

3,010

46.7%

906

12.9%

1,151

17.3%

1,493

23.2%

-

0.0%

-

0.0%

-

0.0%

Other connected persons (on gross basis, before netting)

4,579

65.0%

5,514

82.9%

5,490

85.2%

Other connected persons (amount netted off)

3,518

49.9%

3,154

47.4%

2,693

41.8%

Other connected persons (on partial bilateral net basis)

1,061

15.0%

2,360

35.5%

2,797

43.4%

-

0.0%

-

0.0%

-

0.0%

Other connected persons

n/a

70.0%

n/a

70.0%

n/a

70.0%

Non-bank connected persons

n/a

15.0%

n/a

15.0%

n/a

15.0%

Other connected persons (on partial bilateral net basis)1
Non-bank connected persons

2

Peak end-of-day for the quarter3

Non-bank connected persons
Rating-contingent limit

4

The Banking Group has amounts due from its Parent Company and the Ultimate Parent Bank and other entities within the Overseas Banking Group arising in
the ordinary course of business. These balances arise primarily from unrealised gains on trading and hedging derivative financial instruments with the Ultimate
Parent Bank. As at 30 June 2010, the gross exposures to the Bank’s Parent Company were $533 million (30/06/2009 $nil; 30/09/2009 $522 million). As at 30 June
2010, the gross exposures to the Bank’s Ultimate Parent Bank were $4,012 million (30/06/2009 $4,174 million; 30/09/2009 $3,981 million).
2
Non-bank connected persons exposures consist of loans to directors of the Bank. Any loans are made in the ordinary course of business of the Bank, on an arm’s
length basis and on normal commercial terms and conditions.
3
The Banking Group has complied with the limits on aggregate credit exposure (of a non-capital nature and net of individual provisions) to connected persons
and non-bank connected persons, as set out in the Conditions of Registration, at all times during the quarter.
4
Represents the maximum peak end-of-day aggregate credit exposures limit (of a non-capital nature and net of individual provisions) to all connected persons.
This limit is based on the ratings applicable to the Bank’s long term senior unsecured obligations payable in New Zealand in New Zealand dollars. Within theoverall limit a sub-limit of 15% of Tier One Capital applies to aggregate credit exposures (exclusive of exposures of a capital nature and net of individual
provisions) to non-bank connected persons.
1

The credit exposure concentrations disclosed for connected persons are on the basis of actual gross exposures and exclusiveof exposures of a capital nature. The peak end-of-day credit exposures for the quarter to connected persons are measured overTier One Capital as at the end of the quarter. There were no individual provisions provided against credit exposures toconnected persons as at 30 June 2010 (30/06/2009 $nil; 30/09/2009 $nil). The Banking Group had no contingent exposuresarising from risk lay-off arrangements to connected persons as at 30 June 2010 (30/06/2009 $nil; 30/09/2009 $nil).

17. Interest Earning and Discount Bearing Assets and Liabilities
Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

Interest earning and discount bearing assets

97,836104,285

100,935

Interest and discount bearing liabilities

86,81593,40990,491$millions

ANZ National Bank Limited
24 – 25

Notes to the Financial Statements (continued)
18. Segmental Analysis
For segment reporting purposes, the Banking Group is organised into three major business segments – Retail, Commercial andInstitutional. Centralised back office and corporate functions support these segments.
The segments as reported below are consistent with internal reporting provided to the chief operating decision maker, being
the Chief Executive Officer. As the composition of segments has changed over time, prior period comparatives have beenadjusted to be consistent with the 2010 segment definitions.
A summarised description of each business segment is shown below:
RetailProvides banking products and services to individuals and small businesses through separate ANZ and The National Bank of
New Zealand branded distribution channels. Personal banking customers have access to a wide range of financial services andproducts. Small business banking services are offered to enterprises with annual revenues of less than $5 million. Included inthis segment is Private Banking, which offers a fully inclusive banking and investment service to high net worth individuals.
This segment also includes ING NZ and other profit centres supporting the Retail Banking segment.
Commercial
This segment provides services to Rural, Commercial and UDC customers. A full range of banking products and services areprovided to Rural customers. Commercial customers consist of primarily privately owned medium to large businesses withannual revenues of $2 million and greater. The Banking Group’s relationship with these businesses ranges from simple banking
requirements with revenue from deposit and transactional facilities, and cash flow lending, to more complex funding
arrangements with revenue sourced from a wider range of products. UDC is primarily involved in the financing and leasing ofplant, vehicles and equipment, primarily for small and medium sized businesses, as well as investment products.
Institutional
Comprises businesses that provide a full range of financial services to the Banking Group’s client base. The Institutional business
unit is made up of the following specialised units:•••

Markets – provides foreign exchange and commodity trading and sales-related services, origination, underwriting,structuring, risk management and sale of credit and derivative products globally.
Transaction Banking – provides cash management, trade finance, international payments and clearing services.
Specialised Lending – provides origination, credit analysis, structuring and execution of specific customer transactions.

Other
Includes Treasury and back office support functions, none of which constitutes a separately reportable segment.
Business Segment Analysis1,2
Retail3

Commercial

External revenues3

1,729

Intersegment revenues(594)

Total revenues

1,135

654

Profit before income tax3

173

193

$millions

Institutional

Other4

Total

1,491

41

(873)

2,388

(837)

437

994

-

478

121

2,388

392

101

859

Unaudited 9 months to 30/06/2010

Unaudited 9 months to 30/06/2009
External revenues3

2,036

1,758

80

(1,454)2,420Intersegment revenues(1,037)(1,109)

549

1,597

-

Total revenues

999

649

629

143

2,420

Profit before income tax3

59

242

423

74

798

Audited year to 30/09/2009
External revenues3

2,646

2,260

15

(1,805)

3,116Intersegment revenues(1,300)(1,397)

741

1,956

-

Total revenues

1,346

863

756

151

3,116

36

171

493

65

765

Profit before income tax3

Results are equity standardised.
Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.
3
Includes a loss of $67 million (30/06/2009 nil; 30/09/2009 nil) on acquisition of ING NZ and a charge of $nil (30/06/2009 $211 million; 30/09/2009 $211 million) in
relation to ING NZ funds.
4
The Other segment has negative external revenues as this segment incurs funding costs on behalf of the Banking Group, and is reimbursed internally.
1
2

ANZ National Bank Limited

Notes to the Financial Statements (continued)
19. Notes to the Cash Flow Statement$millions

Unaudited
9 months to
30/06/2010

Unaudited
9 months to
30/06/2009

AuditedYear to30/09/2009

610

561

298

Reconciliation of profit after income tax to net cash flows
provided by / (used in) operating activities
Profit after income tax
Non-cash items:
Depreciation and amortisation

48

35

50

Provision for credit impairment

392

528

874

(6)

4

(8)

Deferred fee revenue and expenses
Share-based payments expense

15

14

18

Amortisation of capitalised brokerage / mortgage origination fees

27

38

50
(1,874)

Deferrals or accruals of past or future operating cash receipts or payments:(805)(3,447)

Change in interest receivable

11

139

138

Change in interest payable

(106)

(279)

(295)

Change in net operating assets and liabilities

Change in accrued income

(2)

(2)

1

Change in accrued expenses

56

43

42

Change in provisions

(51)

180

100

Amortisation of premiums and discounts

22

77

76

Change in insurance policy assets

(33)

-

-

Change in insurance investment assets
Change in net income tax assets and liabilities

(8)

-

-

(363)

(183)

141

Items classified as investing / financing:
(37)

(10)

(11)

Impairment of associates

4

-

-

Remeasuring existing equity interests to fair value

67

-

-

Loss / (gain) on disposal of premises, equipment and intangibles

8

(17)

(13)

(151)

(2,319)(413)

Share of profit of equity accounted associates and jointly controlled entities

Net cash flows from / (used in) operating activities

Reconciliation of core liquidity portfolio to cash and cash equivalents
The definition of cash and cash equivalents is narrower than the Banking Group’s core liquidity portfolio of assets that could
be readily converted into cash if required. This portfolio comprises:$millions

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

2,207

1,427

1,445

Securities purchased under agreement to resell

301

275

1,075

Certificates of deposit

876

4,459

2,736

Government and local body stock and bonds

3,311

1,225

1,102

Available-for-sale assets

1,454

622

1,435

Other bank bonds

2,957

1,625

2,522

Total liquidity portfolio

10,326

9,651

11,077

Cash and balances with central banks

Reconciliation to cash and cash equivalents:
Other cash items not included within liquidity portfolio:
Liquid assets not with central banks

479

631

555

Due from other financial institutions – less than 90 days

247

324

550

Trading securities(6,606)(2,525)(3,624)

Available-for-sale assets(1,454)(622)(1,435)Due from other financial institutions – greater than 90 days

(488)

(3,997)(2,358)

Total cash and cash equivalents

2,504

3,462

4,765

Non-cash items included within liquidity portfolio

Reconciliation of cash and cash equivalents to the balance sheet
Liquid assets
Due from other financial institutions – less than 90 days
Total cash and cash equivalents

1,906

2,076

2,762

598

1,386

2,003

2,504

3,462

4,765

ANZ National Bank Limited
26 – 27

Notes to the Financial Statements (continued)
20. Securitisation, Funds Management, Other Fiduciary Activities and the Marketing and Distributionof Insurance Products
Securitisation
In October 2008, the Banking Group established an in-house residential mortgage backed securities facility that could issue
securities meeting RBNZ criteria. As at 30 June 2010 the rights to cash flows associated with residential mortgages with acarrying value of $5,985 million (30/06/2009 $6,092 million; 30/2009/09 $5,687 million) were held in the facility. These assets do
not qualify for derecognition as the Bank retains a continuing involvement in the transferred assets, therefore the Banking
Group’s financial statements do not change as a result of establishing these facilities.
Funds management
Certain subsidiaries of the Bank act as trustee and/or manager for a number of unit trusts and investment and superannuation
funds. The Bank provides private banking services and investment advisory services to a number of clients, including investment
advice and portfolio management. The Banking Group is not responsible for any decline in performance of the underlying
assets of the investors due to market forces.
As funds under management are not controlled by the Banking Group, they are not included in these financial statements. The
Banking Group derives fee and commission income from the sale and management of investment funds and superannuation
bonds, unit trusts and the provision of private banking services and investment advisory services to a number of clients. The
Banking Group derives commission income from the sale of third party funds management products.
Custodial services
The Banking Group provides custodial services to customers in respect of assets that are beneficially owned by thosecustomers.
Insurance business
The Banking Group conducts insurance business through subsidiaries of ING NZ – the assets, liabilities and operations of which
are fully consolidated into the Banking Group since its acquisition. Previously the Banking Group did not conduct any insurance
business directly, although it held a 49% ownership share in ING NZ. The Banking Group also markets and distributes a range
of insurance products which are underwritten by subsidiaries of ING NZ, as well as third party insurance companies.
The insurance business comprises risk transfer and investment contract life insurance products. The aggregate insurance
business conducted by companies in the Banking Group comprises assets totalling $349 million (30/06/2009 $nil; 30/09/2009$nil) which is 0.3% (30/06/2009 0.0%; 30/09/2009 0.0%) of the total consolidated assets of the Banking Group.
Provision of financial services
Financial services provided by the Banking Group to entities which are involved in trust, custodial, funds management andother fiduciary activities, and to affiliated insurance companies which conduct marketing or distribution of insurance products,
or on whose behalf the marketing or distribution of insurance products are conducted, are provided on arm’s length terms andconditions and at fair value. Any assets purchased from such entities have been purchased on an arm’s length basis and atfair value.
The Banking Group has not provided any funding, except standard lending facilities provided in the normal course ofbusiness on arm’s length terms, to entities which conduct any of the following activities: trust, custodial, funds management
or other fiduciary activities established, marketed and/or sponsored by a member of the Banking Group (30/06/2009 $nil;
30/09/2009 $nil).

21. Notional Value of Derivatives
Nominal value$millions

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

Exchange rate derivatives

133,303

101,243

102,435

Interest rate derivatives

504,605

478,051

485,664

Commodity derivatives

74

44

36

637,982

579,338

588,135

Total derivatives

ANZ National Bank Limited

Notes to the Financial Statements (continued)
22. Credit Related Commitments and Contingent Liabilities
Nominal or contract value$millions

Unaudited
30/06/2010

Unaudited
30/06/2009

Audited30/09/2009

582

792

735

Credit related commitments
Commitments with certain drawdown due within one year
Commitments to provide financial services

21,28623,18122,094

Total credit related commitments

21,86823,973

22,829Contingent liabilities
1,666

1,799

1,753

Standby letters of credit

53

440

341

Transaction related contingent items

878

1,033

982

Trade related contingent liabilities

97

77

89

2,694

3,349

3,165

Financial guarantees

Total contingent liabilities

The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third
parties, including the Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending
loan facilities to customers, therefore these transactions are subjected to the same credit origination, portfolio management
and collateral requirements for customers applying for loans. As the facilities may expire without being drawn upon, thenotional amounts do not necessarily reflect future cash requirements.
Commerce Commission
The Bank is aware that the Commerce Commission is looking at credit contract fees under the Credit Contracts and Consumer
Finance Act 2003 (“CCCFA”). In its 2010-2013 Statement of Intent the Commission stated that:“In CCCF Act enforcement, the Commission will continue to focus on unreasonable credit fees, while still being mindful of
disclosure issues.”
In particular the Bank is aware that the Commerce Commission is investigating the level of default fees charged on credit cards,
the level of currency conversion charges on overseas transactions using credit cards and also informal excess arrangements on
credit cards under the CCCFA. At this stage the possible outcome of these investigations and any liability or impact on feescannot be determined with any certainty. The Commission has concluded its investigation into early repayment charges on
fixed rate mortgages and credit card late payment fees, with no action being taken against the Bank.
ING NZ Funds
The Bank markets and distributes a range of wealth management products in New Zealand which are manufactured andmanaged by ING NZ. Trading in two of the products, the ING Diversified Yield Fund and the ING Regular Income Fund (together,“the Funds”), was suspended in March 2008, due to deterioration in the liquidity and credit markets. Units in the Funds weresold by the Bank to its customers.
In June 2009, ING NZ AUT Investments Limited, a subsidiary of ING NZ, made an offer to investors in the Funds. Investors
holding approximately 99% of the Funds accepted the offer to purchase their units.
In June 2010, the Bank and ING NZ reached settlements with the New Zealand Commerce Commission and the New Zealand
Securities Commission in relation to the Commerce Commission’s investigation into the Bank and ING NZ’s marketing andpromotion of the Funds.
As part of the settlement with the Commerce Commission, $45 million will be paid to eligible investors in the Funds, and the
Banking Group will pay the Commerce Commission $1 million towards their investigation costs.
As part of the settlement with the Securities Commission, ING NZ has undertaken to engage an external party to complete, by
1 February 2011, a review of its procedures and processes to the extent they relate to ING NZ’s business of developing andoffering investment products to the public and to subsequently implement any recommendations of that review. The Bank has
undertaken to facilitate and assist with the ING NZ audit, review and implementation.
The Commerce Commission and the Securities Commission have agreed they will not take any further action against the Bank,ING NZ or their affiliates in relation to the Funds.
The ultimate cost to the Banking Group will depend on the final value of units in the Funds, any recoveries under insurance, theassessment and outcome of customer complaints and the results of any litigation that may be brought in connection with theFunds or their sale. The Banking Group considers it has adequately provided for these matters.
Other contingent liabilities
The Banking Group has other contingent liabilities in respect of actual and potential claims and proceedings. An assessmentof the Banking Group’s likely loss in respect of these matters has been made on a case-by-case basis and provision made whereappropriate. As at 30 June 2010, there were no other contingent assets or liabilities required to be disclosed (30/6/2009 nil;
30/09/2009 nil).

ANZ National Bank Limited
28 – 29

Notes to the Financial Statements (continued)
23. Business Combinations
On 30 November 2009, the Banking Group purchased ING Groep’s 51% interest in ING NZ, which was the holding company for
the ANZ-ING wealth management and life insurance joint venture in New Zealand. The transaction was undertaken tostrengthen the Banking Group’s position in wealth management and more closely integrate its retail banking and wealthbusinesses. The acquisition took the Banking Group’s ownership interest in ING NZ to 100%.
As part of the transaction the Banking Group also purchased ING Groep’s 51% interests in the Funds, taking its ownershipinterest to over 99% of the Funds.
$millions

Unaudited

Fair values of assets acquired and liabilities assumed as at acquisition date (provisional)
Due from financial institutions

142

Available-for-sale assets

173

Investments relating to insurance business40

Insurance policy assets

81

Shares in associates

1

Other assets1

24

Deferred tax assets

21

Premises and equipment

4

Intangible assets

223

Total assets

709

Due to financial institutions

30

Payables and other liabilities

27

Current tax liabilities

27

Provisions2

93

Total liabilities

177

Net assets

532

Non-controlling interests in the Funds3

1

Net assets attributable to the Banking Group

531

Book value of existing equity interests

351

Loss on re-measuring existing equity interests to fair value4(82)

Acquisition date fair value of existing equity interests

269

Cash consideration transferred

247

Total consideration

516

Total consideration less net assets acquired4(15)

Includes receivables with a fair value of $16 million and a gross contractual amount receivable of $17 million. The best estimate at the acquisition date of thecontractual cash flows not expected to be collected on these receivables is $1 million.
2
Includes employee related provisions and the fair value of contingent liabilities, which relate to possible claims by investors in the Funds and investigations byregulatory bodies and other actual and potential claims and proceedings (refer to the Credit Related Commitments and Contingent Liabilities note). The
expected timing and ultimate cost of contingent liabilities to the Banking Group will depend on the assessment and outcome of customer complaints, and theresults of any litigation and regulatory investigations or proceedings that may be brought.
3
Non-controlling interests are measured at their proportionate share of the identifiable net assets of the Funds.
4
The loss on re-measuring existing equity interests of $82 million has been offset by a gain of $15 million as a result of the value of the net assets acquired being
greater than the total consideration. The net loss, of $67 million, has been recognised in Other Operating Income in the Income Statement.
1

Included in the Banking Group’s Income Statement and Statement of Comprehensive Income since 30 November 2009 is net
operating income of $104 million and profit before tax of $45 million, excluding integration costs, contributed by ING NZ and
the Funds. Had ING NZ and the Funds been consolidated from 1 October 2009, the Banking Group’s Income Statement andStatement of Comprehensive Income would have included, for the nine months ended 30 June 2010, net operating income of$131 million and profit before tax of $55 million. Acquisition costs were paid by the Ultimate Parent Bank.
The initial accounting for the business combination, including the fair values of the assets acquired and liabilities assumed andthe calculation of goodwill, is provisional while valuations of the assets acquired and liabilities assumed are finalised.

24. Subsequent Events
On 13 August 2010 the Directors of the Bank resolved to pay an ordinary dividend of $600 million no later than 30 September
2010. On 27 July 2010 the Bank agreed to sell $1.7 billion of residential mortgages to, and purchase $0.8 billion of residential
mortgages from, the NZ Branch. There have been no other material subsequent events.

ANZ National Bank Limited

Conditions of Registration
Conditions of Registration, applicable as at 13 August 2010. These Conditions of Registration have applied
from 30 March 2010.
There have been no changes in the Bank’s conditions of registration since the issuance of the last General Disclosure Statement
dated 21 May 2010.
The registration of the Bank as a registered bank is subject to the following conditions:1.

That the Banking Group complies with the following requirements:(a) the total capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 8%;(b) the tier one capital ratio of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than 4%; and(c) the capital of the Banking Group calculated in accordance with the Reserve Bank of New Zealand document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008 is not less than $30 million.
For the purposes of this condition of registration the scalar referred to in the Reserve Bank of New Zealand document“Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is 1.06.
For the purposes of this condition of registration, the supervisory adjustment referred to in the Reserve Bank of
New Zealand document “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008 is thesum of:(a) 15% of risk-weighted exposures secured by residential mortgages as defined in the Reserve Bank of New Zealanddocument “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and(b) 12.5 times the greater of: zero; and 90% of adjusted Basel I capital, less adjusted Basel II capital; where(i) “adjusted Basel I capital” means 8% of total risk-weighted exposures, plus deductions from tier one capital, plus
deductions from total capital, all calculated in accordance with the Reserve Bank of New Zealand document “Capital
adequacy framework (Basel I approach)” (BS2) dated March 2008;(ii) “adjusted Basel II capital” means 8% of total Basel II risk-weighted exposures plus deductions from tier one capital,plus deductions from total capital, less any amount included in tier two capital arising from the excess of eligible
allowances for impairment over EL (expected losses), all calculated in accordance with the Reserve Bank of New
Zealand document “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008;
and(iii) “total Basel II risk-weighted exposures” means scalar x (risk-weighted on and off balance sheet credit exposures) +12.5 x total capital charge for market risk exposure + 12.5 x total capital requirement for operational risk + 15% ofrisk-weighted exposures secured by residential mortgages as defined in the Reserve Bank of New Zealanddocument “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008.
1A. That(a) the Bank has an internal capital adequacy assessment process (“ICAAP”); that with effect from 31 August 2008 theBank’s ICAAP accords with the requirements set out in the document “Guidelines on a Bank’s internal capital adequacy
process (“ICAAP”)” (BS12) dated December 2007;(b) under its ICAAP the Bank identifies and measures its “other material risks” defined as all material risks of the Banking
Group that are not explicitly captured in the calculation of tier one and total capital ratios under the requirements set
out in the document “Capital adequacy framework (internal models based approach)” (BS2B) dated March 2008; and(c) the Bank determines an internal capital allocation for each identified and measured “other material risk”.
1B. That the Banking Group complies with all requirements set out in the Reserve Bank of New Zealand document “Capital
adequacy framework (internal models based approach)” (BS2B) dated March 2008.
1C. That the Bank complies with the following requirements:
The total capital ratio of the Bank is not less than 8%.
The tier one capital ratio of the Bank is not less than 4%.
For the purposes of this condition of registration:• the total capital ratio is defined as capital as a percentage of risk-weighted exposures where capital and risk-weighted
exposures are as defined in the Reserve Bank of New Zealand document “Capital adequacy framework (Basel I approach)”(BS2) dated March 2008; and• the tier one capital ratio is defined as tier one capital as a percentage of risk-weighted exposures where tier one capitaland risk-weighted exposures are as defined in the Reserve Bank of New Zealand document “Capital adequacy framework(Basel I approach)” (BS2) dated March 2008.

ANZ National Bank Limited

2.

That the Banking Group does not conduct any non-financial activities that in aggregate are material relative to its total
activities, where the term material is based on generally accepted accounting practice, as defined in the Financial ReportingAct 1993.

3.

That the Banking Group’s insurance business is not greater than 1% of its total consolidated assets. For the purposes ofthis condition:4.

(i) Insurance business means any business of the nature referred to in section 4 of the Insurance Companies (Ratings andInspections) Act 1994 (including those to which the Act is disapplied by sections 4(1)(a) and (b) and 9 of that Act), or any
business of the nature referred to in section 3(1) of the Life Insurance Act 1908;(ii) In measuring the size of the Banking Group’s insurance business:(a) where insurance business is conducted by any entity whose business predominantly consists of insurance business,the size of that insurance business shall be:• The total consolidated assets of the group headed by that entity;• Or if the entity is a subsidiary of another entity whose business predominantly consists of insurance business,
the total consolidated assets of the group headed by the latter entity;(b) otherwise, the size of each insurance business conducted by any entity within the Banking Group shall equal the
total liabilities relating to that insurance business, plus the equity retained by the entity to meet the solvency or
financial soundness needs of the insurance business;(c) the amounts measured in relation to parts a) and b) shall be summed and compared to the total consolidated
assets of the Banking Group. All amounts in parts a) and b) shall relate to on balance sheet items only, and shallbe determined in accordance with generally accepted accounting practice, as defined in the Financial ReportingAct 1993;(d) where products or assets of which an insurance business is comprised also contain a non-insurance component,
the whole of such products or assets shall be considered part of the insurance business.
That aggregate credit exposures (of a non-capital nature and net of any allowances for impairment) of the Banking Groupto all connected persons do not exceed the rating-contingent limit outlined in the following matrix:

1

Credit Rating1

Connected exposure limit(% of the Banking Group’s
Tier 1 capital)

AA/Aa2 and above

75

AA-/Aa3

70

A+/A1

60

A/A2

40

A-/A3

30

BBB+/Baa1 and below

15

This table uses the rating scales of Standard & Poor’s, Fitch Ratings and Moody’s Investors Service. (Fitch Ratings’ scale is identical to Standard & Poor’s.)

Within the rating-contingent limit, credit exposures (of a non-capital nature and net of any allowances for impairment) to
non-bank connected persons shall not exceed 15 percent of the Banking Group’s Tier One capital.
For the purposes of this condition of registration, compliance with the rating-contingent connected exposure limit isdetermined in accordance with the Reserve Bank of New Zealand document entitled ‘Connected Exposure Policy’ (BS8)
dated March 2008.
5.

That exposures to connected persons are not on more favourable terms (e.g. as relates to such matters as credit
assessment, tenor, interest rates, amortisation schedules and requirement for collateral) than corresponding exposures tonon-connected persons.

6.

That the board of the Bank contains at least two independent directors and that alternates for those directors, if any, arealso independent. In this context an independent director (or alternate) is a director (or alternate) who is not an employeeof the Bank, and who is not a director, trustee, or employee of any holding company (as that term is defined in section 5 of
the Companies Act 1993) of the Bank, or any other entity capable of controlling or significantly influencing the Bank.

7.

That the chairperson of the Bank’s board is not an employee of the Bank.

8. That the Bank’s constitution does not include any provision permitting a director, when exercising powers or performing
duties as a director, to act other than in what he or she believes is the best interests of the company (i.e. the Bank).
9.

That a substantial proportion of the Bank’s business is conducted in and from New Zealand.

10. That no appointment of any director, chief executive officer, or executive who reports or is accountable directly to thechief executive officer, shall be made in respect of the Bank unless:(i) The Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee, and(ii) The Reserve Bank has advised that it has no objection to that appointment.

30 – 31

Conditions of Registration (continued)

ANZ National Bank Limited

Conditions of Registration (continued)
11. That the Bank has legal and practical ability to control and execute any business, and any functions relating to any business,of the Bank that are carried on by a person other than the Bank, sufficient to achieve, under normal business conditions
and in the event of stress or failure of the Bank or of a service provider to the Bank, the following outcomes:(a) that the Bank’s clearing and settlement obligations due on a day can be met on that day;(b) that the Bank’s financial risk positions on a day can be identified on that day;(c) that the Bank’s financial risk positions can be monitored and managed on the day following any failure and on
subsequent days; and(d) that the Bank’s existing customers can be given access to payments facilities on the day following any failure and on
subsequent days.
For the purposes of this condition of registration, the term “legal and practical ability to control and execute” is explainedin the Reserve Bank of New Zealand document entitled ‘Outsourcing Policy’ (BS11) dated January 2006.
12. (a) That the business and affairs of the Bank are managed by, or under the direction and supervision of, the board of
the Bank.
(b) That the employment contract of the chief executive officer of the Bank or person in an equivalent position (together“CEO”) is with the Bank, and the terms and conditions of the CEO’s employment agreement are determined by, andany decision relating to the employment or termination of employment of the CEO are made by, the board of
the Bank.
(c) That all staff employed by the Bank shall have their remuneration determined by (or under the delegated authority of)
the board or the CEO of the Bank and be accountable (directly or indirectly) to the CEO of the Bank.
13. That the Banking Group complies with the following quantitative requirements for liquidity-risk management with effectfrom 1 April 2010:(a) the one-week mismatch ratio of the Banking Group is not less than zero percent at the end of each business day;(b) the one-month mismatch ratio of the Banking Group is not less than zero percent at the end of each business day;and(c) the one-year core funding ratio of the Banking Group is not less than 65 percent at the end of each business day.
For the purposes of this condition of registration, the ratios identified must be calculated in accordance with the Reserve
Bank of New Zealand documents entitled “Liquidity Policy” (BS13) dated March 2010 and “Liquidity Policy Annex: Liquid
Assets” (BS13A) dated March 2010.
14. That, with effect from 1 April 2010, the Registered Bank has an internal framework for liquidity risk management that is
adequate in the Registered Bank’s view for managing the Bank’s liquidity risk at a prudent level, and that, in particular:(a) is clearly documented and communicated to all those in the organisation with responsibility for managing liquidity
and liquidity risk;(b) identifies responsibility for approval, oversight and implementation of the framework and policies for liquidity risk
management;(c) identifies the principal methods that the Bank will use for measuring, monitoring and controlling liquidity risk; and(d) considers the material sources of stress that the Bank might face, and prepares the Bank to manage stress through acontingency funding plan.
For the purposes of these conditions of registration, the term ‘Banking Group’ means ANZ National Bank Limited’s financial
reporting group (as defined in section 2(1) of the Financial Reporting Act 1993).

ANZ National Bank Limited
32 – 33

Credit Rating Information
Credit Ratings applicable as at 13 August 2010
The Bank has three current credit ratings, which are applicable to its long-term senior unsecured obligations which are payable
in New Zealand in New Zealand dollars. The credit ratings are:Rating Agency

Current Credit Rating

Qualification

Standard & Poor’s

AA

Outlook Stable

Moody’s Investors Service

Aa2

Outlook Stable

Fitch Ratings

AA-

Outlook Positive

On 20 May 2010, Fitch changed the outlook on the Bank from Stable to Positive. During the two year period ended 30 June 2010
there were no other changes to the Bank’s credit ratings or qualifications.
Standard & Poor's

Moody's InvestorsService

Fitch
Ratings

Ability to repay principal and interest is extremely strong. This is thehighest investment category.

AAA

Aaa

AAA

Very strong ability to repay principal and interest.

AA

Aa

AA

Strong ability to repay principal and interest although somewhat
susceptible to adverse changes in economic, business or financial
conditions.

A

A

A

Adequate ability to repay principal and interest. More vulnerable toadverse changes.

BBB

Baa

BBB

Significant uncertainties exist which could affect the payment ofprincipal and interest on a timely basis.

BB

Ba

BB

Greater vulnerability and therefore greater likelihood of default.

B

B

BB

Likelihood of default now considered high. Timely repayment ofprincipal and interest is dependent on favourable financial conditions.

CCC

Caa

CCC

Highest risk of default.

CC to CCa to CCC to CD-

RD & DThe following grades display investment grade characteristics:

The following grades have predominantly speculative characteristics:

Obligations currently in default.

Credit ratings from Standard & Poor’s and Fitch Ratings may be modified by the addition of “+” or “-” to show the relative
standing within the ‘AA’ to ‘B’ categories. Moody’s Investors Service applies numerical modifiers 1, 2, and 3 to each of the ‘Aa’
to ‘Caa’ classifications, with 1 indicating the higher end and 3 the lower end of the rating category.

ANZ National Bank Limited

Directors’ Statement
As at the date on which this General Short Form Disclosure Statement is signed, after due enquiry, each Director believes that:(i) The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statement(Off-Quarter – New Zealand Incorporated Registered Banks) Order 2008;(ii) The Disclosure Statement is not false or misleading.
Over the nine months ended 30 June 2010, after due enquiry, each Director believes that:(i) ANZ National Bank Limited has complied with the Conditions of Registration;(ii) Credit exposures to connected persons were not contrary to the interests of the Banking Group;(iii) ANZ National Bank Limited had systems in place to monitor and control adequately the Banking Group’s material risks,
including credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operationalrisk and other business risks, and that those systems were being properly applied.
This General Short Form Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bankon 13 August 2010. On that date, the Directors of the Bank were:

Dr D T Brash

S C Elliott

J A Fagg

N M T Geary, CBEJ F Judge

P R Marriott

M R P Smith, OBE

Sir Dryden Spring

ANZ National Bank Limited

We have reviewed the interim financial statements on pages 5 to 29 prepared and disclosed in accordance with Clause 19 of
the Registered Bank Disclosure Statement (Off-Quarter – New Zealand Incorporated Registered Banks) Order 2008 (the ‘Order’)and the supplementary information prescribed in Schedules 2 to 8. The interim financial statements, and supplementary
information, provide information about the past financial performance and cash flows of ANZ National Bank Limited and its
subsidiary companies (the ‘Banking Group’) and their financial position as at 30 June 2010. This information is stated inaccordance with the accounting policies set out on page 9.

Directors’ responsibilities
The Directors of ANZ National Bank Limited are responsible for the preparation and presentation of interim financial statementsin accordance with Clause 19 of the Order which give a true and fair view of the financial position of the Banking Group as at
30 June 2010 and its financial performance and cash flows for the nine months ended on that date.
They are also responsible for the preparation of supplementary information which gives a fair view, in accordance with theOrder, of the matters to which it relates; and complies with Schedules 2 to 8 of the Order.

Reviewers’ responsibilities
We are responsible for reviewing the interim financial statements, including the supplementary information disclosed inaccordance with Schedules 3, 5 to 8, and Clause 13 of Schedule 2 of the Order presented to us by the Directors and reporting
our findings to you.
It is also our responsibility to express a review opinion on the supplementary information as required by Schedule 4B of theOrder in order to state whether, on the basis of the procedures described below, anything has come to our attention thatwould indicate that the information disclosed in accordance with Schedule 4B is not in all material respects prepared inaccordance with the Bank’s Conditions of Registration and with the Bank’s internal models for credit risk and operational risk
as accredited by the Reserve Bank of New Zealand and disclosed in accordance with Schedule 4B and for reporting our findings
to you.

Basis of review opinion
We have performed our review in accordance with the review engagement standard RS-1 Statement of Review Engagement
Standards issued by the New Zealand Institute of Chartered Accountants. A review is limited primarily to enquiries of Banking
Group personnel and analytical review procedures applied to the financial data, and thus provides less assurance than an
audit. We have not performed an audit and, accordingly, we do not express an audit opinion.
Our firm has also provided other services to the Banking Group in relation to other audit related services. Partners andemployees of our firm may also deal with the Banking Group on normal terms within the ordinary course of trading activitiesof the business of the Banking Group. There are, however, certain restrictions on borrowings which the partners and employees
of our firm can have with the Banking Group. These matters have not impaired our independence as auditors of the Banking
Group. The firm has no other relationship with, or interest in, the Banking Group.

Review Opinion
Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that:a.

the interim financial statements (excluding the supplementary information disclosed in Notes 15, 16, 17 and 20) do notpresent a true and fair view of the financial position of the Banking Group as at 30 June 2010 and its financial performanceand cash flows for the nine months ended on that date;b. the supplementary information disclosed in Notes 16, 17 and 20 prescribed by Schedules 3, 5 to 8 and Clause 13 of
Schedule 2 of the Order is not fairly stated in accordance with those Schedules; andc. the supplementary information relating to Capital Adequacy disclosed in Note 15 of the interim financial statements, as
required by Schedule 4B of the Order, is not in all material respects prepared in accordance with the Bank’s Conditions ofRegistration, with the Reserve Bank of New Zealand document Capital Adequacy Framework (Internal Models BasedApproach) (BS2B), and with the Banking Group’s internal models for credit risk and operational risk as accredited by the
Reserve Bank of New Zealand, and disclosed in accordance with Schedule 4B of the Order.
Our review was completed on 13 August 2010 and our review opinion is expressed as at that date.

Wellington

34 – 35

Independent Review Report to the Directors of
ANZ National Bank Limited

ANZ National Bank Limited anzacc1474 08/10

anz.co.nz