Australia and New Zealand Banking Group Limited– New Zealand Branch
General Short Form
Disclosure Statement
FOR THE NINE MONTHS ENDED 30 JUNE 2010 | NUMBER 7 | ISSUED AUGUST 2010

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED- NEW ZEALAND BRANCHGENERAL SHORT FORMDISCLOSURE STATEMENTFOR THE NINE MONTHSENDED 30 June 2010

CONTENTS

Page

General Disclosures

2-6

Income Statement

7

Statement of Comprehensive Income

7

Statement of Changes in Equity and Head Office AccountBalance Sheet

8
9Cash Flow Statement

10

Notes to the Financial Statements

11 - 27

Conditions of Registration

28 – 29

Credit Rating Information30

Directors’ and New Zealand Chief Executive Officer’s Statement
Independent Review Report

31
32

1

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURESThis General Short Form Disclosure Statement has been issued in accordance with the Registered Bank
Disclosure Statement (Off-Quarter - Overseas Incorporated Registered Banks) Order 2008 ("the Order").
In this Disclosure Statement unless the context otherwise requires:(a) "Overseas Banking Group" means the worldwide operations of Australia and New Zealand Banking
Group Limited including its controlled entities;(b) "Overseas Bank" or "Ultimate Parent Bank" means the worldwide operations of Australia and New
Zealand Banking Group Limited excluding its controlled entities;(c) "NZ Banking Group" means the aggregated NZ operations of Australia and New Zealand Banking Group
Limited, including those operations conducted through the New Zealand Branch and controlled entitiesof the Overseas Bank registered in New Zealand;(d) "NZ Branch" or "Registered Bank" means the New Zealand operations of Australia and New Zealand
Banking Group Limited, as conducted through the NZ Branch;(e) "Bank" means ANZ National Bank Limited;(f) "RBNZ" means the Reserve Bank of New Zealand;(g) “APRA” means the Australian Prudential Regulation Authority; and(h) Any term or expression which is defined in, or in the manner prescribed by, the Registered Bank
Disclosure Statement (Off-Quarter - Overseas Incorporated Registered Banks) Order 2008 shall havethe meaning given in or prescribed by that Order.
GENERAL MATTERS
The NZ Branch was registered as a bank on 5 January 2009. Its address for service is Level 6, 1 Victoria Street,
Wellington, New Zealand.
The address for service for the Overseas Bank is ANZ Centre Melbourne, Level 9, 833 Collins Street, Docklands,
Victoria 3008, Australia.
On 30 November 2009, the NZ 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.
NATURE OF BUSINESSThe NZ Banking Group provides a broad range of banking and financial products and services to retail, small
business, rural, commercial and institutional clients.
RANKING OF LOCAL CREDITORS IN LIQUIDATION
There are material legislative restrictions in Australia which subordinate the claims of a class of unsecured
creditors of the Registered Bank on the assets of the Overseas Bank to those of another class of unsecured
creditors of the Overseas Bank, in liquidation of the Overseas Bank.
The Banking Act 1959 of the Commonwealth of Australia (the "Banking Act") gives priority over Australianassets of the Overseas Bank to deposits/liabilities in Australia if the Overseas Bank is unable to meet its
obligations or suspends payment. Accordingly, deposits/liabilities in New Zealand (together with all other seniorunsecured creditors of the Overseas Bank) will rank after deposits/liabilities in Australia of the Overseas Bank in
relation to claims against Australian assets.
Specifically, pursuant to section 13A(3) of the Banking Act, if an Authorised Deposit-Taking Institution (definedin that Act to include a Bank like the Overseas Bank) (an "ADI") becomes unable to meet its obligations orsuspends payment, the assets of the ADI in Australia are to be available to meet the ADI's liabilities in thefollowing order:(a) first, the ADI's liabilities to APRA (if any), because of the rights APRA has against the ADI because APRA
has made, or is required to make, payments to depositors under the Financial Claims Scheme (defined
below);(b) second, the ADI's debts to APRA for costs incurred by APRA in administration of the Financial Claims
Scheme in respect of the ADI;(c) third, the ADI's liabilities (if any) in Australia in relation to protected accounts that account-holders keepwith the ADI;(d) fourth, the ADI’s debts (if any) to the Reserve Bank of Australia;(e) fifth, the ADI’s liabilities (if any) under an industry support contract that is certified by APRA; and(f) sixth, the ADI's other liabilities in the order of their priority (apart from section 13A(3)).
Under section 13A(1) of the Banking Act, in certain circumstances APRA may take control of an ADI’s businessor appoint an administrator (defined in the Banking Act) to take control of the ADI’s business. Section 16(1)and (2) of the Banking Act provide that, despite anything contained in any law relating to the winding up ofcompanies, but subject to section 13A(3) of the Banking Act, the debts of an ADI to APRA in respect of APRA's
costs (including costs in the nature of remuneration and expenses) of being in control of the ADI's business or of2

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES
having an administrator in control of the ADI's business have priority in a winding-up of the ADI over all otherunsecured debts.
Section 86 of the Reserve Bank Act provides that notwithstanding anything contained in any law relating to thewinding up of companies, but subject to section 13A(3) of the Banking Act, debts due to the Reserve Bank ofAustralia by any ADI shall, in a winding up, have priority over all other debts other than debts due to the
Commonwealth of Australia.
Section 13A(3) of the Banking Act affects all of the unsecured deposit liabilities of the NZ Branch which as at 30
June 2010 amounted to $nil (30/06/2009 $nil; 30/09/2009 $nil).
REQUIREMENT TO HOLD EXCESS ASSETS OVER DEPOSIT LIABILITIESSection 13A(4) of the Banking Act states that it is an offence for an ADI not to hold assets (other than goodwill)in Australia of a value that is equal to or greater than the total amount of its deposit liabilities in Australia,
unless APRA has authorised the ADI to hold assets of a lesser value. During the nine months ended 30 June
2010, the Overseas Bank has at all times held assets (other than goodwill and any assets or other amounts
prescribed by APRA) in Australia of not less than the value of the Overseas Bank's total deposit liabilities inAustralia.
Section 13E of the Banking Act states that APRA may give the Overseas Bank a direction that requires it toincrease its level of capital.
The requirements of these sections of the Act have the potential to impact on the management of the liquidity of
the NZ Banking Group.
GUARANTEESThe Overseas Bank has guarantees from the Commonwealth of Australia under:(a) in the case of deposits and certain other accounts up to A$1 million, a scheme (The "Financial Claims
Scheme") pursuant to the Financial System Legislation Amendment (Financial Claims Scheme and Other
Measures) Act 2008 of the Commonwealth of Australia (The "Financial Claims Scheme Act");(b) in the case of wholesale funding, by a Deed of Guarantee executed by the Treasurer (and related
scheme rules) (the "Wholesale Funding Guarantee").
The Financial Claims Scheme applies to the Registered Bank, as it is a foreign branch of an eligible Australian
ADI. The Wholesale Funding Guarantee may also apply as described below.
Financial Claims Scheme
Under the Financial Claims Scheme if:•
APRA has applied for an ADI to be wound up; and•the responsible Minister makes a declaration that the Financial Claims Scheme applies to that particular
ADI
then each account holder of a Protected Account (defined below) with that ADI is entitled to be paid by APRA an
amount equal to the balance of the protected account plus accrued interest which has been accrued to theaccount (subject to various adjustments and preconditions described in the Financial Claims Scheme Act). Oncethe responsible Minister has made a declaration, there are no other material conditions to payment other thanthe ADI being unable to meet its obligations or suspending payment. The deposit must be for an amount lessthan A$1 million. Deposits for a greater amount are covered by the Wholesale Funding Guarantee (to theextent that is applicable as described below).
A protected account includes accounts or covered financial products (defined below) kept by an account holder
with an ADI and either:•requiring the ADI to pay the account holder, on demand by the account holder or at a time agreed bythem, the net credit balance of the account at the time of the demand or the agreed time; and•an account prescribed by regulations.
A covered financial product is a financial product declared by the Australian Treasurer to be a covered financial
product and includes accounts such as saving, call, current, cheque, debit card, transaction and mortgage offset
accounts.
Deposit holders do not have to be Australian residents to obtain the benefit of the Financial Claims Scheme andit applies to deposits denominated in any currency.
From 12 October 2011 the Financial Claims Scheme is to apply to Australian dollar deposits only, and isgenerally subject to review at that time.
3

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)
Wholesale Funding Guarantee
The Wholesale Funding Guarantee is a deed governed by the laws of the State of New South Wales and has
been executed by the Australian Treasurer on behalf of the Australian Government. Australian institutions
which are ADIs under the Banking Act, which includes the Overseas Bank, were entitled to apply for the
Wholesale Funding Guarantee prior to 25 March 2010 to apply to deposit accounts over A$1 million and certain
funding liabilities.
Foreign banks authorised to carry on banking business in Australia were also able to apply to have certain
deposits and funding liabilities held by Australian residents guaranteed by the Australian Government. The
Reserve Bank of Australia administers the Wholesale Funding Guarantee.
On 7 February 2010 the Australian Government announced the withdrawal of the Wholesale Funding Guarantee
on 31 March 2010. The final date for ADIs to apply for access to the Wholesale Funding Guarantee was 24
March 2010. Existing guaranteed liabilities of ADIs, including those of the Overseas Bank, will continue to becovered by the Wholesale Funding Guarantee to maturity for wholesale funding and term deposits and to
October 2015 for at call deposits. The Wholesale Funding Guarantee continues to operate for existingguaranteed liabilities as follows.
Under the Wholesale Funding Guarantee, the Commonwealth of Australia irrevocably guarantees the payment ofliabilities covered by an eligibility certificate issued by the Australian Government in response to an application
made by the ADI, and irrevocably undertakes that whenever the ADI does not pay a liability on the date on
which it becomes due or payable, it shall, upon a claim by a person to whom a guaranteed liability is owed, andfollowing the expiry of any applicable grace period, pay the guaranteed liability in accordance with the scheme
rules. A claim must be made in the form provided in the scheme rules. In the case of a liability of an Australian
ADI, such as the Overseas Bank, the claimant need not be a resident of Australia.
In order to have the Wholesale Funding Guarantee apply, an ADI was required to apply to the Reserve Bank ofAustralia for an eligibility certificate. Fees were also paid, calculated by reference to the term and amount of
the liabilities guaranteed and the credit rating of the ADI the fee which applied to the Overseas Bank based on
its rating by Standard and Poor’s of AA, was 70 basis points per annum applied in respect of its guaranteed
liabilities in accordance with the Wholesale Funding Guarantee). The fees are levied on a monthly or quarterly
basis depending on the liability. An ADI was able to apply for an eligibility certificate in respect of a program
under which it issues debt instruments from time to time or on a series-by-series basis.
A person to whom a guaranteed liability is owed may rely on the eligibility certificate issued by the AustralianGovernment as conclusive evidence that the liability satisfies the criteria for eligibility to be guaranteed under
the Wholesale Funding Guarantee.
An application must set out details of the liabilities to be guaranteed and be accompanied by an executedcounter indemnity in favour of the Australian Government, external legal opinions in a prescribed form, an
executed fee letter and a letter of prudential compliance. Further information with respect to the application
procedure
and
fees
can
be
found
at
the
AustralianGovernment
Guarantee
websiteatwww.guaranteescheme.gov.au.
If the ADI is an Australian ADI (such as the Overseas Bank) or an Australian subsidiary of a bank incorporated
overseas, it was able to apply for the guarantee to apply to:•
Deposit liabilities for amounts over A$1 million: The deposit could be at call or with maturity of up
to 60 months in excess of $1 million per customer per ADI, be in any currency and pre-date theWholesale Funding Guarantee. There were no restrictions on the types of depositors;•
Deposits held in overseas branches: Deposits held in overseas branches of Australian-owned ADIs
could be covered by the Wholesale Funding Guarantee. There were no restrictions on the types ofdepositors;•
Short Term Wholesale Funding Liabilities: The liability (which could be in any currency) was
required to be a senior and unsecured debt instrument with a maturity not exceeding 15 months. In
addition, the instrument must be "not complex" and be either a bank bill, a certificate of deposit ortransferable deposit, a debenture or commercial paper; and•Term Wholesale Funding Liabilities: The liability (which may be in any currency) was required to bea senior and unsecured debt instrument with a maturity not exceeding 60 months but greater than 15
months. The instrument required to be "not complex" and be either a bond, a note or a debenture.
In the case of all instruments, they would be issued in bearer, registered or dematerialised form. An instrument
could not be granted an eligibility certificate unless it was "not complex". The Government has published a list of
the features that were likely to be regarded by the Government as "complex".

4

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)
Wholesale Funding Guarantee (Continued)
If the Australian Government does not perform its obligations under the Wholesale Funding Guarantee, abeneficiary of the guarantee could sue the Commonwealth of Australia under the Judiciary Act 1903 of Australia.
In such a suit, the rights of parties are similar to these in a suit between subjects of the Commonwealth ofAustralia. Jurisdiction to hear claims against the Commonwealth of Australia in contract is vested in certain
Australian courts under the Judiciary Act 1903 of Australia. If a judgment is obtained against the AustralianGovernment, no execution or attachment can be issued against the property or revenues of the Commonwealthof Australia. However, if any judgment is given against the Australian Government, the Minister for Finance isobliged to satisfy the judgment out of money legally available, on receipt of a certificate of the judgment issued
by an officer of a court in which such judgment has been obtained.
In order to render money legally available, specific appropriation by legislation passed by the Parliament of theCommonwealth of Australia would be necessary before any payment is made, unless the amount involved issuch that it could be paid out of funds available under an existing standing appropriation. The AustralianGovernment has enacted legislation which appropriates funds from consolidated revenue for the purposes ofpaying claims under the Wholesale Funding Guarantee. The Wholesale Funding Guarantee does not contain any
submission to the courts of a foreign jurisdiction or any waiver of any immunity which might be available to the
Commonwealth of Australia under the law of any foreign jurisdiction.
The Australian Government shall not be liable to perform its obligations under the Wholesale Funding Guarantee
in respect of liabilities which have been varied, amended, waived, released, novated, supplemented, extended
or restated in any material respect without the written consent of the Australian Government.
Further information on the Wholesale Funding Guarantee including the Wholesale Deed of Guarantee is available
in the most recent Supplemental Disclosure Statement.
Copies of eligibility certificates issued by the Reserve Bank of Australia under the Wholesale Funding Guarantee
are available at www.guaranteescheme.gov.au.
The name of the Guarantor and address for service is: The Scheme Administrator, Australian Government
Guarantee Scheme for Large Deposits and Wholesale Funding, c/- The Secretary, Reserve Bank of Australia, 65
Martin Place, Sydney, New South Wales 2001, Australia.
Further details of the arrangements, together with relevant legislation, regulations and other documents settingout the terms and conditions of the current guarantee arrangements, are available at the Treasury website
www.treasury.gov.au, www.apra.gov.au and www.guaranteescheme.gov.au.
The most recent audited financial statements of the Commonwealth of Australia can be obtained at theTreasury's Budget website www.budget.gov.au. As at the date of signing of the General Disclosure Statement,
the following ratings were assigned to the Commonwealth of Australia's long term, AUD denomination debt: AAA
Outlook Stable (Standard & Poor's), Aaa Outlook Stable (Moody's) and AAA Outlook Stable (Fitch). These
ratings have remained unchanged in the two preceding years. Refer to 'Credit Rating Information' for a fulldescription of credit rating scales.
New Zealand Guarantee Arrangements
The Crown guarantees retail deposits and wholesale funding of participating New Zealand financial institutions
under the New Zealand Deposit Guarantee Scheme and New Zealand Wholesale Funding Guarantee Facility
respectively. The Registered Bank does not have a guarantee under either Scheme.

5

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHGENERAL DISCLOSURES (CONTINUED)PENDING PROCEEDINGS OR ARBITRATIONOther than disclosed in the General Short Form Disclosure Statement, there are no pending proceedings orarbitration concerning any member of the NZ Banking Group that may have a material adverse effect on the NZ
Banking Group as at the date of the General Short Form Disclosure Statement.
Further details on pending proceedings or arbitration are set out in the Credit Related Commitments andContingent Liabilities note.
OTHER MATERIAL MATTERS
There are no matters relating to the business or affairs of the NZ Branch and the NZ Banking Group which are
not contained elsewhere in the General Short Form Disclosure Statement and which would, if disclosed,materially adversely affect the decision of a person to subscribe for debt securities of which the NZ Branch or
any member of the NZ Banking Group is the issuer.
SUPPLEMENTAL DISCLOSURE STATEMENT
A copy of the most recent Supplemental Disclosure Statement for the nine months ended 30 June 2010 can beobtained immediately where request is made within normal banking hours at Level 6, 1 Victoria Street,
Wellington, New Zealand. It is also available at no charge:(a) on the NZ Banking Group's website at www.anz.com;(b) immediately if request is made at the NZ Banking Group's head office; and(c) 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 NZ Banking Group's most recent Supplemental Disclosure Statement contains a copy of the 31 March 2010
Interim Financial Report for the Overseas Banking Group and a copy of the Deed of Guarantee for the Guarantee
Scheme.
FINANCIAL STATEMENTS OF THE OVERSEAS BANK AND OVERSEAS BANKING GROUP
Copies of the most recent publicly available financial statements of the Overseas Bank and Overseas Banking
Group, will be provided immediately, free of charge, to any person requesting a copy where the request is madeat Level 6, 1 Victoria Street, Wellington, New Zealand. The most recent publicly available financial statements
for the Overseas Bank and Overseas Banking Group can also be accessed at the internet address www.anz.com.
DIRECTORATE
Since the authorisation date of the previous General Disclosure Statement on 26 May 2010, there have been nochanges to the Directors of Australia and New Zealand Banking Group Limited.

6

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHINCOME STATEMENTFOR THE NINE MONTHS ENDED 30 JUNE 2010

STATEMENT OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED 30 JUNE 2010

The notes on pages 11 to 27 form part of and should be read in conjunction with these financial statements.

7

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHSTATEMENT OF CHANGES IN EQUITY AND HEAD OFFICE ACCOUNTFOR THE NINE MONTHS ENDED 30 JUNE 2010

The notes on pages 11 to 27 form part of and should be read in conjunction with these financial statements.

8

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHBALANCE SHEETAS AT 30 June 2010

The notes on pages 11 to 27 form part of and should be read in conjunction with these financial statements.

9

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCASH FLOW STATEMENTFOR THE NINE MONTHS ENDED 30 JUNE 2010
$ millions

Unaudited
9 months to
30/06/2010

Unaudited
9 months to
30/06/2009

AuditedYear to30/09/2009

4,577
2
83
612
(2,910)(1,059)
(561)

5,933
1
49
619
(4,148)(1,032)
(335)

7,368
3
97
848
(5,137)(1,483)
(338)

744

1,087

1,358

2,184
(3,011)
1,342
(65)
14
730
57
(1,809)
(715)
(154)

(1,835)(293)(1,477)
(651)
5
(85)
6,298
(4,760)(53)(246)(1,505)(3,494)(1,388)
43
(165)
9,630
(3,965)
(167)

19

(683)

(1,764)101

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of shares in associates and jointly controlled entities
Proceeds from sale of premises and equipment
Proceeds from sale of software
Purchase of shares in associates and jointly controlled entities
Purchase of shares in subsidiary entities
23
Purchase of intangible assets
Purchase of premises and equipment

1
1
(247)
(38)
(61)

36
(25)
(19)
(61)

33
3
(92)
(21)
(95)

Net cash flows used in investing activities

Note
CASH FLOWS FROM OPERATING ACTIVITIESInterest received
Dividends received
Net cash from funds management & insurance
Fees and other income received
Interest paid
Operating expenses paid
Income taxes paid
Cash flows from operating profits before changes in operating
assets and liabilities
Net changes in operating assets and liabilities:
Change in due from other financial institutions - term
Change in trading securities
Change in derivative financial instruments
Change in available-for-sale assets
Change in insurance investment assets
Change in loans and advances
Change in other assets
Change in due to other financial institutions
Change in deposits and other borrowings
Change in payables and other liabilities
Net cash flows from / (used in) operating activities

(344)

(69)

(172)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bonds and notes
Redemptions of bonds and notes
Redemptions of loan capital
Proceeds from issue of redeemable preference shares
Dividends paid
Cash contributed from head office

3,098(3,691)
(200)
(441)
-

2,113
(4,618)1,000(1,000)11

5,012(7,751)(225)
1,000(1,000)11

Net cash flows used in financing activities(1,234)(2,494)(2,953)

Net cash flows from / (used in) operating activities
Net cash flows used in investing activities
Net cash flows used in financing activities

(683)
(344)
(1,234)(1,764)(69)(2,494)101(172)(2,953)Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the period(2,261)
4,766(4,327)
7,790(3,024)
7,790

Cash and cash equivalents at end of the period

2,505

3,463

4,766

The notes on pages 11 to 27 form part of and should be read in conjunction with these financial statements

10

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS
1.

ACCOUNTING POLICIES(i) Basis of preparation

These financial statements have been prepared in accordance with NZ IAS 34 Interim Financial Reporting
and the Registered Bank Disclosure Statement (Off-Quarter - Overseas Incorporated Registered Banks)
Order 2008. These financial statements should be read in conjunction with the NZ Banking Group’s 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 stated at their fair value:• derivative financial instruments including in the case 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 24 November 2009.
The following standards have been initially applied by the NZ 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 and requires 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 with the acquisition of NBNZ Holdings Limited Group is allocated to
the reportable segments in accordance with NZ IFRS 8. The NZ Banking Group’s reportable operating
segments did not change on adoption of NZ IFRS 8.
In accordance with NZ IAS 1 a “statement of comprehensive 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 a material impact on the financial results or positionof the NZ Banking Group.

(iv) Presentation currency and rounding

The amounts contained in the financial statements are presented in millions of New Zealand dollars, unlessotherwise stated.

(v) Basis of aggregation

These financial statements aggregate the financial statements of the New Zealand geographic activities ofAustralia and New Zealand Banking Group Limited as conducted through the NZ Branch and its controlled
entities in New Zealand, the NZ Banking Group.

(vi) Comparatives

To ensure consistency with the current period, comparative figures have been reclassified whereappropriate.

2. RISK MANAGEMENT POLICIESThere has been no material change in the NZ Banking Group’s policies for managing risk, or material exposures
to new types of risk since the authorisation date of the previous Disclosure Statement on 26 May 2010.

11

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3. INCOME TAX EXPENSE

Change in tax rates
In May 2010 legislation was passed to reduce the New Zealand corporate tax rate from 30% to 28% and to
remove the ability 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 ofdeferred 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 financetransactions as part of 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 Groupplc, was met from existing tax provisions.

4. LIQUID ASSETS

5. DUE FROM OTHER FINANCIAL INSTITUTIONS

12

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6. TRADING SECURITIES

7. AVAILABLE-FOR-SALE ASSETS

8. NET LOANS AND ADVANCES

1.

As at 30 June 2010 the NZ 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).

13

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES 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

Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

387
423
(12)
(241)
(44)

59
205
(1)
(84)
(97)

740
919
(74)
(308)
(48)

1,186
1,547
(87)
(633)
(189)

Individually impaired asset balance at end of the period

513

82

1,229

1,824

7

-

-

7

520

82

1,229

1,831

Balance at beginning of the period
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

83
373
(18)
(137)
(16)

30
188
(20)
(26)
(108)

214
470
(18)
(98)
(45)

327
1,031
(56)
(261)
(169)

Individually impaired asset balance at end of the period

285

64

523

872

Restructured items and other individually impaired assets

1

-

-

1

286

64

523

873

Balance at beginning of the year
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

83
586
(22)
(232)
(28)

30
243
(20)
(45)
(149)

214
882
(25)
(230)
(101)

327
1,711
(67)
(507)
(278)

Individually impaired asset balance at end of the year

387

59

740

1,186

Unaudited 30/06/2010

Restructured items and other individually impaired assets
Total impaired assets
Unaudited 30/06/2009

Total impaired assets
Audited 30/09/2009

Restructured items and other individually impaired assets
Total impaired assets

-

2

-

2

387

61

740

1,188

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 aconcession that would not otherwise have been available, due to the counterparty’s difficulty in complying withthe original terms, and where the yield on the asset following restructuring is still above the NZ Banking Group’s
cost of funds. An asset is classified as an other individually impaired asset if, following the restructure, the yieldon the asset is below the NZ 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 NZ Banking
Group as a result of enforcing security, other than any buildings occupied by the NZ Banking Group. The NZ
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, andwhich 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 isin any form of voluntary or involuntary administration, including receivership, liquidation, bankruptcy or
statutory management.

14

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9. IMPAIRED ASSETS, PAST DUE ASSETS AND OTHER ASSETS UNDER ADMINISTRATION(CONTINUED)

1.

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.

15

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10. PROVISION FOR CREDIT IMPAIRMENT$ millions

Retailmortgages

Other retail
exposures

Corporate
exposures

Total

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

127
(6)

159
(8)

518
64

804
50

Balance at end of the period

121

151

582

854

Individual provision (individually impaired assets)
Balance at beginning of the period
Charge to income statement
Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

156
120
1
(44)
(12)

40
92
12
(97)
(2)

281
146
2
(48)
(18)

477
358
15
(189)
(32)

Balance at end of the period

221

45

363

629

Total provision for credit impairment

342

196

945

1,483

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

81
22

164
(14)

289
92

534
100

Balance at end of the period

103

150

381

634

Individual provision (individually impaired assets)
Balance at beginning of the period
Charge to income statement
Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

28
100
1
(16)
-

10
116
13
(108)
-

94
216
(45)
(5)

132
432
14
(169)
(5)

Balance at end of the period

113

31

260

404

Total provision for credit impairment

216

181

641

1,038

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

81
46

164
(5)

289
229

534
270

Balance at end of the year

127

159

518

804

Individual provision (individually impaired assets)
Balance at beginning of the year
Charge to income statement
Recoveries of amounts previously written off
Bad debts written off
Discount unwind1

28
155
1
(28)
-

10
161
18
(149)
-

94
297
1
(101)
(10)

132
613
20
(278)
(10)

Balance at end of the year

156

40

281

477

Total provision for credit impairment

283

199

799

1,281

Unaudited 30/06/2010

Unaudited 30/06/2009

Audited 30/09/2009

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 toits present value using the original effective interest rate for the asset. This discount unwinds over the period the asset is held as interest income.

16

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10. PROVISION FOR CREDIT IMPAIRMENT (CONTINUED)

11. DUE TO OTHER FINANCIAL INSTITUTIONS

17

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. DEPOSITS AND OTHER BORROWINGS

13. BONDS AND NOTES

14. LOAN CAPITAL

18

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
15. CAPITAL ADEQUACY

Overseas Banking Group Basel II capital adequacy ratio (unaudited)

The Overseas Banking Group has accreditation from APRA to apply the Advanced Internal Ratings Basedmethodology for credit risk weighted assets and the Advanced Measurement Approach for operational risk
weighted asset equivalent, under Basel II rules. The Overseas Banking Group met the requirements imposed by
APRA as at 30 June 2010.
Further details of the Overseas Banking Group's capital adequacy requirements and credit risk management
processes can be found in its 2009 Annual Report and report for the half year ended 31 March 2010. This report
can be accessed at the following website address: www.anz.com.
Risk weighted credit risk exposures
Risk weighted exposures for the NZ Banking Group and NZ Branch have been derived in accordance with the
RBNZ document entitled 'Capital Adequacy Framework (Basel I Approach)' (BS2) dated March 2008.
Total risk weighted exposures of the NZ Banking Group as at 30 June 2010 (unaudited) were:

On-balance sheet exposures

Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential mortgages
Other
Non risk weighted assets

Principal
amountRiskweightRiskweighted
exposure

$m
3,546
3,529
4,621
806
53,64544,468
11,744

0%
10%
20%
20%
50%
100%
n/a

$m
353
924
161
26,823
44,468-122,359

Direct credit substitutes
Commitments with certain drawdown
Transaction related contingent items
Short term, self liquidating trade related contingencies
Other commitments to provide financial services whichhave an original maturity of 1 year or more
Other commitments with an original maturity of less than
1 year or which can be unconditionally cancelled at any time
Market related contracts 1- Foreign exchange- Interest rate
- Other

1.

Averagerisk
weight

100%
100%
50%
20%

Creditequivalentamount
$m
1,719
582
439
19

41%
59%
79%
98%

Risk
weighted
exposure
$m
704
346
347
19

3,961

50%

1,981

100%

1,981

17,3660%-Principal
amount
$m
1,719
582
878
97

Off-balance sheet exposures

Creditconversion
factor140,956
489,448
74

6,382
8,451
11

655,081

19,584The credit equivalent amounts for market related contracts are calculated using the current exposure method.

19

72,729

21%
23%
73%

1,348
1,979
8
6,732

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
15. CAPITAL ADEQUACY (CONTINUED)
Total risk weighted exposures of the NZ Branch as at 30 June 2010 (unaudited) were:Principal
amount
$m
245
9,627
36
35

On-balance sheet exposures
Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential mortgages
Other
Non risk weighted assets

Risk
weight
0%
10%
20%
20%
50%
100%
n/a

9,943

Direct credit substitutes
Commitments with certain drawdown
Transaction related contingent items
Short term, self liquidating trade related contingencies
Other commitments to provide financial services whichhave an original maturity of 1 year or more
Other commitments with an original maturity of less than
1 year or which can be unconditionally cancelled at any time
Market related contracts 1- Foreign exchange- Interest rate
- Other

1.

4,899
Averagerisk
weight

100%
100%
50%
20%

Creditequivalentamount
$m
-

n/a
n/a
n/a
n/a

Risk
weighted
exposure
$m
-

41

50%

21

100%

21

-

0%

-

n/a

-

9,558
16,240
-

56
94
-

20%
20%
n/a

11
19
-

25,839171

Principal
amount$m-

Off-balance sheet exposures

Risk
weighted
exposure
$m
49
4,814
36
-

Creditconversion
factor51

The credit equivalent amounts for market related contracts are calculated using the current exposure method.

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 for all categories of exposure may not have occurred at
the same time.
The peak end-of-day market risk exposures for the quarter are measured as a percentage of the Overseas
Banking Group’s most recently publicly disclosed equity as at 31 March 2010 (30/06/2009: 31 March 2009;
30/09/2009: 30 September 2009) and are calculated separately for each category of exposure.

$ millions

Implied risk weighted
exposure

Aggregate capital charge

As a percentage of theOverseas Banking Group's
equity

As at

Peak

As at

Peak

As at

Peak

3,850
59
79
3,988

4,486
89
96

308
5
6
319

359
7
8

0.7%
0.0%
0.0%

0.9%
0.0%
0.0%

3,714
18
81
3,813

3,714
140
91

297
1
6
304

297
11
7

0.9%
0.0%
0.0%

0.9%
0.0%
0.0%

3,990
5
69
4,064

4,321
301
82

320
6
326

346
24
7

0.8%
0.0%
0.0%

0.9%
0.1%
0.0%

Unaudited 30/06/2010
Interest rate risk
Foreign currency risk
Equity risk
Unaudited 30/06/2009
Interest rate risk
Foreign currency risk
Equity risk
Audited 30/09/2009
Interest rate risk
Foreign currency risk
Equity risk

20

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
15. CAPITAL ADEQUACY (CONTINUED)
Retail mortgages by loan-to-valuation (“LVR”) ratio
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided
by the Bank’s valuation of the security property at origination of the exposure. The exposure amount used to
calculate LVR excludes commitments to lend.
Retail mortgages by LVR ratio for the NZ Banking Group as at 30 June 2010 (unaudited):
ExposureAmount$m
LVR range
0% - 80%
80% - 90%
Over 90%

43,1686,187
5,129
54,484

16. CONCENTRATIONS OF CREDIT RISKThe NZ Banking Group has no credit exposures, on the basis of limits, to individual counterparties or groups ofclosely related counterparties (whether bank or non-bank exposures) which equal or exceed 10% of theOverseas Banking Group's equity as at 30 June 2010, 30 June 2009 or 30 September 2009, or in respect ofpeak end-of-day aggregate credit exposures for the nine months ended 30 June 2010. The peak end-of-day
exposures have been calculated using the Overseas Banking Group equity as at 31 March 2010 (30/06/2009: 31
March 2009; 30/09/2009: 30 September 2009). These calculations exclude credit exposures to the central
government of any country with a long term credit rating of A- or A3 or above, or its equivalent.

17. INTEREST EARNING AND DISCOUNT BEARING ASSETS AND LIABILITIES21AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
18. SEGMENTAL ANALYSIS

For segment reporting purposes, the NZ Banking Group is organised into three major business segments Retail, Commercial and Institutional. 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 been adjusted 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 and products. Small business banking services are offered to enterprises with annual
revenues of less than $5 million. Included in this segment is Private Banking, which offers a fully inclusivebanking and investment service to high net worth individuals. This segment also includes ING NZ and otherprofit centres supporting the Retail Banking segment.
Commercial
This segment provides services to Rural, Commercial and UDC customers. A full range of banking products andservices are provided to Rural customers. Commercial customers consist of primarily privately owned medium tolarge businesses with annual revenues of $2 million and greater. The NZ Banking Group's relationship withthese 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 of plant, 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 NZ 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 customertransactions.
Other
Includes Treasury and back office support functions, none of which constitutes a separately reportable segment.
BUSINESS SEGMENT ANALYSIS1,2

1.
2.
3.
4.

Results are equity standardised.
Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.
Includes a loss of $67 million (30/09/2009 nil; 31/12/2008 nil) on acquisition of ING NZ and a charge of $nil (30/09/2009 $211 million; 31/12/2008 $161 million)
in relation to ING NZ funds.
The Institutional and Other segments have negative external revenues as these segments incur funding costs on behalf of the NZ Banking Group, and arereimbursed internally.

22

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES 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

Profit after income tax

620

478

194

Non-cash items:
Depreciation and amortisation
Provision for credit impairment
Deferred fee revenue and expenses
Share-based payments expense
Amortisation of capitalised brokerage/ mortgage origination fees

48
408
(6)
15
34

35
532
4
14
40

50
883
(8)
18
54

(1,442)
11
(91)
(2)
58
(51)
22
(33)
(8)
(308)

(2,851)
115
(268)
(2)
43
180
77
(134)

(1,346)
138
(259)
1
41
100
76
183

(37)
4
67
8

(10)
(17)

(11)
(13)

(683)

(1,764)

101

Reconciliation of profit after income tax to net cash flows
provided by / (used in) operating activities

Deferrals or accruals of past or future operating
cash receipts or payments:
Change in net operating assets and liabilities
Change in interest receivable
Decrease in interest payable
Change in accrued income
Change in accrued expenses
Change in provisions
Amortisation of premiums and discounts
Change in insurance policy assets
Change in insurance investment assets
Change in net income tax assets and liabilities
Items classified as investing/financing:
Share of profit of equity accounted associates andjointly controlled entities
Impairment of associates
Remeasuring existing equity interests to fair value
Loss / (gain) on disposal of premises and equipment and intangibles
Net cash flows from operating activities
Reconciliation of core liquidity portfolio to cash and cash equivalents

The definition of cash and cash equivalents is narrower than the NZ 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

1,427
301
876
3,311
1,454
2,957

1,445
275
4,459
1,225
622
1,625

2,207
1,075
2,736
1,102
1,435
2,522

10,326

9,651

11,077

480
247

632
324

556
550

Non-cash items included within liquidity portfolio
Trading securities
Available-for-sale assets
Due from other financial institutions - greater than 90 days

(6,606)(1,454)(488)(2,525)(622)(3,997)(3,624)(1,435)(2,358)

Total cash and cash equivalents

2,505

3,463

4,766

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

1,907
598

2,077
1,386

2,763
2,003

Total cash and cash equivalents

2,505

3,463

4,766

Cash and balances with central banks
Securities purchased under agreement to resell
Certificates of deposit
Government and local body stock and bonds
Available-for-sale assets
Other bank bonds
Total liquidity portfolio
Reconciliation to cash and cash equivalents:
Other cash items not included within liquidity portfolio:
Liquid assets not with central banks
Due from other financial institutions - less than 90 days

1.

Assets held for managing liquidity risk includes short term cash held with the RBNZ or other banks, government securities and other securities that are readily
acceptable in repurchase agreements with the RBNZ and other New Zealand banks and securities issued by offshore Supranational and highly rated banks.

23

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
20. SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES AND THE MARKETINGAND DISTRIBUTION OF INSURANCE PRODUCTS

Securitisation
In October 2008, the NZ 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 withresidential mortgages with a carrying value of $5,985 million (30/06/2009 $6,092 million; 30/09/2009 $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 NZ Banking Group’s financial statements do not change asa result of establishing these facilities.
Funds management
Certain entities in the NZ Banking Group act as trustee and/or manager for a number of unit trusts andinvestment 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 NZ Banking Groupis 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 NZ Banking Group, they are not included in thesefinancial statements. The NZ Banking Group derives fee and commission income from the sale and managementof investment funds and superannuation bonds, unit trusts and the provision of private banking services andinvestment advisory services to a number of clients. The NZ Banking Group derives commission income fromthe sale of third party funds management products.
Custodial services
The NZ Banking Group provides custodial services to customers in respect of assets that are beneficially ownedby those customers.
Insurance business
The NZ Banking Group conducts insurance business through subsidiaries of ING NZ – the assets, liabilities andoperations of which are fully consolidated into the NZ Banking Group since its acquisition. Previously the NZ
Banking Group did not conduct any insurance business directly, although it held a 49% ownership share in ING
NZ. The NZ 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 NZ 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 NZ Banking Group.
Provision of financial services
Financial services provided by the NZ Banking Group which are involved in trust, custodial, funds management
and other 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, areprovided on arm’s length terms and conditions and at fair value. Any assets purchased from such entities havebeen purchased on an arm’s length basis and at fair value.
The NZ Banking Group has not provided any funding, except standard lending facilities provided in the normal
course of businesses on arms 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 memberof the NZ Banking Group (30/06/2009 $nil; 30/09/2009 $nil).

24

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
21. NOTIONAL VALUE OF DERIVATIVES

22. CREDIT RELATED COMMITMENTS AND CONTINGENT LIABILITIESThe NZ Banking Group guarantees the performance of customers by issuing standby letters of credit andguarantees to third parties, including the Ultimate Parent Bank. The risk involved is essentially the same as thecredit risk involved in extending loan facilities to customers, therefore these transactions are subjected to thesame credit origination, portfolio management and collateral requirements for customers applying for loans. As
the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash
requirements.
Commerce Commission
The NZ Banking Group is aware that the Commerce Commission is looking at credit contract fees under theCredit Contracts and Consumer Finance Act 2003 ("CCCFA"). In its 2010-2013 Statement of Intent theCommission 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 NZ Banking Group 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 fees cannot be determined with any certainty.
The Commission has concluded its investigation into early repayment charges on fixed rate mortgages andcredit card late payment fees, with no action being taken against the NZ Banking Group.

25

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
22. CREDIT RELATED COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)ING NZ Funds
The Bank markets and distributes a range of wealth management products in New Zealand which are
manufactured and managed 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 theliquidity and credit markets. Units in the Funds were sold 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 theFunds. 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 and promotion of the Funds.
As part of the settlement with the Commerce Commission, $45 million will be paid to eligible investors in theFunds, and the NZ Banking Group will pay the Commerce Commission $1 million towards their investigation
costs.
As part of the settlement with the Securities Commission, the NZ Banking Group has undertaken to engage anexternal 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 and offering investment products to the public and to subsequently
implement any recommendations of that review. The NZ Banking Group 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 NZ Banking Group will depend on the final value of units in the Funds, any recoveries
under insurance, the assessment and outcome of customer complaints and the results of any litigation that may
be brought in connection with the Funds or their sale. The NZ Banking Group considers it has adequately
provided for these matters.
Other contingent liabilities
The NZ Banking Group has other contingent liabilities in respect of actual and potential claims and proceedings.
An assessment of the NZ Banking Group’s likely loss in respect of these matters has been made on a case-bycase basis and provision made where appropriate. As at 30 June 2010, there were no other contingent assets or
liabilities required to be disclosed (30/06/2009 nil; 30/09/2009 nil).

26

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
23. BUSINESS COMBINATIONS

On 30 November 2009, the NZ Banking Group purchased ING Groep’s 51% interest in ING NZ, which was theholding company for the ANZ-ING wealth management and life insurance joint venture in New Zealand. The
transaction was undertaken to strengthen the NZ Banking Group’s position in wealth management and moreclosely integrate its retail banking and wealth businesses. The acquisition took the NZ Banking Group’s
ownership interest in ING NZ to 100%.
As part of the transaction the NZ Banking Group also purchased ING Groep’s 51% interest in the ING Diversified
Yield Fund and the ING Regular Income Fund (together, "the Funds"), taking its ownership interest to over 99%
of the Funds.

1.
2.

3.
4.

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
the contractual cash flows not expected to be collected on these receivables is $1 million.
Includes employee related provisions and the fair value of contingent liabilities, which relate to possible claims by investors in the Funds and investigations
by regulatory 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 NZ Banking Group will depend on the assessment and outcome of customer complaints,
and the results of any litigation and regulatory investigations or proceedings that may be brought.
Non-controlling interests are measured at their proportionate share of the identifiable net assets of the Funds.
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.

Included in the NZ 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 NZ Banking Group’s Income Statement and Statement of Comprehensive Income would haveincluded, 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 and the calculation of goodwill, is provisional while valuations of the assets acquired and liabilities
assumed are finalised.

24. SUBSEQUENT EVENTS

There have been no material subsequent events.

27

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCONDITIONS OF REGISTRATION
Conditions of Registration, applicable as at 25 August 2010.
The Conditions of Registration imposed on the NZ Branch, which apply from the date of registration are:1.

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

2.

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

Insurance business means any business of the nature referred to in section 4 of the Insurance
Companies (Ratings and Inspections) Act 1994 (including those to which the Act is disapplied bysections 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 New Zealand Banking Group’s insurance business:a.

where insurance business is conducted by any entity whose business predominantly consistsof 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 consistsof insurance business, the total consolidated assets of the group headed by the latterentity;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 tothe total consolidated assets of the banking group. All amounts in parts (a) and (b) shallrelate to on balance sheet items only, and shall be determined in accordance with generally
accepted accounting practice, as defined in the Financial Reporting Act 1993;d.

where products or assets of which an insurance business is comprised also contain a noninsurance component, the whole of such products or assets shall be considered part of theinsurance business.

3. That the business of the registered bank in New Zealand does not constitute a predominant proportion of
the business of the Australia and New Zealand Banking Group Limited.
4. That no appointment to the position of the New Zealand chief executive officer of the registered bank shallbe made unless:i. the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed
appointee; andii. the Reserve Bank has advised that it has no objection to that appointment.
5. That Australia and New Zealand Banking Group Limited complies with the requirements imposed on it by theAustralian Prudential Regulation Authority.
6. That Australia and New Zealand Banking Group Limited complies with the following minimum capital
adequacy requirements, as administered by the Australian Prudential Regulation Authority:-tier one capital of the Australia and New Zealand Banking Group Limited is not less than 4
percent of risk weighted exposures;
capital of Australia and New Zealand Banking Group Limited is not less than 8 percent ofrisk weighted exposures.

28

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCONDITIONS OF REGISTRATION (CONTINUED)

7. That the business of the registered bank in New Zealand is restricted to:i. acquiring for fair value, and holding, mortgages originated by ANZ National Bank Limited; andii. any other business for which the prior written approval of the Reserve Bank of New Zealand has
been obtained; andiii. activities that are necessarily incidental to the business specified in paragraphs (i) and (ii).
8. That the value of the mortgages held by the registered bank in New Zealand must not exceed $15 billion inaggregate.
9. That the registered bank in New Zealand may not incur any liabilities except:
i.
ii.
iii.
iv.
v.

to the government of New Zealand in respect of taxation and other charges; andto other branches or the head office of the registered bank; andto trade creditors and staff; andto ANZ National Bank Limited in respect of activities, other than borrowing, that are necessarily
incidental to the business specified in paragraphs (i) and (ii) of condition 7; andany other liabilities for which the prior written approval of the Reserve Bank has been obtained.

For the purposes of these Conditions of Registration, the term "Banking Group” means the New Zealandoperations of Australia and New Zealand Banking Group Limited whose business is required to be reported in
the financial statements for the group's New Zealand business, prepared in accordance with section 9(2) of the
Financial Reporting Act 1993.

29

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – NEW ZEALAND BRANCHCREDIT RATING INFORMATION
Credit Ratings applicable as at 25 August 2010
The Overseas Bank has three current credit ratings, which are applicable to its long-term senior unsecured
obligations, including obligations payable in New Zealand in New Zealand dollars. The credit ratings are:Rating Agency
Standard & Poor’s

Current Credit Rating

Qualification

AA

Outlook Stable

Moody’s Investors Service

Aa1

Outlook Negative

Fitch Ratings

AA-

Outlook Positive

On 20 May 2010, Fitch changed the outlook on the Overseas Bank from Stable to Positive. On 2 March 2009,
Moody’s changed the outlook on ANZ Banking Group Limited from Stable to Negative. Moody’s commented at
the time "The negative outlook reflects the potential for the deepening global economic downturn to have a
protracted impact on the banks' asset quality and earnings". During the two year period ended 30 June 2010
there were no other changes to the Overseas Bank’s credit ratings or qualifications.
Moody's
Standard Investors& Poor's
Service
The following grades display investment grade characteristics:
Ability to repay principal and interest is extremely strong. This is the highest investment
category.
Very strong ability to repay principal and interest.
Strong ability to repay principal and interest although somewhat susceptible to adversechanges in economic, business or financial conditions.
Adequate ability to repay principal and interest. More vulnerable to adverse changes.

Fitch
Ratings

AAA

Aaa

AAA

AA

Aa

AA

A

A

A

BBB

Baa

BBB

BB

Ba

BB

B

B

BB

CCC

Caa

CCC

CC to CCa to CCC to CD-

RD & DThe following grades have predominantly speculative characteristics:
Significant uncertainties exist which could affect the payment of principal and interest on atimely basis.
Greater vulnerability and therefore greater likelihood of default.
Likelihood of default now considered high. Timely repayment of principal and interest isdependent on favourable financial conditions.
Highest risk of default.
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 therating category.

30

Independent Review Report to the Directors of Australia and New Zealand Banking Group Limited - New Zealand Branch
We have reviewed the interim financial statements on pages 7 to 27 prepared and disclosed in accordance with Clause 19 of the Registered
Bank Disclosure Statement (Off-Quarter – Overseas Incorporated Registered Banks) Order 2008 (the ‘Order’) and the supplementary
information prescribed in Schedules 2 to 6. The interim financial statements, and supplementary information, provide information about
the past financial performance and cash flows of Australia and New Zealand Banking Group Limited - New Zealand Branch and its related
entities (the ‘NZ Banking Group’) and their financial position as at 30 June 2010. This information is stated in accordance with theaccounting policies set out on page 11.
Directors’ responsibilities
The Directors of Australia and New Zealand Banking Group Limited - New Zealand Branch are responsible for the preparation andpresentation of interim financial statements in accordance with Clause 19 of the Order which give a true and fair view of the financial
position of the NZ 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 the Order, of thematters to which it relates; and complies with Schedules 2 to 6 of the Order.
Reviewers’ responsibilities
We are responsible for reviewing the interim financial statements, including the supplementary information disclosed in accordance with
Schedules 3, 5 to 6, and Clause 15 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 to state whether, the supplementary information relating to credit and market risk
exposures and capital adequacy that is required to be disclosed under Schedule 4 of the Order, is in all material respects prepared anddisclosed in accordance with Capital Adequacy Framework (Basel 1 Approach) and Capital Adequacy Framework (Standardised
Approach) (BS2A) and disclosed in accordance with Schedule 4 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 NZ 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 NZ Banking Group in relation to other audit related services. Partners and employees ofour firm may also deal with the NZ Banking Group on normal terms within the ordinary course of trading activities of the business of the
NZ Banking Group. There are, however, certain restrictions on borrowings which the partners and employees of our firm can have with
the NZ Banking Group. These matters have not impaired our independence as auditors of the NZ Banking Group. The firm has no otherrelationship with, or interest in, the NZ 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 not present a trueand fair view of the financial position of the NZ Banking Group as at 30 June 2010 and its financial performance and cash flows for thenine months ended on that date;b. the supplementary information disclosed in Notes 16, 17 and 20 prescribed by Schedules 3, 5 to 6 and Clause 15 of Schedule 2 of theOrder 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 4 of the Order, is not in all material respects prepared in accordance with Capital Adequacy Framework (Basel 1 Approach)(BS2) and Capital Adequacy Framework (Standardised Approach) (BS2A), and disclosed in accordance with Schedule 4 of the Order.

Our review was completed on 25 August 2010 and our review opinion is expressed as at that date.

Wellington