21 November 2023
Market Announcements Office
ASX Limited
Level 420 Bridge Street
SYDNEY NSW 2000
Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)(“ANZBGL”) - Annual Financial Report submission under the Disclosure andTransparency Rules of the United Kingdom Financial Conduct Authority (“UKDTR Submission”)
The attached UK DTR Submission will be lodged by ANZBGL with the London Stock
Exchange (“LSE”) today. This UK DTR Submission has been prepared by ANZBGL inorder to comply with the applicable periodic reporting requirements of DTR 4 of theDisclosure and Transparency Rules of the United Kingdom Financial Conduct Authority inconnection with certain debt securities issued by ANZBGL. For completeness, in addition
to lodgement with the LSE, ANZBGL is lodging this UK DTR Submission with applicableexchanges, including the Australian Securities Exchange today.
Yours faithfully

Simon Pordage
Company Secretary
Australia and New Zealand Banking Group Limited

ANZ Centre Melbourne, Level 9, 833 Collins Street, Docklands Vic 3008
GPO Box 254, MELBOURNE VIC 3001 AUSTRALIA
www.anz.com
Approved for distribution by ANZBGL’s Board of Directors

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

21 November 2023
DISCLOSURE AND TRANSPARENCY RULES – ANNUAL FINANCIAL REPORTSUBMISSION
Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)(“ANZBGL”) together with its subsidiaries (“ANZBGL Group” or the “Group”) –Annual Financial Report submission under the Disclosure and Transparency
Rules (“DTR”) of the United Kingdom Financial Conduct Authority
The following attached documents constitute ANZBGL’s 2023 Annual Financial Report forthe purposes of the disclosure requirements of DTR 4.1:•

ANZBGL’s 2023 Annual Report for the year ended 30 September 2023;•

A description of the principal risks and uncertainties for the Group provided inaccordance with DTR 4.1.8 (2); and•A responsibility statement of the Directors of ANZBGL provided in accordance with DTR
4.1.12 (3)(b).

1

AUSTRALIA AND
NEW ZEALAND
BANKINGGROUP LIMITED2023 / ANNUAL REPORT2Australia and New Zealand Banking Group Limited 2023 Annual Report

CONTENTS

Overview
Our 2023 reporting suite

3

Operating Environment
Our operating environment

4

How we create value

5

Our purpose and strategy

6

About our business

11

GovernanceDirectors

8

Risk management

11

Performance overview

20

Remuneration report

34

Directors’ report

72

Financial report

75

Glossary214

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreport3

OUR 2023
REPORTING SUITEAUSTRALIA AND
NEW ZEALAND BANKINGGROUP LIMITED2023 ANZBGL Annual Reportanz.com/annualreport

ANZ GROUPHOLDINGS
LIMITED
2023 Full Year Results
Announcement
anz.com/results

2023 September Quarter
APS 330 Pillar III Disclosure
anz.com/results

2023 ANZGHL Annual Reportanz.com/annualreport

2023 Principal Risks andUncertainties Disclosure
anz.com/results

2023 Corporate GovernanceStatement
anz.com/corporategovernance2023 United Kingdom
Disclosure and Transparency
Rules Submission
anz.com/results

2023 Climate-Related
Financial Disclosuresanz.com/annualreport
2023 Environment, Social andGovernance (ESG) Supplement
anz.com/annualreport

Annual Report structure

The various elements of the Directors’ Report, including the Operating and Financial Review, are coveredon pages 1 to 32. Commentary on our performance overview contained on pages 20 to 32 references
information reported in the Financial Report pages 75 to 213.
The Remuneration Report on pages 34 to 71 and the Financial Report on pages 75 to 213 have been
audited by KPMG.
This report covers all of Australia and New Zealand Banking Group Limited’s operations worldwide over which,unless otherwise stated, we had control for the financial year 1 October 2022 to 30 September 2023. Monetaryamounts in this document are reported in Australian dollars, unless otherwise stated.

DISCLAIMER & IMPORTANT NOTICESThe material in this report contains general background information about the Group’s activities current as at 10th November 2023. It is information given insummary form and does not purport to be complete. It is not intended to be and should not be relied upon as advice to investors or potential investors, anddoes not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without
professional advice, when deciding if an investment is appropriate.
FORWARD -LOOKING STATEMENTS
This report may contain forward-looking statements or opinions including statements regarding our intent, belief or current expectations with respect to
the Group’s business operations, market conditions, results of operations and financial condition, capital adequacy, sustainability objectives or targets,
specific provisions and risk management practices. When used in the report, the words ‘forecast’, ‘estimate’, 'goal', 'target', 'indicator', 'plan', 'pathway',‘ambition’, ‘modelling’, ‘project’, ‘intend’, ‘anticipate’, ‘believe’, ‘expect’, ‘may’, ‘probability’, ‘risk’, ‘will’, ‘seek’, ‘would’, ‘could’, ‘should’ and similar expressions,as they relate to the Group and its management, are intended to identify forward-looking statements or opinions. Those statements are usually predictive
in character; or may be affected by inaccurate assumptions or unknown risks and uncertainties or may differ materially from results ultimately achieved.
As such, these statements should not be relied upon when making investment decisions. These statements only speak as at the date of publication andno representation is made as to their correctness on or after this date. Forward-looking statements constitute ‘forward-looking statements’ for the purposesof the United States Private Securities Litigation Reform Act of 1995. The Group does not undertake any obligation to publicly release the result of any revisions
to these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.

4

Australia and New Zealand Banking Group Limited 2023 Annual ReportOUR OPERATINGENVIRONMENT
Our operating environment
The environment in which we operate ischaracterised by a range of conflicting forces.
Economic activity and inflationary pressure
have broadly moderated, resulting in an
evolving peak in the most aggressive interest
rate tightening cycle in more than a decade.
This has reduced the risk of a deep recession,
but a range of economic outcomes arestill possible.
China has tracked a different path, withweak activity and a flirtation with deflation
promoting policy easing. Economic activity
in China continues to grow, albeit at a
slower rate than has been the case in recent
decades. The world’s second largest
economy remains an important source ofdemand and business activity, even as its
slowdown is contributing to businesses andinvestors examining other opportunities.
Unemployment remains low andimmigration has returned to Australia and
New Zealand at record rates. These aresupporting house price levels and demand
for mortgages, even as consumer spending
has moderated. Workforce shortages are notas acute, but input costs remain a challenge
for many businesses.
On average, household balance sheets arestrong and corporates hold high levels of
liquidity. In some part this reflects theregulatory efforts of the past 15 years. This
has reduced the level of delinquencies in
the current interest rate tightening cycle,
but also contributed to sustaining demand.

Economic outlook

Public sector demand is strong across a
range of sectors including infrastructure,
defence, and housing. Housing affordability,in particular, has been subject to morevigorous policy action. Many governments
are also active in addressing perceived
supply chain vulnerabilities and prioritisingdomestic resilience.
The climate transition has gathered
momentum. Over the past year Australia has
introduced the safeguard mechanism, New
Zealand has agreed methane should betaxed differently from carbon dioxide, theUSA introduced the Inflation Reduction Act
and in Europe the Carbon Border Adjustment
Mechanism began administrative operation.
This is altering patterns of economic activity,
investment, and trade, and creating
opportunities and challenges for banks.

The year ahead is likely to be one of economic consolidation across ANZ’s geographies. In Australia and New Zealand we expect somewhat
slower growth and only modest movements in interest rates around the peak in the cycle. Consumer spending is likely to remain weak as
the full impact of interest rate increases is felt. Demand is also likely to be supported by strong household balance sheets, resilient housing
markets, government activity, solid business investment intentions in Australia and strong migration in New Zealand. Modest increases inunemployment and underemployment, while disruptive for the individuals involved, should be sufficient to encourage inflation backtowards target without undue delinquency stress. Both ANZ and the Reserve Bank of Australia expect to see inflation back at the topof the band by the end of 2025.
In China, weak demand has been the main challenge. Policy has responded, activity has begun to stabilise and inflation, though there arestill deflationary pressures normalise. China’s stabilisation will support the region as it copes with the effects of its own tightening cycle andweaker global demand.

Challenges

Our response

Inflationary pressures andhigher interest rates• Assessing borrowers’ resilience to rising interest rates• Offering appropriate products and services to customers• Dealing appropriately with customers experiencing financial hardship or in need of extra care
• Adjusting our staff salaries appropriately

Public and regulatory
scrutiny• Building trust by ‘doing what we say’
• Working cooperatively with regulators, government and non-governmental organisations (NGOs)• Continuing to evolve our ESG policies and processes and seek to implement them effectively andtransparently disclose our progress

Competitive banking
industry• Deploying new and improved digital services, products and processes to help meet customer needs for
efficient and accessible banking• Investing in underlying technology and systems to establish more flexible and responsive platforms(including ANZ Plus and Institutional Payments and Cash Management Platforms)

Cyber-security threats• Ongoing investment in cyber-security, fraud and scams detection capabilities and raising customer
awareness as to the relevant risks

Geopolitical tension• Contingency plans for our medium-to-higher risk jurisdictions with trigger events identified
and monitored

Climate change and natureincluding biodiversity loss

• Providing sustainable banking and finance products and services, such as green and sustainabilitylinked loans and bonds, that drive the transition to a low carbon economy• Continuing to evolve our strategy, policies, processes, products and services to seek to manage the risks
and opportunities associated with climate change and nature, including biodiversity loss

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report5

Financialreport

HOW WE
CREATE VALUEVALUE DRIVERSOUR STRATEGY AND BUSINESS MODEL

Products and services

To embrace the opportunities, address the risks presented by
the external environment and realise our vision, we are pursuinga strategy to create value for all our stakeholders.

Loans, transaction banking services,
deposits and other financial products
developed for our customers.

Finance
Access to capital through customer
deposits, debt and equity investors,
to support our operations
and strategy.

Better access to capitaland talent, driving
greater capacity toinvest well

PeopleEngaged workforce with theskills required to reinvent banking,in line with our purpose and culture.

Better financial
outcomes forshareholders
and staff

Technology, data andrisk management
Flexible, digital-ready infrastructure toprovide a great customer experience,with systems and processes that areless complex, less prone to error andmore secure.

Better acquisition
and retention rates,
and higher share oftarget customers

SocialTrusted relationships with our customers,
business partners and the community tostrengthen our brand and reputation.
Environment

Better customer
propositions that are
purposeful, engaging,efficient and safe

Our customers will haverelatively better financial
wellbeing, more sustainable
practices and generatehigher average
lifetime value

Better data,
insights, risk
decisions and pricing

Better financial
wellbeing andsustainability outcomesfor customers andthe community

Better reputation
among customers
and the community,and higher workforce
engagement

Better customer
engagement, andgreater use of our
products and services

Minimising the impactof our operations by:• The customers we choose to bank
• How we design and distributeour products• Collaboration with partners.

CREATING VALUE FOR OUR STAKEHOLDERS

Shareholder value

Customer value

Employee value

Community value

We generate stronger longterm financial results (in termsof sustainable economic profits)
enabling shareholders to meettheir goals.

Our customers are financiallybetter off over their lifetime andimplement more sustainablebusiness practices than others.

Our diverse teams are engaged
and optimised for success.

Our practices and services
provide more opportunity forthe community and we havesupported and improved
positive economic
development and transition.

6Australia and New Zealand Banking Group Limited 2023 Annual ReportOUR PURPOSEAND STRATEGY
Our purpose is to shape a world
where people and communities
thrive. It explains ‘why’ we exist anddrives everything we do at ANZ,
including the choices we makeeach day about those we serveand how we operate.

Through our purpose we have elevatedthree areas facing significant societal
challenges aligned with our strategy
and our reach which include
commitments to:

We bring our purpose to life
through our strategy: to improve
the financial wellbeing andsustainability of customers throughexcellent services, tools and insightsthat engage and retain them,and help positively change
their behaviour.

• Supporting household, businessand financial practices that improve
environmental sustainability; andIN PARTICULAR, WE WANTTO HELP CUSTOMERS:

Save for, buy andown a liveable homeStart or buy
and sustainably growtheir businessMove capital and goods
around the regionand sustainably growtheir business• Improving the financial wellbeing of ourpeople, customers and communities byhelping them make the most of theirmoney throughout their lives;• Improving the availability of suitable
and affordable housing options for all
Australians and New Zealanders.
We will achieve our strategy through:• Propositions our customers love ... witheasy-to-use services that evolve to meettheir changing needs• Flexible and resilient digital banking
platforms ... powering our customers
and made available for others to power
the industry• Partnerships that unlock new value ...
with ecosystems that help customers
further improve their financial wellbeing
and sustainability

Our values
Our values shape how we deliver our
purpose-led strategy. They are thefoundation of ‘how’ we work – living
our values every day enables us to deliveron our strategy and purpose, strengthen
stakeholder relationships and earn thecommunity’s trust. All employees andcontractors must comply with our Codeof Conduct, which sets down the expected
standards of professional behaviour andguides us in applying our values.
OUR VALUES ARE: I.C.A.R.E

Integrity: We are honest and fairby speaking openly and transparently,
making thoughtful and balanced
decisions, doing what’s right andacting with courage.

Collaboration: We work together
for the customer, by getting the rightpeople together to get the job done
and helping each other.

• Purpose and values-led people ...
who drive value by caring about ourcustomers and the outcomes we create.

Accountability: We take ownership

Our people listen, learn, adapt and do theright thing the first time - delivering theoutcomes that address financial andsustainability challenges.

and get things done – we do what we
say we will do – find the solutions by
testing and learning and act withdetermination.

Respect: We care for all those we
serve. We value difference andencourage everyone to have a voice,think and act with consideration forour customers, community andthe environment.

Excellence: We challenge ourselves tobe better. This is done by making things
simple, finding ways to work differently,
using data to improve and asking as wellas acting on feedback.

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report7

FinancialreportABOUT OUR
BUSINESS

Operating income

We operate across a diverse business structure:
Australia Retail

Provides a range of banking products and services toAustralian consumers.

Australia
Commercial

Provides a range of banking products and financial services to small
business owners, medium commercial customers, large commercial
customers, and high net worth individuals and family groups.

Institutional

Services global institutional and corporate customers, andgovernments across Australia, New Zealand and International(including Papua New Guinea (PNG)) via Transaction Banking,Corporate Finance and Markets business units.

New Zealand

Provides a range of banking and wealth management products andservices to consumer and private banking customers and a range ofbanking services to business customers.

Pacific

Provides banking products and services to retail and commercial
customers (including multi-nationals) and to governments locatedin the Pacific region (excluding PNG which forms part of theInstitutional division).

Group Centre

Provides support to the operating divisions, including technology,
property, risk management, financial management, treasury, strategy,
marketing, human resources, corporate affairs, and shareholder
functions. It also includes minority investments in Asia.

Our international presence and earning composition by geography1

20,900M
Total group cash operating
income, (up 13%)Australia Retail: 31%

Australia
Commercial: 17%

Institutional: 32%

New Zealand: 17%

Pacific & Group
Centre: 3%

International
Asia
China
Hong Kong
India
Indonesia
Japan
Laos
Malaysia

The Philippines
Singapore
South Korea
TaiwanThailand
Vietnam

Pacific
International$1,359 million

Cook Islands
Fiji
Kiribati
Papua New Guinea
Samoa

Australia$4,027 million

Solomon Islands
Timor–Leste
Tonga
Vanuatu

EuropeNew Zealand$2,086 million

FranceGermany
United Kingdom
Middle East
United Arab Emirates (Dubai)

1. On a cash profit basis. Excludes non-core items included in statutory profit. It is provided to assist readers in understanding
the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash
profit refer to page 21.

United States of America

8Australia and New Zealand Banking Group Limited 2023 Annual Report

DIRECTORS
As at the date of this report, there are ten members on the Boardof Directors of ANZBGL. Their names, positions within ANZBGL andrelevant other directorships are described below. Graeme Liebelt
ceased as a Non-Executive Director on 15 December 2022, having
served on the Board since 2013.

Paul O’Sullivan
Position
Chairman, Independent
Non-Executive Director sinceNovember 2019

Relevant other directorships
Chairman: ANZGHL (from 2022), Singtel
Optus Pty Limited (from 2014, Director
from 2004) and Western Sydney Airport
Corporation (from 2017).

Director: St Vincent’s Health Australia(from 2019).

Relevant former directorships
held in last three years include
Former Director: Telkomsel Indonesia(2010-2020), National Disability Insurance
Agency (2017-2020), Coca-Cola Amatil(2017-2021) and Indara Digital Infrastructure(formerly Australian Tower Network Pty Ltd)
(2021-2023).

Shayne Elliott
Position

Relevant other directorships

Chief Executive Officer
Executive Director since
January 2016

Director: ANZGHL (from 2022), ANZ BankNew Zealand Limited (from 2009) and the
Financial Markets Foundation for Children(from 2016). Member: Business Council ofAustralia (from 2016), the Australian Banking
Association (from 2016, Chairman 20172019) and the Australian Customs Advisory
Board (from 2020).

Ilana Atlas, AO
PositionIndependent Non-Executive Director
since September 2014

Relevant other directorships
Chairman: Jawun (from 2017, Director
from 2014). Director: ANZGHL (from 2022),
Scentre Group (from 2021), Origin Energy
Limited (from 2021) and Paul Ramsay

Foundation (from 2017). Member: Councilof the National Gallery of Australia(from 2021) and Panel of Adara Partners(from 2015).

Relevant former directorships
held in last three years include
Former Chairman: Coca-Cola Amatil
Limited (2017-2021, Director from 2011).

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreport9

Jane Halton, AO PSM
PositionIndependent Non- Executive Director
since October 2016

Relevant other directorships
Chairman: Coalition for Epidemic
Preparedness Innovations (Norway) (from2018, Member from 2016) and Council on
the Ageing Australia (from 2017).
Director: ANZGHL (from 2022) and Clayton
Utz (from 2017). Member: Executive Boardof the Institute of Health Metrics and
Evaluation at the University of Washington(from 2007). Adjunct Professor: University

of Sydney and University of Canberra.
Honorary Professor: Australian National
University Research School of Psychology.
Council Member: Australian Strategic
Policy Institute (from 2016).

Relevant former directorships
held in last three years include
Former Chairman: Vault Systems(2017-2022). Former Director: Crown
Resorts Limited (2018-2022) and NavalGroup Australia Pty Ltd (2021-2022).
Former Member: National COVID-19
Commission Advisory Board (2020-2021).

Graham Hodges
Position
Non-Executive Director
since February 2023

Relevant other directorships

Relevant former directorships
held in last three years include
Director: AmBank Holdings Berhad(2016-2021).

Chairman: Regis Healthcare Limited(Director from 2017, Chairman from 2018).
Director: Assemble Communities(from 2020).

Rt Hon Sir John Key, GNZM AC
PositionIndependent Non-Executive Director
since February 2018

Relevant other directorships
Chairman: ANZ Bank New Zealand Limited(from 2018, Director from 2017) andOritain Global Limited (from 2023).

Director: ANZGHL (from 2022) and Palo Alto
Networks (from 2019). Strategic Advisor:
BHP Group Limited (Australia) (from 2023).

Relevant former directorships
held in last three years include
Former Director: Air New Zealand Limited(2017-2020).

Holly Kramer
PositionIndependent Non-Executive Director
since August 2023

Pollination (from 2023). Pro Chancellor:
Western Sydney University (from 2018).

Relevant other directorships

Relevant former directorships
held in last three years include

Director: ANZGHL (from 2023), Woolworths
Group Limited (from 2016) and Fonterra
Co-operative Group Limited (from 2020).
Member: Board Advisory Group, Bain &Company (from 2021). Senior Advisor:

Former Chairman: Lendi Group (2020-2021).
Former Deputy Chair: Australia Post
(2015-2020). Former Director: Abacus
Group Holdings (2018-2022) and Endeavour
Group Limited (2021-2023).

10

Australia and New Zealand Banking Group Limited 2023 Annual Report

John Macfarlane
PositionIndependent Non-Executive Director
since May 2014

Relevant other directorships
Director: ANZGHL (from 2022), Colmac
Group Pty Ltd (from 2014), AGInvest
Holdings Ltd (MyFarm Ltd) (from 2014,
Chairman 2014-2016), Balmoral Pastoral
Investments (from 2017), L1 Long Short

Fund Ltd (from 2018) and Aikenhead Centreof Medical Discovery Limited (from 2016).

Relevant former directorships
held in last three year include
Former Director: Craigs Investment
Partners Limited (2013-2020).

Christine O’Reilly
PositionIndependent Non-Executive Director
since November 2021

Relevant other directorships
Director: Stockland (from 2018) and BHPGroup Limited (from 2020).

Relevant former directorships
held in last three years include
Former Director: Medibank Private Limited(2014–2021), CSL Limited (2011–2020),
Transurban Group (2012–2020) and
The Baker Heart & Diabetes Institute(2013-2023).

Jeff Smith
PositionIndependent Non-Executive Director
since August 2022

Relevant other directorships
Director: ANZGHL (from 2022), ANZ Group
Services Pty Ltd (from 2022), Sonrai Security

Inc. (from 2021) and Pexa Australia Limited(from 2023). Advisor: Zoom Video
Communications, Inc (from 2018), Box,
Inc (from 2018), and World Fuel Services(from 2023)).

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreport11

RISK
MANAGEMENT
2023 has seen an elevation ofgeopolitical tensions and continuing
uncertainty in the macroeconomic
environment. These continue topose challenges to operating
conditions. We recognise that ourcustomers are similarly affectedby these, as well as by additional
challenges such as adverse weather
events. Our risk management
framework and practices havecontinued to evolve to meetsuch challenges.
External environment
The heightened geopolitical landscape withthe ongoing conflicts in Europe and the
Middle East, accompanied by the economic
challenges relating to higher interest rates,
inflation and real cost of living pressurescontinue to be the main drivers to create
uncertainty for many of our customers.
While households and businesses havebeen largely resilient to date, the Board andmanagement continually monitor thesedeveloping conditions to set appropriate
risk criteria for a range of potential scenarios.
We have focused on the following tohelp support our customers and theirfinancial resilience:• Global banking instability – Global
financial stability risks increased during
the year following the failure of someregional banks in the US and theregulator facilitated takeover of Credit
Suisse by UBS. In the face of these events
the broader global banking system has
remained resilient. ANZ has navigatedthis challenging period from a positionof strength as a profitable, wellprovisioned, strongly capitalised andhighly liquid bank and is well placed
to support our customers.
• Home Loans and Consumer Lending –We continue to engage with ourcustomers to help them better manage
their home loans and personal finances.
70 per cent of our customers have paid
additional funds to reduce their principal
debt with almost half of those more than
two years ahead on their repayments.
Our portfolio customer credit scores
have improved and we have consistently

written new businesses at a higher
average customer credit score. We havealso proactively communicated withour customers to provide reassurance
that, where required, we have options
available to continue to support them.
This includes additional support provided
to customers facing natural disasters (forinstance, the 2023 cyclones and floods
in New Zealand).
• Data Analytics – Data and analytics
continue to play an important role inearly identification of customers heading
towards financial difficulty. Our analytics
have focused on customer transaction
data and the identification of customers
that may need additional support.
We are using data analytics to look at
savings, credit, and offset accounts tobetter understand customers’ financial
behaviour and potential future outcomes.
The analysis considers interest ratechanges, increases in living expenses
and cashflow. We continue to analyse
our downturn indicators to understand,quantify, and address impacts to portfolio
delinquency through tailored treatments
to reduce customer financial difficulties/
delinquencies.

• Financial health and Wellbeing –Financial health and wellbeing is theguiding principle for our ANZ Plus App
which provides tools and insights to help
customers to have better visibility andcontrol over their money. In addition,
our targeted communication is designed
to encourage at-risk customers to takesteps to avoid falling behind on loan
repayments and to contact ANZ as earlyas possible if they are experiencing
financial difficulty. We have also identified
common reasons customers provide forexperiencing financial hardship, suchas reduced income, medical illness,separation or over-commitment to assist
with repayment management. We havealso delivered proactive customer support
including communications and webinars
to help customers as they head into
challenging economic times.

12

Australia and New Zealand Banking Group Limited 2023 Annual Report

Risk culture
Risk culture is an important componentof our organisational culture and underpins
the shared values, behaviours and practices
that influence how risk is considered indecision making.
Significant progress has been made instrengthening risk culture, with the Group
achieving our target state. The Boardand executive leadership teams haveemphasised the importance of risk culture,providing strong leadership and oversight.
This has resulted in outcomes that havefurther embedded our target risk
behaviours and uplifted risk management
in a number of key focus areas – particularly
the group wide non-financial risk
framework. The risk culture framework,with our Risk Principles at the core, outlines
the approach to measure, assess, embedand govern risk culture. The approachassesses risk management behaviours andpractice through consideration of an annual
risk culture survey as well as frequentmonitoring of business and risk metrics
that provide insights about our risk culture.
Risk culture maturity is assessed at thedivisional and functional1 level to assist
the Board to form a view of our overallrisk culture. Our Board Risk Committee
receives half-yearly updates on plans andactions being taken to further improve
our risk culture.
Maintaining a sound risk culture is
supported by alignment between our Risk
Principles and organisational behaviours,
training, and tools and resources toraise awareness of and embed the
behaviours and practices that support
our target risk culture.
Risk culture is included as a performance
objective for all Group Executives, andrisk is a key element of the Group
Performance Framework and Divisional/
individual performance scorecards for ourpeople’s performance and remuneration.
Behaviours supporting the target risk culture
are reinforced through the Enterprise
Accountability Group (EAG) (see section 8of the Remuneration Report with the Annual
Report). We acknowledge individuals whorole model outstanding risk behaviours
through their efforts to identify, manage

and mitigate the organisation’s risks andcontribute to our strong risk culture.

Financial crime
We continue to maintain an effective
financial crime risk management programthat anticipates and navigates criminal
threats supported by the right people withthe right tools. The Financial Crime portfolio
continues to be responsible for ensuringthat ANZ meets its regulatory obligations
through its Anti-Money Laundering/Counter Terrorism Finance and Sanction
Programs, and for delivering enhanced
detection, investigative and/or intelligencecapability focusing on identifying,
mitigating, and managing financial crime
risk and protecting the community. We also
maintain our partnership with the AustralianTransaction Report and Analysis Centre(AUSTRAC)-led Fintel Alliance to strengthen
the finance industry’s capability to tackle
serious crimes and to better support
police investigations.
Refer to our ESG Supplement available
at anz.com/annualreport for further
information.

Scams
We are continually reviewing and adjusting
our capabilities to keep customers safe as
new scams emerge and cyber criminals
change how they operate. In the last twelve
months, our staff and our systems havestopped more than $100 million going tocriminals and from April to September thisyear. We have has seen a 59% reduction incustomer losses and a 38% increase indetected and prevented amounts.
Investment in new technologies is criticalas we continue to work to protect ourcustomers and the community from fraud
and scams. Our newest measures include:• The deployment of more than 170
new sophisticated algorithms thathave helped to prevent $20m of
customer scam losses across multiple
payment channels.
• A significant investment in a newcapability using Artificial Intelligence(AI) and Machine Learning technology
designed to detect accounts being used
to receive funds from scam victims.

• Preventing payments being madeto particular high risk cryptocurrency
platforms and introducing new holds
and delays to some payment types
and destinations.
• Working with the major telcos to activate
the Do Not Originate (DNO) service
and to put in place measures that stop
scammers from adopting the “ANZ” label
in text messages.

Non-financial risk
We have made progress against our
non-financial risk transformation agenda.
Our improved Non-financial Risk Framework
is uplifting both the effectiveness andefficiency of how we manage our nonfinancial risks ensuring we can operate
our business well, support the right risk
culture, save time and make things simpler.
It is achieving this by being a holistic,
standardised, integrated and automatedframework with greater data-informed
insights, enhanced operating modeland capability uplift. This enables us tobetter anticipate and navigate a changing
environment as we seek to protect ourcustomers, shareholders and thecommunity from harm.

Other risks
We manage and monitor risks inaccordance with our Risk Management
Framework (RMF). In addition to our key
material risks - see below - three risks that
we are paying particular attention to are:Climate-related risk: the Group’s mostmaterial climate-related risks arise fromlending to business and retail customers,
which contributes to credit risk. These
include the effect of extreme weather
events on a customer’s business or property
including impacts to the cost andavailability of insurance and insurance
exclusions, changes to the regulatory andpolicy environment in which the customer
operates, disruption from new technology
and changes in demand towards low
carbon products and services. Climaterelated risks may also indirectly affect acustomer through impacts to its supply
chains and customer base.

1. Enablement Functions – Legal, Enterprise Finance, Talent and Culture, Internal Audit, Group Risk, Comms and PA, Group Technology and Group Capability Centre.

OverviewOperatingenvironment

GovernanceOur key material risk category of credit risk
considers the risks associated with lending
to customers that may be impacted byclimate change, including physical andtransition risks. Climate-related risks may
also affect the ability of customers to repay
debt, result in an increased probability ofdefault, result in ‘stranded assets’, andimpact the amount that the Group is able
to recover due to the value or liquidity ofcollateral held as security being impaired.
The Group may also face legal proceedings
and suffer reputational damage if it acts
inconsistently with public commitments
in relation to climate change.
We continue to improve our managementof climate-related risks and recently
elevated climate-related risk as a key
material risk within our RMF - refer below.
We are transitioning our lending withthe goals of the Paris Agreement andsupporting customers to reduce emissions
and enhance their resilience to a changing
climate. In this respect, we factor climatechange risk into lending decisions for large
business customers1, assessing theircapacity to respond to climate change
and the evolving regulatory landscape.
We expect our existing large businesscustomers in higher-emitting sectors suchas energy, building products and transport
to integrate climate change risk into theircompany strategies.
For details on the how we are improving
our management of climate-related risks,
how we govern climate-related risks andopportunities, performance against our
climate targets and our new sectoral
decarbonisation pathways set inaccordance with our commitment to the
Net-Zero Banking Alliance, refer to our2023 Climate-related Financial Disclosuresavailable at anz.com/annualreport. Our
Climate Change Commitment is available
at anz.com/esgreport.
Cybersecurity risk: As a bank, we handle
a considerable amount of personal andconfidential information about ourcustomers across multiple geographies inwhich we operate. We continue to take the

Performanceoverview

Remuneration
reportDirectors’
reportsecurity of our bank, our customers and ourcustomers’ information very seriously. Our
security strategy has helped build a mature
security risk posture and operational cybersecurity capability commensurate with thesize and extent of threats to us.
Cyber security threats continue to
evolve, becoming more sophisticatedand increasing in volume and our approachdraws on multiple layers of security testingand intelligence, seeking to ensuresustainable security practices to protect
information and assets. We have layers ofdefence within the Group complemented
by robust governance. We use industry
benchmarking as well as a series of
exercises to map and simulate potential
threats. This helps us identify and better
understand emerging threats, and adapt
processes, technology and education toaddress the increase in customer fraud
and scams. We maintain strong relationships
and strategic partnerships with government,
industry, community groups and law
enforcement agencies locally andinternationally to promote cybersecurity resilience across jurisdictions.
We are fostering a security-centric culture
by providing staff education to help us
to respond to the rapidly changing threat
environment, as well as our customer
education service to engage with andsupport our customers. We focus on raisingcustomer awareness to cyber-threat risk.
Our Cyber security centre also publishes
a range of latest security alerts andprotection approaches to assist ourcustomers to avoid scams.

Financialreport13

reforms to halt and reverse forest loss,
species extinction and land degradation.
These changes may impact the Group
directly, or indirectly through our customers.
Biodiversity risk is recognised in our Climate
Change Commitment and across our‘sensitive sector’ lending policies. In linewith our Social and Environmental Risk
Policy, we expect our large businesscustomers1 to use, or mitigate towards
internationally accepted industry practices
to manage social, environmental andeconomic impacts, including potential
impacts on nature. This year have continued
to engage with 100 of our large emitting
business customers to support them to
implement and strengthen their lower
carbon transition plans and enhance theirefforts to protect biodiversity. We havealso utilised the Exploring Natural Capital
Opportunities Risks and Exposure (ENCORE)
tool2 to take initial steps to identify priority
sectors and assess potential sector levelbiodiversity impacts and dependencies.
For details on our customer engagement,
the ENCORE tool, including how we areupskilling our staff and the Taskforce on
Nature-related Financial Disclosures (TNFD)
pilot studies we have participated in thisyear, refer to our 2023 Climate-related
Financial Disclosures available at anz.com/
annualreport. This year we have alsosought to draw on the TNFD’s
recommendations to help inform ourdisclosures in this document.

Biodiversity risk: Biodiversity loss including
as a result of species extinction or decline,
ecosystem degradation and nature loss(“Biodiversity Loss”) is an emerging risk
which the Group is seeking to understandfurther. Biodiversity risks are closely linked
to climate-related risks. Risks are likely toarise primarily from lending to customers
that have material dependencies and/or
whose actions may have negative impacts
on nature, including biodiveristy. These risks
can also arise from legal, and regulatory
or policy, changes including potential

1. Institutional customers. 2. The ENCORE tool consolidates international and national data from public databases. It is widely used by other banking institutions and recognised as a robust tool.
The ENCORE tool was developed by the Natural Capital Finance Alliance (the NCFA) and the World Conservation Monitoring Centre (the UNEP-WCMC).

14

Australia and New Zealand Banking Group Limited 2023 Annual Report

Our Risk Management
Framework (RMF)
The Board is ultimately responsible forestablishing and overseeing the Group’s
RMF, which is supported by the Group’s
underlying systems, structures, policies,
procedures, processes and people.
The Board has delegated authority to
the Board Risk Committee (BRC) to develop
and monitor compliance with the Group’s
risk management policies. The Committee
reports regularly to the Board on its
activities. The key pillars of our GroupRMF include:• The Risk Management Strategy (RMS),
which describes the approach for
managing risk arising from the Group’s
purpose and strategy. The RMS includes:
how the Risk function is structured
to support the Group’s purpose andstrategy, and the execution of theGroup Chief Risk Officer’s prescribed
responsibilities as an Accountable
Person for ANZBGL under the Banking
Executive Accountability Regime;
the values, attitudes and behaviours
required of employees in delivering on
strategic priorities; a description of eachmaterial risk; and an overview of how
the RMF addresses each material risk,
with reference to the relevant policies,
standards and procedures. It also includes
information on how the Group identifies,
measures, evaluates, monitors, reports
and then either controls or mitigatesthe material risks and the oversightmechanism and/or committees in place.
• The Risk Appetite Statement (RAS),
which sets out the Board’s expectations
regarding – for each material risk – themaximum level of risk the Group iswilling to accept in pursuing its strategic
objectives and its operating plansconsidering its shareholders’, depositors’
and customers’ interests.

• Risk Culture is an intrinsic part of theGroup’s RMF and underpins the values,
attitudes and behaviours of our staff
which drive the risk decisions we make.
The Group operates a Three Lines-ofDefence Model. Each line of defence has
clearly defined roles, responsibilities andescalation paths to support effective risk
management at ANZ. The three lines ofdefence model embeds a culture whererisk is everyone’s responsibility.
The business occupies the first line ofdefence responsibility for implementationand ongoing maintenance of the RMF
including day-to-day ownership of risks
and controls.
The Risk function (including Divisional/
functional and Group) form the secondline of defence, providing independent
oversight of the Group’s risk profile and
RMF, including effective challenge toactivities and decisions that materiallyaffect the Group’s risk profile and assistancein developing and maintaining the RMF.
Internal Audit is the third line of defence,
providing independent evaluation andobjective assurance on the appropriateness,
effectiveness and adequacy of theGroup’s RMF.
The governance and oversight of risk
management, whilst embedded in
day-to-day activities, is also the focus
of committees and regular forums acrossthe Group (see diagram next page).
The committees and forums discussand monitor known and emerging risks,review management plans and monitor
progress to address known issues.

OverviewOperatingenvironment

Performanceoverview

Governance

Remuneration
reportDirectors’
report15

FinancialreportPrincipal Board
Committees

BOARD OF DIRECTORS

Audit
Committee

Ethics,Environment,
Social andGovernanceCommittee

Risk
Committee

Digital Businessand Technology
Committee

Nomination
and Board
Operations
Committee

Executive Committee

Group Performance Execution Committee

The Group’s most senior
executives meet regularly to
discuss performance and review
shared initiatives.

The Group’s key Management Committee charged
with oversight of the Group’s overall operational
performance and position and execution of theoperating plan.

Human
Resources
Committee

Enterprise
Accountability
Group

KEY MANAGEMENT COMMITTEESGroup Assetand Liability
Committee

Operational
Risk Executive
Committee

Credit Ratings
System OversightCommittee

Capital and Stress
Testing OversightCommittee

Financial Crime Operational
Risk Executive Committee
Sub-Committee

Division

Divisional Risk Management
Committees

CountryGroup

Credit andMarket Risk
Committee

Regional orCountry Risk
Management
Committees

Country Assets
and Liability
Committees

Ethics andResponsible
Business
Committee

Investment
Committee

Divisional
Initiatives Review
Committees/
Project Advisory
Councils

Group Executive
PeopleCommittee

Divisional/
Functional
AccountabilityGroups16

Australia and New Zealand Banking Group Limited 2023 Annual Report

KEY MATERIALRISKS
The key material risks facing the Group per the Group’s RMS, and how these are managed are summarised below.
Climate change risk is managed and monitored as part of ANZ’s business, strategic and capital management processes.
While climate change risk primarily manifests as financial risks, especially credit risk, it may also result in additional market,
operational or other risks.
Our understanding of climate-related risks continues to evolve and mature. On 9 November 2023 our Board Risk Committee
approved that “climate risk” will be elevated as a key material risk. This means going forward that we are further strengthening
our enterprise-wide approach to managing climate risk. We are working to embed this change and expect to disclose ourprogress in our 2024 reporting. The table below discusses how climate-related risk has been managed and monitored
during our 2023 financial year.
For further information about the principal risks and uncertainties that the Group faces, see our“Principal Risks and Uncertainties” disclosure available at anz.com/shareholder/centre.

RISK TYPEDESCRIPTIONMANAGING THE RISKCapital adequacy
risk

The risk of loss arising from the Group failingto maintain the level of capital required by
prudential regulators and other key stakeholders(shareholders, debt investors, depositors, rating
agencies, etc.) to support the Group’s
consolidated operations and risk appetite.

We pursue an active approach to Capital Management,
which is designed to protect the interests of depositors,
creditors and shareholders through ongoing review,
and Board approval, of the level and composition of
our capital base against key policy objectives.

Compliancerisk

The risk of failure to act in accordance with laws,
regulations, industry standards and codes,
internal policies and procedures and principles
of good governance as applicable to theGroup’s businesses.

Key features of how we manage Compliance Risk
as part of our I.AM (Identify, Act and Monitor)
Framework include:• Management of key obligations via a Global
Obligations Library, enabling our change
management capability in relation to new
and revised obligations.
• An emphasis on the identification of changing
regulations and the business environment, to enableproactive assessment of emerging compliance risks.
• Recognition of incident management as a separate
element to enhance our ability to identify, manage
and report on incidents/breaches in a timely manner.

Credit risk

The risk of financial loss resulting from:• A counterparty failing to fulfil its obligations; or• A decrease in credit quality of a counterparty
resulting in a loss.
Credit Risk incorporates the risks associatedwith our lending to business and retail customers
who could be impacted by climate change orby changes to laws, regulations, or other policies
adopted by governments or regulatory
authorities, including carbon pricing andclimate change adaptation or mitigation policies.
As noted above, we recently elevated climaterelated risk to be a key material risk in its own
right and will work to embed this within our RMF.

Our Credit Risk framework is top down, being definedby credit principles and policies. Credit policies,
requirements and procedures cover all aspects ofthe credit life cycle from initial approval and risk
grading, through to ongoing management andproblem debt management.

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreportRISK TYPERISK TYPEDESCRIPTION DESCRIPTIONMANAGING
THE RISKMANAGING THE
RISK

Liquidity andfunding risk

The risk that the Group is unable to meet its
payment obligations as they fall due, including:

Key principles in managing our Liquidity and Funding
Risk include:• Repaying depositors or maturingwholesale debt; or• ANZ’s short term liquidity scenario modelling stresses
cash flow projections against multiple survival
horizons’ over which the Group is required
to remain cash flow positive;• The Group having insufficient capacity to fundincreases in assets.

Market risk

The risk stems from our trading and balance
sheet activities and is the risk to the Group’s
earnings arising from:• Changes in interest rates, foreign exchange
rates, credit spreads, volatility, correlations; or• Fluctuations in bond, commodity or
equity prices.

Operationalrisk

The risk of loss and/or non-compliance with laws
resulting from inadequate or failed internal
processes, people and/or systems, or fromexternal events. This definition includes legal risk,
and the risk of reputation loss or damage arisingfrom inadequate or failed internal processes,
people and systems, but excludes strategic risk.

• Longer-term scenarios are in place that measure thestructural liquidity position of the balance sheet.
We have a detailed market risk management andcontrol framework to support our trading and balance
sheet activities, which incorporates an independent risk
measurement approach to quantify the magnitude ofmarket risk within the trading and balance sheet
portfolios. This approach, along with related analysis,
identifies the range of possible outcomes, that canbe expected over a given period of time, andestablishes the likelihood of those outcome andallocates an appropriate amount of capital to support
these activities.

We manage Compliance and Operational Risk in thebest interests of our customers and the community andto meet expectations of the regulators. The Complianceand Operational Risk (C&OR) Policy establishes thefundamental requirements at ANZ which inform
policies, processes, and procedure development of
ANZ’s management of Compliance and Operational
Risk, through timely and appropriate identification,action and monitoring. We take a risk-based approachto the management of operational risk and obligations.
This enables the Group to be consistent in proactively
identifying, assessing, managing, reporting andescalating operational risk-related risk exposures,
while respecting the specific obligations of eachjurisdiction in which the Group operates.
Day-to-day management of operational risk is the
responsibility of business unit line management andstaff. Risk management is supported by a strong Risk
Culture, which seeks to ensure all staff manage risk
on a daily basis – “Risk is Everyone’s Responsibility”.

Strategic risk

Risks that affect or are created by anorganisation’s business strategy and strategic
objectives. A possible source of loss might arise
from the pursuit of an unsuccessful businessplan. For example, Strategic risk might arise
from making poor strategic business decisions,from the sub-standard execution of decisions,from inadequate resource allocation, or froma failure to respond well to changes in thebusiness environment.

Strategic risks are discussed and managed through ourannual strategic planning process, managed by the
Executive Committee and approved by the Board.
Where the strategy leads to an increase in other Key
Material Risks (e.g. Credit Risk, Market Risk, Operational
Risk) the risk management strategies associated withthese risks form the primary controls.

17

18

Australia and New Zealand Banking Group Limited 2023 Annual Report

RISK TYPE

Technology
risk

DESCRIPTION

The risk of loss and/or non-compliance withlaws from inadequate or failed internal processes,
people or systems that deliver Technology assets
and services to customers and staff. This risk
includes Technology assets and services deliveredor managed by third parties, and external events.

MANAGING THE RISK

Our approach to manage Technology Risk is to manage
our operational risks caused by the use of technology,
including risks associated with cyber security andthird-party providers, in a manner that seeks to ensure
customer information is secure and service disruption
is within acceptable levels.

The risk specifically includes information security
and cyber security and how information heldby the Group needs to be protected frominappropriate modification, loss, disclosureand unavailability.

Conduct risk

Financialcrime risk

The risk of loss or damage arising from the failureof the Group, its employees or agents toappropriately consider the interests of customers,
the integrity of the financial markets and the
expectations of the community in conducting
its business activities.

Our approach to manage Conduct Risk is to seek toensure that risks to customers, community and market
integrity are identified, assessed, measured, evaluated,
treated, monitored and reported with appropriate
governance and oversight.

Financial Crime Risk covers the following risks
at ANZ:

Financial Crime Risk at ANZ is managed using arisk-based approach in accordance with the Conduct
Risk Framework, and in conjunction with theCompliance and Operational Risk Framework (I.AM)
and three lines of defence model. However, for
Sanctions, in addition to a risk-based approach to risk
management, there is a rules-based lens to ensurecompliance with Sanctions legislation. For the Businessto identify and manage Financial Crime Risk, it must
identify its regulatory obligations and impacted businessactivities and maintain and monitor key controls.

• Money Laundering (ML) Risk – the risk that
we may reasonably face from our products
and/or services being misused to facilitate
the processing of the proceeds of crime toconceal their illegal origins and make themappear legitimate.
• Terrorism Financing (TF) Risk – the risk that
we may reasonably face from our products
and/or services being misused to facilitate
the provision or collection of funds with theintention or knowledge that they may be
used to carry out acts associated in supportof terrorists or terrorist organisations.
• Sanctions Risk – the risk of failing to comply
with laws and regulations relating to sanctions
imposed by governments and multinational
bodies as a result of our products and services
being misused to facilitate prohibited sanctions
activities.
• Fraud Risk – the risk that we may reasonably
face from our products and/or services
being misused to facilitate intentional actsby one or more individuals, involving theuse of deception to obtain an unjust or
illegal advantage arising from internal orexternal sources.

The articulation of Conduct Risk as a Level 1 Risk Theme
under the new NFR model will help manage Conduct
Risk as a key material risk for the Group. To support the
NFR model (and our obligations under Prudential
Standard CPS 220 Risk Management), ANZ has
developed a global Conduct Risk Framework andConduct Risk taxonomy which facilitates a clear andconsistent way of managing and monitoring the risk,
and the risk is managed in conjunction with theCompliance and Operational Risk Policy.

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportPAGE INTENTIONALLY
LEFT BLANK

Directors’
reportFinancialreport19

20

Australia and New Zealand Banking Group Limited 2023 Annual Report

PERFORMANCEOUR PERFORMANCE (continued)
OVERVIEWGROUP PERFORMANCEThe results of the Group’s operations and financial position are set out on pages 20-32. Pages 4-7 outline the Group’s strategy andprospects. Discussion of our approach to risk management, including a summary of our key material risks, is outlined on pages 11-18.
Discussion or disclosure of further business strategies and prospects for future financial years has not been included in this reportbecause, in the opinion of the directors, it would be likely to result in unreasonable prejudice to the Group.

GROUP PROFIT RESULTS
2023

2022

Statutory
$m

Cash
$m

Statutory
$m

Cash
$m

Net interest income
Other operating income

16,575
3,891

16,575
4,325

14,874
4,552

14,874
3,673

Operating income
Operating expenses

20,466(10,087)

20,900(10,087)

19,426(9,579)18,547(9,579)Profit before credit impairment and income tax
Credit impairment (charge)/release

10,379(245)

10,813
(245)

9,847
232

8,968
232

Profit before income tax
Income tax expense

10,134(2,941)(28)

10,568(3,068)(28)

10,079(2,940)(1)

9,200(2,684)
(1)

7,165

7,472

7,138

6,515

Income Statement

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

-

-

(19)

(19)

7,165

7,472

7,119

6,496

Statutory profit for the year increased $46 million on the prior year to $7,165 million.
The Group uses cash profit, a non-IFRS measure, to assess the performance of its business activities. It is an industry-wide measure whichenables comparison with our peer group. We calculate cash profit by adjusting statutory profit for non-core items. In general, it represents thefinancial performance of our core business activities. We use cash profit internally to set targets and incentivise our Senior Executives andleaders through our remuneration plans. Refer to page 21 for adjustments between statutory and cash profit. The adjustments made inarriving at cash profit are included in statutory profit which is subject to audit within the context of the external auditor’s audit of the 2023
Financial Report. Cash profit is not subject to audit by the external auditor. Our external auditor has informed the Audit Committee that
adjustments between statutory and cash profit have been determined on a consistent basis across each of the periods presented.
DISCONTINUED OPERATIONSThere are no discontinued operations in the current period. Profit/(Loss) from discontinued operations in the comparative periods relates toimmaterial residual operational costs from divested wealth businesses and partial recovery of certain costs based on Transition Service
Agreements, which ceased in April 2022.
ESTABLISHMENT OF A NEW GROUP ORGANISATIONAL STRUCTURE
On 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established by a scheme of arrangement, a non-operatingholding company, ANZ Group Holdings Limited (ANZGHL), as the new listed parent holding company of the ANZ Group and implemented a
restructure to separate ANZ’s banking and certain non-banking businesses into the ANZ Bank Group and ANZ Non-Bank Group (Restructure).
The ANZ Bank Group comprises the majority of the businesses and subsidiaries that were held in ANZBGL prior to the Restructure. The ANZ
Non-Bank Group comprises banking-adjacent businesses developed or acquired by the ANZ Group to focus on bringing new technology andbanking-adjacent services to the ANZ Group’s customers, and a separate service company.

ANZGHL Financial Information
As a result of the Restructure, the ultimate holding company of ANZBGL is ANZGHL. A copy of the 2023 ANZGHL Annual Report can beaccessed via the ANZ Shareholder Centre on website https://www.anz.com/shareholder/centre/reporting/.

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report21

FinancialreportOUR PERFORMANCE (continued)

CONTINUING OPERATIONS
Key measures of our financial performance are set out below.
O p e r a t i n g e x p en s e s t oo p erat ing inco m e –cash1 (% )N et in t er e s t m a r g in –cash1 (%)

2023

1.70

2023

48.3

2023

2022

1.63

2022

51.6

2022

Re2020t u r n o n eq u it y –cash1 (%)

2023
2022

1.

C r ed it im p a ir m en t c h a r ge
/ ( r elease) – c ash 1 ( $m )C a sh p r o fit1
( $m )
245

2023

7,472

2022

(232)

6,515

C o m m o n eq u it yt ier 1 ( % )
11.2

2023

13.3

10.4

2022

12.3

Information has been presented on a cash profit from continuing operations basis.

ADJUSTMENTS BETWEEN STATUTORY PROFIT AND CASH PROFIT ($m)
90

7,472

Revenue andexpense hedges

2023 Cash profit
attributable to shareholdersof the Company fromcontinuing operations

217

7,165

2023 Statutory profit
attributable to shareholdersof the Company fromcontinuing operations

Economic
hedgesAdjustments between continuing operations statutory profit and cash profit are summarised below:
Adjustment

Comment for the adjustment

Economic hedges
2023: $217 million loss
2022: $569 million gain

The Group enters into economic hedges to manage its interest rate and foreign exchange risk which, in
accordance with accounting standards, result in fair value gains and losses being recognised within the Income
Statement. We remove the fair value adjustments from cash profit since the profit or loss resulting from the hedgetransactions will reverse over time to match with the profit or loss from the economically hedged item as part ofcash profit. This includes gains and losses arising from derivatives not designated in accounting hedge
relationships but which are considered to be economic hedges, including hedges of foreign currency debt
issuances and foreign exchange denominated revenue and expense streams, primarily NZD and USD (and USD
correlated), as well as ineffectiveness from designated accounting hedges.

Revenue and expense
hedges2023: $90 million loss
2022: $54 million gain

In the 2023 financial year, losses on economic hedges relate to funding-related swaps, principally from narrowing
USD/EUR and USD/JPY currency basis spreads. Further losses were driven by the yield curve movement impact on
net pay fixed economic hedge positions, largely during the first half of 2023. Losses on revenue and expense
hedges were mainly due to the depreciation of AUD against the NZD.

22

Australia and New Zealand Banking Group Limited 2023 Annual ReportOUR PERFORMANCE (continued)

GROUP CASH PROFIT PERFORMANCE FROM CONTINUING OPERATIONS
Financial performance and the analysis thereof has been presented on a cash profit from continuing operations basis.
CASH PROFIT FROM CONTINUING OPERATIONS ($m)

652
1,701

(508)
(477)

7,472
(411)

6,515

2022 Cash profit
attributable toshareholders of
the Company
from continuing
operations

Net interest
incomeOther
operatingincomeOperatingexpensesCreditimpairment

Income tax
expense &non-controllinginterests

2023 Cash profit
attributable toshareholders of
the Company
from continuing
operations

2023
$m

2022
$m

Movt

Net interest income
Other operating income

16,575
4,325

14,874
3,673

11%
18%

Operating income
Operating expenses

20,900(10,087)

18,547(9,579)13%
5%

Profit before credit impairment and income tax

10,813
(245)

8,968
232

21%
large

10,568(3,068)(28)

9,200(2,684)
(1)

15%
14%
large

7,472

6,515

15%

Credit impairment (charge)/release
Profit before income tax
Income tax expense
Non-controlling interests
Cash profit attributable to shareholders of the Company
from continuing operations

Cash profit attributable to shareholders of the Company from continuing operations increased $957 million (15%) compared with the 2022
financial year.
Net interest income increased $1,701 million (11%) driven by a $65.5 billion (7%) increase in average interest earning assets and a 7 bps
increase in net interest margin. The increase in average interest earning assets was driven by lending growth across all divisions, higher liquid
assets and the impact of foreign currency translation. The increase of 7 bps was driven by favourable deposit margins, higher earnings oncapital and replicating deposits, and favourable lending mix. This was partially offset by home loan pricing competition, unfavourable deposit
mix, and Markets activities impacted by higher funding costs, primarily on commodity assets, where the related revenues are recognised as
Other operating income.
Other operating income increased $652 million (18%) primarily driven by an increase of $1,063 million in Markets other operating income
from increased customer activity and more favourable trading conditions. This was partially offset by a $232 million decrease from businessdivestments/closures, $98 million of lower realised gains on economic hedges against foreign currency denominated revenue streams
offsetting net favourable foreign currency translations elsewhere in the Group, and a $43 million decrease from the loss on disposal of data
centres in Australia.
Operating expenses increased $508 million (5%) driven by inflationary impacts, incremental costs associated with strategic initiatives, higher
Suncorp Bank acquisition related costs, costs previously attributed to discontinued operations, and the initial levy under the Financial Services
Compensation Scheme of Last Resort Levy Act 2023 (CSLR Levy). This was partially offset by productivity initiatives and investment reprioritisation.
Credit impairment increased $477 million driven by increases in both collectively assessed and individually assessed credit impairment.

22

ANZ 2023 ANNUAL REPORTOverviewOperatingenvironment

Performanceoverview

Governance

Remuneration
reportDirectors’
report23

FinancialreportOUR PERFORMANCE (continued)

ANALYSIS OF CASH PROFIT PERFORMANCE
Net interest income
GROUP NET INTEREST MARGIN (bps)

11

32
163

178
(1)

170

(2)
(6)

(8)

(19)

2022 Cashnet interest
marginAssetspricing

Deposits
pricing

Assets andfunding mix

Net interest income1
Net interest margin (%) - cash1
Average interest earning assets
Average deposits and other borrowings
1.

Capital andreplicating
portfolio

Wholesalefunding2023 Cashnet interest
marginsubtotal

Liquidity

Markets
activities

2023 Cashnet interest
margin

2023
$m

2022
$m

Movt

16,575
1.70
975,540
825,113

14,8741.63
910,037
780,373

11%
7 bps
7%
6%

Includes the major bank levy of -$353 million (2022: -$340 million).

Net interest income increased $1,701 million (11%) driven by a $65.5 billion (7%) increase in average interest earning assets and a 7 bps
increase in net interest margin.
Net interest margin increased 7 bps driven by favourable deposit margin from a rising interest rate environment, higher earnings on capitaland replicating deposits, and favourable lending mix with a shift towards higher margin variable rate home loans. This was partially offset byhome loan pricing competition in the Australia Retail and New Zealand divisions, unfavourable deposit mix with a shift towards lower marginterm deposits and increased term wholesale funding relative to customer deposits, lower average yield on Markets averages earning assets
due to higher funding costs for commodity assets where the related revenues are recognised as Other operating income, growth in lower
yielding liquid assets to replace Committed Liquidity Facility (CLF) which ceased in the first half of 2023 and other increases in liquid assets tomeet regulatory compliance requirements, and higher wholesale funding rates.
Average interest earning assets increased $65.5 billion (7%) driven by lending growth across all divisions, higher liquid assets and the impactof foreign currency translation.
Average deposits and other borrowings increased $44.7 billion (6%) driven by growth in term deposits across all divisions, higher deposits
and repurchase agreements from other banks, higher certificates of deposit and the impact of foreign currency translation. This was partially
offset by lower at-call deposits.

ANZ 2023 ANNUAL REPORT

23

24

Australia and New Zealand Banking Group Limited 2023 Annual ReportOUR PERFORMANCE (continued)
Other operating income
OTHER OPERATING INCOME ($m)

1,063

48
4,325
(407)

3,673
(52)

2022 Cashother
operatingincomeNet fee andcommission
income 1

MarketsotheroperatingincomeShare ofassociates’
profit/(loss)

Other 12023 Cashother
operatingincome

2023
$m

2022
$m

Movt

Share of associates' profit/(loss)
Other1

1,855
1,923
225
322

1,907
860
177
729

-3%
large
27%
-56%

Total cash other operating income

4,325

3,673

18%

Net fee and commission income1
Markets other operating income

1.

Excluding the Markets business unit.

Net fee and commission income decreased $52 million (-3%) driven by lower revenue post Worldline business divestment in the prior year,
and lower cards revenue in the New Zealand division due to regulatory fee changes introduced in November 2022. This was partially offset byhigher cards revenue in the Australia Retail division due to recovery in spending, and higher home loan offset account and annual card fees aswaivers related to the transition of Breakfree Package concluded.
Markets other operating income increased $1,063 million driven by increases in Franchise Revenue across all business lines and geographiesfrom increased customer activity and more favourable trading conditions, an increase in Balance Sheet driven by favourable yield curve
movements and portfolio repricing, and an increase in Derivative Valuation Adjustments with gains from tightening credit spreads and lower
currency and interest rate volatility.
Share of associates' profit increased $48 million (27%) driven by increase in the Group’s equity accounted share of profit from P.T. Bank Pan
Indonesia and AMMB Holdings Berhad.
Other decreased $407 million (-56%) primarily driven by a gain on completion of the ANZ Worldline partnership in 2022, lower realised gains
on economic hedges against foreign currency denominated revenue streams offsetting net favourable foreign currency translations
elsewhere in the Group, and a loss on disposal of data centres in Australia. This was partially offset by the net impact from recycling of foreign
currency translation reserves from other comprehensive income to profit or loss on dissolution of a number of international entities in thecurrent and prior year, and a loss on sale of the financial planning and advice business in 2022.

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report25

FinancialreportOUR PERFORMANCE (continued)

Operating expenses
OPERATING EXPENSES ($m)

65

440

68

10,087
(28)

(37)

9,579

2022 Cashoperatingexpenses

Personnel

Personnel
Premises
Technology
Restructuring
Other
Total cash operating expenses
Full time equivalent staff1
Average full time equivalent staff1
1.

Premises

Technology

Restructuring

2023
$m
5,736
684
1,686
169
1,812
10,087
40,11939,674

Other2023 Cashoperatingexpenses

2022
$m
5,296
721
1,621
101
1,840
9,579
39,172
39,672

Movt
8%
-5%
4%
67%
-2%
5%
2%
0%

2022 comparative information has been restated to include full time equivalent staff of the consolidated investments managed by 1835i Group Pty Ltd in the Group Centre division (FTE:185;
Average FTE: 126).

Personnel expenses increased $440 million (8%) driven by incremental costs associated with strategic initiatives, inflationary impacts on
wages including an increase in leave provisions, costs previously attributed to discontinued operations, and the impact of unfavourable
foreign currency translation. This was partially offset by productivity initiatives and investment re-prioritisation.
Premises expenses decreased $37 million (-5%) driven by the lease exit on modification of a significant lease arrangement in the prior year.
Technology expenses increased $65 million (4%) driven by incremental costs associated with strategic initiatives, higher software licencecosts, inflationary impacts on vendor costs, and costs previously attributed to discontinued operations. This was partially offset by benefits
from technology simplification, investment re-prioritisation, and lower amortisation.
Restructuring expenses increased $68 million (67%) driven by operational changes across all divisions.
Other expenses decreased $28 million (-2%) driven by the disposal of non-banking businesses as part of the Restructure, and investment reprioritisation. This was partially offset by higher Suncorp Bank acquisition related costs and the initial CSLR Levy.

ANZ 2023 ANNUAL REPORT

25

26

Australia and New Zealand Banking Group Limited 2023 Annual ReportOUR PERFORMANCE (continued)

Credit impairment
2023
152
93
245
1,521
349.0
4,408
24.7%
1.16%

Collectively assessed credit impairment charge/(release) ($m)
Individually assessed credit impairment charge/(release) ($m)
Credit impairment charge/(release) ($m)
Gross impaired assets ($m)
Credit risk weighted assets ($b)
Total allowance for expected credit losses (ECL) ($m)
Individually assessed as % of gross impaired assets
Collectively assessed as % of credit risk weighted assets

2022
(311)
79
(232)
1,445
359.4
4,395
37.5%
1.07%

Movt
large
18%
large
5%
-3%
0%

COLLECTIVELY ASSESSED CREDIT IMPAIRMENT CHARGE/(RELEASE) ($m)

25

235

0

152

Group Centre

2023 Collectively
assessed credit
impairment
charge

(3)

(18)

224

(311)
2022 Collectively
assessed credit
impairment
releaseAustralia
RetailAustralia
Commercial

Institutional

New ZealandPacific

The collectively assessed impairment charge of $152 million for 2023 was driven by deterioration in the economic outlook and credit risk. Thiswas partially offset by favourable changes in portfolio composition, particularly in the Institutional division. The collectively assessed
impairment release of $311 million for 2022 was driven by improvements in credit risk, favourable changes in portfolio composition, and a net
release of management temporary adjustments. This was partially offset by an increase of downside risks associated with the economic
outlook.
INDIVIDUALLY ASSESSED CREDIT IMPAIRMENT CHARGE/(RELEASE) ($m)

40

42

5

(19)
79

2022 Individuallyassessed credit
impairment
charge(35)

Australia
RetailAustralia
Commercial

Institutional

93
(19)

New ZealandPacific

Group Centre

2023 Individuallyassessed credit
impairment
charge

The individually assessed credit impairment charge increased $14 million (18%) driven by increases in the New Zealand and Australia Retail
divisions due to lower write-backs and recoveries. This was partially offset by decreases in the Institutional division due to write-back of asingle name exposure, and the Pacific division due to higher write-backs.

26

ANZ 2023 ANNUAL REPORTOverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report27

FinancialreportOUR PERFORMANCE (continued)

GROSS IMPAIRED ASSETS BY DIVISION ($m)

29
137
130
0

1,521

Group Centre

2023 Gross
impaired assets

(108)
1,445

2022 Gross
impaired assets(112)

Australia
RetailAustralia
Commercial

Institutional

New ZealandPacific

Gross impaired assets increased $76 million (5%) driven by increases in the Australia Retail division due to increase in restructured Home Loansfacilities, and the Institutional division due to the downgrade of several single name collateralised exposures. This was partially offset bydecreases in the Australia Commercial division due to reduced number of downgrades, and the Pacific division due to upgrade of restructured
exposures.
TOTAL ALLOWANCE FOR EXPECTED CREDIT LOSSES ($m)

43

106

4

4,408
4,395

(38)

(1)

Pacific

Group Centre(101)2022 Total
allowance
for expectedcredit losses

Australia
RetailAustralia
Commercial

Institutional

New Zealand2023 Total
allowance
for expectedcredit losses

The increase in total allowance for expected credit losses was driven by a $179 million increase in the collectively assessed allowance for
expected credit loss, partially offset by a $166 million decrease in the individually assessed allowance for expected credit losses.
The increase in collectively assessed allowance for expected credit losses was driven by $171 million for the downside risks associated with theeconomic outlook, $54 million from deterioration in credit risk and $30 million from foreign currency translation and other impacts. This waspartially offset by $72 million from favourable changes in portfolio composition, particularly in the Institutional division and $4 million
reduction in management temporary adjustments.
The decrease in individually assessed allowance for expected credit losses was driven by decreases in the Institutional division due to thewrite-back of a large single name exposure and Australia Commercial division due to reductions in the level of impaired loans.

ANZ 2023 ANNUAL REPORT

27

28

Australia and New Zealand Banking Group Limited 2023 Annual ReportOUR PERFORMANCE (continued)

DIVISIONAL PERFORMANCE
2023

Australia
RetailAustralia
Commercial

Institutional

New
Zealand

Pacific

Group
Centre

Group

2.22%
55.6%

2.70%
39.6%

0.89%
40.2%

2.64%
36.3%

3.91%
69.7%

n/a
n/a

1.70%
48.3%

Net interest margin
Operating expenses to operating income
Cash profit from continuing
operations ($m)
Net loans and advances ($b)
Customer deposits ($b)
Number of FTE

1,874

1,440

2,963

1,552

71

(428)

7,472

312.2
164.8
11,313

61.6
113.4
3,514

210.2
266.5
6,412

121.8
99.1
6,766

1.7
3.7
1,013

0.2
(0.1)
11,101707.7
647.4
40,1192022

Australia
RetailAustralia
Commercial

Institutional

New
Zealand

Pacific

Group
Centre

Group

2.25%
55.2%

2.10%
40.3%

0.90%
48.0%

2.47%
38.2%

2.82%
93.3%

n/a
n/a

1.63%
51.6%

2,009

1,551

1,937

1,449

9

(440)

6,515

290.3
150.0
11,107

59.7
112.2
3,551

207.2
262.5
6,316

113.3
92.0
6,793

1.8
3.8
1,086

0.1
(0.1)
10,319672.4
620.4
39,172

1

Net interest margin
Operating expenses to operating income
Cash profit from continuing
operations ($m)
Net loans and advances ($b)
Customer deposits ($b)
Number of FTE
1

1.

28

The net interest margin excluding Markets business unit was 2.39% (2022: 2.17%) for the Group and 2.31% (2022: 1.93%) for the Institutional division.

ANZ 2023 ANNUAL REPORTOverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report29

FinancialreportOUR PERFORMANCE (continued)

DIVISIONAL PERFORMANCE
Australia Retail
Lending volumes increased driven by home loan growth, partially offset by lower unsecured lending. Net interest margindecreased driven by asset margin contraction from competitive pressure, unfavourable deposit mix with a shift towards lower
margin term deposits and higher net funding costs. This was partially offset by favourable deposit margins from a rising interest rateenvironment, favourable lending mix with a shift towards higher margin variable home loans and higher earnings on capital andreplicating portfolio. Other operating income increased driven by higher cards revenue reflecting an increase in consumer
spending, and higher home loan offset account and annual card fees as waivers related to the transition of Breakfree Package
concluded. This was partially offset by lower insurance-related income. Operating expenses increased driven by inflationary
impacts, incremental costs associated with strategic initiatives including ANZ Plus and higher restructuring expense. This waspartially offset by productivity initiatives and investment re-prioritisation. Credit impairment charge increased driven by higher
collectively assessed credit impairment, and higher individually assessed credit impairment due to lower write-backs and recoveries.
Australia Commercial
Lending volumes increased driven by SME and Specialist Business lending growth, partially offset by the sale of Investment Lending
business and asset finance run-off. Net interest margin increased driven by favourable deposit margins from a rising interest rateenvironment and higher earnings on capital and replicating portfolio. This was partially offset by unfavourable deposit mix with ashift towards lower margin term deposits, higher net funding costs and asset margin contraction from competitive pressure. Other
operating income decreased driven by the gain on sale relating to the ANZ Worldline partnership in the prior year and lower impact
of divested business results. This was partially offset by the loss on sale of the financial planning and advice business in the prior year,
and higher cards revenue reflecting an increase in commercial spending. Operating expenses increased driven by inflationarypressure, incremental costs associated with strategic initiatives and higher restructuring expense, partially offset by lower costs post
business divestment and productivity initiatives. Credit impairment charge increased driven by higher collectively assessed credit
impairment, and higher individually assessed credit impairment charge.
Institutional
Lending momentum was sustained, with higher Markets balances partially offset by lower Transaction Banking volumes. Net
interest margin ex-Markets increased driven by favourable deposit margins from a rising interest rate environment and higher
earnings on capital and replicating portfolio. Other operating income increased primarily driven by higher Markets revenues fromincreased customer activity and more favourable trading conditions. Operating expenses increased driven by inflationary impacts
and incremental costs associated with strategic initiatives, partially offset by productivity initiatives. Credit impairment release
increased driven by release of collectively assessed credit impairment, and release of individually assessed credit impairment due towrite-back of a single name exposure.
New ZealandLending volumes increased driven by home loan growth, partially offset by contraction in business lending. Net interest marginincreased driven by favourable deposit margins from a rising interest rate environment. This was partially offset by asset margin
contraction from competitive pressure and unfavourable deposit mix with a shift towards lower margin term deposits. Other
operating income decreased driven by gain on sale of government securities in 2022 and lower cards revenue due to regulatorychanges introduced in November 2022. Operating expenses increased driven by inflationary pressure and customer remediation
provision release in the prior year. Credit impairment charge increased driven by increase in collectively assessed credit impairment
and increase in individually assessed credit impairment due to lower write-backs and recoveries.
Pacific
Cash profit increased driven by higher net interest margin, loss on the planned closure of ANZ American Territories in 2022, andhigher credit impairment release due to higher write-backs.
Group Centre
2023 included the recycling of foreign currency translation reserves (FCTR gain) from other comprehensive income to profit or loss
on dissolution of a number of legal entities, a loss on sale of data centres in Australia, transaction related costs, and the initial CSLR
Levy. 2022 included the recycling of FCTR loss from other comprehensive income to profit or loss on dissolution of a number of legal
entities, and a net charge on lease modification impacts of a significant lease arrangement.

ANZ 2023 ANNUAL REPORT

29

30

Australia and New Zealand Banking Group Limited 2023 Annual ReportOUR PERFORMANCE (continued)

FINANCIAL POSITION OF THE GROUP
Condensed balance sheet
As at
2023
$b

2022
$b

Movt

186.1
134.0
60.4
707.7
17.8

185.6
121.4
90.2
672.4
16.0

0%
10%
-33%
5%
11%

1,106.0

1,085.6

2%

29.7
815.2
57.5
116.0
18.5

30.0
797.3
85.1
93.7
13.2

-1%
2%
-32%
24%
40%

Total liabilities

1,036.9

1,019.3

2%

Total equity

69.1

66.4

4%

AssetsCash / Settlement balances owed to ANZ / Collateral paid
Trading assets and investment securities
Derivative financial instruments
Net loans and advances
Other
Total assets
Liabilities
Settlement balances owed by ANZ / Collateral received
Deposits and other borrowings
Derivative financial instruments
Debt issuances
Other

Trading assets and investment securities increased $12.6 billion (+10%) driven by an increase in government and semi-government bonds,
and treasury bills.
Derivative financial assets and liabilities decreased $29.8 billion (-33%) and $27.6 billion (-32%) respectively driven by market rate
movements and maturing prior period foreign exchange spot and forwards positions.
Net loans and advances increased $35.3 billion (+5%) driven by home loan growth in the Australia Retail ($21.6 billion) and New Zealand ($3.0
billion) divisions, higher lending volumes in the Australia Commercial ($1.8 billion) and Institutional ($1.8 billion) divisions and the impact offoreign currency translation.
Deposits and other borrowings increased $17.9 billion (+2%) driven by increases in customer deposits in the Australia Retail ($14.8 billion),
Institutional ($2.7 billion) and New Zealand ($1.8 billion) divisions, an increase in certificates of deposit ($7.8 billion) and the impact of foreign
currency translation. This was partially offset by decreases in deposits from banks and repurchase agreements ($11.2 billion) and commercial
paper ($6.3 billion).
Debt issuances increased $22.3 billion (+24%) driven by the issue of new senior and subordinated debt, including ANZ Capital Notes 8.

30

ANZ 2023 ANNUAL REPORTOverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report31

FinancialreportOUR PERFORMANCE (continued)

Liquidity

Total liquid assets ($b)
Liquidity Coverage Ratio (LCR) 1
1

1.

Average
2023

2022

268.3
130%

241.7
131%

Full year average, calculated as prescribed per APRA Prudential Regulatory Standard (APS 210 Liquidity) and consistent with APS 330 requirements.

The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed
environment, as well as to meet regulatory requirements. High Quality Liquid Assets comprise three categories, with the definitions consistent
with Basel 3 LCR:
• Highest-quality liquid assets: cash, highest credit quality government, central bank or public sector securities eligible for repurchase withcentral banks to provide same-day liquidity.
• High-quality liquid assets: high credit quality government, central bank or public sector securities, high quality corporate debt securities
and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
• Alternative liquid assets: eligible securities listed by the RBNZ and assets qualifying as collateral for the CLF.
The Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory
requirements and the risk appetite set by the ANZBGL Board.
The LCR remained above the regulatory minimum of 100% throughout this period.

Funding

Customer liabilities (funding)
Wholesale funding
Shareholders’ equity

2023
$b

2022
$b

659.1
316.8
69.1

628.4
300.3
66.4

Total funding

1,045.0

995.1

Net Stable Funding Ratio

116%

119%

The Group targets a diversified funding base, avoiding undue concentration by investor type, maturity, market source and currency.
Net Stable Funding Ratio remained above the regulatory minimum of 100% throughout this period.
During 2023, the ANZ Bank Group issued $39.9 billion term wholesale debt funding (of which $3.0 billion was pre-funding for the 2024
financial year) with a remaining term greater than one year as at 30 September 2023, and $1.5 billion of Additional Tier 1 Capital.

ANZ 2023 ANNUAL REPORT

31

32

Australia and New Zealand Banking Group Limited 2023 Annual ReportOUR PERFORMANCE (continued)

Capital management1
2023

2022

Movt

- APRA Basel III

13.3%

12.3%

Credit risk weighted assets ($b)

349.0

359.4

-3%

Total risk weighted assets ($b)

433.3

454.7

-5%

APRA Leverage Ratio

5.4%

5.4%

Common Equity Tier 1 (Level 2)

1.

2022 comparatives are based on APRA Basel 3 requirements, whereas 2023 is based on the Capital Reform Requirements.

ANZ’s framework includes managing to Board approved risk appetite settings and maintaining all regulatory requirements. APRA
requirements at Level 1 and Level 2 include ANZ operating at or above APRA’s expectation for Domestic Systematically Important Banks (DSIBs) following the implementation of APRA’s Capital Reform which was effective January 2023.
APRA, under the authority of the Banking Act 1959, sets minimum regulatory requirements for banks including what is acceptable asregulatory capital and provides methods of measuring the risks incurred by ANZ Bank Group.

APRA Capital Reform
APRA released new bank capital adequacy requirements applying to Australian incorporated registered banks, which are set out in APRA’s
Banking Prudential Standard documents. ANZ implemented these new requirements from 1 January 2023. The application of APRA Capital
Reform reduced RWA by $34.5 billion, equivalent to a 100 bps CET1 ratio benefit. This was partially offset by APRA’s expectations that ADIs
operate a higher capital ratio to maintain an unquestionably strong level.
The ANZ Bank Group’s Common Equity Tier 1 ratio was 13.3% based on APRA Basel III standards, exceeding APRA’s minimum requirements. It
increased 105 bps driven by cash earnings, and APRA Capital Reform impacts. This was partially offset by the impact of dividends paid during
the year, underlying RWA movement, capital deductions and surplus capital transferred to ANZGHL as part of the Restructure.
At 30 September 2023, the Group’s APRA leverage ratio was 5.4% which is above the 3.5% proposed minimum for internal ratings-based
approach ADI (IRB ADI), which includes ANZ.
Dividends
ANZBGL paid the following dividends during the year:• $2,213 million final dividend to ANZ shareholders on 15 December 2022;• $1,000 million special dividend to its intermediate holding company, ANZ BH Pty Ltd, a wholly owned subsidiary of ANZGHL, as part of the
Restructure on 3 January 2023; and• $2,387 million interim dividend to ANZ BH Pty Ltd on 3 July 2023.
On 10 November 2023, the Directors proposed a final dividend of $2,825 million be paid on 22 December 2023, to ANZ BH Pty Ltd.
Further details on dividends provided for or paid during the year ended 30 September 2023 are set out in Note 6 Dividends in the Financial
Report.

32

ANZ 2023 ANNUAL REPORTOverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportPAGE INTENTIONALLY
LEFT BLANK

Directors’
reportFinancialreport33

34

Australia and New Zealand Banking Group Limited 2023 Annual Report

REMUNERATIONREPORT
Our employee engagement score hasremained the highest in the Australianbanking sector and improved even further
to now sit equal to the world’s bestcompanies in any industry. We havemade substantial progress in hiring andpromoting women into leadership roles,
and significantly, three of our four Divisions
are now led by women.

2023 variable remuneration
outcomes
As a Board, we believe we haveappropriately recognised the results
achieved by the executive team who havedelivered a strong result for the bank andshareholders, in a challenging environment.
Our Chief Executive Officer (CEO), Shayne
Elliott, performed well this year and in the
Board’s view deserves an assessment of well
above target for his personal objectives.
He also has ultimate accountability for thebroader Group’s performance which wasassessed as above target.
Ilana Atlas, AO
Chair – Human Resources Committee

2023 Remuneration
Report – audited
Dear Shareholder,
ANZ delivered strong results strategically,financially and culturally in financial year
2023. Our performance highlights arecontained in the Chairman and CEO’s
messages within the Annual Report.
The Group achieved a total shareholder
return (TSR) of 20% over the past financial
year with contribution from both shareprice appreciation and dividends paid.
ANZ’s three-year TSR was 76%.
The team has produced good year-on-year
outcomes while investing in a number of
longer-term strategic initiatives that will
position us well for the future. This includes

ongoing investment in our Retail Platform
ANZ Plus which at the end of 2023 had
465K customers and $9.4bn in deposits,
growth in our industry leading highreturning Institutional Payments CashManagement and Platform Services
businesses and in our Commercial business
which delivered close to 20% of ANZ’sGroup Profit.
The Group maintained a high degree of risk
discipline during this volatile period withthe foundational work completed over prioryears positioning us well to manage
financial and non-financial risk in aconsidered and thoughtful way. There wasa material uplift in the work to embed anon-financial risk framework, and other risk
related programs remain on track despite
their complexity.

The Board determined the appropriate
2023 Short Term Variable Remuneration(STVR) outcome was 96% of his maximum
opportunity (120% of target opportunity).
This is the first above target STVR award
for the CEO since commencing in therole in 2016.
2023 Long Term Variable Remuneration(LTVR) was the first LTVR award under our
new executive remuneration structure.
A recap of the remuneration structure(to ensure compliance with APRA CPS 511
Remuneration), is summarised in section 3.2.
The CEO’s proposed 2024 LTVR of $3.375m
will be subject to a shareholder vote at theupcoming Annual General Meeting (AGM).
For Disclosed Executives, the Board
approved 2023 STVR outcomes whichrange from 80% to 100% of maximum
opportunity (average 89%). This reflects
their individual and Divisional performanceand the above target assessment for Group
performance. 2023 LTVR (50% performancerights and 50% restricted rights) wasawarded at full opportunity at the startOverviewOperatingenvironment

Performanceoverview

Governanceof the 2023 year, following the Board’s
pre grant assessment for restricted rights
determining that no reduction
was required.
There were no performance rights due
to vest in financial year 2023, as a resultof a change in the performance period
from three years to four years in 2019.

Remuneration
reportDirectors’
report• for the absolute Compound Annual
Growth Rate (CAGR) TSR hurdle:
CAGR targets to be based on the timeweighted cost of capital over the
four-year performance period (rather
than the cost of capital at the start of theperiod), to better reflect cyclical factors
impacting shareholders for improved
shareholder alignment.

2023 fixed remuneration

See section 7.2.5 for detail.

As reported last year, effective for 2023,
Disclosed Executives (excluding the CEO),received a fixed remuneration (FR)adjustment of ~4% as a result of thechanges we made to the executive
remuneration structure in 2022 (i.e., tobalance the significant reduction in theirmaximum variable remuneration
opportunity from 402% to 235% of FR).
There were no further increases except for
the Group Executive, Technology & Group
Services who received a market adjustment
reflecting the expansion of responsibilities
effective 1 November 2022.

Non-Executive Director (NED) fees

Changes to the way weremunerate executives
For future LTVR awards of performancerights (i.e., these changes apply fromfinancial year 2024 and do not apply
to awards currently on foot), the Board
has approved that:

Financialreport35

CONTENTS
1.

Who is covered by this report

362.

2023 outcomes at a glance

37

3.

Overview of ANZ’sremuneration structure 

38

4.

Group performance40

5.

2023 CEO and Disclosed
Executive outcomes

44

While there were no changes to NED feesfor 2023, some uplifts for 2024 have been
approved. For 2024, there is no uplift to
the Board Chair fee, a 2% uplift to the NED
member fee (noting that this is the firstincrease since 2016), and uplifts to fees
for Committee chairs and members (seesection 9.1).

6.

Structure and delivery:
performance50

7.

Structure and delivery:
remuneration51

8.

Accountability andConsequence Framework

This was a year of good performance, where
we achieved good results in the year, while
also making significant progress towards
creating long-term value. Thank you to all
our employees for their commitment andcontribution this year.

10. Remuneration governance

62

11. Other information

64

On behalf of the Board, I invite you to
consider our Remuneration Report which
will be presented to shareholders at the2023 AGM.

• for the relative TSR hurdle: DBS
Bank Limited to be removed fromthe Select Financial Services (SFS)
comparator group to better balance theweighting of international peers in ourcomparator group;

Ilana Atlas, AO Chair – Human Resources Committee

9.

58

Non-Executive Director (NED)
remuneration60

Australia and New Zealand Banking Group Limited 2023 Annual Report

36

The Remuneration Report for Australia and New Zealand Banking Group Limited (ANZBGL) outlines ourremuneration strategy and structure and the remuneration practices that apply to Key Management
Personnel (KMP). This report has been prepared, and audited, as required by the Corporations Act 2001.
It forms part of the Directors’ Report.
It should be noted that ANZ Group Holdings Limited (ANZGHL) replaced Australia and New Zealand Banking Group Limited (ANZBGL)
as the listed entity on 3 January 2023 under a scheme of arrangement approved by shareholders at the Annual General Meeting (AGM) on
15 December 2022. This report includes disclosures for the full financial year 2023 (1 October 2022 to 30 September 2023). Ordinary sharesand employee equity (deferred shares, deferred share rights, restricted rights and performance rights) held prior to 3 January 2023 werepreviously ANZBGL related equity – post the listing of ANZGHL the equity was converted to ANZGHL related equity. References to ‘the Board’
throughout this report mean the Boards of ANZGHL and ANZBGL. Section 4 Group Performance relates to ANZGHL rather than ANZBGL given
this forms the basis for determining performance and remuneration outcomes for the CEO and Disclosed Executives.

1

WHO IS COVERED BY THIS REPORTKMP are Directors of the Group (orentity) (whether executive directors orotherwise), and those personnel witha key responsibility for the strategic
direction and management of theGroup (or entity) (i.e., members of theGroup Executive Committee (ExCo))
who have Banking Executive
Accountability Regime (BEAR)
accountability and who report to theChief Executive Officer (CEO) (referred
to as Disclosed Executives).

1.1 Disclosed Executive and NonExecutive Director changes1
There were several changes to our KMP
during the 2023 year:• Graham Hodges commenced as a
Non-Executive Director (NED) on
8 February 2023.
• Graeme Liebelt retired as a NED on
15 December 2022, at the conclusionof the 2022 AGM.
• Holly Kramer commenced as a NED
on 1 August 2023.
• Gerard Florian was appointed to the
expanded role of Group Executive,
Technology & Group Services, andAntony Strong was appointed to
ExCo as Group Executive, Strategy &Transformation, effective
1 November 2022.
• Clare Morgan commenced with
ANZ in the Group Executive, Australia
Commercial role effective 6 March 2023.
• Kathryn van der Merwe concluded as
ANZ’s Group Executive, Talent & Culture
and Service Centres in May 2023 –the responsibilities of the role were
subsequently split on an acting capacity1,
with Richard Howell appointed as Acting
Group Executive, Talent & Culture from
1 June 2023.

1.2 Key Management Personnel (KMP)The KMP whose remuneration is disclosed in this year’s report are:2023 Non-Executive Directors (NEDs) – Current
P O’Sullivan

Chairman

I AtlasDirector

J Halton

Director

G Hodges

Director from 8 February 2023 (ANZBGL NED only)

J Key

Director

H Kramer

Director from 1 August 2023

J Macfarlane

Director

C O’Reilly

Director

J SmithDirector

2023 Non-Executive Directors (NEDs) – Former
G Liebelt

Former Director – retired 15 December 2022

2023 Chief Executive Officer (CEO) and Disclosed Executives – Current
S Elliott

CEO and Executive Director

M Carnegie

Group Executive, Australia Retail

K Corbally

Chief Risk Officer (CRO)F Faruqui

Chief Financial Officer (CFO)G FlorianGroup Executive, Technology & Group Services from 1 November 2022
(previously Group Executive, Technology to 31 October 2022)

R HowellActing Group Executive, Talent & Culture (GE T&C) from 1 June 2023

C MorganGroup Executive, Australia Commercial from 6 March 2023

A Strong

Group Executive, Strategy & Transformation from 1 November 2022

A WatsonGroup Executive and CEO, New Zealand

M WhelanGroup Executive, Institutional

2023 Disclosed Executives – Former
K van derMerwe

Former Group Executive, Talent & Culture and Service Centres (GE T&C) –concluded in role 31 May 2023 and ceased employment 30 June 2023

Changes to KMP since the end of 2023 up to the date of signing the Directors’ Report,
as announced:• Richard Howell ceased as Acting Group Executive, Talent & Culture, effective 8 October 2023.
• Elisa Clements appointed to ExCo as Group Executive, Talent & Culture, effective 9 October 2023.

1. The responsibility for ANZ’s Capability Centres (formally known as Service Centres) in an acting capacity was taken over by Sreeram Iyer, Chief Operating Officer Institutional, who does
not meet the definition of a KMP.

Overview2

Operatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreport372023 OUTCOMES AT A GLANCE

Chief Executive Officer(CEO) remuneration

Disclosed Executive
remuneration

Restricted rights and Performancerights outcomes (CEO and Disclosed
Executives)

FOR 2023, OUR CEO:FOR 2023:• Had no increase to fixed
remuneration (FR).

• Disclosed Executives received a FR
adjustment on 1 October 2022 (inaccordance with changes we madeto the executive remuneration structure
in 2022, previously disclosed in the 2022
Remuneration Report). There were nofurther increases to FR for Disclosed
Executives for 2023 except for the Group
Executive, Technology & Group Services
who received a market adjustment
reflecting the expansion of responsibilities
effective 1 November 2022.

The Board determined that the 2023 LTVR
restricted rights (RR) should be made at fullaward value based on the outcome of the
pre grant assessment (see section 5.3).

• Disclosed Executives’ STVR outcomesaveraged 89% of maximum opportunity,with individual outcomes ranging from
80% to 100% of maximum opportunity.

Non-Executive Director (NED) fees

• Was awarded Short Term Variable
Remuneration (STVR) of 96% of
maximum opportunity, reflecting
his overall performance assessment ofwell above target (see section 5.2.1).
• Was awarded Long Term Variable
Remuneration (LTVR) of $3.375m
following shareholder approval at
the 2022 AGM.
• Received total remuneration of $4.6m
in 2023 (i.e., includes the value of priorequity awards which vested in 2023
as per section 5.1).

• Disclosed Executives were awarded theirfull LTVR opportunity of 135% of FR (100%of FR for the CRO) (see section 5.4).

There were no performance rights (PR)due to vest in financial year 2023, as a resultof a change in the performance period
from three years to four years (i.e., 2018 PR
award vested in Nov/Dec 2021, however
2019 PR award is not due to vest until
Nov/Dec 2023).

No increases to NED fees for 2023
(see section 9.1).

Australia and New Zealand Banking Group Limited 2023 Annual Report38

3

OVERVIEW OF ANZ’S REMUNERATION STRUCTURE

3.1 Remuneration framework overview

The following overview highlights how the executive remuneration framework supports ANZ’s purpose
and strategy, reinforces ANZ’s focus on risk management, and aligns to shareholder value.
ANZ’S PURPOSE AND STRATEGY1
Is underpinned by our Performance and Remuneration Policies which include our Reward Principles:
Attract, motivate
and keep great
peopleReward our people fordoing the right thing having
regard to our customers
and shareholders

Focus on how things areachieved as much as whatis achieved

Fair and simple
to understandWith remuneration delivered to our CEO and Disclosed Executives through:Fixed remuneration (FR)

Variable remuneration
Short Term Variable Remuneration (STVR)Long Term Variable Remuneration (LTVR)

Reinforced by aligning remuneration and risk:
Assessing behaviours
based on ANZ’s values
and risk/compliancestandards (including
the BEAR)

Determining variable
remuneration
outcomes with risk
as a modifier –impacting outcomesat both a pool andindividual level

Weightingremuneration toward
the longer-term with asignificant proportion
at riskEmphasising risk inthe determinationand vesting of LTVR RR(see section 7.2.4)

Reinforcing theimportance of risk
culture in driving
sustainable long-term
performance in the
LTVR design

Providing material
weight to non-financial
metrics (particularlyrisk) in line with APRA
requirements

Ensuring risk measures
are considered overa long time horizon(up to 5 and 6 years)

Determining
accountability andapplying consequenceswhere appropriate

Strengthening
risk consequenceswith clawback(see section 7.3)

Prohibiting the hedging
of unvested equity

While supporting the alignment of executives and shareholders through:Substantial
shareholding
requirements

Significant variable
remuneration deferral
up to 5 and 6 years in
ANZ equity

Use of relative andabsolute total
shareholder return(TSR) hurdles

Consideration of cash
profit and economic
profit in determining
the ANZ Incentive
Plan (ANZIP) variable
remuneration pool

Consideration of theshareholder experience(in respect of the shareprice and dividend) in
determining ANZIP pooland individual outcomes

While governed by:
The Human Resources (HR) Committee and the Board determining FR and the variable remuneration outcomes for the CEO and each
Disclosed Executive. Additionally, the CEO’s LTVR outcome is also subject to shareholder approval at the AGM.
Board discretion (with supporting decision-making frameworks) is applied when determining performance and remuneration outcomes(including grant of short and long-term variable remuneration awards), before any scheduled release of previously deferred remuneration(see section 7.3), before the vesting of LTVR RR (see section 7.2.4), and in applying any required consequences (see section 8).
1. See the ‘Our purpose and strategy’ section of the Annual Report.

OverviewOperatingenvironment

Governance

Remuneration
reportPerformanceoverview

Directors’
report39

Financialreport

3.2 Overview of remuneration structure
CEO and Disclosed Executives (DEs) (excluding CRO1)

Fixed Remuneration(FR)

Short Term Variable
Remuneration (STVR) 2Long Term Variable
Remuneration (LTVR)

Mix atMaximum

30%

30%

40%

Maximum
opportunity

100% of FR

100% of FR

135% of FR

DeliveryCash and superannuation
contributions

50% Deferredshares (DS)

50% CashAwarded at end of year basedon Group and individual
performance

Timing/deferral

YEAR 1 Cash 100%

YEAR 1

Cash 50%YEAR 2 DS 25%

50% Restricted
rights (RR)

50% Performancerights (PR)• Awarded at start of year subject to– RR: Pre grant assessment (risk-based measures)– RR & PR: Shareholder approval at AGM for
CEO award• Performance condition tested at end of 4-year
performance period– RR: Pre vest assessment (risk-based measures)– PR: Relative and absolute TSR hurdles
For both RR and PR:
Deferral period = 4-year Performance Period + Holding Period (HP)

YEAR 3 DS 25%
4-year Performance Period~1 yr HP
~2 yr HP

YEAR 4 CEO: 33% / DE: 50%
YEAR 5 CEO: 33% / DE: 50%
YEAR 6 CEO 34%

All variable remuneration is subject to the Board’s ongoing discretion
to apply in-year adjustments, malus and clawback
1. CRO mix: 33.3% FR / 33.3% STVR / 33.3% LTVR. STVR maximum opportunity: the same as CEO/DE at 100% of FR, LTVR maximum opportunity: 100% of FR and delivered as 100% RR
to support independence. 2. If the CEO receives above target STVR, the amount above target will be delivered as 40% cash and 60% DS (20% year 4, 20% year 5, 20% year 6) to ensurecompliance with the minimum deferral requirements with respect to BEAR and APRA's Prudential Standard CPS 511 Remuneration.

As communicated in our 2022 Remuneration Report, the introduction of a new Prudential Standard CPS 511 Remuneration by our regulator
APRA drove a detailed review of the way we reward our CEO and Disclosed Executives. The Board approved changes to the executive
remuneration structure, effective from the 2022 financial year.

The structure has been designed to:

Key features of the structure include:• Maintain a strong focus on performance and risk management• Balanced vesting over the short and long-term, with deferral ofa significant proportion of variable remuneration (~80%) over
2 to 5 years (and over 2 to 6 years for the CEO)• Promote effective management of financial and nonfinancial risks• Provide material weight to non-financial metrics for variable
remuneration outcomes (in line with APRA requirements)• Ensure long-term focus and shareholder alignment• Balance meeting the CPS 511 requirements and having
a market competitive remuneration structure• Strong risk and remuneration consequences, including clawback
applying for two years post the payment/vesting of all variable
remuneration• Rewarding executives for both annual performance and also
performance over the longer term
• Future focused LTVR comprising a combination of risk-based
and TSR hurdles

Australia and New Zealand Banking Group Limited 2023 Annual Report

40

4

GROUP PERFORMANCE

4.1 Assessment against the ANZGroup Performance Frameworkfor 2023
The ANZ Group Performance Framework
is approved by the Board at the start ofeach year. It plays a key role to:• message internally what matters most;

As managing risk appropriately is fundamental to the way
ANZ operates, risk forms an integral part of the assessment,
directly impacting the overall ANZ Group Performance
Framework outcome (a modifier ranging from 0% to 110% of
the ANZ Group Performance assessment).

• reinforce the importance of soundmanagement in addition to risk,
financial, customer, and people
outcomes; andRISK• inform focus of effort, prioritisationand decision-making across ANZ.

0 TO 110%

Assessment of performance against the
ANZ Group Performance Frameworkprovides a key input:

Modifier

Overall assessment

On target (no adjustment)• in determining the size of the ANZ
Incentive Plan (ANZIP) pool, whichfunds STVR for Disclosed Executives; and• in the overall performanceassessment for the CEO (50%weighting) and Disclosed Executives(25% - 50% weighting), which informs
STVR outcomes.

FINANCIALDISCIPLINE &OPERATIONALRESILIENCE

CUSTOMERPEOPLE &CULTUREA range of objective indicators andsubjective factors are considered
including management input on work
undertaken, evidence of outcomesrealised and lessons learned, and withconsideration given to the operating,regulatory and competitive environment.

35%

35%

30%

Overall assessment

Overall assessment

Overall assessment

Well above
targetBelow target

Above target

Overall, performance in 2023 wasassessed as above target with all
business lines contributing strongly.
On the following pages we haveoutlined ANZ’s 2023 performance
objectives and provided a summary ofoutcomes for each of the key performance
categories to inform the overall
assessment for 2023.

weightweightOVERALL

Group Performance
Assessment

Above target

weightOverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
report

FINANCIAL DISCIPLINE & OPERATIONAL RESILIENCE

Directors’
reportAssessment (35% weight): Well above target

Key objectives

Outcomes

Run core businesses well, focused on delivering sustainable growthand operational improvements

Below

Deliver Group economic profit to plan or better in a high-quality manner

Economic Profit(ex large / notables1)

Contain total cost growth to support the ambition of our 3yr Strategic Plan

Total Cost Growth(fx adj ex large/ notables1)

Deliver / progress key change programs – plan for day 1 integration of
Suncorp Bank (SB), NOHC structure, BS11, Ngā Tapuwae (NT)41

FinancialreportPrograms

Target

Above

$552m

$1,596m

5%

SB Plan, NT
Launch, BS11

NOHC

• Significant improvement in financial performance (see section 4.2.1) with Economic Profit2 (+293%) and Cash NPAT (+14%) up YoY, as a result of:– Strong growth in net interest income (+11% YoY), driven by (i) disciplined volume growth across our divisions and (ii) improved margin outcomes– in a supportive rate environment, but in the face of continuing home loan competition and customer shifts to higher rate deposit products.

– All four businesses performing strongly against their Plans.
– Continued low credit impairment charges ($245m), as a result of improved portfolio credit quality, and long-term discipline regarding customer selection.
• Costs were managed well in line with market guidance (of +5% YoY, fx adj ex large/notables), with significant productivity gains and management
focus on our investment slate, which helped to partially offset significant headwinds (e.g., inflationary pressure).
• We implemented the NOHC structure in a short time frame, BS11 was delivered (the first of any bank in NZ), Ngā Tapuwae has launched (to move
ANZ NZ core to cloud and redesign business for greater resilience, agility and lower cost), and we are operationally ready to integrate Suncorp(if our application to the Australian Competition Tribunal is successful).
CUSTOMER

Assessment (35% weight): Below target

Key objectives

Outcomes

Deliver great customer outcomes, focused on improving the financial wellbeing,sustainability and experience of priority segments

Australia Retail: accelerate ANZ Plus customer acquisition and engagement andensure Plus Home Loan is in market, including the broker channel; and maintainhome lending turnaround times in line with or better than major banks
Australia Commercial: materially improve customer and banker experience
New Zealand: continue to make banking easierInstitutional: make meaningful progress on environmental sustainability strategies
Business Services: transition our four business services to a uniform service approach

Below

Aus Retail
Aus Retail

TargetAbove

Plus inBrokerPlus
Lendingtimes

Aus Commercial
NZ
Institutional
Business Services• Australia Retail: Significant progress with ANZ Plus, exceeding 2023 targets related to active customers (465K vs 400K target), funds undermanagement (FUM) ($9.4bn vs $4bn target), and Net Promoter Score (NPS) scores (e.g., Join NPS of +52 vs 45 target). Plus Home Loans launched,although not via the broker channel as planned. Turnaround times in Classic Home Loans have been stable for the entire year and within the range
targeted (<3 days), while growing market share (32 bps), and improving Home Lending NPS from 71.1 in 2022 to 76.1 in 2023.
• Australia Commercial: Strategy is being executed with early signs of success (e.g., faster and simpler application process; time to final decision on asmall business loan improved from 12 to 9.3 days, launch of market leading “streamlined unsecured lending’’ offering simpler processes, NPS of 29.9
vs 26.5 in 2022); however we targeted a more material improvement in customer and banker experience.
• New Zealand: Remain #1 for Brand Consideration. Data capability enhanced with acquisition of DOT Loves Data. Successful launch of Business
Regrowth Loans and Business Visa Debit for business customers.
• Institutional: Continued leading Asia Pacific market in improving social and environmental outcomes and supporting our customers’ transition
to net zero – having achieved close to $47bn of our 2025 sustainable solutions target of $50bn on 31 March 2023, and rolled out a new $100bn
target (by the end of 2030) from 1 April 2023. Institutional extended its leadership in the Peter Lee3 surveys, with the highest Relationship Strength
Index scores ever achieved by any bank in both Australia and NZ, and our best ever Transaction Banking results (including ranking #1 for productdevelopment and innovation, and system implementation for the first time), further strengthening our leadership in the provision of Payments
and Cash Management solutions in Australia and NZ (#1 market share).
• Business Services: Our ambition to build enterprise-wide Business Services as a more efficient and resilient path to service delivery, is behind plan,
however progress has been made.
1. 2. 3. See footnotes over page.

42

Australia and New Zealand Banking Group Limited 2023 Annual Report

PEOPLE & CULTURE

Assessment (30% weight): Above target

Key objectives

Outcomes

Build a culture where our diverse teams are engaged and optimised for success

Below

Target

Above

84%

87%

Maintain industry leading employee engagement
Continue to improve our project delivery capability
90% 94%Retain high performers (particularly those with the critical skills and priority
capabilities to reinvent banking)• We have continued our purposeful focus on strengthening leadership, capability, culture and project delivery, as evidenced by the
execution of a range of supporting initiatives delivering value, our highly engaged workforce, and recognition as a great place to work.

– Our engagement score is industry leading for financial services at 87% (vs 84% in 2022), and equal to the world’s best companies in any
industry, and we have also maintained our #1 ranking amongst major bank peers in Glassdoor4 employer of choice ratings.

– We made good progress on Women in Leadership at 37.3% (vs a target of 36.9%), and up on 2022 outcome of 35.9%. Three out of four ofour business divisions are led by women.

– Our project delivery capability continues to improve, and after a sustained effort and investment we are seeing material uplift in ourdelivery capability (supported by various independent reports to the Board).

– Uplift in leadership capability with investment in a range of programs (e.g., Lead@ANZ rolled out to ~5,600 people leaders, Executive
Leadership Series with NPS>50). Capability uplift in priority areas (e.g., launch of Engineering Career Pathways to support the developmentof technical mastery across critical specialisations, roll out of a Customer Coaching program, implementation of Career Programs strategy
resulting in a 100% increase in applications to the 2024 Graduate Program).
RISK MODIFIER

Assessment: On target (no adjustment)

Continued sound risk discipline with no major regulatory, credit, audit or market breaches.

• Strong credit outcome with no material credit events recorded.
• Ongoing progress in delivering key regulatory commitments and uplifting non-financial risk management (through the further
implementation of our new Group wide non-financial risk framework), although the APRA imposed operational risk overlay of$500m remains.
• Strengthening risk culture (including achieving the target state of ‘Sound’ and continuing to achieve a high ‘Speak Up’ index of 84%),reflecting sustained efforts to encourage people to speak up and challenge each other respectfully.
• No repeat adverse audits, no material Risk Appetite Statement breaches, and no material non-financial risk events.
BOARD DISCRETION

Assessment: No adjustment

After several years of focus on simplifying ANZ through the sale of businesses and cost restructuring, ANZ has successfully delivered
sustainable growth in the remaining core businesses against a backdrop of increased changes in consumer behaviour, a slowdown in theeconomy, as well as increasing disruption in Financial Services (via the rise of new digitally enabled business models and non-bankcompetitors). The outcome also aligns strongly with the shareholder experience (see section 4.2.2).
Overall, the Board view that an ‘above target’ assessment accurately reflects overall performance in 2023, noting that STVR outcomes for the
CEO and Disclosed Executives also take into consideration performance against individual objectives.
OVERALL ASSESSMENT

Assessment: Above target

The above target assessment appropriately reflects our performance with all business lines each contributing strongly together to achieve
above target financial results and strong performance against our strategic objectives - positioning ANZ well for the future.
1. The Group’s results include a number of items collectively referred to as large/notable items. Given the nature and significance they are considered separately given the target was establishedwithout consideration of large notables. 2. Economic profit is a risk adjusted profit measure used to evaluate business unit performance and is not subject to audit by the external auditor.
Economic profit is calculated via a series of adjustments to cash profit with the economic credit cost adjustment replacing the accounting credit loss charge; the inclusion of the benefit of
imputation credits (measured at 70% of Australian tax) and an adjustment to reflect the cost of capital. The economic profit increase in 2023 was driven by higher cash profit, favourable economic
credit cost adjustment and higher imputation credits, partially offset by higher cost of capital. 3. Peter Lee Associates 2022 Large Corporate and Institutional Relationship Banking surveys, Australia
and NZ. 4. Glassdoor is a website where employees and former employees anonymously review companies and their management.

Operating
environment

Overview

Governance

Performanceoverview

Remuneration
reportDirectors’
report43

Financialreport4.2 ANZ Performance Outcomes
4.2.1 ANZ’S FINANCIAL PERFORMANCE 2019–2023

When determining variable remuneration outcomes for the CEO, Disclosed Executives and employees a range of different financial indicators
are considered. The Group uses cash profit1 as a measure of performance for the Group’s ongoing business activities, as this provides a basis
to assess Group and Divisional performance against earlier periods and against peer institutions. The adjustments made in arriving at cash
profit are included in statutory profit which is subject to audit. Although cash profit is not audited, the external auditor has informed the
Audit Committee that the cash profit adjustments have been determined on a consistent basis across each period presented.
Statutory profit is flat compared to the prior financial year, while cash profit from continuing operations has increased almost 14%.
Underlying performance reflects stronger revenue from lending volumes across our divisions together with improved net interest margin in
a supportive rate environment which enable continued focus on investing for growth.
The table below provides ANZ’s financial performance, including cash profit, over the last five years.
2019

2020

2021

2022

2023

Statutory profit attributable to ordinary shareholders ($m)

5,953

3,577

6,162

7,119

7,098

Cash profit ($m, unaudited)

6,161

3,660

6,181

6,496

7,405

Cash profit – Continuing operations ($m, unaudited)

6,470

3,758

6,198

6,515

7,405

Cash profit before provisions – Continuing operations($m, unaudited)

9,958

8,369

8,396

8,968

10,754

Cash ROE (%) – Continuing operations (unaudited)

10.9

6.2

9.9

10.4

10.9

Cash EPS – Continuing operations (unaudited)

220.2

128.7

216.5

228.8

247.1

Share price at 30 September ($)

28.52

17.22

28.15

22.80

25.66

Total dividend (cents per share)

160

60

142

146

175

Total shareholder return (12 month %)9.2(36.9)

70.7(14.0)

20.0

1(On 1 October 2018, opening share price was $27.80)

1. Cash profit excludes non-core items included in statutory profit with the net after tax adjustment resulting in an increase to statutory profit of $307m for 2023, made up of several items. It isprovided to assist readers understand the results of the core business activities of the Group.

4.2.2 ANZ TSR PERFORMANCE (1 TO 10 YEARS)The table below compares ANZ’s TSR performance against the median TSR and upper quartile TSR of the PR Select Financial Services (SFS)
comparator group1 over one to ten years, noting that for this table TSR is measured over a different timeframe (i.e., to 30 September 2023) tothe performance period for our PR.
• ANZ’s TSR performance was above the median TSR of the SFS comparator group1 when comparing over one year; and• below the median over three, five and ten years.

Years to 30 September 2023
1

3

5

10

ANZ (%)

20.0

76.3

19.7

46.1

Median TSR SFS (%)

14.6

77.3

29.8

60.0

Upper quartile TSR SFS (%)

22.3

90.9

60.9

128.2

1. See section 7.2.5 for details of the SFS comparator group.

Australia and New Zealand Banking Group Limited 2023 Annual Report

4452023 CEO AND DISCLOSED EXECUTIVE OUTCOMES• The ANZ Group Performance Frameworkassessment (see section 4.1).
• The quality of earnings and operating
environment.
• The shareholder experience during2023 such as shareholder returns anddividend comparison with prior periods.
• Our Reward Principles such as attract,
motivate and keep great people (seesection 7).

Variable remuneration is ’at risk’
remuneration and can range from zero
to maximum opportunity.
With the exception of the CEO’s STVR,
individual variable remuneration
outcomes for all other employees
including STVR for Disclosed Executives
are funded under the ANZ Incentive
Plan (ANZIP). The Board decides theCEO’s variable remuneration outcomesseparately to help mitigate potential
conflicts of interest. See section 10.1.3.
At the end of each financial year the Board
exercise their judgement to determine a fairand reasonable ANZIP pool. An assessmentof financial performance guides the pool
range but it is not a formulaic outcome. The
Board considers a range of factors including:

Where expectations are met, STVR is likely
to be awarded around 80% of maximum
opportunity. Where performance is below
expectations, STVR will be less (potentiallydown to zero), and where above
expectations, STVR will be more (potentially
up to maximum opportunity).

Annual performance objectives are set atthe Group and also at the Divisional/
individual level at the start of each year.
They are designed to be stretching yetachievable. The HR Committee and theBoard make variable remuneration outcome
decisions for the CEO and Disclosed
Executives following lengthy and detailed
discussions and assessment, supported bycomprehensive analysis of performancefrom a number of sources.

LTVR will be awarded at the beginning of
the year, based on full opportunity unless
the LTVR RR pre grant assessment results
in any reduction (and is also subject toshareholder approval for the CEO).
Remuneration outcomes have beenpresented in the following three ways:
i. RECEIVED remuneration(see section 5.1)
ii. AWARDED remuneration(see sections 5.2, 5.3 and 5.4)
iii. STATUTORY remuneration(see section 11.1)

5.1 2023 Received remuneration
This table shows the remuneration the CEO and Disclosed Executives actually received in relation to the 2023 financial year as cash paid, or in thecase of prior equity awards, the value which vested in 2023.
FR adjustments were received by Disclosed Executives in accordance with the executive remuneration structure changes made in 2022, as disclosed
in the 2022 Remuneration Report. There were no other adjustments to FR for Disclosed Executives in 2023, apart from the Group Executive,
Technology & Group Services whose FR was increased on 1 November 2022 from $1.15m to $1.25m to reflect the expansion of responsibilities
and to improve alignment with the market.

2023 Received remuneration – CEO and Disclosed Executives:
Received value includes the value of prior equity awards which vested in that year
Fixed
remuneration$

Cash variable
remuneration$

Total cash$

Deferred variable
remuneration which
vested during the year1$

Other deferredremuneration
which vested
during the year1$

Actualremuneration
received2$

CEO AND CURRENT DISCLOSED EXECUTIVESS Elliott

2,500,000

1,160,000

3,660,000

919,413-

4,579,413

M Carnegie

1,250,000

550,000

1,800,000

561,264-

2,361,264

K Corbally

1,250,000

532,500

1,782,500

471,287-

2,253,787

F Faruqui

1,250,000

600,000

1,850,000

795,274-

2,645,274

G Florian3

1,242,000

497,500

1,739,500

496,698-

2,236,198

R Howell4

231,792

180,000

411,792--

411,792

C Morgan4,5

627,000

250,000

877,000-

407,000

1,284,000

A Strong4

690,000

315,100

1,005,100

291,162-

1,296,262

A Watson6

1,106,505

472,570

1,579,075

450,151-

2,029,226

M Whelan

1,460,000

730,000

2,190,000

753,723-

2,943,723

n/a780,000

488,194-

1,268,194

FORMER DISCLOSED EXECUTIVESK van der Merwe1,4

780,000

1. Deferred variable remuneration which either vested or lapsed/forfeited during the year is the point in time value of previously deferred remuneration granted as deferred shares, deferredshares rights and/or restricted rights/performance rights, and is based on the one day Volume Weighted Average Price (VWAP) of the Company’s shares traded on the ASX on the date of vestingor lapsing/forfeiture multiplied by the number of deferred shares/deferred share rights and/or restricted rights/performance rights. No previously deferred variable remuneration lapsed/forfeitedduring the year for the CEO or Disclosed Executives (due to no performance rights due to vest in 2023) other than for K van der Merwe -$4,880,967, which relates to forfeiture on resignation ofunvested deferred remuneration. 2. The sum of fixed remuneration, cash variable remuneration and deferred variable remuneration which vested during the year. 3. Fixed remuneration reflects
changes in fixed remuneration during the financial year due to expanded role (G Florian). 4. Fixed remuneration based on time as a Disclosed Executive (R Howell, C Morgan, A Strong, K van der
Merwe). 5. Other deferred remuneration for C Morgan relates to deferred remuneration forfeited and bonus opportunity forgone as a result of joining ANZ, that was deferred as cash and vested
during the year. 6. Paid in NZD and converted to AUD. Year to date average exchange rate used to convert NZD to AUD as at 30 September for the relevant year.

OverviewOperatingenvironment

Performanceoverview

Governance

5.2 Awarded STVR

Remuneration
reportDirectors’
reportand Disclosed Executives for the 2022 and2023 performance periods. STVR awarded
reflects actual cash and the deferred sharescomponent of STVR awarded in respectof the relevant financial year. As non-cash
components are subject to future vestingoutcomes, the awarded value may be higher
or lower than the future realised value.

At the end of the financial year, the HR
Committee makes a recommendation
to the Board for their approval in respectof STVR outcomes.
STVR will vary up or down year-on-year, it is
not guaranteed, and may range from zero toa maximum opportunity.

2023 remuneration outcomes reflect boththe overall performance of the Group andthe performance of each individual/Division.

These tables show a year-on-yearcomparison of STVR awarded to the CEO,45

Financialreport5.2.1 CEOThe Board determined that an STVR
outcome of $2.4m (96% of maximum
opportunity) was appropriate for 2023
having regard to both the overall
performance of the CEO and also theoverall performance of the Group. This is
the first above target STVR award for the
CEO since commencing in the role in 2016,reflecting the above target performanceoutcome in 2023 as summarised below.

'WHAT' ASSESSMENT SUMMARYANZ Group Performance Framework - see section 4.1(50% weighting)

Individual Strategic Objectives - see below(50% weighting)Assessed as: Above target

Assessed as: Well above target'HOW' ASSESSMENT SUMMARYANZ Values & Behaviours

Individual Risk / Compliance Assessment

Assessed as: Above expectations

Assessed as: Met expectations

OVERALL PERFORMANCE ASSESSMENT

Assessed as: Well above target (120%)

Awarded STVR in the relevant financial year – CEO
Actual STVR

STVR as % of

Financial
year

STVR
maximum
opportunity$

Total STVR$

STVR
STVR cash deferred shares
$
$

2023

2,500,000

2,400,000

1,160,000

2022

2,500,000

1,860,000

930,000

Targetopportunity

Maximum
opportunity

1,240,000

120%

96%

930,000

93%

74%

CEO

S Elliott

46

Australia and New Zealand Banking Group Limited 2023 Annual Report

2023 CEO individual strategic objectives• Drive the strategic direction of the organisation, with particular focus on growth, home lending momentum and Commercial strategy
in Australia, and embed our digital transformation, Sustainability, Platforms and Ecosystems• Focus on sound risk management, operational excellence and resilience including system stability, to ensure ANZ has robust andreliable platforms to support long-term growth• Lead and role model the culture and accountability required to transform ANZ• Enhance the reputation of ANZ across all stakeholder groups• Complete Suncorp acquisition with agreed integration plan
• Continue to build ExCo effectiveness and succession pipelines for ExCo and CEO

Board assessment of performance on individual strategic objectives:
The CEO delivered a strong performance
this year. After several years focused on
simplification of ANZ (disposal of businesses
and internal re-structures), ANZ has moved
to driving sustainable growth ineach of the core businesses. Pleasingly,
ANZ’s record financial performance in2023 was contributed to by each of thefour core business divisions. The CEO’sdeliverables highlight that the key strategic
building blocks are in place to support
long-term performance.
The CEO has focused on executing anddelivering sustainable growth in our corebusinesses. Key results include:• ANZ Plus being the fastest growing newbank platform in Australia, including
exceeding targets related to the numberof active customers, funds undermanagement and Net Promoter Scores• Executing the Commercial strategy, with
the new Division performing strongly - inlarge part due to the CEO’s stewardshipof this business (pre appointment of GE,
Australia Commercial)• Exceeding our ambitions to growsustainability as a source of revenue
through a range of sustainability banking
activities such as, labelled sustainablefinance (e.g., green and sustainability
linked loans, bonds and guarantees), andbanking activities to fund and facilitate
the transition to a net zero economy(e.g., green buildings, renewableenergy, energy efficiency, sustainableinfrastructure)• Recovery of home lending momentum,with growth exceeding 1x system target• Improving share on Institutional payment
platforms, with overall payments
growing by ~8%• Building digital ecosystems in support ofthe broader strategy (e.g., investments in
View Media Group, DOT Loves Data andPollination, and appointment of a new
CEO in Cashrewards)
There has been continued strongrisk discipline championed by the CEO,with emphasis on the right behaviours
to identify, discuss, and act on risks thebank confronts and takes. Strengthening
operational excellence and resiliencehas been a key focus of the CEO.
Examples include:• Clear progress in the build of a Groupwide non-financial risk framework (withstrong business leadership)• Executed a very ambitious change
agenda (e.g., technology uplift programs,
ANZ Plus, NOHC implementation,
Suncorp acquisition, Platform Services,major regulatory programs)• Demonstration of strong cyber resilience,and positive achievements in the area offinancial crime• Delivery of BS111 (the first of any New
Zealand bank) and the launch of NgāTapuwae2 in NZ to unlock future growthin New Zealand
A key strength of the CEO is his strong
advocacy and role modelling of ANZ’svalues and behaviours – create
opportunities, deliver what matters,
succeed together – as evidenced by all
business lines contributing strongly toachieve a great performance outcome.
The CEO’s leadership translates into
continuing high employee engagement(87%) – which is equal to the Global BestIn Class across all industries. Similarly,
ANZ’s ‘Speak Up’ index at 84% reflects
continued efforts to encourage a culture

where people feel they can challenge
each other respectfully.
The CEO continues to demonstrate hisability to communicate effectively andauthentically with stakeholder groups– shareholders, employees, customers,
regulators, government and the community(including non-profit and environmentalgroups). He is regarded as a thought
and industry leader both internallyand externally, and engages regularly
with employees and the community
at large, via multiple communicationand media channels, parliamentary
hearings, and through proactive
relationship management.
The CEO has played a key role in leading
the Suncorp acquisition initiative, and has
been a strong advocate of the benefits
and opportunities for ANZ, our customers
in Queensland, and the broader community.
While the ACCC rejected ANZ’s application,
the CEO has ensured ANZ is well prepared
for the integration of Suncorp Bank into
ANZ in the event its application forAustralian Competition tribunal review
is successful.
The strong performance in 2023 reflects
the effective support provided by the
CEO to ExCo, along with key moves andappointments made to his team over thelast 1 to 2 years. Executive succession anddevelopment continue to be a focus for the
CEO and the Board, with the CEO making
solid progress in enabling potential internal
CEO successors in the future.
Overall there were many positive
achievements in 2023 (positioning ANZ
well to deliver against our strategic
priorities), and in the Board’s view the CEO
deserves an overall assessment outcomeof well above target.

1. BS11 outlines the Reserve Bank of New Zealand’s outsourcing policy. 2. ANZ New Zealand has embarked on a multi-year program of work to fundamentally transform
its business. Called “Ngā Tapuwae o ANZ” (“The footsteps of ANZ”), this program will change our core technology, processes and ways of working.

Operating
environment

Overview

Governance

Performanceoverview

Remuneration
reportDirectors’
report47

Financialreport5.2.2 DISCLOSED EXECUTIVES• STVR outcomes continue to differ both year-on-year and between executives demonstrating the at risk nature of this element of
remuneration and the variability in Group and individual performance year-on-year. In 2023, STVR is at or above target for all Disclosed
Executives (reflecting that they have all jointly delivered material value from strategic and operational decisions in 2023); however only 2of 38 Disclosed Executives in recent reporting periods (2018 to 2022) received at or above target variable remuneration. See section 5.4 for2023 variable remuneration awarded details.
• The average STVR outcome for current Disclosed Executives is 89% of maximum opportunity. This reflects both the overall assessment of
ANZ Group performance as above target (see section 4.1), which is weighted 25% or 50%, and also individual performance (see section
6.2) which is weighted 75% or 50% depending on role. Outcomes range from 80% to 100% of maximum opportunity. The remuneration
outcomes in 2023 reflect that this is a high performing team, with all business and enablement functions each contributing significantly toa strong performance outcome for ANZ.
• 2023 STVR awarded outcomes for both C Morgan and A Strong are based on their time as a Disclosed Executive during 2023
(i.e., ~7 months and ~11 months respectively).
• R Howell’s 2023 STVR awarded outcome reflects the period acting as the GE T&C (i.e., ~4 months).
Awarded STVR in the relevant financial year – Disclosed Executives
Actual STVR

STVR as % of

STVR
maximum
opportunity$

Total STVR$

STVR cash$

STVR deferredshares$Targetopportunity

Maximum
opportunity

2023

1,250,000

1,100,000

550,000

550,000

110%

88%

2022

1,250,000

920,000

460,000

460,000

92%

74%

2023

1,250,000

1,065,000

532,500

532,500

107%

85%

2022

1,250,000

885,000

442,500

442,500

89%

71%

2023

1,250,000

1,200,000

600,000

600,000

120%

96%

2022

1,212,500

1,159,150

579,575

579,575

120%

96%

2023

1,250,000

995,000

497,500

497,500

100%

80%

2022

1,150,000

885,000

442,500

442,500

96%

77%

2023

348,068

300,000

180,000

120,000

108%

86%

C Morgan

2023

627,000

500,000

250,000

250,000

100%

80%

A Strong1

2023

690,000

630,200

315,100

315,100

114%

91%

A Watson2

2023

1,106,505

945,140

472,570

472,570

107%

85%

2022

1,108,830

845,483

422,742422,742

95%

76%

2023

1,460,000

1,460,000

730,000

730,000

125%

100%

2022

1,460,000

1,070,000

535,000

535,000

92%

73%

Financial
year
CURRENT DISCLOSED EXECUTIVES

M Carnegie

K Corbally

F Faruqui1

G Florian

R Howell11

M Whelan

FORMER DISCLOSED EXECUTIVES		K van der Merwe3

2023

780,000

n/a

n/a

n/a

n/a

n/a

2022

1,040,000

800,000

400,000

400,000

96%

77%

1. STVR based on time as a Disclosed Executive in either 2022 (F Faruqui) or 2023 (R Howell, C Morgan, A Strong). R Howell STVR subject to 40% deferral (see section 7.1 for remuneration
arrangements due to acting nature of appointment). 2. Paid in NZD and converted to AUD. Year to date average exchange rate used to convert NZD to AUD as at 30 September for the relevant
year. 3. Ineligible for STVR.

48

Australia and New Zealand Banking Group Limited 2023 Annual Report

5.3 Awarded LTVR and pre grant assessment outcome
The first award of LTVR under the new remuneration structure was made at the start of the 2023 financial year to Disclosed Executives(Nov 2022) and the CEO (Dec 2022 post AGM), and it was awarded at full opportunity.
LTVR was not awarded in 2022, due to the transition from awarding LTVR at the beginning of the year rather than at the end.
The RR component of LTVR was subject to a pre grant assessment by the Board which determined that the award should be made at fullvalue (i.e., no reduction); and will be subject to a pre vest assessment by the Board of non-financial measures at the end of the four-year
performance period to determine whether the RR should vest in full.

Restricted Rights Pre Grant Assessment (see section 7.2.4)
STEP

ACTIONOUTCOME

Step 1

Assess Prudential Soundness

Met

Step 2

Assess Risk Measures

Met

Step 3

Apply Board discretion

No adjustment

Pre grant assessment outcome

100%

The PR component of LTVR is subject to TSR hurdles (see section 7.2.5), which will determine the level of vesting and subsequent value of PR
at the end of the performance period.

CEO LTVR: Shareholders approved at the 2022 AGM a 2023 LTVR award of $3.375m (135% of FR), delivered in the form of 50% RR and 50% PR.
Similarly, shareholder approval will be sought at the 2023 AGM for a 2024 LTVR award of $3.375m.
Disclosed Executives LTVR: 2023 LTVR awarded at full opportunity (135% of new FR related to the structural change, and 100% for the CRO).
Note that for C Morgan, a pro-rated 2023 LTVR was granted in September 2023 (rather than November 2022) due to commencement with
ANZ partway through 2023, and R Howell was not eligible in his acting capacity. See section 7.2.3 for delivery details.

5.4 2023 Awarded VR
The below charts show the STVR and LTVR awarded to the CEO and Disclosed Executives for the year ending 30 September 2023.
CEO 2023 VRS ELLIOTT

VR $5,775,000$2,400,000
STVR cash

STVR deferred shares$3,375,000
LTVR RR

LTVR PR

Disclosed Executives 2023 VR
M CARNEGIE

VR $2,787,500$1,100,000$1,687,500

K CORBALLY

VR $2,315,000$1,065,000$1,250,000

F FARUQUI

VR $2,887,500$1,200,000$1,687,500

G FLORIAN

VR $2,547,500$995,000$1,552,500

R HOWELL

VR $300,000$300,000C MORGAN

VR $1,350,000$500,000$850,000A STRONG

VR $1,642,700$630,200$1,012,500

A WATSON

VR $2,442,061$945,140$1,496,921

M WHELAN

VR $3,431,000$1,460,000
STVR cash

STVR deferred shares$1,971,000
LTVR RR

LTVR PROperating
environment

Overview

Remuneration
reportPerformanceoverview

GovernanceDirectors’
report49

Financialreport5.5 2023 Remuneration comparison with prior years
CEO - Summary of 2022 and 2023 total remuneration

AWARDEDRECEIVEDSTATUTORYAwarded remuneration reflects actual cash and thedeferred shares component of STVR awarded in theyear. As non-cash components are subject to future
vesting outcomes, the awarded value may be higher
or lower than the future realised value.

Received remuneration reflects

Statutory remunerationreflects remuneration inaccordance with Australian
Accounting Standards which
includes FR and the amortised
accounting value of variable
remuneration, not the actualawarded or received value inrespect of the relevant financial
year (i.e., includes the value of
STVR and LTVR expensed in
the year). This is different toremuneration received in 2023
(which includes prior year
awards which vested).

the actual remuneration received
in the year (i.e., cash paid and thevalue of previously awarded STVR
deferred shares and LTVR
performance rights which vested
in the year).

Awarded remuneration appears significantly higher in
2023, largely because no LTVR was awarded for 2022
(as we transitioned to the new remuneration structure
and moved to awarding LTVR at the start (rather thanend) of the financial year). Note, STVR is awarded at
the end of the year.

The amount received is lower
in 2023 (compared to 2022),
primarily due to there being
no LTVR due to vest in 2023
due to changing from a three
to four-year performance period
in Nov/Dec 2019.
Total
remuneration$

Total
remuneration$

8,275,000

4,579,413

6,186,508

4,360,000

6,000,069

5,489,133

Total
LTVR remuneration
$
$

Fixed
remuneration
$

STVR
$

2023

2,500,000

2,400,000

3,375,000

2022

2,500,000

1,860,000

n/aHistorical STVR and LTVR
This table shows the STVR as a % of maximum opportunity and LTVR vesting outcomes for the CEO over the last five years. STVR outcomesare reasonably aligned with financial performance trends over the corresponding 2019 to 2023 periods, with 2023 STVR higher than prioryears, consistent with 2023 financial performance (see section 4.2.1).
Historical STVR and LTVR – CEO1
2019

2020

2021

2022

2023

STVR2 outcome (% of maximum opportunity)

48%

33%3

53%

74%

96%

LTVR vesting outcome (% vested)

21.8%

0%

43.3%

51.6%

n/a

1. Prior to 2022, the maximum STVR opportunity for the CEO was 150% of target, however under the new structure (effective from 2022) this was reduced to 125% of target, therefore the 2022
and 2023 STVR % of maximum opportunity of 74% and 96% respectively is not comparable with prior years. If the maximum opportunity had remained at 150% of target, then the 2022 and2023 STVR outcomes for the CEO (on a like for like basis) would have equated to 62% and 80% of maximum opportunity respectively. 2. Previously referred to as AVR pre-2022. 3. Post 50%
COVID-19 reduction.

Historical VR1
This table shows the VR as a % of maximum opportunity for the executives who were disclosed over the last five years.
Historical VR – Disclosed Executive
STVR outcome (average % of maximum opportunity )2

3

STVR outcome (range % of maximum opportunity )2

VR PR vesting outcome (% vested)

3

2019

2020

2021

2022

2023

45%

4

36%

60%

78%

89%

0% - 74%

31% - 44%

46% - 66%

71% - 96%80% - 100%

21.8%

0%

43.3%

51.6%

n/a

1. Prior to 2022 the maximum VR opportunity for Disclosed Executives was 150% of combined VR target, however under the new structure (effective from 2022), this was reduced to 125% of
STVR target component only, therefore the 2022 and 2023 STVR % of maximum opportunity shown above of 78% and 89% respectively are not comparable with prior years. If the maximum
opportunity had remained at 150% of target, then the average 2022 and 2023 STVR outcomes for Disclosed Executives (on a like for like basis) would have equated to 65% and 74% of maximum
opportunity respectively. 2. Previously referred to as VR pre-2022. 3. Pre 2022, % of maximum opportunity applied to the full VR due to the combined VR structure for Disclosed Executives in those
years. 4. Post 50% COVID-19 reduction.

Australia and New Zealand Banking Group Limited 2023 Annual Report

50

6

STRUCTURE AND DELIVERY: PERFORMANCE

6.1 CEO performanceWith regard to STVR, the CEO is assessed
50% on the ANZ Group Performance
Framework and 50% on achievementof individual strategic objectives aligned
to ANZ’s strategy. Both the ANZ Group
Performance Framework and individual
strategic objectives are agreed by the
Board at the start of the financial year
and are stretching.
WEIGHTING OF
FINANCIAL METRICSSTVR
The CEO’s STVR is not formulaic –outcomes are moderated by the Risk
element of the ANZ Group Performance
Framework and the Board’s judgementon the appropriate STVR considering all
aspects of performance.
LTVR
TSR (both relative and absolute) continue
to determine the outcome of LTVR PR(50% LTVR weighting). However, LTVR
also includes a 50% weighted RR award
that is primarily focused on risk-based
measures (as part of the pre grant andpre vest assessments – see section 7.2.4).
This ensures LTVR has a material weight
to non-financial measures as required
under the APRA Prudential Standard CPS
511 Remuneration.
At the end of the financial year, ANZ’s
performance is assessed against the ANZGroup Performance Framework, and theCEO’s performance is also assessed against
this, along with his individual strategic
objectives, the ANZ values (behaviours),delivery of the BEAR obligations and ANZ’srisk and compliance standards. In
conducting the CEO’s performanceassessment, the HR Committee seeks input
from the Chairman, CRO (on risk
management), CFO (on financial
performance), GE T&C (on talent and culture
matters) and Group General Manager
Internal Audit (GGM IA) (on internal audit
matters). Material risk, audit and conduct

events that have either occurred or cometo light in the year are also considered,
together with input from both the Audit
Committee and the Risk Committee of
the Board.

Finance, Talent and Culture, and Internal
Audit, and also reviews material risk, audit
and conduct events, and seeks input fromboth the Audit Committee and the Risk
Committee of the Board.

6.2 Disclosed Executive
performance

The HR Committee reviews andrecommends to the Board for approval theoverall performance outcomes for each
Disclosed Executive.

At the start of each year, stretching
performance objectives are set in the formof Divisional Performance Frameworks foreach of our Disclosed Executives, inalignment with the ANZ Group Performance
Framework approved by the Board.
At the end of the financial year, theperformance of each Disclosed Executive1
is assessed against the ANZ Group
Performance Framework (25% to 50%
weighting), their Divisional Performance
Framework, ANZ’s values (behaviours),delivery of BEAR obligations and ANZ’srisk and compliance standards.
The ANZ Group Performance Framework
weighting for Disclosed Executives
reinforces the importance of collective
accountability and contribution to Groupoutcomes. The respective 2023 weighting
varies based on role focus:• 50% Group performance weighting: CFO,
GE Strategy & Transformation, GE T&C,
and GE Technology & Group Services• 25% Group performance weighting:CRO, GE Australia Retail, GE Australia
Commercial, GE & CEO New Zealand,and GE Institutional
Similar to the ANZ Group Performance
Framework, the Divisional Performance
Frameworks include the key elements ofFinancial Discipline and Operational
Resilience, Customer, and People andCulture, with Risk acting as a modifier.2 The
weighting of each element varies to reflect
the responsibilities of each individual’s role.
The Financial Discipline and Operational
Resilience element weightings range from
20% to 40%.
The HR Committee seeks input from theCEO, and independent reports from Risk,

STVR and LTVRAt the end of the financial year, the CEO
and HR Committee determine STVR
recommendations for each Disclosed
Executive, which are ultimately approved by
the Board.3 STVR varies year-on-year in linewith performance – it is not guaranteed andmay be adjusted up or down ranging fromzero to a maximum opportunity.
As highlighted in section 4, performanceagainst objectives impacts STVR outcomes(e.g., where expectations are met, STVR islikely to be awarded around target which
equates to 80% of maximum opportunity).
The degree of variance in individual STVR
outcomes reflect the weighting of theGroup component (i.e., roles with 50%
Group weighting will generally have lessdifferentiation), and relative performance ofthe different areas/individuals, ensuring
appropriate alignment between
performance and reward. The outcomesdemonstrate the at risk nature of STVR, andthat outcomes vary across the Disclosed
Executives and also from year to year. The
average 2023 STVR for Disclosed Executives
is 89% of maximum opportunity (ranging
from 80% to 100%).
LTVR under the new remuneration structure
was awarded for the first time in 2023, witha pre grant assessment (focused on risk
measures) resulting in a full RR award. A prevest assessment will determine the number
of RR that ultimately vest, and performanceagainst TSR hurdles will determine the levelof vesting of PR. LTVR (RR and PR) is
designed to strengthen the alignment ofexecutive interests with shareholders, andPR provide a strong link between the
reward for executive performance and TSR
returns over the next four-year period.

1. Performance arrangements for the CRO are addressed additionally by the Risk Committee. Performance arrangements for the Group Executive and CEO, New Zealand are determined andapproved by the ANZ NZ HR Committee/ANZ NZ Board in consultation with and endorsed by the HR Committee/Board, consistent with their respective regulatory obligations. 2. Except for the
CRO who has a percentage weighting assigned to risk measures. 3. Remuneration arrangements for the Group Executive and CEO, New Zealand are determined and approved by the ANZ NZBoard in consultation with and endorsed by the Board, consistent with their respective regulatory obligations.

Overview

7

Operatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreport51

STRUCTURE AND DELIVERY: REMUNERATION

There are two core componentsof remuneration at ANZ – FR andat risk variable remuneration.
In structuring remuneration, the Board aims
to find the right balance between fixed andvariable remuneration (at risk), the way it isdelivered (cash versus deferredremuneration) and appropriate deferral
time frames (the short, medium andlong-term).
The Board sets (and reviews annually) theCEO and Disclosed Executives’ FR basedon financial services market relativities andreflecting their responsibilities, performance,
qualifications and experience.
The CEO and Disclosed Executives’ variable
remuneration is comprised of STVR
and LTVR consistent with externalmarket practice.
Variable remuneration is designed to focus
our CEO and Disclosed Executives on
stretching performance objectives
supporting our business strategy, risk
management and the delivery of long-term
stakeholder value.

In considering variable remuneration
outcomes the HR Committee and Board
reflect on the application of ANZ’s Reward
Principles:• Reward our people for doing the rightthing having regard to our customers
and shareholders: Variable remuneration

should be primarily based on ‘outcomes’
rather than ‘effort’ and proportionate
relative to performance. It also needs toconsider the experience and expectationsof a range of stakeholders (including
shareholders, customers, employees,
community and regulators).
• Attract, motivate and keep great people:
In determining remuneration outcomes,
the Board acknowledges the importanceof balancing performance with being
market competitive to ensure retention of
key talent – particularly in a competitive
talent landscape.
• Focus on how things are achieved asmuch as what is achieved: The Board
ensures that appropriate consideration
and weight is given to performanceagainst objectives (which includes a risk

modifier), a risk assessment (capturing
financial and non-financial risks), and howthat performance was achieved (i.e., in
accordance with our values and purpose).
• Fair and simple to understand: Variable
remuneration should be fair andconsistent through the cycle and haveregard to external influences outside ofmanagement’s control.
Variable remuneration outcomes are basedon a range of measures (as illustrated
overleaf ), with material weight provided to
non-financial measures in accordance withPrudential Standard CPS 511 Remuneration.
Our variable remuneration approach has
a strong focus on driving long-termsustainable outcomes for shareholders. For
example, STVR outcomes include a numberof objectives that are considered key driversof shareholder value, and the significant
weighting to the LTVR component (around
60% of VR) as well as 50% of STVR delivered
as ANZ shares, aligns a large proportion of
executive remuneration to the shareholder
experience (in respect of the share priceand dividend).

52

Australia and New Zealand Banking Group Limited 2023 Annual Report

STVR
Mix of financial and non-financial measures

LTVR RR
Mostly non-financial

LTVR PR
Financial

Key Individual Assessment Inputs
ANZ values
Behaviours

Risk/compliance
Including material events

BEAR obligations

ANZ Group
Performance
Framework
25%-50% weighting

Individual strategic
objectives/Divisional
Performance Framework
50%-75% weighting

Controlfunction input
Risk, Finance,
T&C, Audit

FY23 ANZ Group Performance Framework
Objectives below are examples of key drivers of shareholder value
RISK (MODIFIER)
Maintain risk discipline
focused on good customer
and regulatory outcomes• Deliver major regulatorycommitments• Strengthen risk culture

Additional financial andnon-financial overlays
considered by the Boardin determining Group andindividual performanceand the size of the ANZIP
pool include:• Broader financial
performance (beyond
scorecard measures)• The quality of earnings
and operating
environment• The shareholder
experience (e.g., shareprice growth anddividends)

ALIGNED TO SHAREHOLDER EXPERIENCE
Prudential Soundness

TSR• Capital ratio and liquidity
prudential minimums• 75% relative TSR
Rewards for performance
relative to that of SFS
comparator group

Risk Measures• Material risk outcomes
Considers all risk types
including capital adequacy
risk, compliance risk,
credit risk, liquidity andfunding risk, market risk,
operational risk, strategic
risk, technology risk andconduct risk

• 25% absolute TSR
Ensures there is acontinued focus onproviding positive
growth – even whenmarket is declining
Measures absolute CAGR

• APRA active supervision• Risk culture

FINANCIAL DISCIPLINE& OPERATIONALRESILIENCE (35%)
Run core businesses well,delivering sustainable growthand operational improvements

CUSTOMER (35%)
Deliver great customer outcomes,
focused on improving the financial
wellbeing, sustainability andexperience of priority segments

PEOPLE & CULTURE (30%)
Build a culture where ourdiverse teams are engaged
and optimised for success• Deliver economic profit to plan or
better in a high-quality manner• Contain total cost growth• Deliver/progress key change
programs• Accelerate ANZ Plus customer
acquisition and engagement• Materially improve Commercial
customer & banker experience• Meaningfully progress environmental
sustainability strategies• Transition to uniform business services• Maintain high employee engagement• Continue to improve project capability• Attract, retain and develop people
with critical skills to reinvent banking

STVR and LTVR provide material weight to non-financial measures as per CPS 511

By deferring a significant portion of variable remuneration (around 80% of maximum opportunity for the CEO and Disclosed Executives
and 75% for the CRO), we seek to ensure alignment with shareholder interests, to deliver on ANZ’s strategic objectives, and to ensure a focus
on long-term value creation. Deferred variable remuneration has significant retention elements, and most importantly, can be adjusted
downwards, including to zero, allowing the Board to hold executives accountable, individually or collectively, for the longer-term impactsof their decisions and actions.
Board discretion is applied when determining all CEO and Disclosed Executive variable remuneration outcomes including:• STVR and LTVR outcomes for each financial year;• LTVR vesting outcomes (pre vest assessment);• Consideration of malus or further deferral before any scheduled release of previously deferred remuneration;• Consideration of clawback for up to two years post payment or vesting of variable remuneration. See section 7.3.

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Financialreport7.1 Remuneration mix
The CEO and Disclosed Executives1 have an aligned remuneration mix (30% FR, 30% STVR and 40% LTVR at maximum opportunity),and structure (with the exception of longer deferral for the CEO in line with APRA’s deferral requirements).
CEO

Remuneration mix – CEO ($m)
Remuneration mix – CEO ($m)

Minimum opportunity
2.500

2.500

Maximum opportunity
2.500

8.375 (44% cash, 56% equity)30%
FR+1.200+1.300+1.68830%
STVR cash+1.68840%

STVR deferred shares

LTVR RR

LTVR PR

Disclosed Executives
The dollar amounts in the below example are for illustrative purposes only, and are based on the FR value of $1.25m.

Remuneration mix – CEO ($m)

Remuneration mix – Disclosed Executives1 ($m)
Minimum opportunity
1.250

1.250

Maximum opportunity
1.250

4.188 (45% cash, 55% equity)+0.62530%
FR+0.62530%
STVR cash

STVR deferred shares+0.844+0.84440%
LTVR RR

LTVR PR

1. Excluding CRO and Acting GE T&C.

CRO
To preserve the independence of therole and to minimise any conflicts ofinterest in carrying out the risk control
function across the organisation, the CRO’s
remuneration arrangements differ toother Disclosed Executives.
While the STVR opportunity (100% of FR)
is the same as the CEO and Disclosed
Executives, the LTVR opportunity is different(100% of FR instead of 135% of FR)
reflecting the delivery of LTVR as 100% RR(instead of 50% RR and 50% PR). Maximum
variable remuneration opportunity is 200%of FR for the CRO. The remuneration mix is
33.3% FR/33.3% STVR/33.3% LTVR.
Acting GE T&C
Due to the acting nature of R Howell’s
appointment his remuneration
arrangements differ to other Disclosed
Executives. For the time spent in this actingrole, his FR was set at $700k per annum
from 1 June 2023 and increased to $703k
from 1 July 2023 (due to the impact of theSuperannuation Guarantee rate change).
His VR maximum opportunity was set at150% of FR (his remuneration mix istherefore 40% FR/60% VR). His VR will bedelivered as 60% cash and 40% as sharesdeferred over years 4 to 5 to ensurecompliance with CPS 511 deferral
requirements.

7.2 Variable remuneration delivery
Variable remuneration for the CEO and theDisclosed Executives (excluding the CRO
and Acting GE T&C) is delivered as follows:• STVR as 50% cash and 50% sharesdeferred equally over years 2 and 3; and• LTVR as RR and PR deferred over:– year 4 (33%), year 5 (33%) and year 6(34%) for the CEO; and– year 4 (50%) and year 5 (50%) for
Disclosed Executives.
Both RR and PR are tested against therelevant performance condition at the endof the four-year performance period and arethen subject to additional holding period(s)until the completion of the respective
deferral periods.

At target performance, 63% of variable
remuneration for the CEO and Disclosed
Executives, and 56% of variable
remuneration for the CRO is deferred
for at least four years (from the date theBoard approved the variable remunerationin October (and the date shareholders
approve the CEO’s LTVR)), noting that
this complies with the BEAR minimum
deferral requirement of 60% for the CEO
and 40% for Disclosed Executives. If the
CEO receives above target STVR (as is thecase in 2023), the amount above target
will be delivered as 40% cash and 60%
deferred shares (20% year 4, 20% year 5,
20% year 6) to ensure compliance withthe minimum deferral requirements withrespect to BEAR and APRA’s Prudential
Standard CPS 511 Remuneration.
Before any scheduled release ofdeferred remuneration, the Board
considers whether malus should beapplied to previously deferred remuneration(or further deferral of vesting), or clawback
to variable remuneration previously
granted, for the CEO and Disclosed
Executives. See section 7.3.

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7.2.1 STVR CASH – CEO ANDDISCLOSED EXECUTIVES

The cash component of STVR is paid
to executives at the end of the annual
Performance and Remuneration Review(December 2023), and is subject toclawback for two years post payment.
7.2.2 STVR DEFERRED SHARES – CEO
AND DISCLOSED EXECUTIVES

By deferring 50% of an executives’ STVR
as deferred shares over years two and three(and it remaining subject to malus andclawback), we enable a substantial amountof their STVR to be directly linked todelivering shareholder value. We grant
deferred shares in respect of performancefor the financial year ending 30 September
in late November each year.

For deferred variable remuneration for the
CEO and Disclosed Executives, we calculate
the number of deferred shares to be
granted based on the VWAP of the shares
traded on the ASX in the five trading days
leading up to and including 1 October (i.e.,
in line with the beginning of the financialyear). Allocations prior to the 2022 financial
year were based on the VWAP in the five
trading days leading up to and including
the date of grant. The VWAP used fordisclosure and expensing purposes is the
one-day VWAP at the date of grant, which isin line with the Accounting Standard.

7.2.3 LTVR – CEO AND DISCLOSEDEXECUTIVES1LTVR reinforces the focus on achieving
longer term strategic objectives, driving
outperformance relative to peers, andcreating long-term sustained value forall stakeholders. The following tabledetails design features common toboth LTVR RR and PR.
This section details the LTVR approach thatapplied to the 2023 LTVR award granted in
November/ December 2022, and to the GE
Australia Commercial in September 2023.

In some cases, we may grant deferred sharerights to executives instead of deferredshares. Each deferred share right entitles
the holder to one ordinary share.

LTVR ELEMENTDETAIL

Description

RR and PR provide a right to acquire one ordinary ANZ share at nil cost – as long as applicable time and performance
conditions are met. Their future value may range from zero to an indeterminate value. The value depends on
performance against the applicable performance condition and on the share price at the time of exercise.

Performance
periodBoth RR and PR have a four-year performance period commencing from 1 October and ending four years later on
30 September (e.g., 1 October 2022 to 30 September 2026 for the 2023 grant), noting that LTVR is awarded at thestart of the financial year (rather than the end).
A four-year performance period provides sufficient time for longer term performance to be reflected.

Deferral periods

The deferral period is the sum of the four-year performance period and the applicable holding period.
The holding period commences the day after the end of the four-year performance period (e.g., 1 October 2026
in the case of the 2023 LTVR award), and finishes on the 4th, 5th or 6th anniversary of grants.

Exercise period

Rights can only be exercised at the end of the relevant deferral period (4, 5 or 6 years) when the rights vest
and become exercisable.
There is a two-year exercise period which commences at the end of the relevant deferral period for RR and PR.

Expensing

ANZ engages PricewaterhouseCoopers to independently determine the fair value of RR and PR, which is only used
for expensing for accounting purposes. They consider factors including: the market performance conditions, shareprice volatility, life of the instrument, dividend yield, and share price at grant date.

Dividends

A dividend equivalent payment (DEP) is paid in cash at the end of the relevant deferral period, but is only madeto the extent that all or part of the underlying rights meet the relevant performance condition and vest to theindividual. Dividend equivalent payments accrue over the full deferral period for RR, and only during the holding
period for PR.

Allocation
basis

The value the Board uses to determine the number of RR and PR to be allocated to the CEO and Disclosed
Executives is the face value of ANZGHL shares traded on the ASX in the five trading days leading up to andincluding 1 October (beginning of the financial year and LTVR performance period).
LTVR is awarded around the start of the financial year in late November for Disclosed Executives and December
for the CEO (subject to shareholder approval).

1. Excluding Acting GE T&C.

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7.2.4 LTVR RESTRICTED RIGHTS – CEO AND DISCLOSED EXECUTIVES1

The award of RR ensures that LTVR provides material weight to non-financial measures (as required under APRA’s Prudential Standard
CPS 511 Remuneration), as well as supporting long-term alignment with shareholders.
Having a risk-based focus reflects the intent of the Prudential Standard CPS 511 Remuneration in ensuring remuneration arrangements
appropriately incentivise individuals to prudently manage risks. The performance conditions are designed to ensure there is focus on bothmaterial risk events and building a strong risk culture over the longer term.
LTVR ELEMENTPERFORMANCE CONDITION DETAIL

RR pre grantand pre vest
assessments

Pre grant assessment purpose: Determines whether any reduction should be made to RR award value and isprimarily based on outcomes in the prior financial year.
Pre vest assessment purpose: Determines whether the RR amount awarded should vest in full and is based on outcomesover the four-year performance period.

The pre grant and pre vest assessments also take into consideration any adjustments already applied for the same
event/outcomes in either the current or prior years (i.e., adjustments to STVR and LTVR, malus and clawback),
to ensure the overall impact is fair and proportionate to the severity of the outcome. Therefore, given other
remuneration adjustments are likely to be considered first, and as the award of RR is future focused, it is anticipatedthat RR will be allocated at full value in most years – unless the outcome of the following three assessment steps
determines otherwise.
STEP 1

STEP 2

STEP 3

Assess Prudential soundness

Assess risk measures

Apply Board discretion• Nil award if ANZ does
not meet capital ratio
and liquidity prudential
minimums.

• Consideration of any Material
Risk Outcomes from executive
actions or inactions which is
expected to/or has resulted insignificant impacts.

• Board to determine whether any
reduction should be made to LTVR RR
outcome based on consideration of arange of factors, including:• Consideration of any significant
adverse change in APRA’s Active
Supervision level.
• Consideration of Risk Culture(additional measure for pre vest)that examines whether or not
ANZ has maintained (or madeprogress towards) a soundrisk culture, considering both
executive actions or inactions.

– the outcomes from steps 1 and 2;– the impact, if any, of the issue/s on ANZ’sreputation/standing in the market;– whether the issue was specific to
ANZ, the banking industry or thebroader market;– any impacts already applied (e.g.,regarding downward adjustment
mechanisms, pre grant assessment
impact to LTVR RR);

– whether any impact should be madeon an individual or collective basis.

The assessments are not intended to be formulaic given the circumstances requiring the application of Board
discretion will typically be different or unique, however a Board decision making framework is in place to guidethe Board in applying discretion.
Material risk
outcomes process

The consideration of material risk outcomes is a key process that forms part of our broader Accountability andConsequence Framework (A&CF) (see section 8), and is a comprehensive bottom-up process designed to ensurethat all relevant events are surfaced and considered appropriately. Key steps include:• Risk, conduct and audit events are reported in ANZ’s Compliance & Operational Risk System.
• Divisional Accountability Groups review serious risk, conduct and audit events, and provide recommendations
regarding accountability and consequences, where appropriate.
• Enterprise Accountability Group (EAG) reviews recommendations of the Divisional Accountability Groups andmake final determination (with some exceptions where local Board approval is required or for material risk takers
and other non-administrative direct reports to the CEO, where Board approval is required).
• HR Committee reviews most serious risk, conduct and audit events (as part of independent report from CRO)and determines impacts at the Group, Division and individual level for the CEO and ExCo.

1. Excluding Acting GE T&C.

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7.2.5 LTVR PERFORMANCE RIGHTS – CEO AND DISCLOSED EXECUTIVES EXCLUDING THE CRO1
LTVR ELEMENTPERFORMANCE CONDITION DETAIL

Performancerights hurdles

The PR have TSR performance hurdles reflecting the importance of focusing on achieving longer term strategic
objectives and aligning executives’ and shareholders’ interests. There are two TSR performance hurdles for the2023 grants of PR:• 75% will be measured against a relative TSR hurdle.
• 25% will be measured against an absolute TSR hurdle.
TSR represents the change in value of a share plus the value of reinvested dividends paid. We regard it as the mostappropriate long-term measure – it focuses on the delivery of shareholder value and is a well understood andtested mechanism to measure performance. The combination of relative and absolute TSR hurdles provides balance
to the plan by:• Relative: rewarding executives for performance that exceeds that of comparator companies; and• Absolute: ensuring there is a continued focus on providing positive growth – even when the market is declining.
The two hurdles measure separate aspects of performance:• the relative TSR hurdle measures our TSR compared to that of the Select Financial Services (SFS) comparatorgroup, made up of core local and global competitors. This comparator group is chosen to broadly reflect thegeographies and business segments in which ANZ competes for revenue; and• the absolute Compound Annual Growth Rate (CAGR) TSR hurdle provides executives with a more direct lineof sight to the level of shareholder return to be achieved. It also provides a tighter correlation between theexecutives’ rewards and the shareholders’ financial outcomes.
We will measure ANZ’s TSR against each hurdle at the end of the four-year performance period to determine
whether any PR becomes exercisable. We measure relative and absolute TSR hurdles independently from the other– for example one may vest fully or partially but the other may not vest.

Relative TSR
hurdle for PR

The relative TSR hurdle is an external hurdle that measures our TSR against that of the SFS comparator group overfour years. The SFS comparator group is made up of: Bank of Queensland Limited; Bendigo and Adelaide Bank
Limited; Commonwealth Bank of Australia Limited; DBS Bank Limited; Macquarie Group Limited; National Australia
Bank Limited; Standard Chartered PLC; Suncorp Group Limited; and Westpac Banking Corporation.
For future LTVR awards of PR (i.e., from financial year 2024), the Board approved for DBS Bank Limited to be
removed from the comparator group (noting that this change does not apply to awards currently on foot). Thischange reflects the need to better balance the weighting of international peers in our comparator group to more
appropriately reflect the change in capital allocated to Asia compared to when international comparators wereoriginally included in 2015 (as part of the super regional strategy at that time). When considering an appropriate
cohort of peers for benchmarking TSR performance, the Board take into consideration organisations with a similar
scope of activities, common geographical focus, broadly comparable risk compliance and regulatory profiles, andrelative stability and transparency across market cycles.
If our TSR when compared to the TSR of
the comparator groupthen the percentage of PR that vest

is less than the 50th percentile

is nilreaches at least the 50 percentile, but is lessthan the 75th percentile

is 50% plus 2% for every one percentile
increase above the 50th percentile

reaches or exceeds the 75th percentile

is 100%th

1. Excluding Acting GE T&C.

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LTVR ELEMENTPERFORMANCE CONDITION DETAIL

Absolute TSR
hurdle for PR

The absolute CAGR TSR hurdle is an internal hurdle as to whether ANZ achieves or exceeds a threshold level ofgrowth the Board sets at the start of the performance period. The Board reviews and approves the absolute TSR
targets each year for the PR award. When reviewing the targets, the Board references ANZ’s assessed Cost of Capital(CoC). The CoC is determined using methodologies including the Capital Asset Pricing Model (CAPM). The CoC isregularly reviewed and updated to reflect current market conditions. Due to the prospective nature of the 2023 PR
and given the increased volatility in the 10-year bond rate, the Board determined it was appropriate to use the 2H
average CoC as the CAGR TSR target for the 2023 PR.
If the absolute CAGR of our TSR

then the percentage of 2023 PR that vest

is less than 9.125%

is nilis 9.125%is 50%

reaches at least 9.125%, but is less than 13.688%

is progressively increased on a pro-rata, straight-line,
basis from 50% to 100%

reaches or exceeds 13.688%

is 100%For future LTVR awards of PR (i.e., from financial year 2024), the CAGR TSR hurdle will be based on the time weighted
CoC over the four-year performance period of the PR. Therefore, the CAGR TSR target will be adjusted on a timeweighted basis unless the Board applies discretion not to adjust. The CoC will be reviewed by the Board on aquarterly basis based on the output from the CAPM methodology (which takes into consideration the risk-freebond rate, the market risk premium and the beta – i.e., the volatility of ANZ’s historical share price relative to themarket). Any CoC changes approved by the Board throughout the performance period are prospective only
(i.e., reflect current market factors) and will form part of the dynamic absolute TSR target calculation. Moving toa dynamic target that reflects the changes in CoC over the performance period (rather than a static target atthe beginning of the performance period), is more responsive to changes in both interest rates and risks, and isconsidered more appropriate and fairer from both an investor and executive perspective, and supports better
shareholder alignment.
Calculating
TSR performance

When calculating performance against TSR, we:• reduce the impact of share price volatility – by using an averaging calculation over a 90-trading day period
for start and end values;• ensure an independent measurement – by engaging the services of an external organisation, to calculate ANZ’s
performance against both the absolute and relative TSR hurdles; and• test the performance against the relevant hurdle once only at the end of the four-year performance period –the rights lapse if the performance hurdle is not met – there is no retesting.

7.3 Downward adjustment – Board discretion
The Board can exercise its discretion to apply a number of downward adjustment options as part of consequence management (inaccordance with applicable law and any terms and conditions provided). The Board may choose to exercise the following options or a
combination of these at any time, but will always consider their use if any of the circumstances specified by Prudential Standard CPS 511
Remuneration occur. The downward adjustment options specified in #1 to #3 below are applicable to all employees, while clawback (#4) in
2023 is currently limited to select employees (primarily the CEO, Disclosed Executives and some senior employees in jurisdictions where
clawback regulations apply):
1. In year adjustment, the most common type of downward adjustment, which reduces the amount of variable remuneration an employee
may have otherwise been awarded for that year.
2. Further deferral/freezing delays the decision to pay/allocate variable remuneration, or further defers the vesting of deferred remuneration
or freezes vested/unexercised shares and rights. This would typically only be considered where an investigation is pending/underway.
3. Malus is an adjustment to reduce the value of all or part of deferred remuneration before it has vested. Malus is used in cases of more
serious performance or behaviour issues. Any and all variable remuneration we award or grant to an employee is subject to ANZ’s on-going
and absolute discretion to apply malus and adjust variable remuneration downward (including to zero) at any time before the relevant
variable remuneration vests.
4. Clawback is the recovery of variable remuneration that has already vested or been paid (up to two years from vesting/payment or a longer

period as determined by Board discretion, policy or applicable law). This would typically only be considered if the other types of downward
adjustment/other consequences are considered inadequate given the severity of the situation.
Before any scheduled vesting of deferred remuneration, the Board (for the CEO, Disclosed Executives and other specified roles) and/or theEnterprise Accountability Group (EAG) (for other employees) considers whether any further deferral, malus, or clawback should be applied.
See section 8 for details.

Australia and New Zealand Banking Group Limited 2023 Annual Report

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8

ACCOUNTABILITY AND CONSEQUENCE FRAMEWORKThe Enterprise Accountability Group (EAG) is the primary governance mechanism for the operation of the
Accountability and Consequence Framework (A&CF).
8.1 Role of the EAG

8.3 Risk role models

The EAG is chaired by the CEO andmembers include the CRO, CFO and GE T&C.
It operates under the delegated authority of
the HR Committee and is responsible for:In 2023, 81 individuals were recognised by
the EAG for role modelling outstanding risk
behaviours through their efforts to identify,
manage and mitigate the organisation’srisks and contribute to our strong risk
culture. Recognition provided included apersonalised e-mail from the CEO, local
recognition events, and having theirachievement profiled on our intranet
and in internal newsletters.

• supporting the Board in monitoring
the implementation and ongoing
effectiveness of ANZ’s A&CF;• reviewing the most material risk, conduct
and audit events for accountability andthe application of consequences, whereappropriate;• providing guidance to the Divisions andconsidering initiatives across the Divisions
to strengthen risk behaviours;• acknowledging material positive risk
events and recognising risk role models,
whose achievements are profiled acrossthe organisation; and• approving the release or applicationof downward adjustment for deferredvariable remuneration (noting that for
the CEO and Disclosed Executives this isapproved by the Board).

8.2 Material positive risk eventsThe EAG review material positive risk
decisions and events – times when our
proactive approach to identifying andmitigating risk have had a material positive
outcome. Reviewing these examples
provides an opportunity to acknowledge
the importance of these events and sharelearnings across the enterprise.

8.4 Compliance with Prudential
Standard CPS 511 Remuneration
ANZ’s A&CF is an integral part of ourenterprise approach to meeting therequirements of APRA Prudential Standard
CPS 511 Remuneration.
We introduced clawback provisions for
the CEO and our Disclosed Executives
effective 2022, in addition to existing
downward adjustment tools such as in year
adjustment, further deferral and malus.
In 2023, we have continued to raise
employee awareness with respect toaccountability and consequences throughexplicit references to the A&CF (including
remuneration consequences) in employee
training and communications andperformance and remuneration policy
documents.
In addition, as part of our annual
performance and remuneration process,we have provided our People Leaders withguidance regarding appropriate (and insome cases, mandatory) remunerationconsequences for conduct andperformance issues, including insights fromthe previous year’s consequences applied.
These activities are part of our continued
focus on consistency in applicationof remuneration consequence across
ANZ globally.

8.5 Consideration ofconsequences for material risk,
audit and conduct eventsThe EAG has processes in place toensure that we mitigate the risk of
conflicts of interest in reviewing eventsand determining accountability andconsequences. For example, when
undertaking accountability reviews, arecommendation regarding the review
leader and scope must be sent to the
CRO (or in the case of an event involving
Group Risk to the CEO), for review andapproval to ensure the individual iscapable of undertaking an impartial
and unbiased review.
Considerations regarding accountability
and consequences for our most senior
executives are considered and determinedby the HR Committee and Board.
Reports on the most material risk, audit
and conduct issues were presented to
the HR, Risk and Audit Committees at aconcurrent meeting. This information wasconsidered by the Board when considering
the performance of the Group and the2023 ANZIP variable remuneration pool
for all employees and determining theperformance and remuneration outcomesof the CEO and Disclosed Executives.
The HR Committee and Board consider
accountability and consequences for the
CEO and Disclosed Executives, including
the application of malus and clawback(see section 7.3). No malus or clawback
was applied to the remuneration of the CEO
and Disclosed Executives during 2023.
When determining consequences,consideration is given to the level ofaccountability, and the severity of the issue,
including customer impacts. Consequences
may include, for example, one or more of
the following: counselling, formal warnings,
impacts to in year performance andremuneration outcomes or application ofmalus to previously deferred remuneration
and ultimately termination of employment
or clawback for the most serious issues.

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8.6 Evolving the A&CF

8.8 Application of consequences

Our ongoing focus on accountability,
consequences and driving a strong risk
culture supports our customer commitmentthat when things go wrong, we fix themquickly and hold executives, current(and former where we can), to accountwhere appropriate. We are also focusedon ensuring that we learn from the causeof the event, mitigate the risk of future
recurrences and continuously seek tostrengthen our risk culture. We review
the effectiveness of the A&CF every year
and implement enhancements to further
strengthen the A&CF based on regulatory
and internal stakeholder input.

In 2023, there were 1,330 employee
relations cases involving alleged breachesof our Code, with 501 resulting in a formal
consequence or the employee leaving ANZ,
down from 518 in 2022. Breaches ranged
from compliance/procedural breaches(23%), through to general unacceptablebehaviour (31.7%), email/systems misuse(9.2%), attendance issues (20.8%), fraud/
theft (5.4%), conflict of interest (5.6%) andbreaches of our Equal Opportunity, Bullying
and Harassment Policy (3.6%). Outcomes
following investigations of breaches this year
included 100 terminations, 314 warnings and87 employees leaving ANZ.

8.7 Speak up culture
We continue to raise employee awarenessof, and promote the various ways
employees can speak up and raise issues
and ideas for improvement including
through initiatives such as:• a global awareness campaign tomark World Whistleblower Day inJune, which included a conversation
guide designed to support People
Leaders with team discussions on
the importance of speaking up andpromotion of whistleblowing;• digital communications designed to build
confidence and trust in the Whistleblower
Program and process; and• through monitoring responses in our
employee engagement surveys.
Key risk and speak-up scores, including‘The People Leaders in the area I work
demonstrate personal accountability for risk
and sound risk behaviours’ (91%), ‘I can raiseissues and concerns without fear of reprisals’(81%) and ‘When I speak up, my ideas,
opinions and concerns are heard’ (84%)
remained strong and consistent with 2022
and 2021 results.1

In relation to the application ofconsequences to our senior leadership
population (senior executives, executives
and senior managers), 30 current and former
employees (21 in 2022) had a consequence
applied as a result of the applicationof our Code of Conduct Policy and/or
findings of accountability for a relevant
event. Consequences included warnings,
impacts on performance and remuneration
outcomes and dismissal.
All employees and contractors acrossthe enterprise are required to complete
mandatory learning modules. Permanent
employees who fail to complete theirmandatory learning requirements within
30 days of the due date are (in the absenceof genuinely exceptional circumstances)ineligible for any FR increase or variable
remuneration award as part of our annual
Performance and Remuneration Review.
In 2023, the mandatory learning course
compliance rate across the enterprise
was 99.6%.

1. Results reported are taken from the Q2 and/or Q4 employee engagement surveys, and Risk Culture Survey.

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Australia and New Zealand Banking Group Limited 2023 Annual Report60

9NON-EXECUTIVE DIRECTOR (NED) REMUNERATION

9.1 Remuneration structure
The HR Committee reviewed NED fees and determined not to increase fees for 2023.
For 2024, the HR Committee has reviewed and approved a 2% increase to the NED member fee (from $240,000 to $245,000) which has
remained unchanged since 2016. The Board Chairman fee remains unchanged. Following review, the HR Committee also approved thealignment of the fee structure across all Committees increasing each Committee chair fee to $68,000, and each Committee member fee
to $34,000. This fee review considered increased complexity in the regulatory environment, uplifts for ANZ’s broader employee population,and the external market.
The fee structure is applicable to NEDs of ANZGHL and ANZBGL. Fees prior to the implementation of the Non-Operating Holding Company(NOHC) structure related to membership of the ANZBGL Board, and post implementation are viewed as a single fee covering both Boards(i.e., membership of ANZGHL and ANZBGL Boards/Committees). Currently the fee structure applies irrespective of whether NEDs serve on
one or more Boards.
NEDs receive a fee for being a Director of the Board, and additional fees for either chairing, or being a member of a Board Committee.
The Chairman of the Board does not receive additional fees for serving on a Board Committee.
In setting Board and Committee fees, the following are considered: general industry practice, ASX Corporate Governance Principles andRecommendations, the responsibilities and risks attached to the NED role, the time commitment expected of NEDs on Group and Company
matters, and fees paid to NEDs of comparable companies.
ANZ compares NED fees to a comparator group of Australian listed companies with a similar market capitalisation, with particular focus on
the major financial services institutions. This is considered an appropriate group, given similarity in size and complexity, nature of work andtime commitment by NEDs.
To maintain NED independence and impartiality:• NED fees are not linked to the performance of the Group; and• NEDs are not eligible to participate in any of the Group’s variable remuneration arrangements.
The current aggregate fee pool for NEDs of $4m was approved by shareholders at the 2012 AGM. The annual total of NEDs’ fees, including
superannuation contributions, is within this agreed limit.
This table shows the NED fee policy structure for 2023.
2023 NED fee policy structure

2023
Chair fee

Member fee

Board1,2$850,000$240,000

Audit Committee$65,000$32,500

Risk Committee$65,000$32,500

HR Committee$65,000$32,500

Digital Business & Technology Committee$55,000$27,500

Ethics, Environment, Social & Governance Committee$55,000$27,500

1. Including superannuation. 2. The Chairman of the Board does not receive additional fees for serving on a Board Committee. The Chairman of the Board and NEDs do not receive a fee forserving on the Nomination and Board Operations Committee.

NED shareholding guidelines
We expect our NEDs to hold ANZ shares. NEDs are required:• to accumulate shares – over a five-year period from their appointment to the value of:– 100% of the NED member fee for Directors;– 100% of the Chairman fee for the Chairman; and• to maintain this shareholding while they are a Director of ANZ.
Based on the ANZ share price as at 30 September 2023, all NEDs meet or, if less than five years' tenure, are on track to meetthe holding guideline.

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report61

Financialreport9.2 2023 Statutory remuneration – NEDS
The following table outlines the statutory remuneration of NEDs1 disclosed in accordance with Australian Accounting Standards.
1. In addition to the fee shown below, Sir John Key received NZD 422,050 in 2022 and 2023 for his role as Chairman of ANZ Bank New Zealand Limited.

2023 Statutory remuneration – NEDS
Short-term NED benefits

Post-employment
Super
contributions1$

Total
remuneration3$

Financial
year

Fees1
$

Non monetary
benefits2$

2023

824,181-

25,819850,000

2022

813,501

6,128

23,999843,6282023

339,181-

25,819365,000

2022

330,751-

23,999354,7502023

329,181-

25,819355,000

2022

318,001-

23,999342,000

G Hodges4

2023

176,745-

17,102

193,847

J Key

2023

301,681-

25,819327,500

2022

290,251-

23,999314,250

H Kramer4

2023

35,841-

3,942

39,783

J Macfarlane

2023

336,443-

25,819362,2622022

301,501-

23,999325,500

2023

344,181-

25,819370,000

2022

302,863-

22,579325,4422023

298,889-

25,819324,708

2022

36,003-

3,780

39,7832023

72,4392,104-

74,5432022

360,427-

6,323

366,7502023

3,058,762

2,104

201,777

3,262,643

2022

2,753,298

6,128

152,677

2,912,103

CURRENT NON-EXECUTIVE DIRECTORSP O’Sullivan

I AtlasJ Halton

C O’Reilly4

J Smith4

FORMER NON-EXECUTIVE DIRECTORSG Liebelt4

Total of all Non-Executive Directors

1. Year-on-year differences in fees relate to changes to the NED fees and also to the superannuation Maximum Contribution Base. G Liebelt elected to receive all payments in fees and therefore did
not receive superannuation contributions during 2022 and 2023 with exception to fees paid in Q422. 2. Non monetary benefits generally consist of company-funded benefits (and the associatedFringe Benefits Tax) such as car parking and gifts provided upon retirement. 3. Long-term benefits and share-based payments do not apply for the NEDs. 4. Remuneration based on time as a NED(2022 for C O'Reilly and J Smith, 2023 for G Hodges, H Kramer and G Liebelt).

62

10

Australia and New Zealand Banking Group Limited 2023 Annual Report

REMUNERATION GOVERNANCE

10.1 The Human Resources (HR)Committee
10.1.1 ROLE OF THE HR COMMITTEE

The HR Committee has been establishedby the ANZGHL Board, and has beendelegated authority to act as the
remuneration committee for ANZBGL.
The HR Committee supports the Boardon remuneration and other HR matters.
It reviews the remuneration policies andpractices of the Group, and monitors market
practice and regulatory and compliancerequirements in Australia and overseas.
During the year the HR Committee met on
five occasions and reviewed and approved,or made recommendations to the Boardon matters including:• remuneration for the CEO and otherkey executives (broader than those
disclosed in the Remuneration Report)
in accordance with the ANZ Group
Performance and Remuneration
Policy and ANZBGL Performanceand Remuneration Policy, and fees
for the NEDs;• matters related to the implementationof APRA’s Prudential Standard CPS 511
Remuneration, and updates on the BEAR,
and Treasury’s Financial Accountability
Regime (FAR);• the ANZ Group Performance
Framework (annual objectives setting
and assessment) and annual variable
remuneration spend;• performance and reward outcomesfor key senior executives, including theconsideration of material events thathave either occurred or came to lightin the year;• the release, further deferral or applicationof malus of deferred remuneration
or clawback;• key senior executive appointments
and terminations;• the review of the ANZ Group
Performance and Remuneration
Policy and ANZBGL Performanceand Remuneration Policy, and the
Accountability & Consequence
Framework (A&CF);• building capabilities required to deliveron our strategy;• succession plans for key senior
executives; and• culture, diversity and inclusion, employee
engagement, and how we work in a post
COVID environment.

• the CRO also provides an independent
report to assist the Board in theirassessment of performance andremuneration outcomes for the CEO and
Disclosed Executives;

More details about the role of the HR
Committee, including its Charter, can befound on our website. Go to anz.com >Our company > Strong governanceframework > ANZ Human Resources
Committee Charter.

• the ANZ Group Performance Frameworkand Divisional Performance Frameworks
include Risk as a key element acting as amodifier, and it forms an integral part ofeach framework’s assessment and directly
impacts the overall outcomes; and10.1.2 LINK BETWEENREMUNERATION AND RISKThe HR Committee has a strong focus
on the relationship between businessperformance, risk management andremuneration, aligned with our businessstrategy. The chairs of the Risk and Audit
Committees and the full Board (ANZGHL
and ANZBGL) are in attendance for specific
HR Committee meetings. A concurrent
meeting of the HR, Risk and Audit
Committees was held to review:• material risk, conduct and audit
events that either occurred or cameto light in 2023;• 2023 performance and variable
remuneration recommendations at
both the Group, CEO and Disclosed
Executive level.
To further reflect the importance of thelink between remuneration and risk:• the Board had two NEDs (in addition
to the Chairman) in 2023 who served
on both the HR Committee and the
Risk Committee;• the HR Committee has free andunfettered access to risk and financial
control personnel (the CRO and CFO
attend HR Committee meetings for
specific agenda items);• the CRO (together with GE T&C and GGMIA) provides an independent report to
the HR Committee on the most material
risk, conduct and audit events (asrelevant) to help inform considerationsof performance and remuneration, andaccountability and consequences at theGroup, Divisional and individual level;• the chairs of the Risk and Audit
Committees are asked to provide input
to ensure appropriate consideration of all
relevant risk and internal audit issues;• the LTVR RR pre grant and pre vest
assessments undertaken by the Board
are primarily based on non-financial
risk outcomes.
10.1.3 CONFLICT OF INTEREST

To help mitigate potential conflictsof interest:• management are not in attendance
when their own performance or
remuneration is being discussed by the
HR Committee or Board;• the CEO’s STVR is funded and determined
separately from the ANZIP variable
remuneration pool;• the CRO’s remuneration arrangements
differ to other Disclosed Executives topreserve the independence of the role;• the EAG also has processes in place tohelp mitigate conflicts of interest as
outlined in section 8; and• the HR Committee seeks input froma number of sources to inform theirconsideration of performance andremuneration outcomes for the CEO and
Disclosed Executives including:– independent reports from Risk, Finance,
Talent and Culture, and Internal Audit;– material risk, conduct and audit event
data provided by the CRO;– input from both the Audit Committee
and the Risk Committee of the Board.
10.1.4 EXTERNAL ADVISORSPROVIDED INFORMATION BUTNOT RECOMMENDATIONSThe HR Committee can engage independent
external advisors as needed.

OverviewOperatingenvironment

GovernanceThroughout the year, the HR Committee
and management received informationfrom the following external advisors: Aon,
Ashurst, Deloitte, EY, Guerdon Associates,
Herbert Smith Freehills, PayIQ Executive
Pay and PricewaterhouseCoopers. This
information related to market data, market
practices, analysis and modelling, legislativerequirements and the interpretation of
governance and regulatory requirements.
During the year, ANZ did not receive
any remuneration recommendations
from external advisors about the
remuneration of KMP.
ANZ employs in-house remuneration
professionals who provide recommendations
to the HR Committee and the Board. The
Board made its decisions independently,
using the information provided and withcareful regard to ANZ’s strategic objectives,

Performanceoverview

Remuneration
reportDirectors’
reportpurpose and values, risk appetite and the
Performance and Remuneration Policies
and Principles.

10.2 Internal governance10.2.1 HEDGING PROHIBITION

All deferred equity must remain at risk until
it has fully vested. Accordingly, executives
and their associated persons must not enter
into any schemes that specifically protect
the unvested value of equity allocated.
If they do so, then they would forfeit therelevant equity.
10.2.2 CEO AND DISCLOSEDEXECUTIVES’ SHAREHOLDINGGUIDELINES

We expect the CEO and each Disclosed
Executive to, over a five-year period:

Financialreport63• accumulate ANZ shares to the valueof 200% of their FR; and• maintain this shareholding level while
they are an executive of ANZ.
Executives are permitted to sell ANZ
securities to meet taxation obligations on
employee equity even if below the 200%
guideline. However, tax obligations for the
purpose of these guidelines is limited tothat arising from the initial taxing point
event (i.e., when the deferred shares vestor rights are exercised).
Shareholdings include all vested andunvested equity (excluding PR). Based onequity holdings as at 30 September 2023,
the CEO and all Disclosed Executives meetor, if less than five years’ tenure, are on
track to meet their minimum shareholding
guidelines requirements.

10.2.3 CEO AND DISCLOSED EXECUTIVES’ CONTRACT TERMS AND EQUITY TREATMENT

The details of the contract terms and the equity treatment on termination (in accordance with the Conditions of Grant) relating to the CEO
and Disclosed Executives are below. Although they are similar, they vary in some cases to suit different circumstances.
Type of contract

Permanent ongoing employment contract.

Notice on resignation• 12 months by CEO;• 6 months by Disclosed Executives.1

Notice on termination
by ANZ2• 12 months by ANZ for CEO and Disclosed Executives.3

How unvested equity istreated on leaving ANZ

Executives who resign or are terminated will forfeit all their unvested deferred equity – unless the Board
determines otherwise.
If an executive is terminated due to redundancy or they are classified as a ‘good leaver’, unless the Board
determines otherwise, then:• their STVR (deferred shares/share rights) remain on foot and are released at the original vesting date;• their LTVR (RR/PR) (for grants awarded from 31 December 2020) remain on foot and are released at theoriginal vesting date (to the extent that the performance hurdles are met); and• their PR4 (for grants awarded pre 31 December 2020) are prorated for service to the full notice termination
date and released at the original vesting date (to the extent that the performance hurdles are met).

However, ANZ may immediately terminate an individual’s employment at any time in the case of serious
misconduct. In that case, the individual will be entitled only to payment of FR up to the date of theirtermination and their statutory entitlements.

On an executive’s death or total and permanent disablement, their deferred equity vests.
Unvested equity remains subject to malus post termination.
Change of control(applies to the CEO only)

If a change of control or other similar event occurs, then we will test the performance conditions applying to
the CEO’s LTVR (RR/PR). They will vest to the extent that the performance conditions are satisfied.

1. 3 months by the former Acting GE T&C. 2. For M Carnegie, K Corbally, F Faruqui, G Florian, R Howell, C Morgan, A Strong, M Whelan and K van der Merwe, their contracts state that in particular
circumstances they may be eligible for a retrenchment benefit in accordance with the relevant ANZ policy, as varied from time to time. For A Watson, notice on retrenchment is 6 weeks andcompensation on retrenchment is calculated on a scale up to a maximum of 79 weeks after 25 years’ service. 3. 6 months by ANZ for the Acting GE T&C. 4. Or deferred share rights granted to the
CRO instead of PR.

Australia and New Zealand Banking Group Limited 2023 Annual Report64

11

OTHER INFORMATION

11.1 2023 Statutory remuneration – CEO and Disclosed Executives
The following table outlines the statutory remuneration disclosed in accordance with Australian Accounting Standards. While it shows the
FR awarded (cash and superannuation contributions) and also the cash component of the 2023 variable remuneration award, it does notshow the actual variable remuneration awarded or received in 2023 (see sections 5.1 to 5.4), but instead shows the amortised accounting
value for this financial year of deferred remuneration (including prior year awards).
2023 Statutory remuneration – CEO and Disclosed Executives
Short–term employee benefits

Post–employment

Cash salary1$

Non monetary
benefits2$

Total cash
incentive3$

Other cash4$

Supercontributions5$2023

2,474,181

15,676

1,160,000-

25,8192022

2,476,001

15,384930,000-

23,9992023

1,224,181

77,341550,000-

26,3192022

1,176,001

31,041

460,000-

24,4992023

1,224,181

10,176

532,500-

25,8192022

1,176,001

9,884

442,500-

23,9992023

1,224,181

11,423600,000-

25,8192022

1,159,194

174,222579,575

-

4,806

2023

1,216,181

23,179497,500-

25,8192022

1,072,169

18,569442,500-

23,999R Howell

2023

224,942-

180,000-

6,850

C Morgan4,9

2023

608,220

15,707250,000

407,000

18,780A Strong92023

670,504-

315,100-

19,496

A Watson8,11

2023

1,062,823

21,431

472,570-

60,5572022

1,019,021

22,049422,742-

70,6862023

1,434,181

10,176730,000-

25,8192022

1,376,001

9,884

535,000-

23,9992023

760,635

7,190

-

-

19,8652022

976,001

16,034400,000-

24,499Financial year
CEO AND CURRENT DISCLOSED EXECUTIVESS Elliott
M Carnegie
K Corbally
F Faruqui9
G Florian

10

9

M Whelan
FORMER DISCLOSED EXECUTIVESK van der Merwe12

1. Cash salary includes any adjustments required to reflect the use of ANZ's Lifestyle Leave Policy for the period in the KMP role. 2. Non monetary benefits generally consist of company-funded
benefits (and the associated Fringe Benefits Tax) such as car parking, taxation services and costs met by the Company in relation to relocation/accommodation. 3. The total cash incentive relates
to the cash component of STVR only. The relevant amortisation of the STVR deferred components is included in share-based payments and has been amortised over the vesting period. The total
STVR was approved by the ANZBGL and ANZGHL Boards on 17 October 2023, and in addition for A Watson by the ANZ NZ Board on 17 October 2023. 100% of the cash component of the STVR
awarded for the 2022 and 2023 years vested to the executive in the applicable financial year. 4. Other cash and other equity allocations (C Morgan) relate to the employment arrangements ofdeferred variable remuneration forfeited and bonus opportunity forgone as a result of joining ANZ. 5. For Australian based executives, the 2022 and 2023 superannuation contributions reflect
the Superannuation Guarantee Contribution based on the Maximum Contribution Base. F Faruqui's 2022 amount reflects a part year superannuation contribution. A Watson participates in
KiwiSaver where ANZ provides an employer superannuation contribution matching member contributions up to 4% of total gross pay. KiwiSaver employer superannuation contributions are also
contributed on top of cash STVR at the time of payment. 6. For Australian based executives, long service leave accrued takes into consideration the impact of changes to the Superannuation
Guarantee percentage. Year-on-year fluctuations in long service leave accrued relate to the impact of historical fixed remuneration increases on the accrual as calculated at the end of eachOverviewOperatingenvironment

GovernanceLong–term
employee benefits

Performanceoverview

Remuneration
reportDirectors’
report65

FinancialreportShare–based payments7
Total amortisation value of
Variable
remuneration

Other equity
allocations4,8Long service leaveaccrued during
the year6$

Deferred shares$

Deferredshare rights$

Restricted
rights$Performancerights$Deferred shares$

Termination
benefits$

Total
remuneration$

35,112

1,061,506-

212,024

1,202,190--

6,186,508

33,306

933,786--

1,076,657--

5,489,133

22,858548,990-132,871298,501--

2,881,061

17,151

522,450--

129,603--2,360,745

27,518568,319

265,999

196,849---

2,851,361

34,577

513,883

238,579

-

-

-

-

2,439,423

19,332600,306

56,608132,871364,031--3,034,571

17,524

465,805

178,143-

302,636--

2,881,905

30,978531,235-

122,240

270,977--

2,718,109

15,812

512,134--

171,181--2,256,364

9,321

62,538

-

-

-

-

-

483,651

5,367

67,909

-

1,414

798

29,899-1,405,094

18,550354,547-

73,34738,600--1,490,144

6,612

528,328-

117,866

222,92246-

2,493,155

4,068

505,698

2,132-

119,057

312-

2,165,765

36,172

700,447-

155,192

393,646--

3,485,633

17,779666,495--

181,892--

2,811,050-(418,392)--(591,168)-

30,626(191,244)

14,409472,124--

177,072--

2,080,139

financial year. 7. As required by AASB 2 Share-based payments, the amortisation value includes a proportion of the fair value (taking into account market-related vesting conditions) of all equity
that had not yet fully vested as at the commencement of the financial year. The fair value is determined at grant date and is allocated on a straight-line basis over the relevant vesting period.
The amount included as remuneration neither relates to, nor indicates, the benefit (if any) that the executive may ultimately realise if the equity becomes exercisable. No terms of share-based
payments have been altered or modified during the financial year. There were no cash settled share-based payments or any other form of share-based payment compensation during the financial
year for the CEO or Disclosed Executives. 8. Other equity allocations (A Watson) relate to shares received in relation to the historical Employee Share Offer which provided a grant of ANZ sharesin each financial year to eligible employees subject to Board approval. 9. Remuneration based on time as a Disclosed Executive in either 2022 (F Faruqui) or 2023 (R Howell, C Morgan, A Strong).
10. Fixed remuneration reflects changes in fixed remuneration during the financial year due to expanded role (G Florian). 11. Paid in NZD and converted to AUD. 12. 2023 remuneration for
K van der Merwe based on time as a Disclosed Executive up to date of cessation 30 June 2023 (noting her annual fixed remuneration for 2023 was $1.04m). Share-based payments include theexpensing treatment on resignation for unvested deferred remuneration (including reversals for forfeiture on resignation). Termination benefits reflect payment for accrued annual leave inaccordance with her contract, payable on resignation.

66

Australia and New Zealand Banking Group Limited 2023 Annual Report

11.2 Equity holdings
For the equity granted to the CEO and Disclosed Executives in November/December 2022, the CEO’s deferred shares were purchased on
the market and the deferred shares for Disclosed Executives were satisfied through the new issue of shares. For deferred share rights, which
vested to Disclosed Executives in November 2022, where the rights were not able to be satisfied through the reallocation of previously
forfeited shares they were satisfied through the new issue of shares.
11.2.1 CEO AND DISCLOSED EXECUTIVES’ EQUITY GRANTED, VESTED, EXERCISED/SOLD AND LAPSED/FORFEITED

The table below sets out details of deferred shares and rights that we granted to the CEO and Disclosed Executives:• during the 2023 year, relating to 2022 Performance and Remuneration Review outcomes; or• in prior years and that then vested, were exercised/sold or which lapsed/were forfeited during the 2023 year.
Equity granted, vested, exercised/sold and lapsed/forfeited – CEO and Disclosed Executives

Name

Type of equity

Equity fairvalue
(for 2023
grantsNumberonly)
granted1$

Lapsed/Forfeited

Vested
First
Grant
date
date exercisable

Dateofexpiry Number

Vestedand Unexerexercis- cisable
able as as at 30
Value2 at 30 Sep
Sep
20233 20234$

Exercised/Sold%

Value2$

Number%Value2$ Number

8,622 100

213,125

-

-

-

%

CEO AND CURRENT DISCLOSED EXECUTIVESS Elliott

Deferred shares

8,622

22-Nov-18 22-Nov-22-(8,622) 100

205,036--

Deferred shares

6,002

22-Nov-19 22-Nov-22-

6,002 100

148,362---(6,002) 100

142,731--

Deferred shares

8,130

07-Dec-20 22-Nov-22-

8,130 100

200,963---(8,130) 100

193,336--

Deferred shares

14,44122-Nov-21 22-Nov-22-

14,441 100

356,963--- (14,441) 100

343,416--

Deferred shares

20,15622.94 01-Oct-22 22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

20,156

Deferred shares

20,15622.94 01-Oct-22 22-Nov-24

-

-

-

-

-

-

-

-

-

-

-

20,156

Restricted rights

24,13818.75 15-Dec-22 15-Dec-26 15-Dec-28

-

-

-

-

-

-

-

-

-

-

24,138

Restricted rights

24,13817.65 15-Dec-22 15-Dec-27 15-Dec-29

-

-

-

-

-

-

-

-

-

-

24,138

Restricted rights

24,86916.61 15-Dec-22 15-Dec-28 15-Dec-30

-

-

-

-

-

-

-

-

-

-

24,869Performance rights

18,103

11.26 15-Dec-22 15-Dec-26 15-Dec-28

-

-

-

-

-

-

-

-

-

-

18,103

Performance rights

6,034

7.29 15-Dec-22 15-Dec-26 15-Dec-28

-

-

-

-

-

-

-

-

-

-

6,034

Performance rights

18,103

10.26 15-Dec-22 15-Dec-27 15-Dec-29

-

-

-

-

-

-

-

-

-

-

18,103

Performance rights

6,034

7.20 15-Dec-22 15-Dec-27 15-Dec-29

-

-

-

-

-

-

-

-

-

-

6,034

Performance rights

18,6529.34 15-Dec-22 15-Dec-28 15-Dec-30

-

-

-

-

-

-

-

-

-

-

18,652

Performance rights

6,217

7.07 15-Dec-22 15-Dec-28 15-Dec-30

-

-

-

-

-

-

-

-

-

-

6,217

M Carnegie Deferred shares

5,202

22-Nov-18 22-Nov-22-

5,202 100

128,587

-

-

-

-

-

-

5,202

-

Deferred shares

3,961

22-Nov-19 22-Nov-22-

3,961 100

97,911

-

-

-

-

-

-

3,961

-

Deferred shares

5,323

07-Dec-20 22-Nov-22-

5,323 100

131,578

-

-

-

-

-

-

5,323

-

Deferred shares

8,220

22-Nov-21 22-Nov-22-

8,220 100

203,188

-

-

-

-

-

-

8,220

-

Deferred shares

9,970

22.94 01-Oct-22 22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

9,970

Deferred shares

9,969

22.94 01-Oct-22 22-Nov-24

-

-

-

-

-

-

-

-

-

-

-

9,969

Restricted rights

18,28619.36 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

18,286

Restricted rights

18,28618.22 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

18,286

Performance rights

13,715

11.27 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

13,715

Performance rights

4,571

7.46 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

4,571

Performance rights

13,71510.13 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

13,715

Performance rights

4,571

7.32 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

4,571

OverviewOperatingenvironment

Type of equity

Name

Governance

Equity fairvalue
(for 2023
grantsNumberonly)
granted1$

Remuneration
reportPerformanceoverview

Directors’
reportLapsed/Forfeited

Vested
First
Grant
date
date exercisable

Dateofexpiry Number%

Value2$

Number67

Financialreport%Vestedand Unexerexercis- cisable
able as as at 30
Value2 at 30 Sep
Sep
20233 20234$

Exercised/Sold
Value2$ Number%

CEO AND CURRENT DISCLOSED EXECUTIVESK Corbally Deferred shares

3,007

22-Nov-18 22-Nov-22-

3,007 100

74,329---(3,007) 100

74,464--

Deferred shares

3,829

22-Nov-19 22-Nov-22-

3,829 100

94,648---(3,829) 100

94,820--

Deferred shares

5,581

07-Dec-20 22-Nov-22-

5,581 100

137,955---(5,581) 100

138,206--

Deferred shares

6,649

22-Nov-21 22-Nov-22-

6,649 100

164,355---(6,649) 100

164,654--

F Faruqui

Deferred shares

9,590

22.94 01-Oct-22 22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

9,590

Deferred shares

9,590

22.94 01-Oct-22 22-Nov-24

-

-

-

-

-

-

-

-

-

-

-

9,590

Restricted rights

27,09119.36 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

27,091

Restricted rights

27,09118.22 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

27,091

Deferred shares

10,48622-Nov-21 22-Nov-22-

10,486 100

259,200---(1,963)19

48,523

8,523-

Deferred shares

12,95022.94 01-Oct-22 22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

12,950

Deferred shares

12,94922.94 01-Oct-22 22-Nov-24

-

-

-

-

-

-

-

-

-

-

-

12,949Deferred share rights

5,158

07-Dec-20 22-Nov-22 29-Nov-22

5,158 100

127,499---(5,158) 100

127,499--

Deferred share rights

8,033

22-Nov-19 22-Nov-22 29-Nov-22

8,033 100

198,565---(8,033) 100

198,565--

Deferred share rights

8,496

22-Nov-18 22-Nov-22 29-Nov-22

8,496 100

210,010---(8,496) 100

210,010--

Restricted rights

18,28619.36 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

18,286-

Restricted rights

18,28618.22 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

18,286

Performance rights

13,715

11.27 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

13,715

Performance rights

4,571

7.46 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

4,571

Performance rights

13,71510.13 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

13,715

Performance rights

4,571

7.32 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

4,571

G Florian		 Deferred shares

1,609

22-Nov-18 22-Nov-21

-

-

-

-

-

-

-

(1,609) 100

39,614--

Deferred shares

3,251

22-Nov-18 22-Nov-22-

3,251 100

80,360

-

-

-

(476)

15

11,861

2,775-

Deferred shares

3,367

22-Nov-19 22-Nov-21

-

-

-

-

-

-

-

(3,367) 100

82,313--

Deferred shares

2,244

22-Nov-19 22-Nov-22-

2,244 100

55,469---(2,244) 100

54,859--Deferred shares

6,442

07-Dec-20 22-Nov-21

-

-

-

-

-

-

-

(6,442) 100

157,487--

Deferred shares

4,829

07-Dec-20 22-Nov-22-

4,829 100

119,367---(4,829) 100

118,054--

Deferred shares

9,770

22-Nov-21 22-Nov-22-

9,770 100

241,502---(9,770) 100

238,846--

Deferred shares

9,590

22.94 01-Oct-22 22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

9,590

Deferred shares

9,590

22.94 01-Oct-22 22-Nov-24

-

-

-

-

-

-

-

-

-

-

-

9,590

Restricted rights

16,82319.36 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

16,823

Restricted rights

16,82318.22 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

16,823

Performance rights

12,617

11.27 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

12,617

Performance rights

4,205

7.46 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

4,205

Performance rights

12,617

10.13 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

12,617

Performance rights

4,205

7.32 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

4,205

R Howell5

C Morgan5 Deferred shares

3,025

24.52 20-Aug-23 20-Aug-24

-

-

-

-

-

-

-

-

-

-

-

3,025

Deferred shares

5,082

24.52 20-Aug-23 20-Aug-24

-

-

-

-

-

-

-

-

-

-

-

5,082

Deferred shares

5,082

24.52 20-Aug-23 20-Aug-25

-

-

-

-

-

-

-

-

-

-

-

5,082

Restricted rights

18,42219.45 25-Sep-23 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

18,422

Performance rights

13,816

11.89 25-Sep-23 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

13,816

Performance rights

4,605

8.24 25-Sep-23 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

4,605

68

Name

Australia and New Zealand Banking Group Limited 2023 Annual Report

Type of equity

Equity fairvalue
(for 2023
grantsNumberonly)
granted1$

Lapsed/Forfeited

Vested
First
Grant
date
date exercisable

Dateofexpiry Number

Vestedand Unexerexercis- cisable
able as as at 30
Value2 at 30 Sep
Sep
20233 20234$

Exercised/Sold%

Value2$

Number%Value2$ Number

4,361 100

107,798---(4,361) 100

103,826%

CEO AND CURRENT DISCLOSED EXECUTIVES		
A Strong5

A WatsonDeferred shares

4,361

22-Nov-19 22-Nov-22

-

-

-

Deferred shares

3,229

07-Dec-20 22-Nov-22-

3,229 100

79,817

-

-

-

(639)

20

15,213

2,590-

Deferred shares

4,18922-Nov-21 22-Nov-22-

4,189 100

103,547

-

-

-

-

-

-

4,189

-

Deferred shares

6,133

24.72 22-Nov-22 22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

6,133

Deferred shares

6,132

24.72 22-Nov-22 22-Nov-24

-

-

-

-

-

-

-

-

-

-

-

6,132

Deferred shares

6,132

24.72 22-Nov-22 22-Nov-25

-

-

-

-

-

-

-

-

-

-

-

6,132

Restricted rights

10,97219.36 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

10,972

Restricted rights

10,97218.22 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

10,972

Performance rights

8,229

11.27 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

8,229

Performance rights

2,743

7.46 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

2,743

Performance rights

8,229

10.13 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

8,229

Performance rights

2,743

7.32 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

2,743

Deferred shares

3,901

Deferred shares
Deferred shares

22-Nov-19 22-Nov-22-

3,901 100

96,428---(3,901) 100

97,341

-

-

4,354

07-Dec-20 22-Nov-22-

4,354 100

107,625---(4,354) 100

108,644

-

-

9,924

22-Nov-21 22-Nov-22-

9,924 100

245,308---(9,924) 100

247,632--

Deferred shares

9,162

22.94 01-Oct-22 22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

9,162

Deferred shares

9,162

22.94 01-Oct-22 22-Nov-24

-

-

-

-

-

-

-

-

-

-

-

9,162

32

02-Dec-19 02-Dec-22-

32 100

790

-

-

-

-

-

-

32

-

-

-

-

-

-

-

-

16,221

Employee Share Offer
Restricted rights

16,22119.36 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

Restricted rights

16,22118.22 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

16,221

Performance rights

12,166

11.27 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

12,166

Performance rights

4,055

7.46 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

4,055

Performance rights

12,16610.13 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

12,166

Performance rights

4,055

7.32 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

4,055

M Whelan Deferred shares

7,072

22-Nov-18 22-Nov-22-

7,072 100

174,811---(7,072) 100

174,726--

Deferred shares

6,998

22-Nov-19 22-Nov-22-

6,998 100

172,981---(6,998) 100

172,897--

Deferred shares

4,722

07-Dec-20 22-Nov-22-

4,722 100

116,722---(4,722) 100

116,665--

Deferred shares

11,70022-Nov-21 22-Nov-22-

11,700 100

289,209--- (11,700) 100

289,068--

Deferred shares

11,59522.94 01-Oct-22 22-Nov-23

-

-

-

-

-

-

-

-

-

-

-

11,595

Deferred shares

11,59522.94 01-Oct-22 22-Nov-24

-

-

-

-

-

-

-

-

-

-

-

11,595

Restricted rights

21,35819.36 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

21,358

Restricted rights

21,35818.22 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

-

21,358Performance rights

16,01911.27 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

16,019Performance rights

5,339

7.46 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

-

-

-

-

-

-

-

5,339

Performance rights

16,01910.13 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

16,019Performance rights

5,339

7.32 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

-

-

-

-

-

-

5,339

-

Overview

Name

Operatingenvironment

Type of equity

Governance

Equity fairvalue
(for 2023
grantsNumberonly)
granted1$

Remuneration
reportPerformanceoverview

Directors’
reportLapsed/Forfeited

Vested
First
Grant
date
date exercisable

69

FinancialreportVestedand Unexerexercis- cisable
able as as at 30
Value2 at 30 Sep
Sep
20233 20234$

Exercised/SoldDateofexpiry Number%

Value2$

Number%Value2$ Number

-

-

-

-

-

-

%

FORMER DISCLOSED EXECUTIVES		K van derMerwe6

Deferred shares

524

22-Nov-18 22-Nov-19-(524) 100

12,962--

Deferred shares

3,577

22-Nov-18 22-Nov-20

-

-

-

-

-

-

-

(3,577) 100

88,481--

Deferred shares

3,577

22-Nov-18 22-Nov-21

-

-

-

-

-

-

-

(3,577) 100

88,481--

Deferred shares

3,577

22-Nov-18 22-Nov-22-

3,577 100

88,419---(1,192)

33

29,485

2,385-

Deferred shares

3,301

22-Nov-19 22-Nov-22-

3,301 100

81,596

-

-

-

-

-

-

3,301

-

Deferred shares

1,650

22-Nov-19 22-Nov-23

-

-

-

-

(1,650) 100(39,067)

-

-

-

-

-

Deferred shares

4,293

07-Dec-20 22-Nov-22-

4,293 100

106,117

-

-

-

-

4,293

-

-

-

Deferred shares

2,862

07-Dec-20 22-Nov-23

-

-

-

-

(2,862) 100(67,763)

-

-

-

-

-

Deferred shares

1,431

07-Dec-20 22-Nov-24

-

-

-

-

(1,431) 100(33,882)

-

-

-

-

-

Deferred shares

8,579

22-Nov-21 22-Nov-22-

8,579 100

212,062

-

-

-

-

-

8,579

-

Deferred shares

6,433

22-Nov-21 22-Nov-23

-

-

-

-

(6,433) 100(152,313)

-

-

-

-

-

Deferred shares

4,288

22-Nov-21 22-Nov-24

-

-

-

-

(4,288) 100(101,527)

-

-

-

-

-

Deferred shares

2,14422-Nov-21 22-Nov-25

-

-

-

-

(2,144) 100(50,763)

-

-

-

-

-

-

Deferred shares

8,669

22.94 01-Oct-22 22-Nov-23

-

-

-

-

(8,669) 100(205,255)

-

-

-

-

-

Deferred shares

8,669

22.94 01-Oct-22 22-Nov-24

-

-

-

-

(8,669) 100(205,255)

-

-

-

-

-

Restricted rights

15,21419.36 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

(15,214) 100(360,220)

-

-

-

-

-

Restricted rights

15,21418.22 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

(15,214) 100(360,220)

-

-

-

-

-

Performance rights

25,51022-Nov-19 22-Nov-23 22-Nov-25

-

-

-

(25,510) 100(603,998)

-

-

-

-

-

Performance rights

8,503

22-Nov-19 22-Nov-23 22-Nov-25

-

-

-

(8,503) 100(201,325)

-

-

-

-

-

Performance rights

23,21307-Dec-20 22-Nov-24 22-Nov-26

-

-

-

(23,213) 100(549,612)

-

-

-

-

-

Performance rights

7,737

07-Dec-20 22-Nov-24 22-Nov-26

-

-

-

(7,737) 100(183,188)

-

-

-

-

-

Performance rights

33,14022-Nov-21 22-Nov-25 22-Nov-27

-

-

-

(33,140) 100(784,652)

-

-

-

-

-

Performance rights

11,04622-Nov-21 22-Nov-25 22-Nov-27

-

-

-

(11,046) 100(261,535)

-

-

-

-

-

Performance rights

11,41011.27 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

(11,410) 100(270,153)

-

-

-

-

-

Performance rights

3,803

7.46 22-Nov-22 22-Nov-26 22-Nov-28

-

-

-

(3,803) 100(90,043)

-

-

-

-

-

Performance rights

11,41010.13 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

(11,410) 100(270,153)

-

-

-

-

-

Performance rights

3,803

7.32 22-Nov-22 22-Nov-27 22-Nov-29

-

-

-

(3,803) 100(90,043)

-

-

-

-

-

1. For the purpose of the five highest paid executive disclosures, Executives are defined as Disclosed Executives or other members of the ExCo. For the 2023 financial year the five highest paid executives include
five Disclosed Executives. Rights granted to Disclosed Executives as remuneration in 2023 are included in the table. No rights have been granted to the CEO, Disclosed Executives or the five highest paid executives
since the end of 2023 up to the Directors’ Report sign-off date. 2. The point in time value of deferred shares/deferred share rights and/or restricted rights/performance rights is based on the one day VWAP of theCompany’s shares traded on the ASX on the date of vesting, lapsing/forfeiture or exercising/sale/transfer out of trust, multiplied by the number of deferred shares/deferred share rights and/or restricted rights/
performance rights. The exercise price for all deferred share rights/restricted rights/performance rights is $0.00. No terms or conditions of grant of the share-based payment transactions have been altered or
modified during the reporting period. 3. The number vested and exercisable is the number of shares, options and rights that remain vested at the end of the reporting period. No shares, options and rights werevested and unexercisable. 4. Performance rights granted in prior years (by grant date) that remained unexerciseable at 30 September 2023 or date ceased as a KMP include:
Nov-19

Nov-20Nov-21S Elliott

168,066

159,308

126,353

Nov-22
73,143

M Carnegie

40,81638,37842,34536,572

K Corbally

-

-

-

-

F Faruqui

69,11834,04554,00636,572
33,644

G Florian

23,12834,82050,324

R Howell

-

-

-

-

C Morgan---

18,421A Strong---

21,944

A Watson-

31,38951,11732,442

M Whelan

72,10834,04560,26642,716----

K van der Merwe

Performance rights granted to S Elliott in 2023 were approved by shareholders at the 2022 AGM in accordance with ASX Listing Rule 10.14. 5. Equity transactions disclosed from date commenced as a Disclosed
Executive. There were no disclosable transactions for R Howell. 6. Equity transactions disclosed up to date ceased as a KMP.

70

Australia and New Zealand Banking Group Limited 2023 Annual Report

11.2.2 NED, CEO AND DISCLOSED EXECUTIVES’ EQUITY HOLDINGSThe table below sets out details of equity held directly, indirectly or beneficially by each NED, the CEO and each Disclosed Executive,
including their related parties.
Equity holdings – NED, CEO and Disclosed Executives

Name

Type of equity

Openingbalance at
1 Oct 2022

Granted during
the year as
remuneration1

Received during
the year on
exercise of
options or rights

Resulting fromany otherchanges during
the year2

Closingbalance at
30 Sep 20233,4

4,350
9,250
15,3189,653
201,635
1,350
10,5005,828
19,042
5,000
2,140
2,000
6,400
2,779

-

-

405
(17,234)(5,000)
5,000
-

4,350
9,250
15,31810,058
184,401
1,350
10,5005,828
19,042
2,140
2,000
5,000
6,400
2,779

21,671
2,500
2,500

-

-

-

21,6712,500
2,500

21,687(21,687)-(37,195)
100,532(56,989)
7,482(19,066)
2,964(1,963)(1,550)(28,737)
18,029(324)(25)(5,000)1,971(18,179)
13,393(30,492)
233-

73,103495,640
73,145526,870
132,773
41,58036,572
158,11145,9584,345
1,400
62,67554,182
51,942
120,517
9,780
36,572
193,741
47,04855,612
33,646
141,916
12,13813,18918,422
18,421
36,7794,235
21,94421,944
42,101
61
50,97432,442
114,948
48,95847,19642,716
209,135

CURRENT NON–EXECUTIVE DIRECTORSP O’Sullivan
I AtlasJ Halton
G Hodges5
J Key
H Kramer5
J Macfarlane

C O’Reilly
J SmithOrdinary shares
Capital notes 7
Ordinary shares
Ordinary shares
Ordinary shares
Capital notes 4
Ordinary shares
Ordinary shares
Ordinary shares
Capital notes 3
Capital notes 6
Capital notes 7
Capital notes 8
Ordinary shares
Ordinary shares

FORMER NON–EXECUTIVE DIRECTORS		G Liebelt6

Ordinary shares
Capital notes 6
Capital notes 7

CEO AND CURRENT DISCLOSED EXECUTIVES				S Elliott

M Carnegie

K Corbally

F Faruqui

G Florian

R Howell5
C Morgan5

A Strong5

A Watson

M Whelan

Deferred shares
Ordinary shares
Vested shares 1yr restriction
Restricted rights
Performance rights
Deferred shares
Ordinary shares
Restricted rights
Performance rights
Deferred shares
Ordinary shares
Capital notes 6
Deferred share rights
Restricted rights
Deferred shares
Ordinary shares
Deferred share rights
Restricted rights
Performance rights
Deferred shares
Ordinary shares
Restricted rights
Performance rights
Deferred shares
Ordinary shares
Deferred shares
Ordinary shares
Restricted rights
Performance rights
Deferred shares
Ordinary shares
Restricted rights
Performance rights
Deferred shares
Employee Share Offer
Ordinary shares
Restricted rights
Performance rights
Deferred shares
Ordinary shares
Restricted rights
Performance rights

69,986395,108
56,989453,727
112,834
34,098
121,539
45,844
1,381
1,400
62,67528,006
100,380
31,467
157,169
56,60537,583
108,272
12,138324
25
23,382
2,264
41,956
61
37,581
82,50656,26046,963
166,419

40,312
73,14573,143
19,93936,572
36,572
19,18054,18225,89936,572
36,572
19,18033,646
33,644
13,18918,422
18,421
18,397
21,94421,944
18,32432,44232,442
23,19042,71642,716

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report71

FinancialreportFORMER DISCLOSED EXECUTIVESK van derMerwe6

Deferred shares

63,515

17,338-(45,016)

35,837

Ordinary shares

29,407

-

-

1,918

31,325

Restricted rights-

30,428-(30,428)-

109,149

30,426-(139,575)-

Performance rights

1. Details of options/rights granted as remuneration during 2023 are provided in the previous table. 2. Shares resulting from any other changes during the year include the net result of any sharespurchased (including under the ANZ Share Purchase Plan), forfeited, sold or acquired under the Dividend Reinvestment Plan. 3. The following shares (included in the holdings above) were held on
behalf of the NEDs, CEO and Disclosed Executives (i.e., indirect beneficially held shares) as at 30 September 2023 (or the date ceased as a KMP): P O'Sullivan - 0, I Atlas - 15,318, J Halton - 0,
G Hodges - 0, J Key - 10,500, H Kramer - 5,828, J Macfarlane - 28,182, C O'Reilly - 0, J Smith - 0, G Liebelt - 8,436, S Elliott - 562,395, M Carnegie - 132,773, K Corbally - 47,358, F Faruqui - 51,942,
G Florian - 56,947, R Howell - 12,138, C Morgan - 13,189, A Strong - 36,779, A Watson - 42,162, M Whelan - 92,771, K van der Merwe - 35,837. 4. Zero rights were vested and exercisable, and zero
options/rights were vested and unexerciseable as at 30 September 2023. There was no change in the balance as at the Directors' Report sign-off date. 5. Commencing balance is based onholdings as at the date of commencement as a KMP. 6. Concluding balance is based on holdings as at the date ceased as a KMP.

11.3 Loans
11.3.1 OVERVIEWWhen we lend to NEDs, the CEO or Disclosed Executives, we do so in the ordinary course of business and on normal commercial terms andconditions that are no more favourable than those given to other employees or customers – this includes the term of the loan, the security
required and the interest rate. Details of the terms and conditions of lending products can be found on anz.com. No amounts have been
written off during the period, or individual assessed allowance for expected credit losses raised in respect of these balances.
Total loans to NEDs, the CEO and Disclosed Executives, including their related parties at 30 September 2023 (including those with balancesless than $100,000) was $31,068,195 (2022: $30,679,346) with interest paid of $1,346,442 (2022: $790,118) during the period.
11.3.2 NED, CEO AND DISCLOSED EXECUTIVES’ LOAN TRANSACTIONS

The table below sets out details of loans outstanding to NEDs, the CEO and Disclosed Executives including their related parties, if – at any
time during the year – the individual’s aggregate loan balance exceeded $100,000.
Loan transactions – NED, CEO and Disclosed Executives

Name

Opening balance at
1 Oct 2022¹$

Closing balance at Interest paid and payablein the reporting period²
30 Sep 2023$$

Highest balance inthe reporting period$

CURRENT NON–EXECUTIVE DIRECTORSP O'Sullivan

731,495

657,99828

736,813G Hodges

2,173,487

2,322,549

105,4113,307,728

J Key

3,703,009

3,583,961

285,191

3,927,633

H Kramer

3,177,784

3,189,935

29,733

3,198,854

J Macfarlane

9,364,205

5,907,690

539,941

10,643,712

CEO AND CURRENT DISCLOSED EXECUTIVESS Elliott

2,521,407

2,467,062

84,3782,561,192

3,374

5,602,183

18,8555,646,088

G Florian

4,250,856

2,324,157

79,2394,293,369

A Strong

1,461,490

1,715,981

62,505

1,852,107

M Whelan

1,550,938

1,528,458

89,7381,601,107

M Carnegie

FORMER DISCLOSED EXECUTIVESK van der Merwe3

1,655,942

1,696,038

49,224

1,733,877

Total

30,593,988

30,996,013

1,344,242

39,502,479

1. Opening balances have been adjusted for new and leaving KMP. 2. Actual interest paid after considering offset accounts. The loan balance is shown gross, however the interest paid takes into
account the impact of offset amounts. 3. Closing balance is as at the date ceased as a KMP.

11.4 Other transactions
Other transactions with NEDs, the CEO and Disclosed Executives, and their related parties included deposits.
Other transactions – NED, CEO and Disclosed Executives

Total KMP deposits

Opening balance at
1 Oct 20221$

Closing balance at
30 Sep 20232,3$

30,432,187

40,819,935

1. Opening balance is at 1 October 2022 or the date of commencement as a KMP if part way through the year and it has been adjusted to take into account timing variances. 2. Closing balance is
at 30 September 2023 or at the date ceased as a KMP if part way through the year. 3. Interest received on deposits for 2023 was $1,001,678 (2022: $140,355).

Other transactions with KMP and their related parties included amounts paid to the Group in respect of investment management service
fees, brokerage, bank fees and charges. The Group has reimbursed KMP for the costs incurred for security and secretarial services associatedwith the performance of their duties. These transactions are conducted on normal commercial terms and conditions are no more favourable
than those given to other employees or customers.

72

Australia and New Zealand Banking Group Limited 2023 Annual Report

DIRECTORS’REPORT
Directors’ report
The Directors’ Report for the financial year
ended 30 September 2023 has been
prepared in accordance with therequirements of the Corporations Act 2001.
The information below forms part of thisDirectors’ Report:• Principal activities on page 7;• Operating and financial review on
pages 20 to 32;• Dividends on page 32;• Information on the Directors on
pages 8 to 10;• Remuneration report on pages 34 to 71.

Establishment of a New Group
Organisational Structure
On 3 January 2023, Australia and New
Zealand Banking Group Limited (ANZBGL)
established by a scheme of arrangement,a non-operating holding company, ANZGroup Holdings Limited (ANZGHL), as the
new listed parent holding company of the
ANZ Group and implemented a restructure
to separate ANZ’s banking and certain
non-banking businesses into the ANZ Bank
Group and ANZ Non-Bank Group(Restructure). The ANZ Bank Group
comprises the majority of the businesses
and subsidiaries that were held in ANZBGL
prior to the Restructure. The ANZ Non-Bank
Group comprises banking-adjacentbusinesses developed or acquired by the
ANZ Group to focus on bringing newtechnology and banking-adjacent services
to the ANZ Group’s customers, and aseparate service company.
The key steps undertaken in the
Restructure were:• new legal entities ANZGHL, ANZ BH Pty
Ltd, ANZ NBH Pty Ltd and ANZ Group
Services Pty Ltd were created;• each ANZBGL shareholder received one
ANZGHL ordinary share for each ANZBGL
ordinary share that they held prior to theimplementation of the Restructure;• ANZBGL transferred its beneficial interests
in banking-adjacent businesses to ANZ
NBH Pty Ltd;• ANZBGL transferred its interest in several
properties to ANZ Group Services Pty Ltd;• ANZBGL transferred all shares in ANZ BH
Pty Ltd, ANZ NBH Pty Ltd and ANZ Group
Services Pty Ltd to ANZGHL; and• ANZGHL transferred all shares in ANZBGL
to ANZ BH Pty Ltd.
As a result of the Restructure, theconsolidated results of ANZBGL and its
subsidiaries for the 2023 financial year
consist of:• the results of the former ANZ Groupfor the period 1 October 2022 to 2
January 2023;• the results of the ANZBGL Group for theperiod 3 January to 30 September 2023.
ANZGHL Financial Information
As a result of the Restructure, ANZBGL is a
subsidiary of ANZGHL. A copy of the 2023
ANZGHL Annual Report can be accessed via
the ANZ Shareholder Centre at anz.com/
shareholder/centre/reporting.

Significant changes instate of affairs
There have been no other significant
changes in the Group’s state of affairs otherthan Establishment of a New Group
Organisational Structure as describedabove.

Events since the end of thefinancial year
There have been no significant events from30 September 2023 to the date of signing
this report.

Participation in politicalparty activities
We aim to assist the democratic process inAustralia by attending and participating in
paid events hosted by the major federal
political parties. For the year ended 30
September 2023, we contributed $97,159 toparticipate in political activities hosted by
the Australian Labor Party, the Liberal Partyof Australia and the National Party ofAustralia. These activities included speeches,
political functions and conferences, andpolicy dialogue forums. We disclose thesecontributions to the Australian Electoral
Commission (AEC), noting the AEC’s
reporting year is a different period to theGroup’s financial year.

Modern slavery statement
The Group is subject to Australia’s Modern
Slavery Act Australian CommonwealthModern Slavery Act 2018 (Cth) and United
Kingdom’s Modern Slavery Act 2015.
Our Modern Slavery Statement sets out
actions taken to identify, assess and manage
modern slavery risks in our operations andsupply chain during the financial year
ended 30 September 2023.
Our 2023 Modern Slavery Statement will beavailable at anz.com/esgreport prior to our
Annual General Meeting.

Environmental regulation
We recognise the expectations of our
stakeholders – customers, shareholders,
staff and the community – to operate ina way that mitigates our environmental
impact.
In Australia, we meet the requirementsof the National Greenhouse and Energy
Reporting Act 2007 (Cth), which imposes
reporting obligations where energy
production, usage or greenhouse gas
emissions trigger specified thresholds.
We do not believe that our operations
are subject to any other particular andsignificant environmental regulation undera law of the Commonwealth of Australia orof an Australian State or Territory. We may
become subject to environmental
regulation as a result of our lending
activities in the ordinary course of businessand have developed policies, which arereviewed on a regular basis, to help identify
and manage such environmental matters.
Further details of our environmental
performance, including progress against ourtargets and management of material issuesaligned with our commitment to fair andresponsible banking and priority areas offinancial wellbeing, environmental
sustainability and housing, are available
in the ESG Supplement, at anz.com/
annualreport.

OverviewOperatingenvironment

Governance

External auditor
The Group’s external auditor is KPMG.
The ANZ Group appointed Peat, Marwick,
Mitchell & Co (predecessor to KPMG)
in 1969.
The Board Audit Committee conducts aformal annual performance assessment of
the external auditor, including whether tocommence an external tender for the audit.
After considering relevant factors including
tenure, audit quality, local and international
capability and experience, andindependence, the Board Audit Committee
resolved to reappoint KPMG for the 30
September 2024 financial year audit.
KPMG regularly rotates the Group Lead
Audit Engagement Partner and theEngagement Quality Control Review Partnerwith the most recent rotation being for thefinancial years ended 30 September 2023
and 30 September 2020, respectively.

Non-audit services
Our Stakeholder Engagement Model for
Relationship with the External Auditor (thePolicy), which incorporates requirements of
the Corporations Act 2001 and industry bestpractice, prevents the external auditor fromproviding services that are perceived to be
in conflict with the role of the external
auditor or breach independence
requirements. This includes consulting
advice and sub-contracting of operational
activities normally undertaken bymanagement, and engagements where
the external auditor may ultimately berequired to express an opinion on its
own work. Specifically, the Policy:• limits the scope of non-audit services
that may be provided;• requires that audit, audit-related andpermitted non-audit services be
considered in light of independence
requirements and for any potential
conflicts of interest before they areapproved by the Audit Committee,
or approved by the Chair of the Audit
Committee (or delegate) and notified
to the Audit Committee; and• requires pre-approval before theexternal auditor can commence any
engagement for the Group.

Performanceoverview

Directors’
reportRemuneration
reportFurther details about the Policy can befound in ANZGHL’s Corporate GovernanceStatement.

Financialreport73

For the reasons set out above, theDirectors are satisfied that the provision of
non-audit services by the external auditor
during the year ended 30 September 2023
is compatible with the general standardof independence for external auditors
imposed by the Corporations Act 2001
and did not compromise the auditor
independence requirements of the
Corporations Act 2001.

The external auditor has confirmed to the
Audit Committee that it has:
• implemented procedures to ensure it
complies with independence rules inapplicable jurisdictions; and• complied with applicable policies
and regulations in those jurisdictions
regarding the provision of non-audit
services, and the Policy.

Directors’ and officers’ indemnity

The Audit Committee has reviewed the
non-audit services provided by the external
auditor during the 2023 financial year, andhas confirmed that the provision of these
services is consistent with the Policy,
compatible with the general standard of
independence for auditors imposed by
the Corporations Act 2001 and did notcompromise the auditor independence
requirements of the Corporations Act 2001.
This has been formally advised by the Audit
Committee to the Board of Directors.
The categories of non-audit services
supplied to the Group during the year
ended 30 September 2023 by the external
auditor, KPMG, or by another person or firm
on KPMG’s behalf, and the amounts paid or
payable (including GST) by the Group are
as follows:
Amount paid/
payable $’000’s
Non-audit services

2023

2022

Methodology,
procedural andadministrative reviews

105

8

Total

105

8

Further details on the compensation paid to
KPMG are provided in Note 33 Auditor Fees
to the financial statements including
details of audit-related services provided
during the year of $5.82 million (2022:$7.50 million).

ANZBGL’s Constitution (Rule 9.1) permits
ANZBGL to:• Indemnify any officer or employee of
ANZBGL or any of its related bodies
corporate, or its auditor, against liabilities(so far as may be permitted underapplicable law) incurred as such an
officer, employee or auditor to a person(other than ANZBGL or a related body
corporate), including liabilities incurred asa result of appointment or nomination by
ANZBGL or a related body corporate asa trustee or as an officer or employee ofanother corporation; and• Make payments in respect of legal costs
incurred by an officer or employee
or auditor in defending an action fora liability incurred as such an officer,
employee or auditor, or in resistingor responding to actions taken by agovernment agency, a duly constituted
Royal Commission or other official inquiry,a liquidator, administrator, trustee inbankruptcy or other authorised official.
Our policy is that our employees should
be protected from any liability they incur
as a result of acting in the course of theiremployment, subject to appropriate
conditions.
Under the policy, we will indemnify
employees and former employees against
any liability they incur to any third party
as a result of acting in good faith in thecourse of their employment and thisextends to liability incurred as a result of
their appointment/nomination by or at
the request of the ANZ Group as an officer
or employee of another corporation or
body or as a trustee.

74

Australia and New Zealand Banking Group Limited 2023 Annual Report

The indemnity is subject to applicable law
and certain exceptions.

Key management personnel andemployee share and option plans

ANZBGL has entered into Indemnity Deeds
with each of its Directors, with certain
secretaries and former Directors of
ANZBGL, and with certain employees andother individuals who act as directors orofficers of related bodies corporate or ofanother company, to indemnify themagainst liabilities and legal costs of the kind
mentioned in ANZBGL’s Constitution.

The Remuneration Report contains details
of Non-Executive Directors, Chief Executive
Officer and Disclosed Executives’ equity
holdings and options/rights issued during
the 2023 financial year and as at the date ofthis report.

During the 2023 financial year, we have
paid premiums for insurance for the benefitof the Directors and employees of theGroup. In accordance with common
commercial practice, the insurance
prohibits disclosure of the nature of theliability insured against and the amount of
the premium.

The names of all persons who currently holdoptions/rights are entered in the register
kept by ANZGHL pursuant to section 170 of
the Corporations Act 2001. This register may
be inspected free of charge.

Rounding of amounts• Shares issued as a result of the exercise of
options/rights granted to employees; andANZBGL is a company of the kind referred
to in Australian Securities and Investments
Commission Corporations (Rounding in
Financial/Directors’ Reports) Instrument
2016/191 dated 24 March 2016 and, in
accordance with that Instrument, amounts
in the consolidated financial statements andthis Directors’ Report have been rounded to
the nearest million dollars unless specificallystated otherwise.

• Other details about share options/rights
issued, including any rights to participate
in any share issues.

This report is made in accordance with aresolution of the Board of Directors andis signed for and on behalf of the Directors.

Note 30 Employee Share and Option Plans
to the 2023 Financial Report contains detailsof the 2023 financial year and as at the dateof this report:• Options/rights issued over shares granted
to employees;

Paul D O’Sullivan

Shayne C Elliott

ChairmanManaging Director

10 November 2023

10 November 2023

Lead Auditor’s Independence
Declaration

To: the Directors of Australia and New
Zealand Banking Group Limited

The Lead Auditors Independence
Declaration given under Section 307C of the
Corporations Act 2001 is set out below andforms part of the Directors’ Report for
the year ended 30 September 2023.

I declare that, to the best of my knowledge
and belief, in relation to the audit ofAustralia and New Zealand Banking Group
Limited for the financial year ended 30
September 2023, there have been:

KPMG

Martin McGrath• No contraventions of the auditor
independence requirements as set out
in the Corporations Act 2001 in relation to
the audit; and• No contraventions of any applicable codeof professional conduct in relation
to the audit.

Partner
10 November 2023
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member
firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report

FINANCIALREPORT

Financial Statements
Income Statement

76

Statement of Comprehensive Income

77

Balance Sheet

78

Cash Flow Statement

79

Statement of Changes in Equity

80

Notes to the Financial Statements
Non-Financial Assets

Basis of Preparation
1. About Our Financial Statements

82

Financial Performance

21.	Goodwill and Other
Intangible Assets

170

2. Net Interest Income

87

Non-Financial Liabilities

3. Non-Interest Income

88

22. Other Provisions

4. Operating Expenses

91

Equity5. Income Tax

93

23. Shareholders’ Equity

176

6. Dividends

96

24. Capital Management179

7. Segment Reporting

97

174

Consolidation and Presentation

Financial Assets and Other Trading Assets

25. Controlled Entities

182

8. Cash and Cash Equivalents

101

26. Investments in Associates

184

9. Trading Assets

102

27. Structured Entities

186

10. Derivative Financial Instruments

103

28. Transfers of Financial Assets

188

11. Investment Securities

115

12. Net Loans and Advances117

13.	Allowance for Expected
Credit Losses

118

Financial Liabilities
14. Deposits and Other Borrowings

129

15. Payables and Other Liabilities

130

16. Debt Issuances

131

Financial Instrument Disclosures
17. Financial Risk Management

137

18.	Fair Value of Financial Assets
and Financial Liabilities

159

19.	Assets Charged as Security
for Liabilities and CollateralAccepted as Security for Assets

167

20. Offsetting

168

Employee and Related Party Transactions
29.	Superannuation and Post
Employment Benefit Obligations

190

30. Employee Share and Option Plans

192

31. Related Party Disclosures

198

Other Disclosures32.	Commitments, Contingent
Liabilities and Contingent Assets

201

33. Auditor Fees

204

34.	Pending Organisational
Changes Impacting Future
Reporting Periods

205

35.	Events Since the Endof the Financial Year

205

Directors’ Declaration

206

Independent Auditor’s Report

207

Financialreport75

76

Australia and New Zealand Banking Group Limited 2023 Annual Report

FINANCIAL REPORTINCOME STATEMENT
Consolidated
For the year ended 30 September

NoteInterest income1

The Company

2023
$m

2022
$m

2023
$m

2022
$m

49,927

23,60941,144

18,408(33,352)(8,735)(29,026)(7,433)

Net interest income

2

16,575

14,874

12,118

10,975

Other operating income

3

3,577

4,235

5,401

6,424

Net income from insurance business

3

89

140

-

-

Share of associates' profit/(loss)

3

225

177

(18)

(12)

20,466

19,426

17,501

17,387(10,087)(9,579)(8,488)(8,123)

10,379

9,847

9,013

9,264

(245)

232

(75)

265

10,134

10,079

8,938

9,529

(2,941)(2,940)(1,964)(1,933)

7,193

7,139

6,974

7,596

Interest expense

Operating income
Operating expenses

4

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

13

Profit before income tax
Income tax expense
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit for the year

5

-

(19)

-

-

7,193

7,120

6,974

7,596

7,165

7,119

6,974

7,596

28

1

-

-

Comprising:
Profit attributable to shareholders of the Company
Profit attributable to non-controlling interests
1.

Includes interest income calculated using the effective interest method on financial assets measured at amortised cost or fair value through other comprehensive income of $46,918 million(2022: $22,844 million) in the Group and $37,235 million (2022: $17,123 million) in the Company.

The notes appearing on pages 82 to 205 form an integral part of these financial statements.

76

OverviewOperatingenvironment

Performanceoverview

Governance

Remuneration
reportDirectors’
report77

Financialreport

FINANCIAL REPORTSTATEMENT OF COMPREHENSIVE INCOME
Consolidated

The Company

For the year ended 30 September

2023
$m

2022
$m

2023
$m

2022
$m

Profit after tax from continuing operations

7,193

7,139

6,974

7,596

Investment securities - equity securities at FVOCI

(30)

(55)

(23)

(119)

Other reserve movements

(80)

127

(105)

132

Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
1

Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve

718

(759)

64

139

Other reserve movements

199(4,180)378(4,132)

(22)

1,172

(73)

1,186

Income tax attributable to the above items
Share of associates’ other comprehensive income

2

Other comprehensive income after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Total comprehensive income for the year

31

(40)

816

(3,735)241(2,794)

-

(19)

-

-

8,009

3,385

7,215

4,802

7,954

3,399

7,215

4,802

55

(14)

-

-

-

Comprising total comprehensive income attributable to:Shareholders of the Company
Non-controlling interests
1.
2.

1

The Group includes foreign currency translation differences attributable to non-controlling interests of $27 million (2022: -$15 million).
The Group’s share of associates’ other comprehensive income, that may be reclassified subsequently to profit or loss in the Group, includes:
2023
$m

2022
$m

FVOCI reserve gain/(loss)

25

(56)

Defined benefits gain/(loss)

615

Foreign currency translation reserve gain/(loss)

-

1

31

(40)

Total

The notes appearing on pages 82 to 205 form an integral part of these financial statements.

77

78

Australia and New Zealand Banking Group Limited 2023 Annual Report

FINANCIAL REPORT (continued)
BALANCE SHEET
Consolidated
As at 30 September

Note

The Company

2023
$m

2022
$m

2023
$m

2022
$m

168,154

168,132

154,408

155,483

AssetsCash and cash equivalents1

8

Settlement balances owed to ANZ

9,349

4,762

8,935

4,024

Collateral paid

8,558

12,7007,717

11,368937,00435,23730,69328,073

Derivative financial instruments

10

60,40690,17459,98988,056

Investment securities

11

96,96986,153

83,201

72,399Net loans and advances

12707,694

672,407563,017537,345

646

632

284

249

-

-

26,06722,86016,277

17,630

Trading assets

Regulatory deposits
Due from controlled entities
Shares in controlled entities

25

-

-

Investments in associates

26

2,321

2,181

-

53

37

46

9

43

2,988

2,992

Current tax assets
Deferred tax assets

5

3,386

3,384

Goodwill and other intangible assets

21

3,961

3,877

935

935

Premises and equipment

2,360

2,431

1,923

2,171

Other assets

5,196

3,613

3,636

2,402

Total assets

1,106,041

1,085,729

960,079

946,083

Settlement balances owed by ANZ

19,267

13,766

16,574

10,224

Collateral received

10,382

16,2309,452

14,425

Liabilities

Deposits and other borrowings

14815,203797,281675,075

665,607

Derivative financial instruments

10

57,48285,14957,511

84,500--26,89425,305

305

829

133

488

Due to controlled entities
Current tax liabilities
Deferred tax liabilities

5

60

83

47

54

Payables and other liabilities

15

15,932

9,835

13,279

8,562

568

549

424

409

Employee entitlements
Other provisions

22

1,714

1,872

1,499

1,648

Debt issuances

16

116,01493,734

98,21375,8281,036,927

1,019,328

899,101

887,050

69,114

66,40160,97859,033

Total liabilities
Net assets
Shareholders' equity
Ordinary share capital

23

29,082

28,79729,00528,720Reserves

23(1,796)(2,606)(2,222)(2,546)

Retained earnings
Share capital and reserves attributable to shareholders of theCompany
Non-controlling interests

23

41,306

39,71634,19532,85923

68,592

65,90760,97859,033

23

522

494

-

-

Total shareholders' equity

23

69,114

66,40160,97859,033

1.

Includes Settlement balances owed to ANZ that meet the definition of Cash and cash equivalents.

The notes appearing on pages 82 to 205 form an integral part of these financial statements.

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FINANCIAL REPORTCASH FLOW STATEMENT
For the year ended 30 September

Consolidated
2023
$m

2022
$m

The Company
2023
$m

2022
$m

Profit after income tax

7,193

7,120

6,974

7,596

Adjustments to reconcile to net cash provided by/(used in) operating
activities:
Allowance for expected credit losses
Depreciation and amortisation(Gain)/Loss on sale of premises and equipment
Net derivatives/foreign exchange adjustment(Gain)/Loss on sale from divestments
Other non-cash movements1

245
941
43
3,505
(29)
(90)

(232)
1,008
(8)
(4,434)
(252)
(48)

75
795
31
3,074
70
124

(265)
867
(1)
(4,687)
(246)
235

4,143
(23)
(28,289)(1,725)(2,638)8,020(46,364)
(190)

3,590
(1,769)(25,708)(1,481)(1,333)(2,054)
6,355(41,990)
978(81)

21,866
5,278(5,848)(1,015)
(998)
6,195

48,879(3,486)
9,468
3,333
13,056
20,176

21,353
6,314(4,886)(1,295)(1,046)
5,928

45,058(4,769)8,074
3,426
10,90018,496(51,974)
41,401
1,135(604)(10,042)(34,292)
32,797
394
(65)
(651)
(1,817)(46,130)
35,495
1,174
(29)
(612)
(10,102)(30,065)
28,201
(5)
(133)
(667)
(2,669)(11,105)

1,226(12,002)-44,182(23,985)(4,700)
(21)
(337)
4,034
187
168,132(165)

23,422(26,017)(3,784)
(117)
(218)
(846)
492
3,497
(2,345)16,014
151,260
858

40,428(19,641)(4,673)
(21)
(277)
3,814
(360)
155,483(715)

20,145(21,985)(3,782)
(117)
(226)
(846)
3,497
(3,314)
12,513
141,436
1,534

168,154

168,132

154,408

155,483

Net (increase)/decrease in operating assets:
Collateral paid
Trading assets
Net loans and advances1
Net intra-group loans and advances
Other assets1

Net increase/(decrease) in operating liabilities:
Deposits and other borrowings
Settlement balances owed by ANZ
Collateral received
Other liabilities
Total adjustments
Net cash (used in)/provided by operating activities2
Cash flows from investing activities
Investment securities assets:
Purchases
Proceeds from sale or maturity
Proceeds from divestments, net of cash disposed
Net movement in shares in controlled entities
Net investments in other assets
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Deposits and other borrowings drawn down
Debt issuances:3
Issue proceeds
Redemptions
Dividends paid4
On market purchase of treasury shares
Repayment of lease liabilities
Share buyback
ANZ Bank New Zealand Perpetual Preference Shares
Share entitlement issue
Net cash (used in)/provided by financing activities
Net (decrease)/increase in Cash and cash equivalents
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on Cash and cash equivalents
Cash and cash equivalents at end of year
1.

Certain non-cash movements were reclassified to Net loans and advances and Other assets to better reflect the net movement in operating assets. Comparatives have been restated. (2022: reduction to
Other non-cash movements of $861 million, a decrease in Net loans and advances of $14 million, and an increase in Other assets of $875 million) for the Group. (2022: reduction to Other non-cash
movements of $723 million, a decrease in Net loans and advances of $13 million, and an increase in Other assets of $736 million) for the Company.

2.

Net cash (used in)/provided by operating activities for the Group includes interest received of $48,362 million (2022: $22,748 million), interest paid of $30,738 million (2022: $7,857 million) and income taxes
paid of $3,501 million (2022: $2,171 million). Net cash (used in)/provided by operating activities for the Company includes interest received of $40,353 million (2022: $17,672 million), interest paid of $26,846
million (2022: $6,692 million) and income taxes paid of $2,384 million (2022: $1,443 million).

3.

Non-cash movements on Debt issuances include a loss of $2,084 million (2022: $4,725 million gain) from unrealised movements primarily due to fair value hedging adjustments and foreign exchange losses for
the Group, and include a loss of $1,598 million (2022: $3,420 million gain) from unrealised movements primarily due to fair value hedging and foreign exchange losses for the Company.

4.

Cash outflow for shares purchased to satisfy the dividend reinvestment plan are classified in Dividends paid.

The notes appearing on pages 82 to 205 form an integral part of these financial statements.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

STATEMENT OF CHANGES IN EQUITY

Reserves$m

Retainedearnings$m

Share capitaland reserves
attributable toshareholdersof the Company$m25,984

1,228

36,453

63,665

11

63,676

Profit or loss from continuing operations
Profit or loss from discontinued operations

-

-

7,138
(19)

7,138
(19)

1
-

7,139
(19)

Other comprehensive income for the year fromcontinuing operations-(3,835)115(3,720)(15)(3,735)-(3,835)

7,234

3,399

(14)

3,385

Consolidated
As at 1 October 2021

Total comprehensive income for the year
Transactions with equity holders in their capacity
as equity holders:
Dividends paid
Dividend reinvestment plan1
Group share buy-backShare entitlement issue3
2

Ordinaryshare capital$m

NonTotal
controlling shareholders’interests
equity$m$m--(3,965)(3,965)(2)(3,967)

183
(846)

-

-

183
(846)

-

183
(846)

3,497

-

-

3,497

-

3,497

Other equity movements:
Employee share and option plans

(21)

-

-

(21)

-

(21)

4

-

1

(7)
1

(7)
2

499
-

492
2

As at 30 September 2022

Preference shares issued
Other items

28,797(2,606)

39,71665,907494

66,401

Profit or loss from continuing operations

-

-

7,165

7,165

28

7,193

Other comprehensive income for the year fromcontinuing operations

-

863

(74)

789

27

816

-

863

7,091

7,954

55

8,009

-

-

(5,559)(5,559)(27)(5,586)

206

-

-

206

-

206

79
-

(39)
(14)

39
19

79
5

-

79
5

29,082(1,796)

41,306

68,592

522

69,114

Total comprehensive income for the year
Transactions with equity holders in their capacity
as equity holders:
Dividends paid
Dividend reinvestment plan

1

Other equity movements:
Employee share and option plans
Net transfers following Restructure
Other items
As at 30 September 2023
1.

8.4 million shares were issued under the Dividend Reinvestment Plan for the 2022 final dividend (2022 interim dividend: 7.2 million; 2021 final dividend: nil). On-market share purchases for the DRP in 2022
were $204 million.

2.

The Group completed its $1.5 billion on-market share buy-back of ANZ ordinary shares on 25 March 2022 resulting in 31 million shares being cancelled in 2022.

3.

The Group issued 187.1 million new ordinary shares under the share entitlement offer in 2022.
Perpetual preference shares issued by ANZ Bank New Zealand, a wholly owned subsidiary of ANZBGL, are considered non-controlling interests to the Group.

4.

The notes appearing on pages 82 to 205 form an integral part of these financial statements.

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STATEMENT OF CHANGES IN EQUITY

Reserves$m

Retainedearnings$m

Total
shareholders’equity$m

25,907341

29,132

55,380

Profit for the year
Other comprehensive income for the year-

(2,888)

7,596
94

7,596
(2,794)

Total comprehensive income for the year
Transactions with equity holders in their capacity as
equity holders:
Dividends paid
Dividend reinvestment plan1
Group share buy-back2
Share entitlement issue3-(2,888)

7,690

4,802

183
(846)
3,497

-

(3,965)-(3,965)
183
(846)
3,497

(21)
-

1

2

(21)
3

28,720(2,546)32,85959,033

Profit for the year
Other comprehensive income for the year

-

319

6,974
(78)

6,974
241

Total comprehensive income for the year
Transactions with equity holders in their capacity as
equity holders:
Dividends paid

-

319

6,896

7,215

-

-

(5,559)(5,559)

206

-

-

206

79
-

5

(1)

79
4

29,005(2,222)

34,19560,978The Company

Ordinaryshare capital$m

As at 1 October 2021

Other equity movements:
Employee share and option plans
Other items
As at 30 September 2022

Dividend reinvestment plan

1

Other equity movements:
Employee share and option plans
Other items
As at 30 September 2023
1.

8.4 million shares were issued under the Dividend Reinvestment Plan for the 2022 final dividend (2022 interim dividend: 7.2 million; 2021 final dividend: nil). On-market share purchases for the DRP in 2022
were $204 million.

2.

The Company completed its $1.5 billion on-market share buy-back on 25 March 2022 resulting in 31 million shares being cancelled in 2022.

3.

The Company issued 187.1 million new ordinary shares under the share entitlement offer in 2022.

The notes appearing on pages 82 to 205 form an integral part of these financial statements.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

NOTES TO THE
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS

1. ABOUT OUR FINANCIAL STATEMENTS
ORGANISATIONAL RESTRUCTURE
On 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established by a scheme of arrangement, a non-operating holding
company, ANZ Group Holdings Limited (ANZGHL), as the new listed parent holding company of the ANZ Group and implemented a restructure to
separate ANZ’s banking and certain non-banking businesses into the ANZ Bank Group and ANZ Non-Bank Group (the Restructure). The ANZ Bank
Group comprises the majority of the businesses and subsidiaries that were held in ANZBGL prior to the Restructure. The ANZ Non-Bank Group
comprises banking-adjacent businesses developed or acquired by the ANZ Group to focus on bringing new technology and banking-adjacentservices to the ANZ Group’s customers, and a separate service company.
On Restructure, each ANZ shareholder received one ANZGHL ordinary share for each ANZ ordinary share that they held prior to the implementation of
the Restructure. The Restructure is accounted for as a reverse acquisition in the ANZGHL consolidated financial statements as at 30 September 2023,
with ANZBGL identified as the acquirer in accordance with AASB 3 Business Combinations.
As a result of the Restructure, the ANZBGL consolidated results for the 2023 financial year end consist of:• the results of the former ANZ Group for the period 1 October 2022 to 2 January 2023;• the result of ANZBGL and its subsidiaries (Group) for the period 3 January to 30 September 2023.
Refer to Accounting Policies Applicable to the Restructure section below for further details.

GENERAL INFORMATION
These are the financial statements for ANZBGL (the Company) and its controlled entities (together, the Group or Consolidated Entity) for the year
ended 30 September 2023. The Company is a public company incorporated and domiciled in Australia with debt listed on securities exchanges. The
Company is a subsidiary of ANZGHL and is regulated by APRA as an ADI. The address of the Company’s registered office and its principal place ofbusiness is ANZ Centre, 833 Collins Street, Docklands, Victoria, Australia 3008. The Group provides banking and financial services to individuals andbusiness customers and operates in and across 29 markets.
On 10 November 2023, the Directors resolved to authorise the issue of these financial statements. Information in the financial statements is included
only to the extent we consider it material and relevant to the understanding of the financial statements. A disclosure is considered material andrelevant if, for example:• the amount is significant in size (quantitative factor);• the information is significant by nature (qualitative factor);• the user cannot understand the Group’s results without the specific disclosure (qualitative factor);• the information is critical to a user’s understanding of the impact of significant changes in the Group’s business during the period - for example,
business acquisitions or disposals (qualitative factor);• the information relates to an aspect of the Group’s operations that is important to its future performance (qualitative factor); and• the information is required under legislative requirements of the Corporations Act 2001, the Banking Act 1959 (Cth) or by the Group’s principal
regulators, including the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
This section of the financial statements:• outlines the basis upon which the Group’s financial statements have been prepared; and• discusses any new accounting standards or regulations that directly impact the financial statements.

BASIS OF PREPARATIONThis financial report is a general purpose (Tier 1) financial report prepared by a ‘for profit’ entity, in accordance with Australian Accounting Standards(AASs) and other authoritative pronouncements of the Australian Accounting Standards Board (AASB), the Corporations Act 2001, and International
Financial Reporting Standards (IFRS) and interpretations published by the International Accounting Standards Board (IASB).
We present the financial statements of the Group in Australian dollars, which is the Company’s functional and presentation currency. We haverounded values to the nearest million dollars ($m), unless otherwise stated, as allowed under the ASIC Corporations (Rounding in Financial/Directors
Report) Instrument 2016/191. We measure the financial statements of each entity in the Group using the currency of the primary economic
environment in which that entity operates (the functional currency).

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1. ABOUT OUR FINANCIAL STATEMENTS (continued)
BASIS OF MEASUREMENT AND PRESENTATION
We have prepared the financial information in accordance with the historical cost basis - except the following assets and liabilities which we havestated at their fair value:• derivative financial instruments and in the case of fair value hedging, a fair value adjustment made to the underlying hedged item;• financial instruments held for trading;• financial assets and financial liabilities designated at fair value through profit or loss (FVTPL);• financial assets at fair value through other comprehensive income (FVOCI); and• assets and liabilities classified as held for sale (except those required to be at carrying value).
In accordance with AASB 119 Employee Benefits we have measured defined benefit obligations using the Projected Unit Credit Method.
There were no discontinued operations in the current period. For the purpose of comparative information, discontinued operations in the prior period
are separately presented from the results of the continuing operations as a single line item ‘Profit/(Loss) after tax from discontinued operations’ in the
Income Statement.

BASIS OF CONSOLIDATIONThe consolidated financial statements of the Group comprise the financial statements of the Company and all its subsidiaries. An entity, including a
structured entity, is considered a subsidiary of the Group when we determine that the Company has control over the entity. Control exists when theGroup is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. We assess power by examining existing rights that give the Company the current ability to direct the relevant activities of theentity. We have eliminated, on consolidation, the effect of all transactions between entities in the Group.

FOREIGN CURRENCY TRANSLATION
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction. At thereporting date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the relevant spot rate.
Any foreign currency translation gains or losses that arise are included in profit or loss in the period they arise.
We measure translation differences on non-monetary items classified as FVTPL and report them as part of the fair value gain or loss on these items. For
non-monetary items classified as investment securities measured at FVOCI, translation differences are included in other comprehensive income.
FINANCIAL STATEMENTS OF FOREIGN OPERATIONS THAT HAVE A FUNCTIONAL CURRENCY THAT IS NOT AUSTRALIAN DOLLARS
The financial statements of our foreign operations are translated into Australian dollars for consolidation into the Group financial statements using thefollowing method:
Foreign currency item

Exchange rate used

Assets and liabilities

The reporting date rate

EquityThe initial investment date rate

Income and expenses

The average rate for the period – but for a significant transaction if we believe the average rate is notreasonable, then we use the rate at the date of the transaction

Exchange differences arising from the translation of financial statements of foreign operations are recognised in the foreign currency translation
reserve in equity. When we dispose of a foreign operation, the cumulative exchange differences are transferred to profit or loss.

FIDUCIARY ACTIVITIESThe Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Group holding assets onbehalf of third parties and making decisions regarding the purchase and sale of financial instruments. If ANZ is not the beneficial owner or does notcontrol the assets, then we do not recognise these transactions in these financial statements, except when required by accounting standards oranother legislative requirement.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

1. ABOUT OUR FINANCIAL STATEMENTS (continued)
ACCOUNTING POLICIES APPLICABLE TO THE RESTRUCTURE
The implementation of the non-operating holding company involved the transfer of assets and entities between companies within the wider
ANZGHL Group. This had implications for the ANZBGL consolidated financial statements due to the transfers extending outside of the Group. From an
accounting perspective, since the transfers were between wholly owned entities, these are considered common control transactions. As there is no
specific accounting standard for such transfers, the Group is required to make an accounting policy choice.
The Group’s accounting policy for the transfer of the assets and entities between companies under common control is to apply book value
accounting. Under this approach, any differences between book value and the transfer price are recorded in equity. The accounting policy choice did
not have a material impact on profit and loss or equity when the assets were transferred as part of the Restructure. Refer to Note 31 Related Party
Disclosures for details of the transfer.

KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Group’s accounting policies, management has made a number of judgements and applied estimates andassumptions about past and future events. Further information on the key judgements and estimates that we consider material to thefinancial statements are contained within each relevant note to the financial statements.
The global economy is facing challenges associated with high inflation and interest rates, labour market constraints, and continuing
geopolitical tensions which contribute to an elevated level of estimation uncertainty involved in the preparation of these financial
statements.
The Group has made various accounting estimates in this Financial Report based on forecasts of economic conditions which reflect
expectations and assumptions at 30 September 2023 about future events considered reasonable in the circumstances. Thus there is aconsiderable degree of judgement involved in preparing these estimates. Actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of these differences may significantly impact
accounting estimates included in these financial statements. The significant accounting estimates impacted by these forecasts andassociated uncertainties are predominantly related to expected credit losses and recoverable amounts of non-financial assets.
The impact of these uncertainties on each of these accounting estimates is discussed in the relevant notes in this Financial Report. Readers
should consider these disclosures in light of the inherent uncertainties described above.

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NOTES TO THE FINANCIAL STATEMENTS

1. ABOUT OUR FINANCIAL STATEMENTS (continued)
INTEREST RATE BENCHMARK REFORM
Interbank offered rates (IBORs) reform is the global transition away from IBORs and their replacement by risk-free rates (RFRs). IBOR reforms have had awide-ranging impact for the Group and our customers given the fundamental differences between IBORs and RFRs. Accordingly, the Groupestablished an enterprise-wide Benchmark Transition Program to manage the operational, market, legal, conduct and financial reporting risks
associated with IBOR transition.
As at 30 September 2023 the Group’s Program is largely complete, and included the implementation of the required processes, technology andproduct capabilities that ensured the transitions were successfully undertaken. In line with regulatory announcements made in early 2021, IBOR rates
including Pound Sterling (GBP), Euro (EUR), Swiss Franc (CHF) and Japanese Yen (JPY), and the 1-week and 2-month US Dollar (USD) London Interbank
Offered Rate (LIBOR) rate settings ceased on 31 December 2021 and were replaced by alternative RFRs. The Group’s exposure to IBOR reform wasprimarily concentrated in other USD LIBOR settings which ceased on 30 June 2023. No material changes were made to the Group’s risk management
strategy because of IBOR reform and the use of IBOR rates in new products was phased out in accordance with industry and supervisory guidance. The
transition activities had an immaterial impact to the Group’s profit and loss.
To support any legacy contracts referencing these benchmarks across the industry, the 1-month, 3-month and 6-month USD settings will continue tobe published using an alternative ‘synthetic’ methodology. The Group continues to manage a small number of loan and derivative contracts whosetransition is being managed with customers, and a small number of debt issuances with investors. These remaining contracts will either mature ortransition ahead of the synthetic USD LIBOR cessation date of 30 September 2024. The Group has an immaterial exposure to other announced
benchmark cessation events expected to occur between 2024 and 2026.

ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
Accounting policies have been consistently applied, unless otherwise noted.
AASB 2023-2 AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – INTERNATIONAL TAX REFORM – PILLAR TWO MODEL RULESIn May 2023, the Federal Government announced it will implement key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax
challenges arising from digitalisation of the economy. This measure is not yet law. Other jurisdictions in which ANZ operates are also considering
implementation of the regime. The ANZ Group is expected to be within the scope of associated legislation. In anticipation of legislation being
enacted, the AASB issued AASB 2023-2 Amendments to Australian Accounting Standards – International Tax Reform – Pillar Two Model Rules in June
2023. The Group has applied the mandatory exemption included in para. 4A of this standard and will apply the whole amending standard from 1
October 2023. This amending standard stipulates a mandatory temporary exemption from recognising deferred tax assets and liabilities related to
Pillar Two income taxes. The Group is monitoring progress of associated legislation and has not yet determined the expected impact on its financial
statements.

ACCOUNTING STANDARDS NOT EARLY ADOPTED
A number of new standards, amendments to standards and interpretations have been published but are not mandatory for the financial statements
for the year ended 30 September 2023 and have not been applied by the Group in preparing these financial statements. Further details of these areset out below.
GENERAL HEDGE ACCOUNTINGAASB 9 Financial Instruments (AASB 9) introduced new hedge accounting requirements which more closely align accounting with risk management
activities undertaken when hedging both financial and non-financial risks. AASB 9 provided the Group with an accounting policy choice to continue
to apply the AASB 139 Financial Instruments: Recognition and Measurement (AASB 139) hedge accounting requirements until the International
Accounting Standards Board’s ongoing project on Dynamic Risk Management (macro hedge accounting) is completed. The Group continues to apply
the hedge accounting requirements of AASB 139.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
ACCOUNTING STANDARDS NOT EARLY ADOPTED (continued)
AASB 17 INSURANCE CONTRACTS (AASB 17)
The final version of AASB 17 was issued in July 2017 and is not effective for the Group until 1 October 2023. It will replace AASB 4 Insurance Contracts,
AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts. AASB 17 establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts.
The measurement, presentation and disclosure requirements under AASB 17 are significantly different from current accounting standards. Although
the overall profit recognised in respect of insurance contracts will not change, it is expected that the timing of profit recognition will change.
AASB 17 will not have a material impact on the Group.
DEFERRED TAX RELATED TO ASSETS AND LIABILITIES ARISING FROM A SINGLE TRANSACTIONAASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transactionamends AASB 112 Income Taxes. It clarifies that entities are required to recognise deferred tax on transactions for which there is both an asset and aliability and that give rise to equal taxable and deductible temporary differences which may apply to leases and decommissioning or restoration
obligations. This amendment is effective for the Group from 1 October 2023 and will not have a material impact on the Group.
LEASE LIABILITY IN A SALE AND LEASEBACKAASB 2022-5 Amendments to Australian Accounting Standards – Lease Liability in a Sale and Leaseback amends AASB 16 Leases and specifies theaccounting for variable lease payments by seller-lessees in sale and leaseback transactions. The amendment is effective from 1 October 2024 and will
not have a material impact on the Group.

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NOTES TO THE FINANCIAL STATEMENTS

2. NET INTEREST INCOME
Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Financial assets at amortised cost

44,303

21,73735,00016,289Investment securities at FVOCI

2,615

1,107

2,235

834

Trading assets

1,654

700

1,413

547

Financial assets at FVTPL

1,355

65

1,449

177

External interest income

49,927

23,60940,097

17,847

Controlled entities' income

-

-

1,047

561

49,927

23,60941,144

18,408(31,334)(8,019)(26,016)(6,170)Net interest income
Interest income by type of financial asset

Interest income
Interest expense by type of financial liability
Financial liabilities at amortised cost

(451)

(214)

(392)

(191)

Financial liabilities designated at FVTPL(1,214)(162)(1,104)(151)

External interest expense(32,999)(8,395)(27,512)(6,512)

Securities sold short--(1,161)(581)

Interest expense(32,999)(8,395)(28,673)(7,093)Major bank levy

(353)

(340)

(353)

(340)

16,575

14,874

12,118

10,975Controlled entities expense

Net interest income

RECOGNITION AND MEASUREMENTNET INTEREST INCOME
Interest Income and Expense
We recognise interest income and expense in net interest income for all financial instruments, including those classified as held for trading,assets measured at FVOCI, and assets and liabilities designated at FVTPL. We use the effective interest rate method to calculate theamortised cost of assets held at amortised cost and to recognise interest income on financial assets measured at amortised cost and FVOCI.
The effective interest rate is the rate that discounts the stream of estimated future cash receipts or payments over the expected life of thefinancial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or liability. For assets subject toprepayment, we determine their expected life on the basis of historical behaviour of the particular asset portfolio taking into accountcontractual obligations and prepayment experience.
We recognise fees and costs, which form an integral part of the financial instrument (for example loan origination fees and costs), using theeffective interest rate method. These are presented as part of interest income or expense depending on whether the underlying financial
instrument is a financial asset or financial liability.
Major Bank Levy

The Major Bank Levy Act 2017 (levy or major bank levy) applies a rate of 0.06% to certain liabilities of ANZBGL. The levy represents a financecost and it is presented as interest expense in the Income Statement.

87

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
3. NON-INTEREST INCOME
Consolidated
2023$m

The Company
2022
$m

2023
$m

2022
$m

Non-interest income
Fee and commission income
397

374

362

340

2,275

2,394

1,533

1,744

Commissions

85

103

55

74

Funds management income

246

261

22

27

3,003

3,132

1,972

2,185

-

-

187

244

Fee and commission income

3,003

3,132

2,159

2,429

Fee and commission expense(1,057)(1,160)

(553)

(695)

Net fee and commission income

1,946

1,972

1,606

1,734

1,535

1,993

1,272

1,296

-

307

-

307

Lending fees1
Non-lending fees

External fee and commission income
Controlled entities' income

Other income
Net foreign exchange earnings and other financial instruments income2
Gain on completion of ANZ Worldline partnership
Impairment of interest in controlled entities

-

-

-

(180)

Release of foreign currency translation reserve

43

(65)

-

-

-

(62)

-

(22)

Loss on disposal of data centres in Australia

(43)

-

(32)

-

Dividends received from controlled entities

-

-

2,562

3,181

Loss on disposal of financial planning and advice business

96

90

(7)

108

Other income

1,631

2,263

3,795

4,690

Other operating income

3,577

4,235

5,401

6,424

Net income from insurance business

89

140

-

-

Share of associates' profit/(loss)

225

177

(18)

(12)

3,891

4,552

5,383

6,412

Other

Non-interest income
1.
2.

Lending fees exclude fees treated as part of the effective yield calculation in Interest income.
Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange risk, ineffective
portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at FVTPL.

88

OverviewOperatingenvironment

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NOTES TO THE FINANCIAL STATEMENTS

3. NON-INTEREST INCOME (continued)
RECOGNITION AND MEASUREMENTOTHER OPERATING INCOME
Fee and Commission Revenue
We recognise fee and commission revenue arising from contracts with customers (a) over time when the performance obligation issatisfied across more than one reporting period, or (b) at a point in time when the performance obligation is satisfied immediately or issatisfied within one reporting period.
• lending fees exclude fees treated as part of the effective yield calculation of interest income. Lending fees include certain guarantee andcommitment fees where the loan or guarantee is not likely to be drawn upon, and other fees charged for providing customers a distinct
good or service that are recognised separately from the underlying lending product.
• non-lending fees include fees associated with deposit and credit card accounts, interchange fees and fees charged for specific customertransactions such as international transaction fees. Where the Group provides multiple goods or services to a customer under the same
contract, the Group allocates the transaction price of the contract to distinct performance obligations based on the relative stand-alone
selling price of each performance obligation. Revenue is recognised as each performance obligation is satisfied.
• commissions represent fees from third parties where we act as an agent by arranging a third party (such as an insurance provider) to
provide goods and services to a customer. In such cases, we are not primarily responsible for providing the underlying good or service
to the customer. If the Group collects funds on behalf of a third party when acting as an agent, we only recognise the net commission
retained as revenue. When the commission is variable based on factors outside our control (such as a trail commission), revenue is only
recognised if it is highly probable that a significant reversal of the variable amount will not be required in future periods.
• funds management income represents fees earned from customers for providing asset management services. Revenue is recognisedover the period in which the asset management services are delivered. Performance fees associated with funds management activities
are only recognised when it becomes highly probable the performance hurdle will be achieved.
Net Foreign Exchange Earnings and Other Financial Instruments Income
We recognise the following as net foreign exchange earnings and other financial instruments income:• exchange rate differences arising on the settlement of monetary items and translation differences on monetary items translated at rates
different to those at which they were initially recognised or included in a previous financial report;• fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges that we use to
manage interest rate and foreign exchange risk on funding instruments;• the ineffective portions of fair value hedges, cash flow hedges and net investment hedges;• immediately upon sale or repayment of a hedged item, the unamortised fair value adjustments to items designated as fair value hedges
and amounts accumulated in equity related to designated cash flow hedges;• fair value movements on financial assets and financial liabilities designated at FVTPL or held for trading;• amounts released from the FVOCI reserve when a debt instrument classified as FVOCI is sold; and• the gain or loss on derecognition of financial assets or liabilities measured at amortised cost.
Gain or Loss on Disposal of Non-Financial Assets
The gain or loss on the disposal of assets is the difference between the carrying value of the asset and the proceeds of disposal net of costs.
This is recognised in Other income in the year in which control of the asset transfers to the buyer.
When a non-financial asset or group of assets is classified as held for sale, it is measured at the lower of its carrying amount immediately
prior to reclassification and fair value less costs to sell, with any remeasurement recognised in Other operating income to align with theclassification of gain or loss on sale that would have applied if the sale had completed during the year.

89

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
3. NON-INTEREST INCOME (continued)
RECOGNITION AND MEASUREMENTNET INCOME FROM INSURANCE BUSINESSWe recognise:• premiums received (net of reinsurance premiums paid) based on an assessment of the likely pattern in which risk will emerge over theterm of the policies written. This assessment is undertaken periodically and updated in accordance with the latest pattern of risk
emergence; and• claims incurred net of reinsurance, on an accruals basis once the liability to the policy owner has been established under the terms ofthe contract and through actuarial assumptions of future claims.
SHARE OF ASSOCIATES’ PROFIT/(LOSS)The equity method is applied to accounting for associates. Under the equity method, our share of the after tax results of associates is
included in the Income Statement and the Statement of Comprehensive Income.

90OverviewOperatingenvironment

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NOTES TO THE FINANCIAL STATEMENTS

4. OPERATING EXPENSES
Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Personnel
Salaries and related costs

5,157

4,754

3,791

3,494

Superannuation costs

396

375

335

317

Other

183

167

154

127

5,736

5,296

4,280

3,938

Rent

71

88

50

67

Personnel
Premises
Depreciation

437

419

338

344

Other

176

214

123

168

Premises

684

721

511

579

501

578

455

521

1,007

899

695

648

178

144

144

162

Technology

1,686

1,621

1,294

1,331

Restructuring

169

101

146

78

Advertising and public relations

176

165

133

128

Professional fees

857

935

795

864

Freight, stationery, postage and communication

175

172

128

128

Technology
Depreciation and amortisation
Subscription licences and outsourced services
Other

Other

Other

604

568

1,201

1,077

Other

1,812

1,840

2,257

2,197

Operating expenses

10,087

9,579

8,488

8,123

91

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
4. OPERATING EXPENSES (continued)
RECOGNITION AND MEASUREMENTOPERATING EXPENSES
Operating expenses are recognised as services are provided to the Group, over the period in which an asset is consumed, or once a liability
is created.
SALARIES AND RELATED COSTS - ANNUAL LEAVE, LONG SERVICE LEAVE AND OTHER EMPLOYEE BENEFITS
Wages and salaries, annual leave and other employee entitlements expected to be paid or settled within twelve months of employees
rendering service are measured at their nominal amounts using remuneration rates that the Group expects to pay when the liabilities aresettled.
We accrue employee entitlements relating to long service leave using an actuarial calculation. It includes assumptions regarding staff
departures, leave utilisation and future salary increases. The result is then discounted using market yields at the reporting date. The market
yields are determined from a blended rate of high quality corporate bonds with terms to maturity that closely match the estimated future
cash outflows.
If we expect to pay short term cash bonuses, then a liability is recognised when the Group has a present legal or constructive obligation to
pay this amount (as a result of past service provided by the employee) and the obligation can be reliably measured.
Personnel expenses also include share-based payments which may be cash or equity settled. We calculate the fair value of equity settled
remuneration at grant date, which is then amortised over the vesting period, with a corresponding increase in share capital or the shareoption reserve as applicable. When we estimate the fair value, we take into account market vesting conditions, such as share priceperformance conditions. We take non-market vesting conditions, such as service conditions, into account by adjusting the number of
equity instruments included in the expense.
After the grant of an equity-based award, the amount we recognise as an expense is reversed when non-market vesting conditions are notmet, for example an employee fails to satisfy the minimum service period specified in the award due to resignation, termination or noticeof dismissal for serious misconduct. However, we do not reverse the expense if the award does not vest due to the failure to meet amarket-based performance condition.
Further information on share-based payment schemes operated by the Group during the current and prior year is included in Note 30
Employee Share and Option Plans.

92

OverviewOperatingenvironment

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reportDirectors’
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NOTES TO THE FINANCIAL STATEMENTS

5. INCOME TAX
INCOME TAX EXPENSE
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in profit or loss:
Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Profit before income tax from continuing operations

10,134

10,079

8,938

9,529

Prima facie income tax expense at 30%

3,040

3,024

2,681

2,859

Tax effect of permanent differences:
-

(83)

-

(113)

Share of associates' (profit)/loss

(68)

(53)

5

4

Interest on convertible instruments

92

49

92

49

(163)

(128)

(95)

(70)

41

155

35

150

Rebatable and non-assessable dividends

-

-

(769)

(954)

Impairment of interest in controlled entities

-

-

-

54

Net (gain)/loss from divestments/closures

Overseas tax rate differential
Provision for foreign tax on dividend repatriation

Other

(2)

4

23

(21)

Subtotal

2,940

2,968

1,972

1,958

1

(28)

(8)

(25)

Income tax expense

2,941

2,940

1,964

1,933

Current tax expense
Adjustments recognised in the current year in relation to the current tax ofprior years
Deferred tax expense/(income) relating to the origination and reversal of
temporary differences
Income tax expense

2,887

2,694

2,012

1,725

1

(28)

(8)

(25)

53

274

(40)

233

2,941

2,940

1,964

1,933

1,640

1,844

1,568

1,755

Income tax (over)/under provided in previous years

Australia
Overseas
Effective tax rate

1,301

1,096

396

178

29.0%

29.2%

22.0%

20.3%

93

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
5. INCOME TAX (continued)
DEFERRED TAX ASSETS AND LIABILITIESConsolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Collectively assessed allowances for expected credit losses

1,128

1,065

897

880

Individually assessed allowances for expected credit losses

102

148

79

119

Provision for employee entitlements

294

252

243

206

Other provisions

263

314

209

240

Software

917

867

781

708

Deferred tax assets balances comprise temporary differences
attributable to:Amounts recognised in the Income Statement:

Other
Total

290

285

238

218

2,994

2,931

2,447

2,371

Amounts recognised directly in Other Comprehensive Income:-Cash flow hedge reserve

818

882

789

891

Other reserves

29

20

27

16

847

902

816

907

3,841

3,833

3,263

3,278

Total
Total deferred tax assets (before set-off)
Set-off of deferred tax balances pursuant to set-off provisions
Net deferred tax assets

(455)

(449)

(275)

(286)

3,386

3,384

2,988

2,992

2023
$m

2022
$m

2023
$m

2022
$m

Deferred tax liabilities balances comprise temporary differences
attributable to:Amounts recognised in the Income Statement:
Finance leases

95

79

6

(15)

Other

303

300

212

232

398

379

218

217

Foreign currency translation reserve

36

36

36

36

Cash flow hedge reserve

17

8

7

8

FVOCI reserve

17

57

19

31

Defined benefit obligations

47

52

42

48

Total

117

153

104

123

Total deferred tax liabilities (before set-off)

515

532

322

340

(455)

(449)

(275)

(286)

60

83

47

54

Total
Amounts recognised directly in Other Comprehensive Income:Set-off of deferred tax balances pursuant to set-off provisions
Net deferred tax liabilities

94OverviewOperatingenvironment

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Remuneration
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NOTES TO THE FINANCIAL STATEMENTS

5. INCOME TAX (continued)
TAX CONSOLIDATIONThe Company and all its wholly owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Following the
Restructure on 3 January 2023, ANZGHL is the head entity in the tax-consolidated group. We recognise each of the following in the separate financial
statements of members of the tax consolidated group on a ‘group allocation’ basis: tax expense/income, and deferred tax liabilities/assets that arise
from temporary differences for members of the tax-consolidated group.
Under a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by eachmember of the tax-consolidated group in relation to the tax contribution amounts payable or receivable between members of the tax-consolidated
group and the head entity ANZGHL.
Members of the tax-consolidated group have also entered into a tax sharing agreement that provides for the allocation of income tax liabilities
between the entities were the head entity to default on its income tax payment obligations.

UNRECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Unrecognised deferred tax assets related to unused realised tax losses (on revenue account) total $1 million (2022: $1 million) for the Group and nil(2022: nil) for the Company.
Unrecognised deferred tax liabilities related to additional potential foreign tax costs (assuming all retained earnings in offshore branches andsubsidiaries are repatriated) total $286 million (2022: $250 million) for the Group and $30 million (2022: $18 million) for the Company.

RECOGNITION AND MEASUREMENT
INCOME TAX EXPENSE
Income tax expense comprises both current and deferred taxes and is based on the accounting profit adjusted for differences in theaccounting and tax treatments of income and expenses (that is, taxable income). We recognise tax expense in profit or loss except when
the tax relates to items recognised directly in equity and other comprehensive income, in which case we recognise the tax directly inequity or other comprehensive income respectively.
CURRENT TAX EXPENSE
Current tax is the tax we expect to pay on taxable income for the year, based on tax rates (and tax laws) which are enacted at the reporting
date. We recognise current tax as a liability (or asset) to the extent that it is unpaid (or refundable).
DEFERRED TAX ASSETS AND LIABILITIESWe account for deferred tax using the balance sheet method. Deferred tax arises because the accounting income is not always the same as
the taxable income. This creates temporary differences, which usually reverse over time. Until they reverse, we recognise a deferred tax
asset, or liability, on the balance sheet. We measure deferred taxes at the tax rates that we expect will apply to the period(s) when the asset
is realised, or the liability settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date.
We offset current and deferred tax assets and liabilities only to the extent that:• they relate to income taxes imposed by the same taxation authority;• there is a legal right and intention to settle on a net basis; and• it is allowed under the tax law of the relevant jurisdiction.

KEY JUDGEMENTS AND ESTIMATES
Judgement is required in determining provisions held in respect of uncertain tax positions. The Group estimates its tax liabilities based onits understanding of the relevant law in each of the countries in which it operates and seeks independent advice where appropriate.

95

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
6. DIVIDENDS
ORDINARY SHARE DIVIDENDSDividends determined by the Board of the Company are recognised with a corresponding reduction of retained earnings on the dividend payment
date. Accordingly, the final dividend announced for the current financial year is paid in the following financial year. Following the Restructure on 3
January 2023, ANZGHL is the head entity in the tax-consolidated group, and the franking and imputation credits have been transferred by theCompany to ANZGHL.

Dividends% of total

Amountper share

Total dividend$mFinancial Year 2022
2021 final dividend paid1,2

72 cents

2,030

2022 interim dividend paid1,2

72 cents

2,012

Bonus option plan adjustment(77)

Dividends paid during the year ended 30 September 2022

3,965

Cash

90.2%

Dividend reinvestment plan3

9.8%

3,577
388

Dividends paid during the year ended 30 September 2022

3,965

Financial Year 2023
2022 final dividend paid1,2

74 cents

2,213

2023 special dividend paid to ANZ BH Pty Ltd

33 cents

1,000

2023 interim dividend paid to ANZ BH Pty Ltd

79 cents

2,387

Dividends paid during the year ended 30 September 2023

5,600

Cash

96.3%

Dividend reinvestment plan

3.7%

5,394
206
5,600

Dividends paid during the year ended 30 September 2023

Dividends announced and to be paid after year-end
2023 final dividend
1.
2.
3.

Payment dateAmountper share

Total
dividend$m

22 December 2023

94 cents

2,825

Carries New Zealand imputation credits of NZD 9 cents for the 2022 final dividend and 2022 interim dividend, and NZD 8 cents for the 2021 final dividend.
Fully franked for Australian tax purposes (30% tax rate).
Includes on-market share purchases for the DRP of $204 million.

DIVIDEND REINVESTMENT PLAN AND BONUS OPTION PLANANZBGL’s Dividend Reinvestment Plan (DRP) and Bonus Option Plan (BOP) ceased to operate following implementation of the Restructure on 3
January 2023.

RESTRICTIONS ON THE PAYMENT OF DIVIDENDS
APRA’s written approval is required before paying dividends on the ordinary shares of the Company if:• the aggregate dividends exceed the Company’s after tax earnings (in calculating those after tax earnings, we take into account any payments wemade on senior capital instruments) in the financial year to which they relate; or• ANZ’s Common Equity Tier 1 capital ratio falls within capital range buffers specified by APRA.
If the Company fails to pay a dividend or distribution on its ANZ Capital Notes or ANZ Capital Securities on the scheduled payment date, it may(subject to a number of exceptions) be restricted from resolving to pay or paying any dividend on the Company’s ordinary shares.

96OverviewOperatingenvironment

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Remuneration
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reportFinancialreport97
NOTES TO THE FINANCIAL STATEMENTS

7. SEGMENT REPORTINGDESCRIPTION OF SEGMENTS
The Group’s six operating segments are presented on a basis that is consistent with the information provided internally to the Chief Executive Officer,
who is the chief operating decision maker. This reflects the way the Group’s businesses are managed, rather than the legal structure of the Group.
We measure the performance of operating segments on a cash profit basis. To calculate cash profit, we exclude items from profit after tax attributable
to shareholders. For 2023 and 2022, the adjustments relate to impacts of economic hedges and revenue and expense hedges which represent timing
differences that will reverse through earnings in the future. Transactions between divisions across segments within ANZ are conducted on an arm’slength basis and disclosed as part of the income and expenses of these segments.
The presentation of divisional results has been impacted by the following structural changes during the period. Prior period comparatives have been
restated:• Non-banking businesses - transfer of non-banking businesses held in the Australia Commercial and Institutional divisions to the Group Centre
division which were then disposed as part of the Restructure.
• Corporate customer re-segmentation - certain business and property finance customers were transferred from the New Zealand division to theInstitutional division.
• Cost reallocations - certain costs were reallocated across the Australia Retail, Australia Commercial, Institutional and Group Centre divisions.
The reportable segments are divisions engaged in providing either different products or services or similar products and services in different
geographical areas. They are as follows:
Australia Retail
The Australia Retail division provides a full range of banking services to Australian consumers. This includes Home Loans, Deposits, Credit Cards andPersonal Loans. Products and services are provided via the branch network, home loan specialists, contact centres, a variety of self-service channels(digital and internet banking, website, ATMs and phone banking) and third-party brokers. It also includes the costs related to the development andoperation of the ANZ Plus proposition for retail customers.
Australia Commercial
The Australia Commercial division provides a full range of banking products and financial services, including asset financing, across the following
customer segments: SME Banking (small business owners and medium commercial customers), and Specialist Business (large commercial customers,
and high net worth individuals and family groups).
Institutional
The Institutional division services global institutional and corporate customers, and governments across Australia, New Zealand and International(including Papua New Guinea (PNG)) via the following business units:• Transaction Banking provides customers with working capital and liquidity solutions including documentary trade, supply chain financing,commodity financing as well as cash management solutions, deposits, payments and clearing.
• Corporate Finance provides customers with loan products, loan syndication, specialised loan structuring and execution, project and export
finance, debt structuring and acquisition finance and corporate advisory services.
• Markets provides customers with risk management services in foreign exchange, interest rates, credit, commodities, and debt capital markets inaddition to managing the Group's interest rate exposure and liquidity position.
New Zealand
The New Zealand division comprises the following business units:• Personal provides a full range of banking and wealth management services to consumer and private banking customers. We deliver our services
via our internet and app-based digital solutions and a network of branches, mortgage specialists, relationship managers and contact centres.
• Business and Agri (previously Business) provides a full range of banking services through our digital, branch and contact centre channels, andtraditional relationship banking and sophisticated financial solutions through dedicated managers. These cover privately owned small, medium
and large enterprises, the agricultural business segment, government and government-related entities.
Pacific
The Pacific division provides products and services to retail and commercial customers (including multi-nationals) and to governments located in the
Pacific region, excluding PNG which forms part of the Institutional division.
Group Centre
Group Centre division provides support to the operating divisions, including technology, property, risk management, financial management, treasury,
strategy, marketing, human resources, corporate affairs, and shareholder functions. It also includes minority investments in Asia.

97

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
7. SEGMENT REPORTING (continued)
OPERATING SEGMENTS

Year ended 30 September 2023
Net interest income
Net fee and commission income
Net income from insurance business
Other income1,2
Share of associates’ profit/(loss)
Other operating income
Operating income1,2
Operating expenses
Cash profit before credit impairment and income tax
Credit impairment (charge)/releaseCash profit before income tax
Income tax expense and non-controlling interests1,2
Cash profit/(loss) from continuing operations
Cash profit/(loss) from discontinued operations
Cash profit/(loss)
Economic hedges1
Revenue and expense hedges2
Profit after tax attributable to shareholders

Australia
Australia
Retail Commercial Institutional
$m
$m
$m

New
Zealand$m

Pacific$m

Group
Centre
$m

Group
Total
$m

5,716
546
89
16
651
6,367
(3,542)
2,825
(135)
2,690
(816)
1,874

3,224
322
43
365
3,589
(1,423)
2,166
(107)
2,059
(619)
1,440

4,040
685
2,009
2,694
6,734
(2,708)
4,026
80
4,106
(1,143)
2,963

3,149
398
11
409
3,558
(1,291)
2,267
(112)
2,155
(603)
1,552

123
19
66
85
208
(145)
63
28
91
(20)
71

323
(24)
(80)
225
121
444
(978)
(534)
1
(533)
105
(428)

16,575
1,946
89
2,065
225
4,325
20,900(10,087)
10,813(245)
10,568(3,096)
7,472
7,472
(217)
(90)
7,165

(77)
(6)
(135)

(5)
(2)
(107)

(164)
(73)
80

(105)
(4)
(112)

(10)
28

225
(580)
(20)
1

225
(941)
(105)
(245)

Australia
Australia
Retail Commercial Institutional
$m
$m
$m
100
1,261
315,184
61,916
538,827
168,866
119,341
452,779

New
Zealand$m
1,617
125,178
122,924

Pacific
$m
3,391
3,862

Includes non-cash items:
Share of associates’ profit/(loss)
Depreciation and amortisation
Equity-settled share based payment expenses
Credit impairment (charge)/release

Financial position
Goodwill
Investments in associates
Total external assets
Total external liabilities

Group
Group
Centre
Total
$m
$m
2,978
2,321
2,321
61,545 1,106,041
169,155 1,036,927

1.

The cash profit adjustment for economic hedges applies to the Institutional, New Zealand and Group Centre divisions with $305 million loss recognised in Other operating income and $88 million benefit
recognised in Income tax expense.

2.

The cash profit adjustment for revenue and expense hedges applies to the Group Centre division with $129 million loss recognised in Other operating income and $39 million benefit recognised in Income
tax expense.

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NOTES TO THE FINANCIAL STATEMENTS

7. SEGMENT REPORTING (continued)
OPERATING SEGMENTS (continued)

Year ended 30 September 2022
Net interest income
Net fee and commission income
Net income from insurance business
Other income1,2
Share of associates’ profit/(loss)
Other operating income
Operating income1,2
Operating expenses
Cash profit before credit impairment and income tax
Credit impairment (charge)/releaseCash profit before income tax
Income tax expense and non-controlling interests1,2
Cash profit/(loss) from continuing operations
Cash profit/(loss) from discontinued operations
Cash profit/(loss)
Economic hedges1
Revenue and expense hedges2
Profit after tax attributable to shareholders

Australia
Australia
Retail Commercial Institutional
$m
$m
$m
5,527
2,568
3,697
477
404
648
140
5
258
1,003
622
662
1,651
6,149
3,230
5,348
(3,397)(1,301)(2,566)
2,752
1,929
2,782
129
133
27
2,881
2,062
2,809
(872)
(511)
(872)
2,009
1,551
1,937

New
Zealand
$m
2,871
428
32
460
3,331
(1,273)
2,058
(45)
2,013
(564)
1,449

Pacific
$m
96
26
42
68
164
(153)
11
6
17
(8)
9

Group
Centre
$m
115
(11)
44
177
210
325
(889)
(564)
(18)
(582)
142
(440)

Group
Total
$m
14,874
1,972
140
1,384
177
3,673
18,547(9,579)
8,968
232
9,200
(2,685)
6,515
(19)
6,496
569
54
7,119

(158)
(72)
27

(116)
(4)
(45)

(10)
(1)
6

177
(626)
(19)
(18)

177
(1,009)(102)
232

Australia
Australia
Retail Commercial Institutional
$m
$m
$m
178
1,198
292,876
59,983544,066
153,494
118,355
473,114

New
Zealand$m
1,530
116,218
115,263

Pacific
$m
3,707
4,065

Group
Centre$m
2,181
68,879155,037

Group
Total
$m
2,906
2,181
1,085,729
1,019,328

Includes non-cash items:
Share of associates’ profit/(loss)
Depreciation and amortisation
Equity-settled share based payment expenses
Credit impairment (charge)/release

Financial position
Goodwill
Investments in associates
Total external assets
Total external liabilities

(87)
(5)
129

(12)
(1)
133

1.

The cash profit adjustment for economic hedges applies to the Institutional, New Zealand and Group Centre divisions with $802 million gain recognised in Other operating income and $233 million
expense recognised in Income tax expense.

2.

The cash profit adjustment for economic hedges applies to the Group Centre division with $77 million gain recognised in Other operating income and $23 million expense recognised in Income tax
expense.

99

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
7. SEGMENT REPORTING (continued)
SEGMENT INCOME BY PRODUCTS AND SERVICES
The primary sources of our external income across all divisions are Interest income and Other operating income, which includes net fee andcommission income, net foreign exchange earnings and other financial instruments income. The Australia Retail, Australia Commercial, New Zealand,and Pacific divisions derive income from products and services in retail and commercial banking. The Institutional division derives its income frominstitutional products and market services. No single customer amounts to greater than 10% of the Group’s income.

GEOGRAPHICAL INFORMATIONThe reportable segments operate across three geographical regions as follows:• Australia Retail division - Australia• Australia Commercial division - Australia• Institutional division - all three geographical regions• New Zealand division - New Zealand• Pacific division – Rest of World• Group Centre division - all three geographical regions
Discontinued operations results are included in the Australia geography. The Rest of World geography includes Asia, Pacific, Europe and the Americas.
The following table sets out total operating income earned including discontinued operations and assets to be recovered in more than one year
based on the geographical regions in which the Group operates.

Australia
2023
$m

2022
$m

New ZealandRest of World

2023
$m

2023
$m

2022
$m

2022
$m

Total
2023
$m

2022
$m

Total operating income1

12,677

12,462

4,463

4,501

3,326

2,547

20,466

19,510Assets to be recovered in more than one year2

407,221384,724

119,278

109,191

28,87732,350555,376526,2651.

Includes Operating income earned from discontinued operations of nil (2022: $84 million).

2.

Represents Net loans and advances based on the contractual maturity.

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NOTES TO THE FINANCIAL STATEMENTS

FINANCIAL ASSETS
Outlined below is a description of how we classify and measure financial assets as they apply to the note disclosures that follow.

CLASSIFICATION AND MEASUREMENT
Financial assets - general
There are three measurement classifications for financial assets under AASB 9: amortised cost, FVTPL and FVOCI. Financial assets areclassified into these measurement classifications on the basis of two criteria:• the business model within which the financial asset is managed; and• the contractual cash flow characteristics of the financial asset (specifically whether the contractual cash flows represent solely payments
of principal and interest).
The resultant financial asset classifications are as follows:• Amortised cost: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held
in a business model whose objective is to collect their cash flows;• FVOCI: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in abusiness model whose objective is to collect their cash flows or to sell the assets; and• FVTPL: Any other financial assets not falling into the categories above are measured at FVTPL.
Fair value option for financial assets
A financial asset may be irrevocably designated on initial recognition:• at FVTPL when the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise; or• at FVOCI for investments in equity securities, where that instrument is neither held for trading nor contingent consideration recognisedby an acquirer in a business combination.

8. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and other balances, as outlined below, that are convertible into cash with an insignificant risk ofchanges in value and with remaining maturities of three months or less, including reverse repurchase agreements.
Consolidated
2023$m

The Company
2022
$m

2023
$m

2022
$m

Coins, notes and cash at bank

1,070

1,147

667

787

Securities purchased under agreements to resell in less than 3 months1

31,711

15,996

31,12014,372

Balances with central banks

105,689

127,790

94,389118,928

Settlement balances owed to ANZ within 3 months

29,68423,19928,232

21,396

Cash and cash equivalents

168,154

168,132

154,408

155,4831.

During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in theassociated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.

101

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
9. TRADING ASSETS

164

145

4,881

3,860

3,885

2023

28,074Government debt
securities and notes

3,941

2022

27,291

Corporate and financial
institution securities
Commodities
Other securities

Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Government debt securities and notes

28,07427,291

23,144

21,881

Corporate and financial institution securities

3,885

3,941

2,914

2,700

Commodities

4,881

3,860

4,471

3,348

Other securities

164

145

164

144

37,00435,23730,69328,073

Total

RECOGNITION AND MEASUREMENT
Trading assets are financial instruments or other assets we either:• acquire principally for the purpose of selling in the short-term; or• hold as part of a portfolio we manage for short-term profit making.
Trading assets include commodity inventories measured at fair value less cost to sell in accordance with the broker trader exemption under
AASB 102 Inventories.
We recognise purchases and sales of trading assets on trade date:• initially, we measure them at fair value; and• subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in profit or loss.
Assets disclosed as Trading assets are subject to the general classification and measurement policy for Financial Assets outlined at thecommencement of the Group’s financial assets disclosures on page 101.

KEY JUDGEMENTS AND ESTIMATES
Judgement is required when applying the valuation techniques used to determine the fair value of trading assets not valued using quoted
market prices. Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.

102

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NOTES TO THE FINANCIAL STATEMENTS

10. DERIVATIVE FINANCIAL INSTRUMENTS

Fair Value

Assets2023$mLiabilities
2023$m

Assets2022$mLiabilities
2022$m

Derivative financial instruments - held for trading

60,059(57,210)89,716(84,793)

347

(272)

458

(356)

Derivative financial instruments

60,406(57,482)

90,174(85,149)

The Company
Fair Value

Assets2023$mLiabilities
2023$m

Assets2022$mLiabilities
2022$m

Derivative financial instruments - held for trading

59,649(57,256)

87,650(84,200)

340

(255)

406

(300)

59,989(57,511)88,056(84,500)

Consolidated

Derivative financial instruments - designated in hedging relationships

Derivative financial instruments - designated in hedging relationships
Derivative financial instruments

FEATURES
Derivative financial instruments are contracts:• whose value is derived from an underlying price index (or other variable) defined in the contract - sometimes the value is derived from more than
one variable;• that require little or no initial net investment; and• that are settled at a future date.
Movements in the price of the underlying variables, which cause the value of the contract to fluctuate, are reflected in the fair value of the derivative.

PURPOSEThe Group’s derivative financial instruments have been categorised as following:
Trading

Derivatives held in order to:• meet customer needs for managing their own risks.
• manage risks in the Group that are not in a designated hedge accounting relationship (some elements of balance
sheet management).
• undertake market making and positioning activities to generate profits from short-term fluctuations in prices
or margins.

Designated in Hedging
Relationships

Derivatives designated into hedge accounting relationships in order to minimise profit or loss volatility by matching
movements in underlying positions relating to:• hedges of the Group’s exposures to interest rate risk and currency risk.
• hedges of other exposures relating to non-trading positions.

TYPES
The Group offers or uses four different types of derivative financial instruments:
Forwards

A contract documenting the rate of interest, or the currency exchange rate, to be paid or received on a notional
principal amount at a future date.

Futures

An exchange traded contract in which the parties agree to buy or sell an asset in the future for a price agreed on thetransaction date, with a net settlement in cash paid on the future date without physical delivery of the asset.

Swaps

A contract in which two parties exchange one series of cash flows for another.

Options

A contract in which the buyer of the contract has the right - but not the obligation - to buy (known as a ‘call option’)or to sell (known as a ‘put option’) an asset or instrument at a set price on a future date. The seller has thecorresponding obligation to fulfil the transaction to sell or buy the asset or instrument if the buyer exercises
the option.

103

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
RISKS MANAGED
The Group offers and uses the instruments described above to manage fluctuations in the following market factors:
Foreign Exchange

Currencies at current or determined rates of exchange.

Interest Rate

Fixed or variable interest rates applying to money lent, deposited or borrowed.

Commodity

Soft commodities (that is, agricultural products such as wheat, coffee, cocoa and sugar) and hard commodities (thatis, mined products such as gold, oil and gas).

CreditRisk of default by customers or third parties.

The Group uses a number of central clearing counterparties and exchanges to settle derivative transactions. Different arrangements for posting ofcollateral exist with these exchanges:• some transactions are subject to clearing arrangements which result in separate recognition of collateral assets and liabilities, with the carrying
values of the associated derivative assets and liabilities held at their fair value.
• other transactions, are legally settled by the payment or receipt of collateral which reduces the carrying values of the related derivative instruments
by the amount paid or received.

DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADINGThe majority of the Group’s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:
Consolidated
Fair Value

Assets2023$mLiabilities
2023$m

Assets2022$mLiabilities
2022
$m

-

-

-

(1)

Interest rate contracts
Forward rate agreements
Futures contracts

294

(37)

336

(123)

Swap agreements

10,815(15,194)

10,421(15,031)

Options

1,805(2,023)

1,698(1,954)

Total

12,914(17,254)

12,455(17,109)

Spot and forward contracts

21,399(19,580)

42,221(37,426)

Swap agreements

23,230(18,172)

32,169(27,548)690(1,120)926(1,343)

Total

45,319(38,872)

75,316(66,317)

Commodity and other contracts

1,812(1,067)

1,927(1,353)

14

(17)

18

(14)

60,059(57,210)89,716(84,793)

Foreign exchange contracts

Options

Credit default swaps
Derivative financial instruments - held for trading
1.

1

Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.

104

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NOTES TO THE FINANCIAL STATEMENTS

10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADING (continued)
The majority of the Company’s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:

The Company

Assets2023$m

Fair Value

Liabilities
2023$m

Assets2022$mLiabilities
2022$mInterest rate contracts
2

(1)

2

(7)

Futures contracts

259

(30)

240

(116)

Swap agreements

11,324(15,178)

10,778(15,098)

Options

1,807(2,016)

1,684(1,947)

Total

13,392(17,225)

12,704(17,168)

Spot and forward contracts

19,229(17,595)

36,576(33,376)

Swap agreements

24,493(20,216)

35,526(30,949)684(1,110)895(1,331)

Total

44,406(38,921)72,997(65,656)

Commodity and other contracts

1,823(1,078)1,923(1,352)

28

(32)

26

(24)

59,649(57,256)

87,650(84,200)

Forward rate agreements

Foreign exchange contracts

Options

Credit default swaps
Derivative financial instruments - held for trading
1.

1

Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.

105

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPSAs set out in Note 1, under the accounting policy choice provided by AASB 9, the Group has continued to apply the hedge accounting requirementsof AASB 139.
There are three types of hedge accounting relationships the Group utilises:
Fair value hedge

Cash flow hedge

Net investment hedge

Objective of thishedgingarrangement

To hedge our exposure to changes tothe fair value of a recognised asset or
liability or unrecognised firm
commitment caused by interest rateor foreign currency movements.

To hedge our exposure to variability incash flows of a recognised asset or
liability, a firm commitment or a highly
probable forecast transaction caused
by interest rate, foreign currency andother price movements.

To hedge our exposure to exchange
rate differences arising from thetranslation of our foreign operations
from their functional currency toAustralian dollars.

Recognition ofeffective hedge
portionThe following are recognised in profit
or loss at the same time:

We recognise the effective portion ofchanges in the fair value of derivatives
designated as a cash flow hedge inthe cash flow hedge reserve.

We recognise the effective portion ofchanges in the fair value of thehedging instrument in the foreign
currency translation reserve (FCTR).

• all changes in the fair value of theunderlying item relating to thehedged risk; and• the change in the fair value of thederivatives.

Recognition of
ineffective hedge
portionRecognised immediately in Other operating income.

If a hedging
instrument expires,or is sold, terminated,or exercised; or nolonger qualifies forhedge accounting

When we recognise the hedged itemin profit or loss, we recognise therelated unamortised fair value
adjustment in profit or loss. This may
occur over time if the hedged item isamortised to profit or loss as part ofthe effective yield over the period
to maturity.

Only when we recognise the hedged
item in profit or loss is the amountpreviously deferred in the cash flow
hedge reserve transferred to profit
or loss.

The amount we defer in the foreign
currency translation reserve remains inequity and is transferred to profit orloss only when we dispose of, orpartially dispose of, the foreign
operation.

Hedged item sold or
repaidWe recognise the unamortised fairvalue adjustment immediately in
profit or loss.

Amounts accumulated in equity aretransferred immediately to profit
or loss.

The gain or loss, or applicableproportion, we have recognised inequity is transferred to profit or loss on
disposal or partial disposal of a foreign
operation.

106

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FinancialreportDirectors’
reportNOTES TO THE FINANCIAL STATEMENTS

10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The fair value of derivative financial instruments designated in hedging relationships is:
2022

2023
Consolidated

Nominalamount$m

Assets$m

Liabilities$mNominalamount$m

Assets$m

Liabilities$m

Fair value hedges
607

5

-

604

-

(37)

Interest rate swap agreements

126,88132(195)

106,366

79(168)

Interest rate futures contracts

11,778243(9)17,361264(3)122,70417(48)

125,063

33

(53)

683

50

(19)

656

48

(44)

-

-

-

161

-

(4)

47

-

(1)

940

34

(47)

262,700

347

(272)

251,151

458

(356)

Foreign exchange spot and forward contracts

Cash flow hedges
Interest rate swap agreements
Foreign exchange swap agreements
Foreign exchange spot and forward contracts
Net investment hedges
Foreign exchange spot and forward contracts
Derivative financial instruments - designated in
hedging relationships

2022

2023
The Company

Nominalamount$m

Assets$m

Liabilities$mNominalamount$m

Assets$m

Liabilities$m

Fair value hedges
607

5

-

604

-

(37)

Interest rate swap agreements

101,587

32(184)

80,18565(163)Interest rate futures contracts

11,778243(9)17,361264(3)89,17310(42)

94,928

28

(49)

683

50

(19)

656

48

(44)

-

-

-

161

-

(4)

47

-

(1)

146

1

-

203,875

340

(255)

194,041

406

(300)

Foreign exchange spot and forward contracts

Cash flow hedges
Interest rate swap agreements
Foreign exchange swap agreements
Foreign exchange spot and forward contracts
Net investment hedges
Foreign exchange spot and forward contracts
Derivative financial instruments - designated in
hedging relationships

107

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The maturity profile of the nominal amounts of our hedging instruments held is:
Consolidated
Nominal AmountAs at 30 September 2023

Average
Rate

Less than 3months$m

3 to 12months$m

1 to 5
years
$m

After
5 years
$m

Total
$m

2.38%

2,314

10,53379,35046,462

138,659

5.02

607

-

-

-

607

2.27%

7,573

37,63076,3591,142

122,704

-

-

-

683

683

Fair value hedges
Interest rate

Interest Rate

Foreign exchange

HKD/AUD FX Rate

Cash flow hedges
Interest rate

Interest Rate
AUD/USD FX Rate

0.74

USD/EUR FX Rate

0.91

NZD/AUD FX Rate

1.09

-

47

-

-

47

Interest rate

Interest Rate

1.65%

10,931

17,322

65,25930,215

123,727

Foreign exchange

HKD/AUD FX Rate

5.43

604

-

-

-

604

1.59%

3,317

32,14588,461

1,140

125,063

40

121

-

656

817

794

146

-

-

940

Foreign exchange1
Net investment hedges
Foreign exchange
As at 30 September 2022
Fair value hedges

Cash flow hedges
Interest rate
Foreign exchange1

Interest Rate
AUD/USD FX Rate

0.74

USD/EUR FX Rate

0.91

TWD/AUD FX Rate

20.68

THB/AUD FX Rate

25.05

Net investment hedges
Foreign exchange
1.

Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.

108

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reportDirectors’
reportFinancialreport109
NOTES TO THE FINANCIAL STATEMENTS

10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The Company
Nominal AmountAs at 30 September 2023

Average
Rate

Less than 3months$m

3 to 12months$m

1 to 5
years
$m

After
5 years
$m

Total
$m

2.49%

1,910

8,025

61,644

41,786113,365

5.02

607

-

-

-

607

1.78%

3,154

22,35362,577

1,089

89,173

-

-

-

683

683

Fair value hedges
Interest rate

Interest Rate

Foreign exchange

HKD/AUD FX Rate

Cash flow hedges
Interest rate

Interest Rate
AUD/USD FX Rate

0.74

USD/EUR FX Rate

0.91

NZD/AUD FX Rate

1.09

-

47

-

-

47

Interest rate

Interest Rate

1.75%

10,931

13,46648,011

25,13897,546

Foreign exchange

HKD/AUD FX Rate

5.43

604

-

-

-

604

1.37%

1,708

22,611

69,6001,009

94,928

40

121

-

656

817

-

146

-

-

146

Foreign exchange1
Net investment hedges
Foreign exchange
As at 30 September 2022
Fair value hedges

Cash flow hedges
Interest rate
Foreign exchange1

Interest Rate
AUD/USD FX Rate

0.74

USD/EUR FX Rate

0.91

TWD/AUD FX Rate

20.68

Net investment hedges
Foreign exchange
1.

Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.

109

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The impacts of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:IneffectivenessConsolidated
As at 30 September 2023
Fair value hedges1
Interest rate
Foreign exchange
Cash flow hedges1
Interest rate
Foreign exchange
Net investment hedges1
Foreign exchange
As at 30 September 2022
Fair value hedges1
Interest rate
Foreign exchange
Cash flow hedges1
Interest rate
Foreign exchange
Net investment hedges1
Foreign exchange

Change in value
Hedge ineffectivenessof hedging Change in value recognised in profit or
instrument2 of hedged item
loss3
$m
$m
$m
(846)
(4)

870
4

24
-

-

280
-

(239)
-

41
-

(13)
9

(39)

39

-

79

697
(55)

(719)
55

(22)
-

-

(3,619)
(4)

3,453
4

(166)
-

(13)
1

62

(62)

-

-

Change in value
Hedge ineffectivenessof hedging Change in value recognised in profit or
instrument2 of hedged item
loss3
$m
$m
$m

Amount reclassified
from the cash flow
hedge reserve or FCTR
to profit or loss4$m

Ineffectiveness
The Company
As at 30 September 2023
Fair value hedges1
Interest rate
Foreign exchange
Cash flow hedges1
Interest rate
Foreign exchange
Net investment hedges1
Foreign exchange
As at 30 September 2022
Fair value hedges1
Interest rate
Foreign exchange
Cash flow hedges1
Interest rate
Foreign exchange
Net investment hedges1
Foreign exchange

(797)
(4)

814
4

17
-

-

386
-

(344)
-

42
-

(15)
9

(4)

4

-

-

1,570
(55)

(1,586)
55

(16)
-

-

(3,643)
(4)

3,477
4

(166)
-

(13)
1

58

(58)

-

-

All hedging instruments are classified as derivative financial instruments.
Changes in value of hedging instruments is before any adjustments for Settle to Market clearing arrangements.
3. Recognised in Other operating income.
4. Recognised in Net interest income and Other operating income.
1.
2.

110

Amount reclassified
from the cash flow
hedge reserve or FCTR
to profit or loss4$mOverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreport111
NOTES TO THE FINANCIAL STATEMENTS

10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The hedged items in relation to the Group’s fair value hedges are:Consolidated
As at 30 September 2023

Balance sheet
presentation

Hedged risk

3,472

-

(139)

-

Interest rate-

Interest rate

61,082(66,190)

-

4,163

-

(5,121)

-

607

-

79

-

65,161(66,190)(5,181)

4,163

10,252

-

(369)

-

Interest rate-

(51,531)-3,721

Interest rate

53,915-(5,349)-Fixed rate loans and advances

Net loans and advances Interest rate

Fixed rate debt issuance

Debt issuances

Fixed rate investment securities at FVOCI1 Investment securities
Equity securities at FVOCI

1

Investment securities

Carrying amount
AssetsLiabilities$m$m

Accumulated fair value
hedge adjustments on
the hedged item
AssetsLiabilities$m$m

Foreign exchange

Total
As at 30 September 2022
Fixed rate loans and advances

Net loans and advances Interest rate

Fixed rate debt issuance

Debt issuances

Fixed rate investment securities at FVOCI1 Investment securities
Equity securities at FVOCI

1

Investment securities

Foreign exchange

Total
1.

604

-

75

-

64,771(51,531)(5,643)

3,721

The carrying amount of debt and equity instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.

The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is -$13 million(2022: -$7 million).
The hedged items in relation to the Company’s fair value hedges are:

The Company
As at 30 September 2023

Balance sheet
presentation

Hedged risk

Carrying amount
AssetsLiabilities$m$m

Accumulated fair value
hedge adjustments on
the hedged item
AssetsLiabilities
$m
$m

3,472

-

(139)

-

Interest rate-

(51,602)-3,025

Fixed rate investment securities at FVOCI1 Investment securities

Interest rate

52,336-(4,342)-Equity securities at FVOCI1

Foreign exchange

607

-

79

-

56,415(51,602)(4,402)

3,025

10,252

-

(369)

-

Fixed rate loans and advances

Net loans and advances Interest rate

Fixed rate debt issuance

Debt issuances
Investment securities

Total
As at 30 September 2022
Fixed rate loans and advances

Net loans and advances Interest rate

Fixed rate debt issuance

Debt issuancesInterest rate-

(37,141)-

2,572

Fixed rate investment securities at FVOCI1 Investment securities

Interest rate

44,038-(4,489)-Equity securities at FVOCI

Foreign exchange

1

Total
1.

Investment securities

604

-

75

-

54,894(37,141)(4,783)

2,572

The carrying amount of debt and equity instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.

The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is -$13 million(2022: -$7 million).

111

112

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The hedged items in relation to the Group’s and the Company’s cash flow and net investment hedges are:Consolidated
As at 30 September 2023
Cash flow hedges
Floating rate loans and advances
Floating rate customer deposits
Foreign currency debt issuances
Highly probable forecast transactions
Net investment hedges
Foreign operations
As at 30 September 2022
Cash flow hedges
Floating rate loans and advances
Floating rate customer deposits
Foreign currency debt issuances
Highly probable forecast transactions
Net investment hedges
Foreign operations

The Company
As at 30 September 2023
Cash flow hedges
Floating rate loans and advances
Floating rate customer deposits
Foreign currency debt issuances
Highly probable forecast transactions
Net investment hedges
Foreign operations
As at 30 September 2022
Cash flow hedges
Floating rate loans and advances
Floating rate customer deposits
Foreign currency debt issuances
Highly probable forecast transactions
Net investment hedges
Foreign operations

112

Hedged risk

Cash flow
hedge reserve
Continuing Discontinued
hedgeshedges$m$m

Foreign currencytranslation reserve
Continuing Discontinued
hedgeshedges$m$m

Interest rate
Interest rate
Foreign exchange
Foreign exchange(3,482)
794
-

11
(1)
-

-

-

Foreign exchange

-

-

12

49

Interest rate
Interest rate
Foreign exchange
Foreign exchange(4,286)
1,357
(1)
(7)

19
5
(1)
-

-

-

Foreign exchange

-

-

43

(149)

Hedged risk

Cash flow
hedge reserve
Continuing Discontinued
hedgeshedges$m$m

Foreign currencytranslation reserve
Continuing Discontinued
hedgeshedges$m$m

Interest rate
Interest rate
Foreign exchange
Foreign exchange(3,103)
495
-

2
-

-

-

Foreign exchange

-

-

12

49

Interest rate
Interest rate
Foreign exchange
Foreign exchange(4,005)
1,053
(1)
(7)

11
6
(1)
-

-

-

Foreign exchange

-

-

88

(149)

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreport113
NOTES TO THE FINANCIAL STATEMENTS

10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)
The table below details the reconciliation of the Group’s cash flow hedge reserve by risk type:Interest rate$m

Foreigncurrency
$m

Total
$m

398

(5)

393

Fair value gains/(losses)(3,453)(4)(3,457)

Transferred to profit or loss

(13)

1

(12)

Consolidated
Balance at 1 October 2021

Income taxes and others

1,040

-

1,040

Balance at 30 September 2022

(2,028)(8)(2,036)

Fair value gains/(losses)

239

-

239

Transferred to profit or loss

(13)

9

(4)

(69)

(2)

(71)

(1,871)(1)(1,872)

Income taxes and others
Balance at 30 September 2023

Hedges of net investments in a foreign operation resulted in a $40 million increase in FCTR during the year (2022: $62 million increase).
The table below details the reconciliation of the Company’s cash flow hedge reserve by risk type:Interest rate$m

Foreigncurrency$mBalance at 1 October 2021

389

(5)

384

Fair value gains/(losses)(3,477)(4)(3,481)The Company

Total
$m

Transferred to profit or loss

(13)

1

(12)

Income taxes and others

1,048

-

1,048

Balance at 30 September 2022

(2,053)(8)(2,061)

Fair value gains/(losses)

344

-

344

Transferred to profit or loss

(15)

9

(6)

(99)

(2)

(101)

(1,823)(1)(1,824)

Income taxes and others
Balance at 30 September 2023

Hedges of net investments in a foreign operation resulted in a $4 million decrease in FCTR during the year (2022: $58 million increase).

113

114

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
RECOGNITION AND MEASUREMENT
Recognition

Initially and at each reporting date, we recognise all derivatives at fair value. If the fair value of a
derivative is positive, then we carry it as an asset, but if its value is negative, then we carry it as aliability.
Valuation adjustments are integral in determining the fair value of derivatives. This includes:• a credit valuation adjustment to reflect the counterparty risk and/or event of default; and• a funding valuation adjustment to account for funding costs and benefits in the derivatives
portfolio.

Derecognition ofassets and liabilities

We remove derivative assets from our Balance Sheet when the contracts expire or we have transferred
substantially all the risks and rewards of ownership. We remove derivative liabilities from our Balance
Sheet when the Group’s contractual obligations are discharged, cancelled or expired.
With respect to derivatives cleared through a central clearing counterparty or exchange, derivative
assets or liabilities may be derecognised in accordance with the principle above when collateral issettled, depending on the legal arrangements in place for each instrument.

Impact on the
Income Statement

The recognition of gains or losses on derivative financial instruments depends on whether thederivative is held for trading or is designated in a hedge accounting relationship. For derivative
financial instruments held for trading, gains or losses from changes in the fair value are recognised in
profit or loss.
For an instrument designated in a hedge accounting relationship, the recognition of gains or losses
depends on the nature of the item being hedged. Refer to the table on page 106 for details of therecognition approach applied for each type of hedge accounting relationship.
Sources of hedge accounting ineffectiveness may arise from differences in the interest rate reference
rate, margins, or rate set differences and differences in discounting between the hedged items and thehedging instruments.

Hedge effectivenessTo qualify for hedge accounting under AASB 139, a hedge relationship is expected to be highly
effective. A hedge relationship is highly effective only if the following conditions are met:
• the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash
flows attributable to the hedged risk during the period for which the hedge is designated(prospective effectiveness); and• the actual results of the hedge are within the range of 80-125% (retrospective effectiveness).
The Group monitors hedge effectiveness on a regular basis but at a minimum at each reporting date.

KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select the valuation techniques used to determine the fair value of derivatives, particularly the selection ofvaluation inputs that are not readily observable, and the application of valuation adjustments to certain derivatives. Refer to Note 18 Fair
Value of Financial Assets and Financial Liabilities for further details.

114

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
report115

FinancialreportDirectors’
reportNOTES TO THE FINANCIAL STATEMENTS

11. INVESTMENT SECURITIES

946

3,826

1,353

4,758

Government securities

7,791

7,594

2023

84,603

Corporate and financial
institution securities
72,251

2022

Other securities
Equity securities

Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Debt securities

88,271

76,81776,32065,257

Equity securities

946

1,353

945

1,027

7,752

7,943

5,936

6,115

-

40

-

-

96,96986,153

83,201

72,399Investment securities measured at FVOCI

Investment securities measured at amortised cost
Debt securities
Investment Securities measured at FVTPL
Debt securities
Total

During 2023, ANZBGL transferred its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure.
The maturity profile of investment securities is as follows:
Consolidated
As at 30 September 2023

Less than 3months$m

3 to 12months 1 to 5 years After 5 years
$m
$m
$m

No
maturity
$m

Total
$m

8,807

10,23329,482

36,081-

84,603

Corporate and financial institution securities

358

1,205

5,973

58

-

7,594

Other securities

617

591

602

2,016

-

3,826

Equity securities

-

-

-

-

946

946

9,782

12,02936,05738,155946

96,969Government securities

6,544

14,04529,806

21,856-72,251

Corporate and financial institution securities

324

2,462

4,906

97

2

7,791

Other securities

429

423

543

3,363

-

4,758

Equity securities

-

-

-

-

1,353

1,353

7,297

16,93035,25525,316

1,355

86,153Government securities

Total
As at 30 September 2022

Total

During the year, the Group recognised a net gain (before tax) of $9 million (2022: $28 million) in Other operating income from the recycling ofgains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.

115

116

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
11. INVESTMENT SECURITIES (continued)

The Company
As at 30 September 2023

Less than 3months$m

3 to 12months 1 to 5 years After 5 years
$m
$m
$m

No
maturity
$m

Total
$m

33,182-

72,636

7,665

8,649

23,140

Corporate and financial institution securities

280

634

4,822

58

-

5,794

Other securities

617

591

602

2,016

-

3,826

Government securities

-

-

-

-

945

945

8,562

9,874

28,56435,256945

83,201Government securities

5,715

11,647

23,10019,853-60,315

Corporate and financial institution securities

276

1,972

3,993

58

-

6,299

Other securities

429

423

543

3,363

-

4,758

Equity securities
Total
As at 30 September 2022

Equity securities
Total

-

-

-

-

1,027

1,027

6,420

14,042

27,63623,274

1,027

72,399During the year, the Company recognised a net loss (before tax) of $6 million (2022: $1 million gain) in Other operating income from the recycling ofgains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.

RECOGNITION AND MEASUREMENT
Investment securities are those financial assets in security form (that is, transferable debt or equity instruments) that are not held for trading
purposes. By way of exception, bills of exchange (a form of security/transferable instrument) which are used to facilitate the Group’s
customer lending activities are classified as Loans and advances (rather than Investment securities) to better reflect the substance of thearrangement.
Equity investments not held for trading purposes may be designated at FVOCI on an instrument by instrument basis. If this election is
made, gains or losses are not reclassified from Other comprehensive income to profit or loss on disposal of the investment. However, gains
or losses may be reclassified within equity.
Assets disclosed as Investment securities are subject to the general classification and measurement policy for Financial Assets outlined at
the commencement of the Group’s financial asset disclosures on page 101. Additionally, expected credit losses associated with ‘Investment
securities - debt securities at amortised cost’ and ‘Investment securities - debt securities at FVOCI’ are recognised and measured inaccordance with the accounting policy outlined in Note 13 Allowance for Expected Credit Losses. For ‘Investment securities - debt
securities at FVOCI’, the allowance for Expected Credit Loss (ECL) is recognised in the FVOCI reserve in equity with a corresponding charge
to profit or loss.

KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select valuation techniques used to determine the fair value of assets not valued using quoted market
prices, particularly the selection of valuation inputs that are not readily observable. Refer to Note 18 Fair Value of Financial Assets andFinancial Liabilities for further details.

116

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
reportFinancialreport117
NOTES TO THE FINANCIAL STATEMENTS

12. NET LOANS AND ADVANCES
The following table provides details of Net loans and advances:
Consolidated
2023$mOverdrafts
Credit cards
Commercial bills
Term loans – housing
Term loans – non-housing1
Other
Subtotal
Unearned income2
Capitalised brokerage and other origination costs2
Gross loans and advances
Allowance for expected credit losses (refer to Note 13)
Net loans and advances

2022
$m

The Company
2023
$m

2022
$m

5,552
6,805
4,682
404,491
285,458
1,292
708,280(515)
3,475
711,240(3,546)707,694

5,266
6,755
5,214
374,625
279,730
2,035
673,625(518)
2,882
675,989(3,582)
672,407

4,516
5,630
4,682
304,772
242,403
1,244
563,247(483)
3,048
565,812(2,795)563,017

4,262
5,664
5,214
282,965
238,215
1,929
538,249(480)
2,501
540,270(2,925)537,345

152,318
555,376
707,694

146,142526,265
672,407

128,045434,972
563,017

121,513415,832
537,345685,806
21,888707,694

667,732
4,675
672,407541,777
21,240563,017533,082
4,263
537,345

Residual contractual maturity:
Within one year
More than one year
Net loans and advances

Carried on Balance Sheet at:
Amortised cost
Fair value through profit or loss1
Net loans and advances1.

2.

During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
Amortised over the expected life of the loan.

RECOGNITION AND MEASUREMENT
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market andare facilities the Group provides directly to customers or through third party channels.
Loans and advances are initially recognised at fair value plus transaction costs directly attributable to the issue of the loan or advance,
which are primarily brokerage and other origination costs which we amortise over the estimated life of the loan. Subsequently, we thenmeasure loans and advances at amortised cost using the effective interest rate method, net of any allowance for expected credit losses, orat fair value when they are specifically designated on initial recognition as FVTPL, are classified as held for sale or when held for trading.
Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
We classify contracts to lease assets and hire purchase agreements as finance leases if they transfer substantially all the risks and rewards ofownership of the asset to the customer or an unrelated third party. We include these facilities in ‘Other’ in the table above.
The Group enters into transactions in which it transfers financial assets that are recognised on its Balance Sheet. When the Group retains
substantially all of the risks and rewards of the transferred assets, the transferred assets remain on the Group’s Balance Sheet, however ifsubstantially all the risks and rewards are transferred, the Group derecognises the asset. If the risks and rewards are partially retained andcontrol over the asset is lost, the Group derecognises the asset. If control over the asset is not lost, the Group continues to recognise theasset to the extent of its continuing involvement.
We separately recognise the rights and obligations retained, or created, in the transfer of assets as appropriate.
Assets disclosed as Net loans and advances are subject to the general classification and measurement policy for financial assets outlined on
page 101. Additionally, expected credit losses associated with loans and advances at amortised cost are recognised and measured inaccordance with the accounting policy outlined in Note 13 Allowance for Expected Credit Losses.

117

118

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES

Consolidated
Net loans and advances at amortised cost
Off-balance sheet commitments
Investment securities - debt securities at amortised cost
Total
Other comprehensive income
Investment securities - debt securities at FVOCI1The Company
Net loans and advances at amortised cost
Off-balance sheet commitments
Investment securities - debt securities at amortised cost
Total
Other comprehensive income
Investment securities - debt securities at FVOCI1
1.

2023
Collectively Individuallyassessedassessed
$m
$m
3,180
366
817
10
35
4,032
376
15

-

2023
Collectively Individuallyassessedassessed
$m
$m
2,516
279
692
5
1
3,209
284
12

-

Total
$m
3,546
827
35
4,408

2022
Collectively Individuallyassessedassessed
$m
$m
3,049
533
766
9
38
3,853
542

15

Total
$m
2,795
697
1
3,493

10

Total
$m
3,582
775
38
4,395

-

10

2022
Collectively Individuallyassessedassessed
$m
$m
2,500
425
668
5
1
3,169
430

Total
$m
2,925
673
1
3,599

12

7

-

7

For FVOCI assets, the allowance for ECL does not alter the carrying amount which remains at fair value. Instead, the allowance for ECL is recognised in Other comprehensive income with a corresponding
charge to profit or loss.

The following tables present the movement in the allowance for ECL for the year.
Net loans and advances - at amortised cost
Allowance for ECL is included in Net loans and advances.
Stage 31

Consolidated
As at 1 October 2021
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Bad debts written off (excluding recoveries)
Foreign currency translation and other movements2
As at 30 September 2022

Stage 1
$m
968
219
(48)
2
1,141

Stage 2
$m
1,994
(224)
(202)
(20)
1,548

Collectively
assessed
$m
417
(95)
42
(4)
360

Individuallyassessed
$m
666
100
420
(222)
(428)
(3)
533

Total
$m
4,045
212
(222)
(428)
(25)
3,582

Transfer between stages
New and increased provisions (net of releases)
Write-backs
Bad debts written off (excluding recoveries)
Foreign currency translation and other movements2
As at 30 September 2023

148
(73)
11
1,227

(138)
202
12
1,624

(94)
61
2
329

84
388
(212)
(409)
(18)
366

578
(212)
(409)
7
3,546

1.
2.

The Group’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
Other movements include the impacts of discount unwind on individually assessed allowance for ECL or the impact of divestments completed during the year.

118

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportDirectors’
report119

FinancialreportNOTES TO THE FINANCIAL STATEMENTS

13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
Stage 31

The Company
As at 1 October 2021
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Bad debts written off (excluding recoveries)
Foreign currency translation and other movements2
As at 30 September 2022

Stage 1
$m
797
192
(59)
16
946

Stage 2
$m
1,679
(201)
(220)
1
1,259

Collectively
assessed
$m
348
(84)
31
295

Individuallyassessed
$m
563
93
354
(193)
(386)
(6)
425

Total
$m
3,387
106
(193)
(386)
11
2,925

Transfer between stages
New and increased provisions (net of releases)
Write-backs
Bad debts written off (excluding recoveries)
Foreign currency translation and other movements2
As at 30 September 2023

122
(43)
1
1,026

(118)
98
1,239

(83)
39
251

79
295
(192)
(310)
(18)
279

389
(192)
(310)
(17)
2,795

1.
2.

The Company’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
Other movements include the impact of discount unwind on individually assessed allowance for ECL.

Off-balance sheet commitments - undrawn and contingent facilities
Allowance for ECL is included in Other provisions.
Stage 31

Consolidated
As at 1 October 2021
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Foreign currency translation and other movements2
As at 30 September 2022

Stage 1
$m
555
40
7
(9)
593

Stage 2
$m
211
(34)
(28)
(5)
144

Collectively
assessed
$m
19
(8)
18
29

Individuallyassessed
$m
21
2
(2)
(11)
(1)
9

Total
$m
806
(5)
(11)
(15)
775

Transfer between stages
New and increased provisions (net of releases)
Write-backs
Foreign currency translation and other movements2
As at 30 September 2023

31
6
630

(29)
46
1
162

(4)
(1)
1
25

2
2
(4)
1
10

47
(4)
9
827

1.
2.

The Group’s credit exposures that are POCI are insignificant.
Other movements include impact of divestments completed during the year.

119

120

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
Stage 31

The Company
As at 1 October 2021
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Foreign currency translation and other movements2
As at 30 September 2022
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Foreign currency translation
As at 30 September 2023
1.
2.

Stage 1
$m
484
33
17
(4)
530

Stage 2
$m
171
(27)
(29)
(3)
112

Collectively
assessed
$m
12
(6)
20
26

Individuallyassessed
$m
7
(2)
5

Total
$m
674
8
(2)
(7)
673

27
(10)
3
550

(26)
35
121

(3)
(2)
21

2
(2)
5

23
(2)
3
697

Stage 2$m-

Collectively
assessed$m-

Individuallyassessed
$m
-

Total
$m
38
35

Stage 2$m-

Collectively
assessed$m-

The Company’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
Other movements include the impact of divestments completed during the year.

Investment securities - debt securities at amortised cost
Allowance for ECL is included in Investment securities.
Stage 3

Consolidated
As at 30 September 2022
As at 30 September 2023

Stage 1$m
38
35

Stage 3

The Company
As at 30 September 2022
As at 30 September 2023

Stage 1$m
1
1

Individuallyassessed
$m
-

Total
$m
1
1

Investment securities - debt securities at FVOCIAs FVOCI assets are measured at fair value, there is no separate allowance for ECL. Instead, the allowance for ECL is recognised in Other
comprehensive income with a corresponding charge to profit or loss.
Stage 3

Consolidated
As at 30 September 2022
As at 30 September 2023

Stage 1$m
10
15Stage 2$m-

Collectively
assessed$m-

Stage 2$m-

Collectively
assessed$m-

Individuallyassessed
$m
-

Total
$m
10
15

Stage 3

The Company
As at 30 September 2022
As at 30 September 2023

120

Stage 1$m
7
12

Individuallyassessed
$m
-

Total
$m
7
12

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13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
CREDIT IMPAIRMENT CHARGE - INCOME STATEMENT
Credit impairment charge/(release) analysis
Consolidated
2023$m

The Company
2023
$m

2022
$m

2022
$m

New and increased provisions (net of releases)1,2
152- Collectively assessed

41

(311)

(333)

- Individually assessed

476

520

376

447

Write-backs3

(216)

(233)

(194)

(195)

Recoveries of amounts previously written-off

(167)

(208)

(148)

(184)

Total credit impairment charge

245

(232)

75

(265)

1.
2.

Includes the impact of transfers between collectively assessed and individually assessed.
New and increased provisions (net of releases) includes:
Consolidated

The Company

2023

3.

2022

2023

Collectively
assessed$m

Individuallyassessed$mCollectively
assessed$m

Individuallyassessed$m

Net loans and advances at amortised cost

106

472

(308)

Off-balance sheet commitments

43

4

(5)

Investment securities - debt securities at amortised cost(1)-

Investment securities - debt securities at FVOCI

4

Total

152

2022

Collectively
assessed$m

Individuallyassessed$mCollectively
assessed$m

Individuallyassessed
$m

520

15

374

(341)

447

-

21

2

8

-

3

-

-

-

-

-

-

(1)

-

5

-

-

-

476

(311)

520

41

376

(333)

447

Consists of write-backs in Net loans and advances at amortised cost of $212 million (2022: $222 million) for the Group and $192 million (2022: $193 million) for the Company, and Off-balance sheet
commitments of $4 million (2022: $11 million) for the Group and $2 million (2022: $2 million) for the Company.

The contractual amount outstanding on financial assets that were written off during the year and that are still subject to enforcement activity is$147 million (2022: $143 million) for the Group, and $133 million (2022: $128 million) for the Company.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENTEXPECTED CREDIT LOSS MODEL
The measurement of expected credit losses reflects an unbiased, probability weighted prediction which evaluates a range of scenarios andtakes into account the time value of money, past events, current conditions and forecasts of future economic conditions.
Expected credit losses are either measured over 12 months or the expected lifetime of the financial asset, depending on credit
deterioration since origination, according to the following three-stage approach:• Stage 1: At the origination of a financial asset, and where there has not been a Significant Increase in Credit Risk (SICR) since origination,an allowance for ECL is recognised reflecting the expected credit losses resulting from default events that are possible within the next
12 months from the reporting date. For instruments with a remaining maturity of less than 12 months, expected credit losses are
estimated based on default events that are possible over the remaining time to maturity.
• Stage 2: Where there has been a SICR since origination, an allowance for ECL is recognised reflecting expected credit losses resulting
from all possible default events over the expected life of a financial instrument. If credit risk were to improve in a subsequent period
such that the increase in credit risk since origination is no longer considered significant, the exposure returns to a Stage 1 classification
with ECL measured accordingly.
• Stage 3: Where there is objective evidence of impairment, an allowance equivalent to lifetime ECL is recognised.
Expected credit losses are estimated on a collective basis for exposures in Stage 1 and Stage 2, and on either a collective or individual basis
when transferred to Stage 3.
MEASUREMENT OF EXPECTED CREDIT LOSSECL is calculated as the product of the following credit risk factors at a facility level, discounted to incorporate the time value of money:• Probability of default (PD) - the estimate of the likelihood that a borrower will default over a given period;• Exposure at default (EAD) - the expected balance sheet exposure at default taking into account repayments of principal and interest,
expected additional drawdowns and accrued interest; and• Loss given default (LGD) - the expected loss in the event of the borrower defaulting, expressed as a percentage of the facility's EAD,
taking into account direct and indirect recovery costs.
These credit risk factors are adjusted for current and forward-looking information through the use of macroeconomic variables.
EXPECTED LIFE
When estimating ECL for exposures in Stage 2 and 3, the Group considers the expected lifetime over which it is exposed to credit risk.
For non-retail portfolios, the Group uses the maximum contractual period as the expected lifetime for non-revolving credit facilities. For
non-retail revolving credit facilities, such as corporate lines of credit, the expected life reflects the Group’s contractual right to withdraw afacility as part of a contractually agreed annual review, after taking into account the applicable notice period.
For retail portfolios, the expected lifetime is determined using a behavioural term, taking into account expected prepayment behaviour
and events that give rise to substantial modifications.
DEFINITION OF DEFAULT, CREDIT IMPAIRED AND WRITE-OFFS
The definition of default used in measuring ECL is aligned to the definition used for internal credit risk management purposes across all
portfolios. This definition is also in line with the regulatory definition of default. Default occurs when there are indicators that a debtor isunlikely to fully satisfy contractual credit obligations to the Group, or the exposure is 90 days past due.
Financial assets, including those that are well secured, are considered credit impaired for financial reporting purposes when they default.
When there is no realistic probability of recovery, loans are written off against the related impairment allowance on completion of theGroup’s internal processes and when all reasonably expected recoveries have been collected. In subsequent periods, any recoveries ofamounts previously written-off are recorded as a release to the credit impairment charge in the income statement.

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NOTES TO THE FINANCIAL STATEMENTS

13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENT (continued)
MODIFIED FINANCIAL ASSETS
If the contractual terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit orcommercial reasons, an assessment is made to determine if the changes to the terms of the existing financial asset are considered
substantial. This assessment considers both changes in cash flows arising from the modified terms as well as changes in the overall
instrument risk profile; for example, changes in the principal (credit limit), term, or type of underlying collateral. Where a modification isconsidered non-substantial, the existing financial asset is not derecognised and its date of origination continues to be used to determine
SICR. Where a modification is considered substantial, the existing financial asset is derecognised and a new financial asset is recognised at
its fair value on the modification date, which also becomes the date of origination used to determine SICR for this new asset.
SIGNIFICANT INCREASE IN CREDIT RISK (SICR)
Stage 2 assets are those that have experienced a SICR since origination. In determining what constitutes a SICR, the Group considers both
qualitative and quantitative information:i.

Internal credit rating grade
For the majority of portfolios, the primary indicator of a SICR is a significant deterioration in the internal credit rating grade of a facility
since origination and is measured by application of thresholds.
For non-retail portfolios, a SICR is determined by comparing the Customer Credit Rating (CCR) applicable to a facility at reporting dateto the CCR at origination of that facility. A CCR is assigned to each borrower which reflects the PD of the borrower and incorporates
both borrower and non-borrower specific information, including forward-looking information. CCRs are subject to review at least
annually or more frequently when an event occurs which could affect the credit risk of the customer.
For retail portfolios, a SICR is determined, depending on the type of facility, by either comparing the scenario weighted lifetime PD at
the reporting date to that at origination, or by reference to customer behavioural score thresholds. The scenario weighted lifetime
probability of default may increase significantly if:• there has been a deterioration in the economic outlook, or an increase in economic uncertainty; or• there has been a deterioration in the customer’s overall credit position, or ability to manage their credit obligations.

ii. Backstop criteria
The Group uses 30 days past due arrears as a backstop criterion for both non-retail and retail portfolios. For retail portfolios only,
facilities are required to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.
FORWARD-LOOKING INFORMATION
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a SICR since originationand in our estimate of ECL. In applying forward-looking information for estimating ECL, the Group considers four probability-weighted
forecast economic scenarios as follows:i.

Base case scenario
The base case scenario is ANZ’s view of future macroeconomic conditions. It reflects management’s assumptions used for strategicplanning and budgeting, and also informs the Group Internal Capital Adequacy Assessment Process (ICAAP) which is the process theGroup applies in strategic and capital planning over a 3-year time horizon;

ii. Upside and iii. Downside scenarios
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on theeconomic conditions prevailing at balance date) and are based on a combination of more optimistic (in the case of the upside) andpessimistic (in the case of the downside) economic events and uncertainty over long term horizons; andiv. Severe downside scenario
To better reflect the current economic conditions and geopolitical environment, the Group altered the severe downside scenario in
2022 from a scenario fixed by reference to average economic cycle conditions to one which aligns with the scenario used for Groupwide stress testing.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENT (continued)
FORWARD-LOOKING INFORMATION (continued)
The four scenarios are described in terms of macroeconomic variables used in the PD, LGD and EAD models (collectively the ECL models)depending on the lending portfolio and country of the borrower. Examples of the macroeconomic variables include unemployment rates,
Gross Domestic Product (GDP) growth rates, residential property price indices, commercial property price indices and consumer priceindices.
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base caseeconomic scenario, as well as specific portfolio considerations where required. The Group Asset and Liability Committee (GALCO) is
responsible for reviewing and approving the base case economic scenario and the Credit and Market Risk Committee (CMRC) approves theprobability weights applied to each scenario.
Where applicable, temporary adjustments may be made to account for situations where known or expected risks have not been adequately
addressed in the modelling process. CMRC is responsible for approving such adjustments.

KEY JUDGEMENTS AND ESTIMATES
Collectively assessed allowance for expected credit losses
In estimating collectively assessed ECL, the Group makes judgements and assumptions in relation to:• the selection of an estimation technique or modelling methodology; and• the selection of inputs for those models, and the interdependencies between those inputs.
The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between
those inputs, and highlights significant changes during the current period.
The judgements and associated assumptions have been made within the context of the uncertainty as to how various factors might
impact the global economy and reflect historical experience and other factors that are considered to be relevant, including expectations of
future events that are believed to be reasonable under the circumstances. The Group’s ECL estimates are inherently uncertain and, as aresult, actual results may differ from these estimates.
Judgement/Assumption

Description

Considerations for the year ended 30 September 2023

Determining when a
Significant Increase in
Credit Risk has occurredor reversed

In the measurement of ECL, judgement isinvolved in determining whether there has been
a SICR since initial recognition of a loan, which
would result in it moving from Stage 1 to Stage
2. This is a key area of judgement since transition
from Stage 1 to Stage 2 increases the ECL froman allowance based on the probability of default(PD) in the next 12 months, to an allowance for
lifetime expected credit losses. Subsequent
decreases in credit risk resulting in transition
from Stage 2 to Stage 1 may similarly result insignificant changes in the ECL allowance.

The determination of SICR has been applied consistent
with prior periods.

The setting of precise SICR trigger points
requires judgement which may have a material
impact upon the size of the ECL allowance. The
Group monitors the effectiveness of SICR criteria
on an ongoing basis.

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NOTES TO THE FINANCIAL STATEMENTS

13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES (continued)
Judgement/Assumption

Description

Considerations for the year ended 30 September 2023

Measuring both 12month and lifetime
expected credit losses

The PD, LGD and EAD factors used indetermining ECL are point-in-time measuresreflecting the relevant forward-looking
information determined by management.
Judgement is involved in determining which
forward-looking information is relevant forparticular lending portfolios and for
determining each portfolio’s point-in-time
sensitivity.

The PD, LGD and EAD models are subject to the Group’smodel risk policy that stipulates periodic model
monitoring and re-validation, and defines approval
procedures and authorities according to model
materiality.
There were no material changes to the policy.

In addition, judgement is required where
behavioural characteristics are applied inestimating the lifetime of a facility which is usedin measuring ECL.
Base case economic
forecast

The Group derives a forward-looking ‘base case’economic scenario which reflects ANZ Research- Economics’ (ANZ Economics) view of future
macroeconomic conditions.

There have been no changes to the types of forwardlooking variables (key economic drivers) used as model
inputs.
As at 30 September 2023, the base case assumptions
have been updated to reflect slowing economies andreduced levels of household consumption in Australia
and New Zealand associated with continuing highinterest rates and elevated levels of inflation.
The expected outcomes of key economic drivers for thebase case scenario at 30 September 2023 are described
below under the heading “Base case economic forecast
assumptions”.

1.

Probability weighting ofeach economic scenario(base case, upside,
downside and severe
downside scenarios)1

Probability weighting of each economic
scenario is determined by management
considering the risks and uncertainties
surrounding the base case economic scenario
at each measurement date.
The assigned probability weightings in Australia,
New Zealand and Rest of World are subject to ahigh degree of inherent uncertainty andtherefore the actual outcomes may besignificantly different to those projected.

Probability weightings in the current period have beenadjusted to reflect our assessment of the downside risks
from the impact of continued high interest rates andinflation on the economies in which the Group operates.
Weightings for current and prior periods are as detailed in
the section below under the heading on ‘Probability
weightings’.

Management
temporary adjustments

Management temporary adjustments to the
ECL allowance are used in circumstances where
it is judged that our existing inputs,
assumptions and model techniques do not
capture all the risk factors relevant to ourlending portfolios. Emerging local or global
macroeconomic, microeconomic or politicalevents, natural disasters, and natural hazards
that are not incorporated into our current
parameters, risk ratings, or forward-looking
information are examples of suchcircumstances.

Management have continued to apply adjustments toaccommodate uncertainty associated with higher
inflation and interest rates.
Management overlays have been made for risks particular
to retail, including home loans, credit cards and small
business in Australia, and for mortgages, commercial
property and agri in New Zealand.
Management has considered and concluded no
temporary adjustment is required at 30 September 2023
to the ECL in relation to climate- or weather-related
events during the year.

The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are
based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES (continued)
Base case economic forecast assumptions
Continuing uncertainties described above increase the risk of the economic forecast resulting in an understatement or overstatement of
the ECL balance.
The economic drivers of the base case economic forecasts, reflective of ANZ Economics’ view of future macroeconomic conditions used at
30 September 2023 are set out below. For the years following the near term forecasts below, the ECL models apply simplified assumptions
for the economic conditions to calculate lifetime loss.
Forecast calendar year
2023
2024
2025
Australia
GDP (annual % change)
Unemployment rate (annual average)
Residential property prices (annual % change)
Consumer price index (annual average % change)
New Zealand
GDP (annual % change)
Unemployment rate (annual average)
Residential property prices (annual % change)
Consumer price index (annual average % change)
Rest of world
GDP (annual % change)
Consumer price index (annual average % change)

1.5
3.6
5.9
5.6

1.3
4.4
2.8
3.5

2.2
4.5
4.3
2.9

0.7
3.8
-0.6
6.0

0.3
4.8
2.3
3.8

1.5
5.1
3.2
2.2

1.8
3.9

0.9
2.9

2.0
2.2

The base case economic forecasts for Australia, New Zealand and Rest of World are for continuing slowdowns in economic activity.
Continued high inflation in Australia and New Zealand is expected to keep interest rates high and dampen growth over the forecast
period.
Probability weightings
Probability weightings for each scenario are determined by management considering the risks and uncertainties surrounding the basecase economic scenario including the uncertainties described above.
The average base case weighting has increased to 45.9% (Sep 22: 45%) as the downside and severe downside scenario weightings havebeen revised. The average downside case weighting has increased to 41.2% (Sep 22: 40%), and the average severe downside caseweighting has decreased to 12.9% (Sep 22: 15%).
The assigned probability weightings in Australia, New Zealand and Rest of World are subject to a high degree of inherent uncertainty andtherefore the actual outcomes may be significantly different to those projected. The Group considers these weightings in each geography
to provide estimates of the possible loss outcomes and taking into account short and long term inter-relationships within the Group’s
credit portfolios. The average weightings applied across the Group are set out below:

Base
UpsideDownside
Severe downside

126

Consolidated
2023
2022
45.9%
45.0%
0.0%
0.0%
41.2%
40.0%
12.9%
15.0%

The Company
2023
2022
45.0%
45.0%
0.0%
0.0%
42.1%
40.0%
12.9%
15.0%

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NOTES TO THE FINANCIAL STATEMENTS

13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES (continued)
ECL - Sensitivity analysis
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers infuture periods, expected credit losses reported by the Group should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of collectively assessed ECL to key factors used in determining it as at 30 September 2023:
Consolidated
ECL
Impact$m$m

The Company
ECL
Impact$m$m

If 1% of Stage 1 facilities were included in Stage 2

4,116

84

3,283

73

If 1% of Stage 2 facilities were included in Stage 1

4,027

(5)

3,206

(4)

100% upside scenario

1,274(2,758)1,050(2,160)100% base scenario

1,790(2,242)

1,406(1,804)

100% downside scenario

3,123

(909)

2,484

(726)

100% severe downside scenario

9,251

5,219

7,457

4,247

Individually assessed allowance for expected credit losses
In estimating individually assessed ECL, the Group makes judgements and assumptions in relation to expected repayments, the realisablevalue of collateral, business prospects for the customer, competing claims and the likely cost and duration of the work-out process.
Judgements and assumptions in respect of these matters have been updated to reflect amongst other things, the uncertainties describedabove.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
FINANCIAL LIABILITIESOutlined below is a description of how we classify and measure financial liabilities relevant to the note disclosures that follow.

CLASSIFICATION AND MEASUREMENT
Financial liabilities
Financial liabilities are measured at amortised cost, or FVTPL when they are held for trading. Additionally, financial liabilities can be
designated at FVTPL where:• the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise;• a group of financial liabilities are managed and their performance are evaluated on a fair value basis, in accordance with a documented
risk management strategy; or• the financial liability contains one or more embedded derivatives unless:a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract; orb) the embedded derivative is closely related to the host financial liability.
Where financial liabilities are designated as measured at fair value, gains or losses relating to changes in the entity’s own credit risk areincluded in Other comprehensive income, except where doing so would create or enlarge an accounting mismatch in profit or loss.

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NOTES TO THE FINANCIAL STATEMENTS

14. DEPOSITS AND OTHER BORROWINGS
Certificates of deposit
41,91933,322

34,04939,222

Term deposits

103,580

92,562
247,893

42,90650,9062023

On demand and shortterm deposits

200,064

Deposits not bearing interest

2022

Deposits from banks &securities sold under
repurchase agreements

369,460

356,601

Commercial paper andother borrowings

Certificates of deposit
Term deposits
On demand and short term deposits
Deposits not bearing interest
Deposits from banks & securities sold under repurchase agreements1
Commercial paper and other borrowings
Deposits and other borrowings

Consolidated
2023
2022
$m
$m
34,04941,919200,064
247,893
369,460
356,601
50,90642,906
103,580
92,562
39,22233,322797,281815,203

The Company
2023
2022
$m
$m
32,411
39,426
157,479
196,309
310,857
297,195
29,41624,456
98,82586,46436,61931,225
665,607675,075

805,808
9,395
815,203

781,573
15,708797,281

671,395
3,680
675,075

654,997
10,610665,607781,31433,889815,203794,6212,660
797,281643,868
31,207675,075

665,56740
665,607

Residual contractual maturity:
Within one year
More than one year
Deposits and other borrowings

Carried on Balance Sheet at:
Amortised cost
Fair value through profit or loss1
Deposits and other borrowings
1.

During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.

RECOGNITION AND MEASUREMENT
For deposits and other borrowings that:• are not designated at FVTPL on initial recognition, we measure them at amortised cost and recognise their interest expense using theeffective interest rate method; and• are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designate themas measured at FVTPL.
Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
For deposits and other borrowings designated at fair value we recognise the amount of fair value gain or loss attributable to changes in
the Group’s own credit risk in Other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss werecognise directly in profit or loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it toprofit or loss.
Securities sold under repurchase agreements represent a liability to repurchase the financial assets that remain on our balance sheet since
the risks and rewards of ownership remain with the Group. Over the life of the repurchase agreement, we recognise the difference
between the sale price and the repurchase price and charge it to interest expense in profit or loss.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
15. PAYABLES AND OTHER LIABILITIESPayables and accruals
Liabilities at fair value1
Lease liabilities
Trail commission liabilities
Other liabilities
Payables and other liabilities
1.

Consolidated
2023
$m
5,811
5,267
1,767
1,469
1,618
15,932

2022
$m
2,896
3,239
1,040
1,320
1,340
9,835

The Company
2023
$m
4,582
4,922
1,531
1,469
775
13,279

2022
$m
2,189
2,857
1,628
1,320
568
8,562

Relate to securities sold short classified as held for trading and measured at FVTPL.

RECOGNITION AND MEASUREMENTThe Group recognises liabilities when there is a present obligation to transfer economic resources as a result of past events.
Below is the measurement basis for each item classified as other liabilities:• Payables, accruals and other liabilities are measured at the contractual amount payable or the best estimate of consideration required tosettle the payable.
• Liabilities at fair value relate to securities sold short, which we classify as held for trading and measure at FVTPL based on quoted prices
in active markets.
• Lease liabilities are initially measured at the present value of the future lease payments using the Group’s incremental borrowing rate at
the lease commencement date. The carrying amount is then subsequently adjusted to reflect the interest on the lease liability, lease
payments that have been made and any lease reassessments or modifications.
• Trail commission liabilities are measured based on the present value of expected future trail commission payments taking into
consideration average behavioural loan life and outstanding balances of broker originated loans.

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NOTES TO THE FINANCIAL STATEMENTS

16. DEBT ISSUANCESThe Group, primarily via ANZBGL or other banking subsidiaries, uses a variety of funding programmes to issue senior debt (including covered bonds
and securitisations) and subordinated debt. The difference between senior debt and subordinated debt is that holders of senior debt of a Group issuer
take priority over holders of subordinated debt owed by that issuer. In the winding up of a Group issuer, the subordinated debt will be repaid by therelevant issuer only after the repayment of claims of its depositors, other creditors and the senior debt holders of that issuer.
Consolidated
2023
$m

2022
$m

The Company
2023
$m

2022
$m

63,233
18,223880
82,33652,324
12,967
1,115
66,40650,671
15,08465,75540,325
9,371
49,696

8,232
23,707
1,739

7,705
17,9071,716

8,287
23,707464

7,763
17,907462

33,678116,014

27,32893,73432,45898,213

26,13275,828Within one year
More than one year
No maturity date (instruments in perpetuity)

21,74692,856
1,412

25,20866,6601,866

18,49978,245
1,469

21,99051,9291,909

Total debt issued

116,01493,734

98,21375,828

Amortised cost
Fair value through profit or loss

114,678
1,336

92,623
1,111

95,881
2,332

72,757
3,071

Total debt issued

116,01493,734

98,21375,828

Senior debt
Covered bonds
Securitisation
Total unsubordinated debt
Subordinated debt
- ANZBGL Additional Tier 1 capital- ANZBGL Tier 2 capital- Other subordinated debt securities
Total subordinated debt
Total debt issued

Residual contractual maturity 1:

Carried on Balance Sheet at:

1.

Based on the final maturity date or, in the case of Additional Tier 1 capital securities, the mandatory conversion date (if any).

TOTAL DEBT ISSUED BY CURRENCY
The table below shows the Group’s issued debt by currency of issue, which broadly represents the debt holders’ base location.
Consolidated
2023
$m
USD
EUR
AUD
NZD
JPY
CHF
GBP
HKD
Other

United States dollars
Euro
Australian dollars
New Zealand dollars
Japanese yen
Swiss francs
Pounds sterling
Hong Kong dollars
Chinese yuan and Singapore dollars

Total debt issued

32,723
26,99047,043
1,575
1,993
1,039
2,230
1,407
1,014
116,0142022$m
25,527
19,92336,398
1,628
2,159
954
5,261
771
1,113
93,734The Company
2023
$m

2022
$m

24,074
21,356
46,123
43
1,993
2,230
1,407
987
98,213

17,206
14,04935,259
46
2,159
5,261
771
1,077
75,828SUBORDINATED DEBTAt 30 September 2023, all subordinated debt issued by ANZBGL (other than its USD 300 million perpetual subordinated notes) qualifies as regulatory
capital for the Group. Depending on their terms and conditions, the subordinated debt instruments issued by ANZBGL are classified as either
Additional Tier 1 (AT1) capital for the Group (in the case of the ANZ Capital Notes (ANZ CN) and ANZ Capital Securities (ANZ CS)) or Tier 2 capital for
the Group (in the case of the term subordinated notes) for APRA’s capital adequacy purposes.
Subordinated debt issued externally by ANZ Bank New Zealand will constitute subordinated debt of both ANZ Bank New Zealand and the Group.
Whilst it will constitute tier 2 capital for ANZ Bank New Zealand for the purposes of the Reserve Bank of New Zealand’s (RBNZ) capital requirements, itwill not constitute Tier 2 capital for the Group as the terms of the subordinated debt does not satisfy APRA’s capital requirements.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
16. DEBT ISSUANCES (continued)
AT1 Capital
All outstanding AT1 capital instruments issued by ANZBGL are Basel III fully compliant instruments (refer to Note 24 Capital Management for further
information about Basel III) for APRA’s capital adequacy purposes. Each of the ANZ CN and ANZ CS rank equally with each other.
Distributions on the AT1 capital instruments are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions(including regulatory requirements). Distributions on ANZ CNs are franked in line with the franking applied to ANZGHL’s ordinary shares.
Where specified, the AT1 capital instruments provide the issuer with an early redemption or conversion option on a specified date and in certain othercircumstances (such as a tax or regulatory event). This redemption option is subject to APRA’s prior written approval.
Each of the AT1 capital instruments will immediately convert into a variable number of ANZGHL’s ordinary shares (based on the average market priceof the shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number of ANZGHL’s ordinary shares) if:• The Group’s or ANZBGL’s Common Equity Tier 1 capital ratio is equal to or less than 5.125% - known as a Common Equity Capital Trigger Event; or• APRA notifies ANZBGL that, without the conversion or write-off of certain securities or a public sector injection of capital (or equivalent support), it
considers that ANZBGL would become non-viable – known as a Non-Viability Trigger Event.
Where specified, AT1 capital instruments mandatorily convert into a variable number of ANZGHL’s ordinary shares (based on the average market priceof the shares immediately prior to conversion less a 1% discount):• on a specified mandatory conversion date; or• on an earlier date under certain circumstances as set out in the terms.
However, the mandatory conversion is deferred for a specified period if certain conversion tests are not met.
If the AT1 capital securities convert, and the holders receive ANZGHL ordinary shares, then:• the AT1 capital securities are transferred to ANZGHL for their face value;• ANZBGL shall redeem the securities and simultaneously issue ordinary shares to its parent ANZ BH Limited (based on ANZBGL’s share pricecalculated by reference to its consolidated net assets, subject to a maximum conversion number); and• ANZ BH Limited will issue shares to ANZGHL (calculated on the same basis for ANZ BH Limited).
Preference shares issued externally by ANZ Bank New Zealand will constitute additional tier 1 capital for ANZ Bank New Zealand for the purposes of
the RBNZ’s capital requirements, however they will not constitute Additional Tier 1 capital for the Group as the terms of the preference shares do notsatisfy APRA’s capital requirements. The preference shares are included within non-controlling interests in Note 23 Shareholders’ Equity.
The tables below show the key details of the ANZBGL’s AT1 capital instruments on issue at 30 September in both the current and prior years:
Consolidated
2023
$m

2022
$m

The Company
2023
$m

2022
$m

ANZBGL's Additional Tier 1 capital (perpetual subordinated securities)1
ANZ Capital Notes (ANZ CN)
AUD
970m
ANZ CN32
AUD
1,622mANZ CN4
AUD
931m
ANZ CN5
AUD
1,500mANZ CN6
AUD
1,310mANZ CN7
AUD
1,500mANZ CN8ANZ Capital Securities (ANZ CS)
USD
1,000mANZ Capital Securities

1,621
929
1,489
1,298
1,483

970
1,619
928
1,487
1,297
-

1,621
929
1,489
1,298
1,481

985
1,619
928
1,487
1,297
-

1,412

1,404

1,469

1,447

Total ANZBGL Additional Tier 1 capital

8,232

7,705

8,287

7,763

3

1.

Carrying values are net of issuance costs.

2.

All of the ANZ Capital Notes 3 were redeemed on 24 March 2023 with approximately $502 million of the proceeds from redemption reinvested into ANZ Capital Notes 8 on the same date.
This forms part of the Group’s qualifying Additional Tier 1 capital. Refer to Note 24 Capital Management for further details.

3.

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FinancialreportNOTES TO THE FINANCIAL STATEMENTS

16. DEBT ISSUANCES (continued)
ANZ Capital Notes (ANZ CN)
IssuerIssue date

CN3
ANZBGL, acting through its
New Zealand branch
5 March 2015

CN4

CN5

ANZBGLANZBGL27 September 2016

28 September 2017

Issue amount$970 million$1,622 million$931 million

Face value

$100

$100

$100

Distribution frequency

Semi-annually in arrears

Quarterly in arrears

Quarterly in arrears

Distribution rate

Floating rate: (180 day BankBill rate +3.6%)x(1-Australian
corporate tax rate)

Floating rate: (90 day BankBill rate +4.7%)x(1-Australian
corporate tax rate)

Floating rate: (90 day BankBill rate +3.8%)x(1-Australian
corporate tax rate)

Issuer’s early redemption or conversion option

24 March 20231

20 March 2024

20 March 2025

Mandatory conversion date

24 March 20252

20 March 2026

20 March 2027

Common equity capital trigger event

Yes

Yes

Yes

Non-viability trigger event

Yes
nil

Yes
$1,621 million

Yes$929 million(2022: $970 million)(2022: $1,619 million)(2022: $928 million)

CN6

CN7

CN8

Carrying value (net of issue costs)

IssuerANZBGLANZBGLANZBGL

Issue date

8 July 2021

24 March 2022

24 March 2023

Issue amount$1,500 million$1,310 million$1,500 million

Face value

$100

$100

$100

Distribution frequency

Quarterly in arrears

Quarterly in arrears

Quarterly in arrears

Distribution rate

Floating rate: (90 day BankBill rate +3.0%)x(1-Australian
corporate tax rate)

Floating rate: (90 day BankBill rate +2.7%)x(1-Australian
corporate tax rate)

Floating rate: (90 day Bank Billrate +2.75%)x(1-Australian
corporate tax rate)

Issuer’s early redemption or conversion option

20 March 2028

20 March 2029

20 March 2030

Mandatory conversion date

20 September 2030

20 September 2031

20 September 2032

Common equity capital trigger event

Yes

Yes

Yes

Non-viability trigger event

Yes$1,489 million(2022: $1,487 million)

Yes$1,298 million(2022: $1,297 million)

Yes$1,483 million(2022: nil)

Carrying value (net of issue costs)
1.
2.

All of the ANZ Capital Notes 3 were redeemed on 24 March 2023 with approximately $502 million of the proceeds from redemption reinvested into ANZ Capital Notes 8 on the same date.
The mandatory conversion date is no longer applicable as all of CN3 have been redeemed.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
16. DEBT ISSUANCES (continued)
ANZ Capital Securities (ANZ CS)
IssuerANZBGL, acting through its London branch

Issue date

15 June 2016

Issue amountUSD 1,000 million

Face value

Minimum denomination of USD 200,000 and an integral multiple of USD 1,000 above that

Interest frequency
Interest rate
Issuer’s early redemption option

Semi-annually in arrears
Fixed at 6.75% p.a. until 15 June 2026. Reset on 15 June 2026 and each 5 year anniversary
to a floating rate: 5 year USD mid-market swap rate + 5.168%
15 June 2026 and each 5 year anniversary

Common equity capital trigger event

Yes

Non-viability trigger event

Yes

Carrying value (net of issue costs)$1,412 million (2022: $1,404 million)

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FinancialreportNOTES TO THE FINANCIAL STATEMENTS

16. DEBT ISSUANCES (continued)
TIER 2 CAPITAL
Convertible term subordinated notes issued by ANZBGL are Basel III fully compliant instruments for APRA’s capital adequacy purposes. If a NonViability Trigger Event occurs, each of the convertible term subordinated notes will immediately convert into ANZGHL ordinary shares (based on the
average market price of the ANZGHL shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number).
If the Tier 2 capital securities convert, and the holders receive ANZGHL ordinary shares, then ANZBGL shall issue ordinary shares to its parent ANZ BH
Limited (based on ANZBGL’s share price calculated by reference to its consolidated net assets, subject to a maximum conversion number) and ANZ
BH Limited will issue shares to ANZGHL (calculated on the same basis).
The table below shows the Tier 2 capital subordinated debt issued by ANZBGL at 30 September in both the current and prior year:
Consolidated
Currency

Face value Maturity

Next optional call date –subject to APRA’s prior approval

The Company

Interest
rate

2023
$m

2022
$m

2023
$m

2022
$m

ANZBGL Tier 2 capital (term subordinated notes)
USD

800m

2024

N/A

Fixed

1,220

1,189

1,220

1,189

JPY

20,000m

2026

N/A

Fixed

207

213

207

213

USD

1,500m

2026

N/A

Fixed

2,125

2,113

2,125

2,113

JPY

10,000m

2028

2023

Fixed

-

106

-

106

AUD

225m

2032

2027

Fixed

225

225

225

225

AUD

1,750m2029

2024

Floating

1,750

1,750

1,750

1,750

EUR

1,000m

2029

2024

Fixed

1,555

1,410

1,555

1,410

AUD

265m

2039

N/A

Fixed

170

179

170

179

USD

1,250m

2030

2025

Fixed

1,808

1,785

1,808

1,785

AUD

1,250m2031

2026

Floating

1,250

1,250

1,250

1,250

USD

1,500m

2035

2030

Fixed

1,786

1,830

1,786

1,830

AUD

330m

2040

N/A

Fixed

202

214

202

214

AUD

195m

2040

N/A

Fixed

117

124

117

124

EUR

750m

2031

2026

Fixed

1,104

1,003

1,104

1,003

GBP

500m

2031

2026

Fixed

830

714

830

714

AUD

1,450m

2032

2027

Fixed

1,400

1,390

1,400

1,390

AUD

300m

2032

2027

Floating

300

300

300

300

JPY

59,400m

2032

2027

Fixed

606

627

606

627

SGD

600m

2032

2027

Fixed

659

618

659

618

AUD

900m

2034

2029

Fixed

871

867

871

867

USD

1,250m

2032

N/A

Fixed

1,803

-

1,803

-

EUR

1,000m

2033

2028

Fixed

1,594

-

1,594

-

AUD

1,000m

2038

2033

Fixed

975

-

975

-

AUD

275m

2033

2028

Fixed

275

-

275

-

AUD

875m

2033

2028

Floating

875

-

875

-

23,707

17,907

23,707

17,907

Total ANZBGL Tier 2 capital

1,2

1.
2.

Carrying values are net of issuance costs, and, where applicable, include fair value hedge accounting adjustments.
This forms part of the Group’s qualifying Tier 2 capital. Refer to Note 24 Capital Management for further details.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
16. DEBT ISSUANCES (continued)
OTHER SUBORDINATED DEBT SECURITIESThe term subordinated notes issued by ANZ Bank New Zealand constitute tier 2 capital under RBNZ requirements. However, they do not (among
other things) contain a Non-Viability Trigger Event and therefore do not meet APRA’s requirements for Tier 2 capital instruments in order to qualify as
regulatory capital for the Group.
Consolidated

The Company

Interest
rate

2023
$m

2022
$m

2023
$m

2022
$m

Non-Basel III compliant perpetual subordinated notes issued by ANZBGL2Each semi-annual interest payment
USD
300m
Perpetual
Floating
date
Term subordinated notes issued by ANZ Bank New Zealand Limited

464

462

464

462

NZD

600m

2031

2026

Fixed

555

524

-

-

USD

500m

2032

2027

Fixed

720

730

-

-

1,739

1,716

464

462

Currency

Face value

Maturity

Next optional call date1

Other subordinated debt
1.
2.

Subject to APRA’s or RBNZ’s prior approval (as applicable).
The USD 300 million perpetual subordinated notes were redeemed by ANZBGL on 31 October 2023.

RECOGNITION AND MEASUREMENT
Debt issuances are initially recognised at fair value and are subsequently measured at amortised cost, except where designated at FVTPL.
Interest expense on debt issuances is recognised using the effective interest rate method. Where the Group enters into a fair value hedge
accounting relationship, the fair value attributable to the hedged risk is reflected in adjustments to the carrying value of the debt.
Subordinated debt with capital-based conversion features (i.e. Common Equity Capital Trigger Events or Non-Viability Trigger Events) areconsidered to contain embedded derivatives that we account for separately at FVTPL. The embedded derivatives arise because theamount of shares issued on conversion following any of those trigger events is subject to the maximum conversion number, however they
have no significant value as of the reporting date given the remote nature of those trigger events.

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NOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENTRISK MANAGEMENT FRAMEWORK AND MODELINTRODUCTION
The use of financial instruments is fundamental to the Group’s businesses of providing banking and other financial services to our customers. The
associated financial risks (primarily credit, market, and liquidity risks) are a significant portion of the Group’s key material risks.
We disclose details of all key material risks impacting the Group, and further information on the Group’s risk management activities, in the Governanceand Risk Management sections of this Annual Report.
This note details the Group’s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks.
Key material financial risks

Key sections applicable to this risk

Credit risk

• Credit risk overview, management and control responsibilities

The risk of financial loss resulting from:• Maximum exposure to credit risk

• a counterparty failing to fulfil its obligations; or• a decrease in credit quality of a counterparty resulting in afinancial loss.

• Credit quality

Credit risk incorporates the risks associated with us lending tocustomers who could be impacted by climate change, changes tolaws, regulations, or other policies adopted by governments or
regulatory authorities. Climate change impacts include both
physical risks (climate- or weather-related events) and transition
risks resulting from the adjustment to a low emissions
economy. Transition risks include resultant changes to laws,
regulations and policies noted above.

• Concentrations of credit risk
• Collateral management

Market risk

• Market risk overview, management and control responsibilities

The risk to the Group’s earnings arising from:• Measurement of market risk

• changes in interest rates, foreign exchange rates, credit spreads,
volatility and correlations; or• Traded and non-traded market risk

• fluctuations in bond, commodity or equity prices.

• Foreign currency risk – structural exposure• Equity securities designated at FVOCI

Liquidity and funding risk
The risk that the Group is unable to meet payment obligations as
they fall due, including:• Liquidity risk overview, management and control responsibilities• repaying depositors or maturing wholesale debt; or• the Group having insufficient capacity to fund increases in
assets.

• Residual contractual maturity analysis of the Group’s liabilities• Key areas of measurement for liquidity risk
• Liquidity risk outcomes

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
OVERVIEWAN OVERVIEW OF OUR RISK MANAGEMENT FRAMEWORKThis overview is provided to aid the users of the financial statements in understanding the context of the financial disclosures required under AASB 7
Financial Instruments: Disclosures. It should be read in conjunction with the Governance and Risk Management sections of this Annual Report.
The Board is responsible for establishing and overseeing the Group’s Risk Management Framework (RMF). The Board has delegated authority to theBoard Risk Committee (BRC) to develop and monitor compliance with the Group’s risk management policies. The BRC reports regularly to the Boardon its activities.
The Board approves the strategic objectives of the Group including:• the Risk Appetite Statement (RAS), which sets out the Board’s expectations regarding the degree of risk that the Group is prepared to accept in
pursuit of its strategic objectives and business plan; and• the Risk Management Strategy (RMS), which describes the Group’s strategy for managing risks and the key elements of the RMF that give effect tothis strategy. This includes a description of each material risk, and an overview of how the RMF addresses each risk, with reference to the relevant
policies, standards and procedures. It also includes information on how the Group identifies, measures, evaluates, monitors, reports and controls or
mitigates material risks.
The Group, through its training and management standards and procedures, aims to maintain a disciplined and robust control environment in which
all employees understand their roles and obligations. At ANZ, risk is everyone’s responsibility.
The Group has an independent risk management function, headed by the Chief Risk Officer who:
• is responsible for overseeing the risk profile and the risk management framework;• can effectively challenge activities and decisions that materially affect the Group’s risk profile; and• has an independent reporting line to the BRC to enable the appropriate escalation of issues of concern.
The Internal Audit Function reports directly to the Board Audit Committee (BAC). Internal Audit provides:• an independent evaluation of the Group’s RMF annually that seeks to ensure compliance with, and the effectiveness of, the risk management
framework;• facilitation of a comprehensive review every three years that seeks to ensure the appropriateness, effectiveness and adequacy of the risk
management framework; and• recommendations to improve the framework and/or work practices to strengthen the effectiveness of day-to-day operations.

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NOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISKCREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Granting credit facilities to customers is one of the Group’s major sources of income. As this activity is also a principal risk, the Group dedicatesconsiderable resources to its management. The Group assumes credit risk in a wide range of lending and other activities in diverse markets and inmany jurisdictions. Credit risks arise from traditional lending to customers as well as from interbank, treasury, trade finance and capital markets
activities around the world.
Our credit risk management framework ensures we apply a consistent approach across the Group when we measure, monitor and manage the credit
risk appetite set by the Board. The Board is assisted and advised by the BRC in discharging its duty to oversee credit risk. The BRC:
• sets the credit risk appetite and credit strategies; and• approves credit transactions beyond the discretion of executive management.
We quantify credit risk through an internal credit rating system (masterscales) to ensure consistency across exposure types and to provide a consistentframework for reporting and analysis. The system uses models and other tools to measure the following for customer exposures:
Probability of Default (PD)Expressed by a Customer Credit Rating (CCR), reflecting the Group’s assessment of a customer’s ability
to service and repay debt.

Exposure at Default (EAD)

The expected balance sheet exposure at default taking into account repayments of principal andinterest, expected additional drawdowns and accrued interest at the time of default.

Loss Given Default (LGD)

Expressed by a Security Indicator (SI) ranging from A to G. The SI is calculated by reference to thepercentage of loan covered by security which the Group can realise if a customer defaults. The A-G
scale is supplemented by a range of other SIs which cover factors such as cash cover and sovereign
backing. For retail and some small business lending, we group exposures into large homogenous pools– and the LGD is assigned at the pool level.

Our specialist credit risk teams develop and validate the Group’s PD and LGD rating models. The outputs from these models drive our day-to-day
credit risk management decisions including origination, pricing, approval levels, regulatory capital adequacy, economic capital allocation, and credit
provisioning.
All customers with whom the Group has a credit relationship are assigned a CCR at origination via either of the following assessment approaches:
Large and more complex lending

Retail and some small business lending

Rating models provide a consistent and structured assessment, withjudgement required around the use of out-of-model factors. We
handle credit approval on a dual approval basis, jointly with thebusiness writer and an independent credit officer.

Automated assessment of credit applications using a combination ofscoring (application and behavioural), policy rules and external credit
reporting information. If the application does not meet the automatedassessment criteria, then it is subject to manual assessment.

We use the Group’s internal CCRs to manage the credit quality of financial assets. To enable wider comparisons, the Group’s CCRs are mapped toexternal rating agency scales as follows:
Credit Quality
Description

Internal CCR

ANZ Customer Requirements

Moody’s
RatingS&P Global
Ratings

Strong

CCR 0+ to 4-

Demonstrated superior stability in their operating and financial
performance over the long-term, and whose earnings capacity
is not significantly vulnerable to foreseeable events.

Aaa – Baa3

AAA – BBB-

Satisfactory

CCR 5+ to 6-

Demonstrated sound operational and financial stability overthe medium to long-term, even though some may besusceptible to cyclical trends or variability in earnings.

Ba1 – B1

BB+ – B+Weak

CCR 7+ to 8=

Demonstrated some operational and financial instability, withvariability and uncertainty in profitability and liquidity
projected to continue over the short and possibly mediumterm.

B2 - Caa

B - CCC

Defaulted

CCR 8- to 10

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

N/A

N/A

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
MAXIMUM EXPOSURE TO CREDIT RISKFor financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may
be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, thesedifferences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject tomarket risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum
exposure to credit risk is the maximum amount the Group would have to pay if the instrument is called upon.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.
Reported2023$m

Consolidated

Maximum exposure
to credit risk
2023
2022
$m
$m

2022
$m

Excluded1
2023$m707,694

672,407--707,694

672,407

168,154

168,132

1,070

1,147

167,084

166,985

9,349

4,762

9,349

4,762

-

-

2022
$m

On-balance sheet positions
Net loans and advances
Other financial assets:
Cash and cash equivalents
Settlement balances owed to ANZCollateral paid

8,558

12,700

-

-

8,558

12,700

Trading assets

37,00435,237

4,881

3,860

32,12331,377

Derivative financial instruments

60,40690,174--60,40690,174- debt securities at amortised cost

7,752

7,943

-

-

7,752

7,943

- debt securities at FVOCI

88,271

76,817--88,271

76,817- equity securities at FVOCI

946

1,353

946

1,353

-

-

- debt securities at FVTPL

-

40

-

-

-

40

646

632

-

-

646

632

Investment securities

Regulatory deposits
Other financial assets

2

Total other financial assets
Subtotal

4,378

2,943

-

-

4,378

2,943

385,464

400,733

16,246

11,122369,218

389,611

1,093,158

1,073,140

16,246

11,122

1,076,912

1,062,018

290,055

285,041--

290,055

285,041

1,383,213

1,358,181

16,246

11,122

1,366,967

1,347,059

Off-balance sheet positions
Undrawn and contingent facilities3
Total
1.

Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; precious metal exposures and carbon credits within Trading assets; and Equity
securities within Investment securities were excluded as they do not have credit risk exposure.

2.

Other financial assets mainly comprise accrued interest and acceptances.

3.

Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.

140

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
report141

FinancialreportDirectors’
reportNOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)

The Company

Reported
2023$m

Maximum exposure
to credit risk
2023
2022
$m
$m

2022
$m

Excluded12023$m563,017537,345--

563,017537,345

154,408

155,483

667

787

153,741

154,6962022$m

On-balance sheet positions
Net loans and advances
Other financial assets:
Cash and cash equivalents
Settlement balances owed to ANZ

8,935

4,024

8,935

4,024

-

-

Collateral paid

7,717

11,368

-

-

7,717

11,368

Trading assets

30,69328,073

4,472

3,348

26,221

24,725Derivative financial instruments

59,98988,056--59,98988,056

Investment securities- debt securities at amortised cost

5,936

6,115

-

-

5,936

6,115

- debt securities at FVOCI

76,32065,257--76,32065,257- equity securities at FVOCI

945

1,027

945

1,027

-

-

284
26,0673,024

249
22,860
1,882

-

-

284
26,0673,024

249
22,8601,882

Total other financial assets

374,318

384,394

15,0199,186

359,299375,208

Subtotal

937,335

921,739

15,0199,186

922,316

912,553

252,415

246,722--

252,415

246,7221,189,750

1,168,461

15,0199,186

1,174,731

1,159,275

Regulatory deposits
Due from controlled entities
Other financial assets2

Off-balance sheet positions
Undrawn and contingent facilities3
Total
1.

Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; precious metal exposures, and carbon credits within Trading assets; and Equity
securities within Investment securities were excluded as they do not have credit risk exposure.

2.

Other financial assets mainly comprise accrued interest and acceptances.
Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.

3.

141

142

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
CREDIT QUALITY
An analysis of the Group’s credit risk exposure is presented in the following tables based on the Group’s internal credit quality rating by stage without
taking account of the effects of any collateral or other credit enhancements:
Net loans and advances

Consolidated

Stage 1$m

Stage 2$m

Stage 3
Collectively Individuallyassessedassessed
$m
$m

Total
$m

As at 30 September 2023
Strong411,583

17,063--428,646

Satisfactory

193,170

37,977--

231,147

Weak

11,306

10,398--21,704

-

-

3,858

1,037

4,895

616,059

65,438

3,858

1,037

686,392

Allowance for ECL(1,227)(1,624)

(329)

(366)

(3,546)Net loans and advances at amortised cost

614,832

63,814

3,529

671

682,846

0.20%

2.48%

8.53%

35.29%

0.52%

Defaulted
Gross loans and advances at amortised cost

Coverage ratio
Loans and advances at FVTPL

21,888

Unearned income

(515)
3,475

Capitalised brokerage and other origination costs

707,694

Net carrying amountAs at 30 September 2022
Strong443,571

15,880--459,451

Satisfactory

154,823

31,864--

186,687

9,197

9,244

-

-

18,441

-

-

3,328

1,043

4,371

607,591

56,988

3,328

1,043

668,950

Allowance for ECL(1,141)(1,548)

(360)

(533)

(3,582)Net loans and advances at amortised cost

606,450

55,4402,968

510

665,368

0.19%

2.72%

10.82%

51.10%

0.54%

Weak
Defaulted
Gross loans and advances at amortised cost

Coverage ratio
Loans and advances at FVTPL

4,675

Unearned income(518)

Capitalised brokerage and other origination costs
Net carrying amount

142

2,882
672,407

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
report143

FinancialreportDirectors’
reportNOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Net loans and advances
Stage 3
Collectively Individuallyassessedassessed
$m
$m

Total
$m

Stage 1$m

Stage 2$m

Strong315,206

11,682--326,888

Satisfactory

160,357

31,769--192,126

Weak

10,906

8,362

-

-

19,268

-

-

2,994

731

3,725

The Company
As at 30 September 2023

Defaulted
Gross loans and advances at amortised cost

486,469

51,8132,994

731

542,007

Allowance for ECL(1,026)(1,239)

(251)

(279)

(2,795)Net loans and advances at amortised cost

485,443

50,5742,743

452

539,212

0.21%

2.39%

8.38%

38.17%

0.52%

Coverage ratio

21,240Loans and advances at FVTPL
Unearned income(483)

Capitalised brokerage and other origination costs

3,048

Net carrying amount

563,017

As at 30 September 2022
Strong334,850

9,641

-

-

344,491

Satisfactory

142,772

26,186--

168,958

9,181

7,759

-

-

16,940

Weak
Defaulted
Gross loans and advances at amortised cost
Allowance for ECL
Net loans and advances at amortised cost
Coverage ratio

-

-

2,744

853

3,597

486,803

43,5862,744

853

533,986(946)(1,259)

(295)

(425)

(2,925)

485,857

42,3272,449

428

531,061

0.19%

2.89%

10.75%

49.82%

0.55%

Loans and advances at FVTPL

4,263

Unearned income(480)

Capitalised brokerage and other origination costs

2,501

Net carrying amount

537,345

143

144

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Off-balance sheet commitments - undrawn and contingent facilities
Stage 3
Collectively Individuallyassessedassessed$m$m

Stage 1$m

Stage 2$m

Strong

189,980

1,234

-

-

191,214

Satisfactory

30,007

4,276

-

-

34,283

975

746

-

-

1,721

Consolidated

Total
$m

As at 30 September 2023

Weak
Defaulted
Gross undrawn and contingent facilities subject to ECLAllowance for ECL included in Other provisions (refer to Note 22)
Net undrawn and contingent facilities subject to ECL
Coverage ratio

-

-

79

47

126

220,962

6,256

79

47

227,344

(630)

(162)

(25)

(10)

(827)

220,332

6,094

54

37

226,517

0.29%

2.59%

31.65%

21.28%

0.36%

Undrawn and contingent facilities not subject to ECL1

63,538Net undrawn and contingent facilities

290,055

As at 30 September 2022
Strong

191,363

1,703

-

-

193,066

Satisfactory

18,583

3,078

-

-

21,661

774

706

-

-

1,480

-

-

113

19

132

210,720

5,487

113

19

216,339

(593)

(144)

(29)

(9)

(775)

Weak
Defaulted
Gross undrawn and contingent facilities subject to ECLAllowance for ECL included in Other provisions (refer to Note 22)
Net undrawn and contingent facilities subject to ECL
Coverage ratio
Undrawn and contingent facilities not subject to ECL

1

Net undrawn and contingent facilities
1.

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

144

210,127

5,343

84

10

215,564

0.28%

2.62%

25.66%

47.37%

0.36%
69,477
285,041

OverviewOperatingenvironment

Performanceoverview

Governance

Remuneration
reportDirectors’
report145

FinancialreportNOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Off-balance sheet commitments - undrawn and contingent facilities
Stage 3
Collectively Individuallyassessedassessed$m$m

Stage 1$m

Stage 2$m

Strong167,251

1,065

-

-

168,316

Satisfactory

25,966

3,554

-

-

29,520

753

466

-

-

1,219

The Company

Total
$m

As at 30 September 2023

Weak
Defaulted
Gross undrawn and contingent facilities subject to ECLAllowance for ECL included in Other provisions (refer to Note 22)
Net undrawn and contingent facilities subject to ECL
Coverage ratio

-

-

64

35

99

193,970

5,085

64

35

199,154

(550)

(121)

(21)

(5)

(697)

193,420

4,964

43

30

198,457

0.28%

2.38%

32.81%

14.29%

0.35%

Undrawn and contingent facilities not subject to ECL1

53,958Net undrawn and contingent facilities

252,415

As at 30 September 2022
Strong185,979

1,725

-

-

187,704

Satisfactory

15,496

2,306

-

-

17,802

711

463

-

-

1,174

-

-

97

13

110

202,186

4,494

97

13

206,790

Weak
Defaulted
Gross undrawn and contingent facilities subject to ECLAllowance for ECL included in Other provisions (refer to Note 22)
Net undrawn and contingent facilities subject to ECL
Coverage ratio
Undrawn and contingent facilities not subject to ECL

1

Net undrawn and contingent facilities
1.

(530)

(112)

(26)

(5)

(673)

201,656

4,382

71

8

206,117

0.26%

2.49%

26.80%

38.46%

0.33%
40,605
246,722

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

145

146

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Investment securities - debt securities at amortised cost

Consolidated

Stage 3
Collectively Individuallyassessedassessed$m$m

Stage 1$m

Stage 2
$m

6,117

-

-

-

Total
$m

As at 30 September 2023
Strong

6,117

112

-

-

-

112

Weak

1,558

-

-

-

1,558

Satisfactory
Gross investment securities - debt securities at amortised cost

7,787

-

-

-

7,787

Allowance for ECL

(35)

-

-

-

(35)

Net investment securities - debt securities at amortised cost

7,752

-

-

-

7,752

Coverage ratio

0.45%

-

-

-

0.45%

Strong

6,279

-

-

-

6,279

Satisfactory

113

-

-

-

113

Weak

1,589

-

-

-

1589

Gross investment securities - debt securities at amortised cost

7,981

-

-

-

7,981

Allowance for ECL

(38)

-

-

-

(38)

Net investment securities - debt securities at amortised cost

7,943

-

-

-

7,943

Coverage ratio

0.48%

-

-

-

0.48%

Stage 3
Collectively Individuallyassessedassessed
$m
$m

Total
$m

As at 30 September 2022

Stage 1$m

Stage 2
$m

5,796

-

-

-

5,796

Satisfactory

97

-

-

-

97

Weak

44

-

-

-

44

5,937

-

-

-

5,937

(1)

-

-

-

(1)

Net investment securities - debt securities at amortised cost

5,936

-

-

-

5,936

Coverage ratio

0.02%

-

-

-

0.02%

6,032

-

-

-

6,032

The Company
As at 30 September 2023
StrongGross investment securities - debt securities at amortised cost
Allowance for ECL

As at 30 September 2022
StrongSatisfactory
Gross investment securities - debt securities at amortised cost
Allowance for ECL

84

-

-

-

84

6,116

-

-

-

6,116

(1)

-

-

-

(1)

Net investment securities - debt securities at amortised cost

6,115

-

-

-

6,115

Coverage ratio

0.02%

-

-

-

0.02%

146

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
report147

FinancialreportDirectors’
reportNOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Investment securities - debt securities at FVOCI

Consolidated
As at 30 September 2023
StrongSatisfactory
Investment securities - debt securities at FVOCIAllowance for ECL recognised in Other comprehensive income
Coverage ratio

Stage 3
Collectively Individuallyassessedassessed
$m
$m

Total
$m

Stage 1$m

Stage 2
$m

88,271

-

-

-

-

-

88,271---

88,271

(15)

-

-

-

(15)

0.02%

-

-

-

0.02%

76,668---76,668-88,271-As at 30 September 2022
StrongSatisfactory
Investment securities - debt securities at FVOCIAllowance for ECL recognised in Other comprehensive income
Coverage ratio

The Company
As at 30 September 2023
StrongSatisfactory
Investment securities - debt securities at FVOCIAllowance for ECL recognised in Other comprehensive income
Coverage ratio

149

-

-

-

149

76,817---76,817

(10)

-

-

-

(10)

0.01%

-

-

-

0.01%

Stage 3
Collectively Individuallyassessedassessed
$m
$m

Total
$m

Stage 1$m

Stage 2$m

76,320---76,320

-

-

-

-

-

76,320---76,320

(12)

-

-

-

(12)

0.02%

-

-

-

0.02%

65,257---65,257

-

-

-

-

-

65,257---65,257

(7)

-

-

-

(7)

0.01%

-

-

-

0.01%

As at 30 September 2022
StrongSatisfactory
Investment securities - debt securities at FVOCIAllowance for ECL recognised in Other comprehensive income
Coverage ratio

147

148

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Other financial assets
Consolidated
2023
2022
$m
$m
StrongSatisfactory1

270,012

301,735

274,741

301,771

2,579

2,164

2,022

1,707

604

945

280

351

-

7

-

7

273,195

304,851

277,043

303,836

Weak
Defaulted
Total carrying amount1.

The Company
2023
2022
$m
$m

Includes Investment Securities - debt securities at FVTPL of $nil (2022: $40 million) for the Group and $nil (2022: $nil) for the Company..

CONCENTRATIONS OF CREDIT RISK
Credit risk becomes concentrated when a number of customers are engaged in similar activities, have similar economic characteristics, or have similar
activities within the same geographic region – therefore, they may be similarly affected by changes in economic or other conditions. The Group
monitors its credit portfolio to manage risk concentration and rebalance the portfolio. The Group also applies single customer counterparty limits toprotect against unacceptably large exposures to one single customer.
Composition of financial instruments that give rise to credit risk by industry group are presented below:
Loans
and advances
2023
2022
$m
$m

Other financial
assets
2023
2022
$m
$m

Off-balance sheet
credit related
commitments
2023
2022
$m
$m

Total
2023
$m

2022
$m

Consolidated
Agriculture, forestry, fishing and mining

35,79733,668612

781

16,707

17,694

53,11652,143Business services

8,138

9,252

207

242

7,003

6,245

15,34815,739Construction

5,506

6,155

36

48

7,212

6,594

12,754

12,797

Electricity, gas and water supply

8,626

9,650

463

790

11,837

9,865

20,926

20,305Entertainment, leisure and tourism

13,486

12,886

78

89

3,889

3,691

17,453

16,666

Financial, investment and insurance

77,454

75,118278,218

305,148

62,40958,075418,081438,341

Government and official institutions

8,300

7,280

80,544

71,139

1,075

1,592

89,91980,011

Manufacturing

30,261

28,072

1,287

1,279

47,302

46,701

78,85076,052

Personal lending

392,702363,539

1,394

955

59,18557,989453,281

422,483

Property services

58,06455,203439

606

17,503

17,86276,00673,671Retail trade

12,90011,648

113

98

8,131

7,076

21,144

18,822

Transport and storage

12,11012,311

369

327

9,215

8,423

21,69421,061Wholesale trade

12,53815,215660

1,235

25,78328,042

38,98144,49250,86256,507

Other

32,39833,628

4,833

6,912

13,631

15,967Gross total

708,280

673,625

369,253

389,649

290,882

285,816 1,368,415 1,349,090

Allowance for ECL(3,546)(3,582)

(35)

(38)

(827)

Subtotal(775)(4,408)(4,395)

704,734

670,043

369,218

389,611290,055

Unearned income

(515)

(518)

-

-

-

-

(515)

(518)

Capitalised brokerage and other origination costs

3,475

2,882

-

-

-

-

3,475

2,882

707,694

672,407369,218

389,611290,055

Maximum exposure to credit risk

148

285,041 1,364,007 1,344,695

285,041 1,366,967 1,347,059

OverviewOperatingenvironment

Governance

Performanceoverview

Remuneration
reportFinancialreportDirectors’
report149
NOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Composition of financial instruments that give rise to credit risk by industry group are presented below:
Loans
and advances
2023
2022
$m
$m

Other financial
assets
2023
2022
$m
$m

Off-balance sheet
credit related
commitments
2023
2022
$m
$m

Total
2023
$m

2022
$m

The Company
Agriculture, forestry, fishing and mining

20,622

19,065586

751

15,19816,30436,40636,120Business services

7,165

8,382

183

202

6,237

5,517

13,585

14,101

Construction

4,545

5,004

30

42

6,038

5,376

10,613

10,422

Electricity, gas and water supply

7,956

8,820

302

533

10,4098,526

18,667

17,879Entertainment, leisure and tourism

11,721

11,267

67

58

3,390

3,192

15,17814,517

Financial, investment and insurance

74,836

71,889282,701

306,318

58,80653,970416,343432,177

Government and official institutions

8,294

7,272

68,361

58,342384

910

77,03966,524

Manufacturing

26,394

24,645935

664

40,02739,27967,35664,588Personal lending

303,801

282,095

1,347

912

47,96147,596353,109330,603

Property services

44,90342,592368

531

15,794

15,64061,06558,763Retail trade

11,09910,048

85

74

7,342

6,279

18,526

16,401

Transport and storage

10,968

11,231

288

270

8,331

7,252

19,58718,753Wholesale trade

10,32013,055480

791

22,38524,18533,18538,031

Other

20,623

22,884

3,567

5,721

10,81013,36935,00041,974Gross total

563,247

538,249

359,300

375,209

253,112247,395

1,175,659

1,160,853

Allowance for ECL(2,795)(2,925)

(1)

(1)

(697)

(673)

(3,493)(3,599)Subtotal

560,452

535,324359,299375,208

252,415

246,722

1,172,166

1,157,254

(483)

(480)

-

-

-

-

(483)

(480)

3,048

2,501

-

-

-

-

3,048

2,501

563,017537,345359,299375,208

252,415

246,722

1,174,731

1,159,275

Unearned income
Capitalised brokerage and other origination
costs
Maximum exposure to credit risk

COLLATERAL MANAGEMENT
We use collateral for on and off-balance sheet exposures to mitigate credit risk if a counterparty cannot meet its repayment obligations. Where there issufficient collateral, an expected credit loss is not recognised. This is largely the case for certain lending products, such as margin loans and reverse
repurchase agreements that are secured by the securities purchased using the lending. For some products, the collateral provided by customers isfundamental to the product’s structuring, so it is not strictly the secondary source of repayment - for example, lending secured by trade receivables istypically repaid by the collection of those receivables. During the period there was no change in our collateral policies.

149

150

Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
The nature of collateral or security held for the relevant classes of financial assets is as follows:
Net loans and advances
Loans - housing andpersonal

Housing loans are secured by mortgage(s) over property and additional security may take the form ofguarantees and deposits.
Personal lending (including credit cards and overdrafts) is predominantly unsecured. If we take security, thenit is restricted to eligible vehicles, motor homes and other assets.

Loans - businessBusiness loans may be secured, partially secured or unsecured. Typically, we take security by way of amortgage over property and/or a charge over the business or other assets.
If appropriate, we may take other security to mitigate the credit risk, such as guarantees, standby letters ofcredit or derivative protection.

Other financial assets
Trading assets, Investment
securities, Derivatives andOther financial assets

For trading assets, we do not seek collateral directly from the issuer or counterparty. However, the collateral
may be implicit in the terms of the instrument (for example, with an asset-backed security). The terms ofdebt securities may include collateralisation.
For derivatives, we typically terminate all contracts with the counterparty and settle on a net basis at market
levels current at the time of a counterparty default under International Swaps and Derivatives Association(ISDA) Master Agreements.
Our preferred practice is to use a Credit Support Annex (CSA) to the ISDA so that open derivative positions
with the counterparty are aggregated and cash collateral (or other forms of eligible collateral) is exchanged
daily. The collateral is provided by the counterparty when their position is out of the money (or provided tothe counterparty by ANZ when our position is out of the money).

Off-balance sheet positions
Undrawn and contingent
facilities

Collateral for off-balance sheet positions is mainly held against undrawn facilities, and they are typically
performance bonds or guarantees. Undrawn facilities that are secured include housing loans secured by
mortgages over residential property and business lending secured by commercial real estate and/or charges
over business assets.

The table below shows the estimated value of collateral we hold and the net unsecured portion of credit exposures:Consolidated

Maximum exposure to credit risk
2023
2022
$m
$m

Total value of collateral
2023
2022
$m
$m

Unsecured portion of
credit exposure
2023
2022
$m
$m

Net loans and advances

707,694

672,407569,283

531,815

138,411140,592

Other financial assets

369,218

389,611

38,61224,758

330,606

364,853

Off-balance sheet positions

290,055

285,041

65,72360,544

224,332

224,497

1,366,967

1,347,059

673,618

617,117693,349

729,942Total

The Company
Net loans and advances

Maximum exposure to credit risk
2023
2022
$m
$m

Total value of collateral
2023
2022
$m
$m

Unsecured portion of
credit exposure
2023
2022
$m
$m

563,017537,345436,544407,610

126,473

129,735

Other financial assets

359,299375,208

35,542

19,492

323,757

355,716

Off-balance sheet positions

252,415

246,72250,88038,618201,535

208,104

1,174,731

1,159,275

522,966

465,720

651,765

693,555

Total

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NOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISKMARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIESMarket risk stems from the Group’s trading and balance sheet management activities and the impact of changes and correlations between interest
rates, foreign exchange rates, credit spreads, commodities, equities and the volatility within these asset classes.
The BRC delegates responsibility for day-to-day management of both market risks and compliance with market risk policies to the Credit and Market
Risk Committee (CMRC) and the Group Asset and Liability Committee (GALCO).
Within overall strategies and policies established by the BRC, business units and risk management have joint responsibility for the control of market
risk at the Group level. The Market Risk team (a specialist risk management unit independent of the business) allocates market risk limits at various
levels and monitors and reports on them daily. This detailed framework allocates individual limits to manage and control exposures using risk factors
and profit and loss limits.
Management, measurement and reporting of market risk is undertaken in two broad categories:
Traded Market Risk

Non-Traded Market Risk

Risk of loss from changes in the value of financial instruments due
to movements in price factors for both physical and derivative
trading positions. Principal risk categories monitored are:Risk of loss associated with the management of non-traded interest rate risk,
liquidity risk and foreign exchange exposures. This includes interest rate riskin the banking book. This risk of loss arises from adverse changes in theoverall and relative level of interest rates for different tenors, differences in
the actual versus expected net interest margin, and the potential valuation
risk associated with embedded options in financial instruments and bankproducts.

1. Currency risk – potential loss arising from changes in foreignexchange rates or their implied volatilities.
2. Interest rate risk – potential loss from changes in market interest
rates or their implied volatilities.
3. Credit spread risk – potential loss arising from a movement inmargin or spread relative to a benchmark.
4. Commodity risk – potential loss arising from changes incommodity prices or their implied volatilities.
5. Equity risk – potential loss arising from changes in equity prices.

MEASUREMENT OF MARKET RISKWe primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing.
VaR measures the Group’s possible daily loss based on historical market movements. The Group’s VaR approach for both traded and non-traded risk ishistorical simulation. We use historical changes in market rates, prices and volatilities over a 500 business day window using a one-day holding period.
Back testing is used to ensure our VaR models remain accurate.
ANZ measures VaR at a 99% confidence interval which means there is a 99% chance that a loss will not exceed the VaR for the relevant holding period.

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Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK (continued)
TRADED AND NON-TRADED MARKET RISK
Traded market risk
The table below shows the traded market risk VaR on a diversified basis by risk categories:

Consolidated
Traded value at risk 99% confidence

As at
$m

2023
High for Low for
year
year
$m
$m

Averagefor year
$m

As at
$m

2022
High for Low for
year
year
$m
$m

Averagefor year$m

Foreign exchange

2.8

6.2

1.6

3.0

1.8

4.8

1.1

2.4

Interest rate

6.7

18.3

5.1

8.5

7.9

22.7

5.0

9.5

Credit

5.9

7.7

2.5

4.5

2.6

11.8

1.6

4.9

Commodities

4.0

6.6

1.8

3.0

4.3

7.0

1.4

2.9

-

-

-

-

-

-

-

-

EquityDiversification benefit

(9.7)

n/a

n/a

(8.1)

(7.2)

n/a

n/a

(7.1)

Total VaR

9.7

18.2

7.2

10.9

9.4

26.9

5.6

12.6

2023
High for Low for
year
year
$m
$m

Averagefor year
$m

As at
$m

2022
High for Low for
year
year
$m
$m

Averagefor year$m

1

The Company
Traded value at risk 99% confidence

As at
$m

Foreign exchange

2.6

6.0

1.5

2.8

2.0

5.1

0.9

2.4

Interest rate

6.3

15.5

4.8

8.0

6.7

18.6

4.9

8.8

Credit

5.6

7.1

1.9

4.3

2.0

11.9

1.3

4.7

Commodity

2.1

4.5

1.1

2.7

1.4

7.2

0.9

2.8

-

-

-

-

-

-

-

-

Diversification benefit

(8.6)

n/a

n/a

(7.8)

(4.2)

n/a

n/a

(7.4)

Total VaR

8.0

16.2

6.7

10.0

7.9

23.4

5.4

11.3

Equity1

1.

The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for theGroup as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.

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NOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK (continued)
Non-traded market risk

Balance sheet risk management
The principal objectives of balance sheet risk management are to maintain acceptable levels of interest rate and liquidity risk to mitigate the negative
impact of movements in interest rates on the earnings and market value of the Group’s banking book, while ensuring the Group maintains sufficientliquidity to meet its obligations as they fall due.

Interest rate risk management
Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Group’s future Net interest income. Thisrisk arises from two principal sources, namely mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of
capital and other non-interest bearing liabilities and assets. Interest rate risk is reported using VaR and scenario analysis (based on the impact of a 1%
rate shock). The table below shows VaR figures for non-traded interest rate risk for the combined Group as well as Australia, New Zealand and Rest ofWorld geographies which are calculated separately.

Consolidated
Non-traded value at risk 99% confidence

As at
$m

2023
High for Low for
year
year
$m
$m

Averagefor year
$m

As at
$m

2022
High for Low for
year
year
$m
$m

Averagefor year$mAustralia

81.2

93.2

72.0

82.2

78.5

93.4

63.0

76.1

New Zealand

35.3

35.3

26.1

31.1

25.4

27.1

20.2

23.9

Rest of World

32.2

32.8

23.2

27.9

21.7

38.0

16.8

25.8

Diversification benefit(52.6)

n/a

n/a(45.6)(38.1)

n/a

n/a(33.7)

Total VaR

96.1

101.5

86.4

95.6

87.5

104.9

66.8

92.1

2022
High for Low for
year
year
$m
$m

Averagefor year$m

1

The Company
Non-traded value at risk 99% confidence
Australia

As at
$m
81.2

2023
High for Low for
year
year
$m
$m
93.2

72.0

Averagefor year
$m

As at
$m

82.2

78.5

93.4

63.0

76.1

New Zealand

-

0.1

-

-

0.0

0.1

0.0

0.0

Rest of World

34.0

34.5

23.7

28.4

22.1

37.7

16.7

25.6

Diversification benefit1(30.5)

n/an/a(26.6)(17.1)

n/an/a(20.2)

Total VaR

84.7

92.4

76.4

84.0

83.5

94.5

62.9

81.5

1.

The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for theGroup as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK (continued)
We undertake scenario analysis to stress test the impact of extreme events on the Group’s market risk exposures. We model a 1% overnight parallel
positive shift in the yield curve to determine the potential impact on our Net interest income over the next 12 months. This is a standard risk measure
which assumes the parallel shift is reflected in all wholesale and customer rates.
The table below shows the outcome of this risk measure for the current and previous financial years, expressed as a percentage of reported Net
interest income.
Consolidated

The Company

2023

2022

2023

2022

As at period end

0.96%

1.29%

0.73%

0.90%

Maximum exposure

1.17%

2.08%

0.90%

1.65%

Minimum exposure

0.38%

1.15%

0.02%

0.71%

Average exposure (in absolute terms)

0.80%

1.56%

0.56%

1.11%

Impact of 1% rate shock on the next 12 months' net interest income

EQUITY SECURITIES DESIGNATED AT FVOCI
Our investment securities contain equity investment holdings which predominantly comprises Bank of Tianjin. The market risk impact on these equity
investments is not captured by the Group’s VaR processes for traded and non-traded market risks. Therefore, the Group regularly reviews thevaluations of the investments within the portfolio and assesses whether the investments are appropriately measured based on the recognition andmeasurement policies set out in Note 11 Investment Securities.
FOREIGN CURRENCY RISK – STRUCTURAL EXPOSURES
Our investment of capital in foreign operations - for example, branches, subsidiaries or associates with functional currencies other than the Australian
Dollar - exposes the Group to the risk of changes in foreign exchange rates. Variations in the value of these foreign operations arising as a result of
exchange differences are reflected in the foreign currency translation reserve in equity. Where considered appropriate, the Group enters into hedgesof the foreign exchange exposures from its foreign operations.
Similarly, the Group may enter into economic hedges against larger foreign exchange denominated revenue streams (primarily New Zealand Dollar,
US Dollar and US Dollar correlated). The primary objective of hedging is to ensure that, if practical, the effect of changes in foreign exchange rates on
the consolidated capital ratios are minimised.

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NOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISKLIQUIDITY RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Liquidity risk is the risk that the Group is either:• unable to meet its payment obligations (including repaying depositors or maturing wholesale debt) when they fall due; or• does not have the appropriate amount, tenor and composition of funding and liquidity to fund increases in its assets.
Management of liquidity and funding risks are overseen by GALCO. The Group’s liquidity and funding risks are governed by a set of principles
approved by the BRC and include:• maintaining the ability to meet all payment obligations in the immediate term;• ensuring that the Group has the ability to meet ‘survival horizons’ under a range of ANZ specific, and general market, liquidity stress scenarios, at acountry and Group-wide level, to meet cash flow obligations over the short to medium term;• maintaining strength in the Group’s balance sheet structure to ensure long term resilience in the liquidity and funding risk profile;• ensuring the liquidity management framework is compatible with local regulatory requirements;• preparing daily liquidity reports and scenario analysis to quantify the Group’s positions;• targeting a diversified funding base to avoid undue concentrations by investor type, maturity, market source and currency;• holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day operations; and• establishing detailed contingency plans to cover different liquidity crisis events.
Following the Restructure on 3 January 2023, the Group has operated under a non-operating holding company structure whereby:• ANZBGL’s liquidity risk management framework remains unchanged and continues to operate its own liquidity and funding program, governanceframeworks and reporting regime reflecting its authorised deposit-taking institution (ADI) operations;• ANZGHL (parent entity) has no material liquidity risk given the structure and nature of the balance sheet; and• ANZ Non-Bank Group is not expected to have separate funding arrangements and will rely on ANZGHL for funding.
A separate liquidity policy has been established for ANZGHL and ANZ Bank Group to reflect the differing nature of liquidity risk inherent in eachbusiness model. ANZGHL will ensure that the parent entity and ANZ Non-Bank Group holds sufficient cash reserves to meet operating and financing
requirements.
KEY AREAS OF MEASUREMENT FOR LIQUIDITY RISKScenario modelling of funding sourcesGroup’s liquidity risk appetite is defined by a range of regulatory and internal liquidity metrics mandated by the ANZBGL Board. The metrics cover arange of scenarios of varying duration and level of severity.
The objective of this framework is to:• Provide protection against shorter term extreme market dislocation and stress.
• Maintain structural strength in the balance sheet by ensuring that an appropriate amount of longer-term assets are funded with longer-term
funding.
• Ensure that no undue timing concentrations exist in the Group’s funding profile.
Key components of this framework are the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario and Net Stable Funding
Ratio (NSFR) a longer term structural liquidity measure, both of which are mandated by banking regulators including APRA.
Liquid assets
Group holds a portfolio of high quality (unencumbered) liquid assets to protect Group’s liquidity position in a severely stressed environment and tomeet regulatory requirements. High quality liquid assets comprise three categories consistent with Basel III LCR requirements:• Highest-quality liquid assets - cash and highest credit quality government, central bank or public sector securities eligible for repurchase withcentral banks to provide same-day liquidity.
• High-quality liquid assets - high credit quality government, central bank or public sector securities, high quality corporate debt securities and highquality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
• Alternative liquid assets (ALA) - eligible securities that the RBNZ will accept in its domestic market operations and asset qualifying as collateral for
the CLF.
Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory requirements and therisk appetite set by the ANZBGL Board.

155

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK (continued)
LIQUIDITY RISK OUTCOMES1
Liquidity Coverage Ratio - ANZBGL’s Liquidity Coverage Ratio (LCR) averaged 130% for 2023, (2022: 131%) and above the regulatory minimum of100%.
Net Stable Funding Ratio - ANZBGL’s Net Stable Funding Ratio (NSFR) as at 30 September 2023 was 116% (2022: 119%), above the regulatory
minimum of 100%.
1.

This information is not within the scope of the external audit of the Group Financial Report by the Group’s external auditor, KPMG. The Liquidity Coverage Ratio and Net Stable Funding Ratio are non-IFRS
disclosures and are disclosed as part of the Group's APS 330 Public Disclosure which is subject to specific review procedures in accordance with the Australian Standard on Related Services (ASRS) 4400

Agreed upon Procedures Engagements to Report Factual Findings.

Liquidity crisis contingency planningGroup maintains APRA-endorsed liquidity crisis contingency plans for analysing and responding to a liquidity threatening event at a country andGroup-wide level. Key liquidity contingency crisis planning requirements and guidelines include:
Ongoing business management

Early signs/ mild stress

Severe stress• establish crisis/severity levels• monitoring and review• activate contingency funding plans• liquidity limits• management actions not requiring
business rationalisation• management actions for altering asset and liability
behaviour• early warning indicators

Assigned responsibility for internal and external communications and the appropriate timing to communicate
Since the precise nature of any stress event cannot be known in advance, we design the plans to be flexible to the nature and severity of the stressevent with multiple variables able to be accommodated in any plan.
Group funding
Group monitors the composition and stability of its funding so that it remains within the Group’s funding risk appetite. This approach ensures that an
appropriate proportion of the Group’s assets are funded by stable funding sources, including customer deposits; longer-dated wholesale funding(with a remaining term exceeding one year); and equity.
Funding plans prepared

Considerations in preparing funding plans• 3 year strategic plan prepared annually• customer balance sheet growth• annual funding plan as part of the Group’s planning
process• changes in wholesale funding including: targeted funding volumes; markets;
investors; tenors; and currencies for senior, secured, subordinated, hybridtransactions and market conditions• forecasting in light of actual results as a calibration to theannual plan

RBA Term Funding Facility
As an additional source of funding, in March 2020, the RBA announced a Term Funding Facility (TFF) for the banking system to support lending toAustralian businesses. The TFF is a three-year secured funding facility to ADIs at a fixed rate of 0.25% for drawdowns up to 4 November 2020, andreduced to 0.10% for new drawdowns from 4 November 2020 onwards. The TFF was closed to drawdowns on 30 June 2021.
As at 30 September 2023, $8.1 billion remains drawn under the RBA’s TFF (2022: $20.1 billion).
RBNZ Funding for Lending Programme and Term Lending Facility
Between May 2020 and July 2021, the RBNZ made funds available under a Term Lending Facility (TLF) to promote lending to businesses. The TLF is afive-year secured funding facility for New Zealand banks at a fixed rate of 0.25%.
In November 2020 the RBNZ announced a Funding for Lending Programme (FLP) which aimed to lower the cost of borrowing for New Zealandbusinesses and households. The FLP is a three-year secured funding facility for New Zealand banks at a floating rate of the New Zealand Official Cash
Rate (OCR). New Zealand banks were able to obtain initial funding of up to 4% of their lending to New Zealand resident households, non-financial
businesses and non-profit institutions serving households as at 31 October 2020 (eligible loans). The initial allocation closed on 6 June 2022. An
additional allocation of up to 2% of eligible loans was available, subject to certain conditions until 6 December 2022.
As at 30 September 2023, ANZ Bank New Zealand had drawn $0.3 billion under the TLF (2022: $0.3 billion) and $3.2 billion under the FLP (2022: $2.3
billion).

156

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FinancialreportDirectors’
reportNOTES TO THE FINANCIAL STATEMENTS

17. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK (continued)
RESIDUAL CONTRACTUAL MATURITY ANALYSIS OF THE GROUP’S LIABILITIESThe tables below provide residual contractual maturity analysis of financial liabilities as at 30 September within relevant maturity groupings. All
outstanding debt issuance and subordinated debt is profiled on the earliest date on which the Group may be required to pay. All at-call liabilities arereported in the ‘Less than 3 months’ category unless there is a longer minimum notice period. The amounts represent principal and interest cash flows
and therefore may differ from equivalent amounts reported on balance sheet.
It should be noted that this is not how the Group manages its liquidity risk. The management of this risk is detailed on page 155.
Less than
3 months$m

3 to 12months$m

1 to 5
years
$m

After
5 years
$m

Total
$m

As at 30 September 2023
Settlement balances owed by ANZ

19,267---

19,267

Collateral received

10,382---

10,382

Deposits and other borrowings

674,762

137,488

9,762

241

822,253

646

-

-

-

646

Liability for acceptances

4,738

23,90888,27016,017

132,933

48,150---48,150

100

264

872

743

1,979

Receive leg(29,459)(40,907)(90,906)(14,001)(175,273)

Pay leg

28,852

41,38590,23013,986

174,453

Receive leg(142,289)(44,586)(35,720)(19,866)(242,461)

Pay leg

138,899

42,86734,19819,872

235,836

13,766---

13,766

Debt issuances1

Derivative liabilities (excluding those held for balance sheet management)2
Lease liabilities
Derivative assets and liabilities (balance sheet management)

3- Funding:- Other balance sheet management:

As at 30 September 2022
Settlement balances owed by ANZ
Collateral received

16,230---

16,230

Deposits and other borrowings

667,568

117,166

15,960160

800,854

352

-

-

-

352

Debt issuances

7,591

22,31560,716

13,667104,289

Derivative liabilities (excluding those held for balance sheet management)2

71,073---71,073

81

210

654

168

1,113

Receive leg(33,155)(49,030)(66,661)(12,851)(161,697)

Pay leg

30,84549,191

68,211

12,913

161,160

Receive leg(125,122)(44,835)(29,188)(10,063)(209,208)

Pay leg

120,959

44,12631,02615,170211,281

Liability for acceptances
1

Lease liabilities
Derivative assets and liabilities (balance sheet management)3- Funding:- Other balance sheet management:

1.

Callable wholesale debt instruments have been included at their next call date. Balance includes subordinated debt instruments that may be settled in cash or in equity, at the option of the Group andsubordinated debt issued by ANZ New Zealand which constitutes Tier 2 capital under RBNZ requirements but does not qualify as the APRA Tier 2 requirements.

2.

The full mark-to-market after any adjustments for Settle to Market of derivative liabilities (excluding those held for balance sheet management) is included in the ‘Less than 3 months’ category.
Includes derivatives designated into hedging relationships of $272 million (2022: $356 million) and $9,060 million (2022: $13,720 million) categorised as held for trading but form part of the Group’s balance
sheet managed activities.

3.

At 30 September 2023, $240,711 million (2022: $236,051 million) of the Group’s undrawn facilities and $50,171 million (2022: $49,765 million) of its
issued guarantees mature in less than 1 year, based on the earliest date on which the Group may be required to pay.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK (continued)
Less than
3 months$m

3 to 12months$m

1 to 5
years
$m

After
5 years
$m

Total
$m

16,574---

16,574

9,452

-

-

-

9,452

567,239

109,010

3,718

232

680,199

391

-

-

-

391

Debt issuances

4,321

20,66975,192

13,297

113,479

Derivative liabilities (excluding those held for balance sheet management)2

53,111---

53,111

80

207

715

725

1,727

Receive leg(26,321)(31,549)(70,627)(10,871)(139,368)

Pay leg

25,602

31,952

69,816

10,860138,230

Receive leg(136,668)(38,700)(27,047)(18,876)(221,291)

Pay leg

133,496

37,54026,247

18,914

216,197

10,224---

10,224The Company
As at 30 September 2023
Settlement balances owed by ANZ
Collateral received
Deposits and other borrowings
Liability for acceptances
1

Lease liabilities
Derivative assets and liabilities (balance sheet management)3- Funding:- Other balance sheet management:

As at 30 September 2022
Settlement balances owed by ANZ
Collateral received

14,425---

14,425

Deposits and other borrowings

564,147

93,197

10,639157

668,140

Liability for acceptances

144

-

-

-

144

Debt issuances1

7,648

18,951

48,323

9,970

84,892Derivative liabilities (excluding those held for balance sheet management)275,810---75,810

76

202

744

826

1,848

Receive leg(29,397)(39,350)(46,997)(8,857)(124,601)

Pay leg

27,41340,23748,281

9,064

124,995

Receive leg(121,112)(40,061)(21,417)(9,498)(192,088)

Pay leg

116,992

39,921

24,081

14,666

195,660

Lease liabilities
Derivative assets and liabilities (balance sheet management)3- Funding:- Other balance sheet management:

1.

Callable wholesale debt instruments have been included at their next call date. Balance includes subordinated debt instruments that may be settled in cash or in equity, at the option of the Company.
The full mark-to-market after any adjustments for Settle to Market of derivative liabilities (excluding those held for balance sheet management) is included in the ‘Less than 3 months’ category.
3.
Includes derivatives designated into hedging relationships of $255 million (2022: $300 million) and $4,145 million (2022: $8,390 million) categorised as held for trading but form part of the Company’sbalance sheet managed activities.
2.

At 30 September 2023, $206,405 million (2022: $201,204 million) of the Company’s undrawn facilities and $46,707 million (2022: $46,191 million) of its
issued guarantees mature in less than 1 year, based on the earliest date on which the Company may be required to pay.

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report159

FinancialreportNOTES TO THE FINANCIAL STATEMENTS

18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESCLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESThe Group recognises and measures financial instruments at either fair value or amortised cost, with a significant number of financial instruments on
the balance sheet at fair value.
Fair value is the best estimate of the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date.
The following tables set out the classification of financial asset and liabilities according to their measurement bases together with their carrying
amounts as recognised on the balance sheet.
2023

Consolidated
Financial assets
Cash and cash equivalents1

Note

At
fair
value
$m

Total
$m

At
amortised
cost
$m

8

140,588

27,566

168,154

9,349

-

9,349

Settlement balances owed to ANZCollateral paid
Trading assets

2022

At
amortised
cost
$m

9

At
fair
value
$m

Total
$m

168,132-

168,132

4,762

-

4,762

8,558

-

8,558

12,700-12,700-37,00437,004-35,23735,237

Derivative financial instruments

10-

60,40660,406-90,17490,174

Investment securities

11

7,752

89,217

96,969

7,943

78,21086,153

12

685,806

21,888707,694

667,732

4,675

672,407

Regulatory deposits

646

-

646

632

-

632

Other financial assets

4,378

-

4,378

2,943

-

2,943

Net loans and advances

1

Total

857,077

236,081

1,093,158

864,844

208,296

1,073,140

Financial liabilities
Settlement balances owed by ANZ

19,267-

19,267

13,766-

13,766

Collateral received

10,382-

10,382

16,230-

16,2301

Deposits and other borrowings

14781,31433,889815,203794,6212,660

797,281

Derivative financial instruments

10-

57,482

57,482-85,14985,149

Payables and other liabilities

15

10,665

5,267

15,932

6,596

3,239

9,835

Debt issuances

16

114,678

1,336

116,014

92,623

1,111

93,734

936,306

97,974

1,034,280

923,836

92,1591,015,995

Total
1.

During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in theassociated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
2023

2022
Total
$m

At
amortised
cost
$m

At
fair
value
$m

Total
$m

27,099154,408

155,483-

155,483

8,935

-

8,935

4,024

-

4,024

7,717

-

7,717

11,368-11,368Note

At
amortised
cost
$m

At
fair
value
$m

8

127,309

Settlement balances owed to ANZCollateral paid

The Company
Financial assets
Cash and cash equivalents1

Trading assets

9-30,69330,693-28,07328,073

Derivative financial instruments

10-

59,98959,989-88,05688,056

Investment securities

11

5,936

77,26583,201

6,115

66,284

72,399Net loans and advances1

12541,777

21,240563,017533,082

4,263

537,345

284

-

284

249

-

249

Due from controlled entities

24,173

1,894

26,067

20,3602,500

22,860

Other financial assets

3,024

-

3,024

1,882

-

1,882

732,563

189,176

921,739

Regulatory deposits

Total

719,155

218,180

937,335

Financial liabilities
Settlement balances owed by ANZ

16,574-

16,574

10,224-

10,224

Collateral received

9,452

-

9,452

14,425-

14,425

Deposits and other borrowings1

14643,868

31,207675,075

665,56740

665,607

Derivative financial instruments

10-

57,511

57,511-

84,50084,50026,737

157

26,89425,305-25,305Due to controlled entities
Payables and other liabilities

15

8,357

4,922

13,279

5,705

2,857

8,562

Debt issuances

16

95,881

2,332

98,21372,757

3,071

75,828800,869

96,129896,998

793,983

90,468884,451

Total
1.

During 2023, within the trading book in its Markets business, the Company commenced the management of repurchase agreements and associated reverse repurchase agreements on a fair value basis. This
resulted in repurchase and associated reverse repurchase agreements being recognised and measured at FVTPL.

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NOTES TO THE FINANCIAL STATEMENTS

18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE
The fair valuation of financial assets and financial liabilities is generally determined at the individual instrument level.
If the Group holds offsetting risk positions, then we use the portfolio exception in AASB 13 Fair Value Measurement (AASB 13) to measure the fair valueof such groups of financial assets and financial liabilities. The Group measure the portfolio based on the price that would be received to sell a net longposition (an asset) for a particular risk exposure, or to transfer a net short position (a liability) for a particular risk exposure.
Fair value designation
The Group designate certain loans and advances and certain deposits and other borrowings and debt issuances as fair value through profit or loss:• where they contain a separable embedded derivative which significantly modifies the instruments’ cash flow ensuring we recognise the fair value
movements on the assets or liabilities in profit or loss in the same period as the movement on the associated hedging instruments; or• in order to eliminate an accounting mismatch which would arise if the asset or liabilities were otherwise carried at amortised cost. This mismatcharises due to measuring the derivative financial instruments (which we use to mitigate interest rate risk of these assets or liabilities) at fair value
through profit or loss.
Our approach ensures that we recognise the fair value movements on the assets or liabilities in profit or loss in the same period as the movement on
the associated derivatives.
The Group may also designate certain loans and advances, certain deposits and other borrowings and debt issuances as fair value through profit orloss where they are managed on a fair value basis to align the measurement with how the instruments are managed.
FAIR VALUE APPROACH AND VALUATION TECHNIQUESWe use valuation techniques to estimate the fair value of assets and liabilities for recognition, measurement and disclosure purposes where no quoted
price in an active market exists for that asset or liability. This includes the following:
Asset or Liability

Fair Value Approach

Financial instruments classified as:

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

- Derivative financial assets and financial liabilities(including trading and non-trading)- Repurchase agreements < 90 days
- Net loans and advances- Deposits and other borrowings- Debt issuances
Other financial instruments held for trading:- Securities sold short

Valuation techniques are used that incorporate observable market inputs for financial
instruments with similar credit risk, maturity and yield characteristics.

- Debt and equity securities

Equity securities where an active market does not exist are measured using
comparable company valuation multiples (such as price-to-book ratios).

Financial instruments classified as:

Valuation techniques use comparable multiples (such as price-to-book ratios) or
discounted cashflow (DCF) techniques incorporating, to the extent possible,
observable inputs from instruments with similar characteristics.

- Investment securities – debt or equity

There were no significant changes to valuation approaches during the current or prior periods.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
FAIR VALUE HIERARCHYThe Group categorises assets and liabilities carried at fair value into a fair value hierarchy in accordance with AASB 13 based on the observability of
inputs used to measure the fair value:• Level 1 - valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;• Level 2 - valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly or
indirectly; and• Level 3 - valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:
Fair value measurements
Quoted price in
active markets(Level 1)
2023
2022
$m
$m

Consolidated
AssetsCash and cash equivalents (measured at fair value)1
Trading assets

2

Derivative financial instruments
Investment securities2,3
Net loans and advances

1

Total
Liabilities
Deposits and other borrowings (designated at fair value)1
Derivative financial instruments
Payables and other liabilities
Debt issuances (designated at fair value)
Total

Using observable Using unobservable
inputs (Level 2)
inputs (Level 3)
2023
2022
2023
2022
$m
$m
$m
$m

Total
2023
$m

2022
$m

-

-

27,566---

27,566-

26,388935

28,455944

10,61459,448

6,782
89,1852
23

45

37,00460,40635,237
90,17471,355-

68,211-

16,924
21,159

8,614
4,272

938
729

1,385
403

89,217
21,88878,210
4,675

98,67897,610135,711

108,853

1,692

1,833

236,081

208,296

218
4,841

309
2,842

33,88957,241426

2,660
84,809
397

23
-

31
-

33,88957,4825,267

2,660
85,149
3,239

-

-

1,336

1,111

-

-

1,336

1,111

5,059

3,151

92,892

88,97723

31

97,974

92,1591.

During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in theassociated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.

2.

During 2023, $3,624 million of assets were transferred from Level 1 to Level 2 (2022: $1,043 million transferred from Level 1 to Level 2), and $1,452 million of assets were transferred from Level 2 to Level 1(2022: $1,677 million transferred from Level 2 to Level 1) due to a change of the observability of valuation inputs. There were no other material transfers between Level 1 and Level 2 during the year.
Transfers into and out of levels are measured at the beginning of the reporting period in which the transfer occurred.

3.

During 2023, ANZBGL sold its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure. These investments were classified as Level 3 assets in the fair value
hierarchy in September 2022, with a fair valuation of $402 million.

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NOTES TO THE FINANCIAL STATEMENTS

18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
FAIR VALUE HIERARCHY (continued)
Fair value measurements
Quoted price in
active markets(Level 1)
2023
2022
$m
$m

Using observable Using unobservable
inputs (Level 2)
inputs (Level 3)
2023
2022
2023
2022
$m
$m
$m
$m

Trading assets
Derivative financial instruments
Investment securities2,3
Net loans and advances1
Due from controlled entities

22,264900
63,879-23,037848
58,259-27,0998,427
59,066
12,44920,511
1,894

5,036
87,181
7,006
3,860
2,500

2
23
937
729
-

27
1,019
403
-

27,09930,69359,98977,265
21,2401,894

28,07388,056
66,284
4,263
2,500

Total

87,04382,144

129,446

105,583

1,691

1,449

218,180

189,176

Derivative financial instruments
Payables and other liabilities
Debt issuances (designated at fair value)
Due to controlled entities

210
4,500
-

301
2,510
985
-

31,20757,287
422
2,332
157

40
84,179
347
2,086
-

14
-

20
-

31,20757,511
4,922
2,332
157

40
84,500
2,857
3,071
-

Total

4,710

3,796

91,40586,65214

20

96,12990,468The Company
AssetsCash and cash equivalents (measured at fair value)1
2

Liabilities
Deposits and other borrowings (designated at fair value)1

Total
2023
$m

2022
$m

1.

During 2023, within the trading book in its Markets business, the Company commenced the management of repurchase agreements and associated reverse repurchase agreements on a fair value basis. This
resulted in repurchase and associated reverse repurchase agreements being recognized and measured at FVTPL.

2.

During 2023, $2,139 million of assets were transferred from Level 1 to Level 2 (2022: $1,043 million transferred from Level 1 to Level 2), and $1,155 million of assets were transferred from Level 2 to Level 1(2022: $1,677 million transferred from Level 2 to Level 1) due to a change of the observability of valuation inputs. There were no other material transfers during the year. Transfers into and out of levels aremeasured at the beginning of the reporting period in which the transfer occurred.

3.

During 2023, ANZBGL sold its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure. These investments were classified as Level 3 assets in the fair value
hierarchy in September 2022, with a fair valuation of $402 million.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
FAIR VALUE MEASUREMENT INCORPORATING UNOBSERVABLE MARKET DATA
Level 3 fair value measurements
Level 3 financial instruments are a net asset of $1,669 million (2022: $1,802 million) for the Group and $1,676 million (2022: $1,429 million) for theCompany.
The assets and liabilities which incorporate significant unobservable inputs are:• equity and debt securities for which there is no active market or traded prices cannot be observed;• loans and advances measured at fair value for which there is no observable market data; and• derivatives referencing market rates that cannot be observed primarily due to lack of market activity.

Level 3 Transfers
During the year, the Group and the Company transferred $218 million (2022: $312 million) of Loan and advances measured at fair value from Level 2
to Level 3, as a result of valuation parameters becoming unobservable during the year. There were no other material transfers into or out of Level 3
during the period.
The material Level 3 financial instruments as at 30 September 2023 are listed as below:i) Investment Securities - equity holdings classified as FVOCIBank of Tianjin (BoT)The Group holds an investment in the Bank of Tianjin. The investment is valued based on comparative price-to-book (P/B) multiples (a P/B multiple is
the ratio of the market value of equity to the book value of equity). The extent of judgement applied in determining the appropriate multiple andcomparator group from which the multiple is derived resulted in the Level 3 classification. As at September 2023, the BoT equity holding balance was$849 million (2022: $854 million). The decrease in the BoT fair valuation was due to a decrease in the P/B multiple used in the valuation.

Other equity investments
The Group holds $89 million (2022: $491 million) and the Company holds $87 million (2022: $165 million) of unlisted equities classified as FVOCI for
which there are no active markets or traded prices available, resulting in Level 3 classification. The decrease in unlisted equity holdings balance wasdue to the sale of equity securities to the ANZ Non-Bank Group as part of the establishment of the new Group organisational structure.

ii) Net loans and advances - classified as FVTPL
Syndication Loans
The Group holds $729 million (2022: $403 million) of syndication loans for sale which are measured at FVTPL for which there is no observable market
data available for the valuation. The increase in the Level 3 loan balances during the financial year was mainly due to increased syndication loans forsale as at reporting date, and loans and advances transferred from Level 2 to Level 3.
Sensitivity to Level 3 data inputs
When we make assumptions due to significant inputs to a valuation not being directly observable (Level 3 inputs), then changing these assumptions
changes the Group’s estimate of the instrument’s fair value. Favourable and unfavourable changes are determined by changing the primary
unobservable parameters used to derive the fair valuation.

Investment Securities - equity holdings
The valuation of the equity investments are sensitive to variations in select unobservable inputs, with valuation techniques used including P/B
multiples and discounted cashflow techniques. If for example, a 10% increase or decrease to the primary input into the valuations were to occur (suchas the P/B multiple), it would result in a $94 million increase or decrease in the fair value of the portfolio, which would be recognised in shareholders’equity in the Group ($93 million for the Company), with no impact to net profit or loss.

Net Loans and Advances
Syndicated loan valuations are sensitive to credit spreads in determining their fair valuation. However as these are primarily investment-grade loans,an increase or decrease in credit spreads and or interest yield would have an immaterial impact on net profit or net assets of the Group.

Other
The remaining Level 3 balance is immaterial and changes in inputs have a minimal impact on net profit and net assets of the Group.
Deferred fair value gains and losses
Where fair values are determined using unobservable inputs significant to the fair value of a financial instrument, the Group does not immediately
recognise the difference between the transaction price and the amount we determine based on the valuation technique (day one gain or loss) in
profit or loss. After initial recognition, we recognise the deferred amount in profit or loss on a straight-line basis over the life of the transaction or until
all inputs become observable. Day one gains and losses which have been deferred are not material.

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NOTES TO THE FINANCIAL STATEMENTS

18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE
The financial assets and financial liabilities listed below are carried at amortised cost on the Group’s Balance Sheet. While this is the value at which we
expect the assets will be realised and the liabilities settled, the Group provides an estimate of the fair value of the financial assets and financial liabilities
at balance date in the tables below.
Fair values of financial assets and liabilities carried at amortised cost not included in the table below approximate their carrying values. These financial
assets and liabilities are either short term in nature or are floating rate instruments that are re-priced to market interest rates on or near the end of thereporting period.

Consolidated
Financial assets

At amortised cost
2023
2022
$m
$m

Categorised into fair value hierarchy
Quoted priceWith significant nonactive markets
observable inputs
Using observable(Level 1)
inputs (Level 2)(Level 3)
2023
2022
2023
2022
2023
2022
$m
$m
$m
$m
$m
$m

Total fair value
2023
2022
$m
$m

Investment securities1

7,752

7,943

-

-

7,712

7,918

-

-

7,712

7,918

Net loans and advances

685,806

667,732--

19,61929,460664,120634,272

683,739663,732--

27,33137,378664,120634,272

691,451

671,650

Total

693,558

675,675

Financial liabilities
Deposits and other borrowings

781,314794,621--781,106

794,124--

781,106

794,124

Debt issuances

114,678

92,62330,78622,982

83,86769,028--

114,653

92,010Total

895,992

887,244

30,78622,982864,973

863,152--

895,759

886,134

Categorised into fair value hierarchy

The Company
Financial assets

At amortised cost
2023
2022
$m
$m

Quoted priceactive markets(Level 1)
2023
2022
$m
$m

Using observable
inputs (Level 2)
2023
2022
$m
$m

With significant nonobservable inputs(Level 3)
2023
2022
$m
$m

Total fair value
2023
2022
$m
$m

Investment securities1

5,936

6,115

-

-

5,896

6,092

-

-

5,896

6,092

Net loans and advances

541,777

533,082--

19,22428,708521,474

501,795

540,698

530,503

Total

547,713539,197--

25,12034,800521,474

501,795

546,594536,595

Financial liabilities
Deposits and other borrowings

643,868

665,567--

643,755

665,242--643,755

665,242

Debt issuances

95,88172,75728,496

19,741

67,30952,453--

95,80572,194

Total

739,749

738,324

28,496

19,741

711,064

717,695--

739,560

737,436

1.

Investment securities at amortised cost includes $4,558 million of assets that are part of the Group’s liquidity portfolio for the Group (2022: $3,976 million) and $2,917 million of assets for the Company (2022:$2,304 million) that are part of the Group’s and Company’s liquidity portfolio. These are all short tenor (<1 year) instruments primarily in the Group’s Rest of World geography and represent <2% of theGroup’s total liquid assets at 30 September 2023.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE (continued)
The following table sets out the Group’s basis of estimating the fair values of financial assets and liabilities carried at amortised cost where the carrying
value is not typically a reasonable approximation of fair value.
Financial Asset and Liability

Fair Value Approach

Investment securities - debt securities at amortised cost

Calculated based on quoted market prices or observable inputs as applicable. If
quoted market prices are not available, we use a discounted cash flow model using ayield curve appropriate for the remaining term to maturity of the debt instrument.
The fair value reflects adjustments to credit spreads applicable for that instrument.

Net loans and advances to banks

Discounted cash flows using prevailing market rates for loans with similar
credit quality.

Net loans and advances to customers

Present value of future cash flows, discounted using a curve that incorporates
changes in wholesale market rates, the Group’s cost of wholesale funding and thecustomer margin, as appropriate.

Deposit liability without a specified maturity or at call

The amount payable on demand at the reporting date. We do not adjust the fairvalue for any value we expect the Group to derive from retaining the deposit for a
future period.

Interest bearing fixed maturity deposits and otherborrowings and acceptances with quoted market rates

Market borrowing rates of interest for debt with a similar maturity are used to
discount contractual cash flows to derive the fair value.

Debt issuances

Calculated based on quoted market prices or observable inputs as applicable. If
quoted market prices are not available, we use a discounted cash flow model using ayield curve appropriate for the remaining term to maturity of the debt instrument.
The fair value reflects adjustments to credit spreads applicable to ANZ for that
instrument.

KEY JUDGEMENTS AND ESTIMATES
A significant portion of financial instruments are carried on the balance sheet at fair value. The Group therefore regularly evaluates the key
valuation assumptions used in the determination of the fair valuation of financial instruments incorporated within the financial statements,
as this can involve a high degree of judgement and estimation in determining the carrying values at the balance date.
In determining the fair valuation of financial instruments, the Group has considered the impact of related economic and market conditions
on fair value measurement assumptions and the appropriateness of valuation inputs in these estimates, notably valuation adjustments, aswell as the impact of these matters on the classification of financial instruments in the fair value hierarchy.
Most of the valuation models the Group uses employ only observable market data as inputs. For certain financial instruments, we may use
data that is not readily observable in current markets. If we use unobservable market data, then we need to exercise more judgement todetermine fair value depending on the significance of the unobservable input to the overall valuation. Generally, we derive unobservable
inputs from other relevant market data and compare them to observed transaction prices where available. When establishing the fair valueof a financial instrument using a valuation technique, the Group also considers any required valuation adjustments in determining the fairvalue. We may apply adjustments (such as credit valuation adjustments and funding valuation adjustments – refer to Note 10 Derivative
Financial Instruments) to reflect the Group’s assessment of factors that market participants would consider in determining fair value of aparticular financial instrument.

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NOTES TO THE FINANCIAL STATEMENTS

19. ASSETS CHARGED AS SECURITY FOR LIABILITIES AND COLLATERAL ACCEPTED AS
SECURITY FOR ASSETS
The following disclosure excludes the amounts presented as collateral paid and received in the Balance Sheet that relate to derivative liabilities andderivative assets respectively. The terms and conditions of those collateral agreements are included in the standard Credit Support Annex that forms
part of the International Swaps and Derivatives Association Master Agreement under which most of our derivatives are executed.
ASSETS CHARGED AS SECURITY FOR LIABILITIESAssets charged as security for liabilities include the following types of instruments:• securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements;• specified residential mortgages provided as security for notes and bonds issued to investors as part of ANZ’s covered bond programs;• collateral provided to central banks; and• collateral provided to clearing houses.
The carrying amount of assets pledged as security are as follows:
Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Securities sold under arrangements to repurchase1

47,55252,75742,002

47,846

Residential mortgages provided as security for covered bonds

31,18827,57521,017

17,953

Other

6,152

5,601

6,077

5,527

1.

The amounts disclosed as securities sold under arrangements to repurchase include both:
assets pledged as security which continue to be recognised on the Group's balance sheet; and• assets repledged, which are included in the disclosure below.
•

COLLATERAL ACCEPTED AS SECURITY FOR ASSETSANZ has received collateral associated with various financial transactions. Under certain arrangements ANZ has the right to sell, or to repledge, thecollateral received. These arrangements are governed by standard industry agreements.
The fair value of collateral we have received and that which we have sold or repledged is as follows:
Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Fair value of assets which can be sold or repledged

52,18432,38951,51930,647

Fair value of assets sold or repledged

33,493

21,26933,21820,359167

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
20. OFFSETTING
We offset financial assets and financial liabilities on the balance sheet (in accordance with AASB 132 Financial Instruments: Presentation) when there is:• a current legally enforceable right to set off the recognised amounts in all circumstances; and• an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
The following table identifies financial assets and financial liabilities which have not been offset but are subject to enforceable master netting
agreements (or similar arrangements) and the related amounts not offset in the balance sheet. We have not taken into account the effect of overcollateralisation.
Amount subject to master netting agreement or similar
Amounts not
Total amounts
subject torecognised master nettingin the agreement orBalance Sheetsimilar$m$m

Consolidated

Total
$m

Financial
instruments5$mFinancialcollateral(received)/pledged5$m

Net amount$m

As at 30 September 2023
60,406(3,290)57,116(38,070)(13,049)

5,997

4,145

(124)

4,021

-

(4,021)-

44,088(10,505)

33,583(2,401)(31,182)-

108,639(13,919)

94,720(40,471)(48,252)

5,997(57,482)

5,096(52,386)

38,0706,547(7,769)(12,744)

1,117(11,627)-

11,627-(31,710)

13,304(18,406)

2,401

16,005-(101,936)

19,517(82,419)

40,471

34,179(7,769)90,174(6,983)

83,191(56,491)(16,951)

9,749

29,776(6,697)

23,079(1,985)(21,094)-

119,950(13,680)

106,270(58,476)(38,045)9,749(85,149)

9,936(75,213)56,491

9,964(8,758)- at amortised cost

(47,229)

12,497(34,732)

1,985

32,747-

Total financial liabilities(132,378)

22,433(109,945)

58,47642,711(8,758)Derivative financial assets1
Reverse repurchase, securities borrowing andsimilar agreements2- at amortised cost
- at fair value through profit or loss

3

Total financial assets
Derivative financial liabilities

1

Repurchase, securities lending and similar
agreements4- at amortised cost
- at fair value through profit or loss

3

Total financial liabilities
As at 30 September 2022
Derivative financial assets1
Reverse repurchase, securities borrowing andsimilar agreements2- at amortised cost
Total financial assets
Derivative financial liabilities

1

Repurchase, securities lending and similar
agreements41.

2.

Derivative assets and liabilities recognised in the Balance Sheet reflect the impact of certain central clearing collateral arrangements, whereby collateral that qualifies as legal settlement has reduced thecarrying value of those associated derivative balances.
Reverse repurchase agreements:
with less than 90 days to maturity are presented in the Balance Sheet within Cash and cash equivalents; or• with 90 days or more to maturity are presented in the Balance Sheet within Net loans and advances.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
•

3.

4.
5.

Repurchase agreements are presented on the Balance Sheet within Deposits and other borrowings.
The amount of financial instruments and financial collateral disclosed is limited to the net balance sheet exposure of the relevant financial assets or liabilities, and any over-collateralisation is excluded fromthe tables.

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NOTES TO THE FINANCIAL STATEMENTS

20. OFFSETTING (continued)
Amount subject to master netting agreement or similar
Amounts not
Total amounts
subject torecognised master nettingin the agreement orBalance Sheetsimilar$m$m

The Company

Total
$m

Financial
instruments5$mFinancialcollateral(received)/pledged5$m

Net amount$m

As at 30 September 2023
59,989(1,096)58,893(41,574)(11,716)

5,603

4,021

-

4,021

-

(4,021)-

43,553(10,143)

33,410(2,248)(31,162)-

107,563(11,239)

96,324(43,822)(46,899)

5,603(57,511)2,760(54,751)

41,574

6,356(6,821)(8,955)865(8,090)

-

8,090

-

(31,125)

12,872(18,253)

2,248

16,005-(97,591)

16,497(81,094)

43,82230,451(6,821)

88,056(4,242)

83,814(61,038)(14,876)

7,900- at amortised cost

28,045(5,323)22,722(1,629)(21,093)-

Total financial assets

116,101(9,565)

106,536(62,667)(35,969)

7,900

Derivative financial liabilities1(84,500)

6,839(77,661)

61,0388,548(8,075)- at amortised cost

(42,940)

11,021(31,919)

1,629

30,290-Total financial liabilities(127,440)

17,860(109,580)

62,667

38,838(8,075)Derivative financial assets1
Reverse repurchase, securities borrowing andsimilar agreements2- at amortised cost
- at fair value through profit or loss

3

Total financial assets
Derivative financial liabilities

1

Repurchase, securities lending and similar
agreements4- at amortised cost
- at fair value through profit or loss

3

Total financial liabilities
As at 30 September 2022
Derivative financial assets1
Reverse repurchase, securities borrowing andsimilar agreements2

Repurchase, securities lending and similar
agreements4

1.

Derivative assets and liabilities recognised in the Balance Sheet reflect the impact of certain central clearing collateral arrangements, whereby collateral that qualifies as legal settlement has reduced thecarrying value of those associated derivative balances.

2.

Reverse repurchase agreements:
with less than 90 days to maturity are presented in the Balance Sheet within Cash and cash equivalents; or• with 90 days or more to maturity are presented in the Balance Sheet within Net loans and advances.
3.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in theassociated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
•

4.
5.

Repurchase agreements are presented on the Balance Sheet within Deposits and other borrowings.
The amount of financial instruments and financial collateral disclosed is limited to the net balance sheet exposure of the relevant financial assets or liabilities, and any over-collateralisation is excluded fromthe tables.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

170

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
21. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill1
Consolidated
Balance at start of year

Software

Other Intangibles

Total

2023

2022

2023

2022

2023

2022

2023

2022

$m

$m

$m

$m

$m

$m

$m

$m

2,906

3,089

896

960

75

75

3,877

4,124

2

Additions

-

78

332

315

-

10

332

403

Amortisation expense

-

-

(316)

(375)

(2)

(4)

(318)

(379)

-

-

-

(3)

-

-

-

(3)

Written-off on disposal/exit3

(78)

(40)

-

-

(7)

-

(85)

(40)

Foreign currency exchange difference

150

(221)

1

(1)

4

(6)

155

(228)

Balance at end of year

2,978

2,906

913

896

70

75

3,961

3,877

Cost4

2,978

2,906

8,127

7,843

78

83

11,183

10,832n/an/a(7,214)(6,947)(8)(8)(7,222)(6,955)

2,978

2,906

913

896

70

75

3,961

3,877

Impairment expense

Accumulated amortisation
Carrying amount

Goodwill1
The Company
Balance at start of year

Software

2023

2022

$m

$m

62

62

2023

Other Intangibles

Total

2022

2023

2022

2023

2022

$m

$m

$m

$m

$m

$m

872

952

1

3

935

1,017

Additions

-

-

310

287

-

-

310

287

Amortisation expense

-

-

(310)

(363)

(1)

(3)

(311)

(366)

Impairment expense

-

-

-

(3)

-

-

-

(3)

-

-

1

(1)

-

1

1

-

Balance at end of year

62

62

873

872

-

1

935

935

Cost4

62

62

7,800

7,544

7

7

7,869

7,613

Accumulated amortisation

n/a

n/a

(6,927)(6,672)(7)(6)(6,934)(6,678)Carrying amount

62

62

873

872

-

1

935

935

Foreign currency exchange difference

1.
2.
3.
4.

Goodwill excludes notional goodwill in equity accounted investments.
2022 goodwill addition relates to acquisition of Cashrewards.
2023 goodwill written-off on disposal/exit relates to the disposal of Cashrewards to ANZ NBH Pty Ltd. 2022 goodwill written-off on disposal/exit relates to the exit of the financial planning and advice
business.
Includes impact of foreign currency translation differences.

IMPAIRMENT TESTING FOR CASH GENERATING UNITS CONTAINING GOODWILL
Goodwill acquired in a business combination is tested for impairment annually and whenever there are indicators of potential impairment. Goodwill isallocated at the date of acquisition to the cash generating unit (CGU) or group of CGUs that are expected to benefit from the synergies of the related
business combination.
Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. We estimate the recoverable
amount of each CGU to which goodwill is allocated using a fair value less costs of disposal (FVLCOD) approach, with a value-in-use (VIU) assessment
performed where the FVLCOD is less than the carrying amount.
Goodwill is allocated to the following CGUs based on the lowest level at which goodwill is monitored.
Cash generating units:
Australia Retail
New ZealandInstitutional

170

2023
$m
100
1,617
1,261

2022
$m
178
1,530
1,198

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NOTES TO THE FINANCIAL STATEMENTS

2 1 . G O O DW I L L A N D O T H ER I N T A N GI B L E A S S E T S ( c o n t i n u e d )We estimate the FVLCOD of each CGU to which goodwill is allocated by applying observable price earnings multiples of comparable companies tothe estimated future maintainable earnings of each CGU. A deduction is then made for estimated costs of disposal. The valuation is considered to belevel 3 in the fair value hierarchy due to unobservable inputs used in the valuation.
Management’s approach and the key assumptions used in determining FVLCOD are as follows:
Key assumption

Approach to determining the value (or values) for each key assumption

Future maintainable earnings

Future maintainable earnings for each CGU is estimated as the sum of:• The Group’s 2024 financial plan for each CGU; and• An allocation of the central costs recorded outside of the CGUs to which goodwill is allocated.
Where relevant, adjustments are made to the Group’s financial plan to reflect the long-term expectations foritems such as expected credit losses and investment spend.

Price/Earnings (P/E) multiple

P/E multiples applicable to each CGU have been derived from a comparator group of publicly traded
companies, and include a 30% control premium, discussed below.
In the case of the New Zealand and Institutional CGUs, management has made downwards adjustments to
P/E multiples to address specific factors relevant to those CGUs.
A control premium has been applied which recognises the increased consideration a potential acquirer
would be willing to pay in order to gain sufficient ownership to achieve control over the relevant activities of
the CGU. For each CGU, the control premium has been estimated as 30% of the comparator group P/E
multiple based on historical transactions.

Costs of disposal

Costs of disposal have been estimated as 2% of the fair value of the CGU based on those observed from
historical and recent transactions.

As noted above, our impairment testing did not result in the identification of any material impairment of goodwill as at 30 September 2023.
The FVLCOD estimates for each CGU are sensitive to assumptions about P/E multiples, future maintainable earnings and control premium (30%).
However, each CGU would continue to show a surplus in recoverable amount over carrying amount even where other reasonably possible alternative
estimates were used.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
21. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
RECOGNITION AND MEASUREMENT
The table below details how we recognise and measure different intangible assets:

Definition

Goodwill

Software

Other Intangibles

Excess amount the Group has paidin acquiring a business over the fairvalue of the identifiable assets andliabilities acquired.

Purchased software owned by the Group
is capitalised.

Management fee rights arisingfrom acquisition of funds
management business andother intangible assets arisingfrom contractual rights.

Internal and external costs incurred inbuilding software and computer systems
costing greater than $20 million are
capitalised as assets. Those less than $20
million are expensed in the year in which
the costs are incurred.
Costs incurred in planning or evaluating
software proposals or in maintaining
systems after implementation are
not capitalised.

Carrying value

Cost less any accumulated
impairment losses.
Allocated to the cash generating
unit to which theacquisition relates.

Useful life

Indefinite.
Goodwill is reviewed for
impairment at least annually or
when there is an indication of
impairment.

Initially, measured at cost.
Subsequently, carried at cost lessaccumulated amortisation andimpairment losses.

Except for major core infrastructure,amortised over periods between
2-5 years; however major core
infrastructure may be amortised over 7
years subject to approval by the Audit
Committee.
Purchased software is amortised over 2
years unless it is considered integral toother assets with a longer useful life.

Depreciation
method172

Not applicable.

Straight-line method.

Initially, measured at fair value atacquisition.
Subsequently, carried at costless accumulated amortisationand impairment losses.
Management fee rights with anindefinite life are reviewed for
impairment at least annually or
when there is an indication of
impairment. Other intangible
assets are amortised over 3
years.

Not applicable to indefinite life
intangible assets. Straight-line
method for assets with a finite
life.

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NOTES TO THE FINANCIAL STATEMENTS

21. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

KEY JUDGEMENTS AND ESTIMATESManagement judgement is used to assess the recoverable value of goodwill and other intangible assets, and the useful economic life of anasset, or whether an asset has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.
Goodwill
A number of key judgements are required in the determination of whether or not a goodwill balance is impaired including:• the level at which goodwill is allocated – consistent with prior periods the CGUs to which goodwill is allocated are the Group’s revenue
generating segments that benefit from relevant historical business combinations generating goodwill.
• determination of the carrying amount of each CGU which includes an allocation, on a reasonable and consistent basis, of corporate
assets and liabilities that are not directly attributable to the CGUs to which goodwill is allocated.
• assessment of the recoverable amount of each CGU including:o selection of the model used to determine the fair value – the Group has used the market multiple approach to estimate the fairvalue; ando selection of the key assumptions in respect of future maintainable earnings, the P/E multiple applied, including selection of an
appropriate comparator group and determination of an appropriate control premium, and costs of disposal as described above.
Software and other intangible assets
At each reporting date, software and other intangible assets are assessed for indicators of impairment and, where such indicators are
identified, an impairment assessment is performed. In the event that an asset’s carrying amount is determined to be greater than its
recoverable amount, the carrying amount of the asset is written down immediately. Those assets not yet ready for use are tested for
impairment annually.
In addition, the expected useful lives of intangible assets are assessed at each reporting date. The assessment requires management
judgement, and in relation to our software assets, a number of factors can influence the expected useful lives. These factors include
changes to business strategy, significant divestments and the pace of technological change.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
22. OTHER PROVISIONS
Consolidated
2023
$m

2022
$m

2023
$m

2022
$m

ECL allowance on undrawn and contingent facilities1

827

775

697

673

Customer remediation

459

662

425

600

Restructuring costs

98

68

83

47

Non-lending losses, frauds and forgeries

73

105

62

93

Other

257

262

232

235

1,714

1,872

1,499

1,648

Total other provisions

Customer
remediation$m

Restructuring
costs
$m

Non-lending
losses, frauds
and forgeries
$m

Other
$m

Balance at 1 October 2022

662

68

105

262

New and increased provisions made during the year

147

91

11

66

Provisions used during the year

(321)

(40)

(32)

(61)

Unused amounts reversed during the year

(29)

(21)

(11)

(10)

Balance at 30 September 2023

459

98

73

257

Customer
remediation$m

Restructuring
costs
$m

Non-lending
losses, frauds
and forgeries
$m

Other
$m

Balance at 1 October 2022

600

47

93

235

New and increased provisions made during the year

146

83

9

63

Provisions used during the year

(295)

(27)

(29)

(59)

Unused amounts reversed during the year

(26)

(20)

(11)

(7)

Balance at 30 September 2023

425

83

62

232

Consolidated

The Company

1.

The Company

Refer to Note 13 Allowance for Expected Credit Losses for movement analysis.

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NOTES TO THE FINANCIAL STATEMENTS

22. OTHER PROVISIONS (continued)
Customer remediation
Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory claims,
penalties and litigation costs and outcomes.
Restructuring costs
Provisions for restructuring costs arise from activities related to material changes in the scope of business undertaken by the Group or the manner inwhich that business is undertaken and include employee termination benefits. Costs relating to on-going activities are not provided for and are
expensed as incurred.
Non-lending losses, frauds and forgeries
Non-lending losses include losses arising from certain legal actions not directly related to amounts of principal outstanding for loans and advancesand losses arising from forgeries, frauds and the correction of operational issues. The amounts recognised are the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into account the risks and uncertainties that surround the events andcircumstances that affect the provision.
Other
Other provisions comprise various other provisions including workers compensation, make-good provisions associated with leased premises,
warranties and indemnities provided in connection with various disposals of businesses and assets, and contingent liabilities recognised as part of abusiness combination.

RECOGNITION AND MEASUREMENTThe Group recognises provisions when there is a present obligation arising from a past event, an outflow of economic resources isprobable, and the amount of the provision can be measured reliably.
The amount recognised is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into
account the risks and uncertainties surrounding the timing and amount of the obligation. Where a provision is measured using theestimated cash flows required to settle the present obligation, its carrying amount is the present value of those cash flows.

KEY JUDGEMENTS AND ESTIMATESThe Group holds provisions for various obligations including customer remediation, restructuring costs, non-lending losses, frauds andforgeries and litigation related claims. These provisions involve judgements regarding the timing and outcome of future events, including
estimates of expenditure required to satisfy such obligations. Where relevant, expert legal advice has been obtained and, in light of suchadvice, provisions and/or disclosures as deemed appropriate have been made.
In relation to customer remediation, determining the amount of the provisions, which represent management’s best estimate of the costof settling the identified matters, requires the exercise of significant judgement. It will often be necessary to form a view on a number ofdifferent assumptions, including the number of impacted customers, the average refund per customer, the associated remediation project
costs, and the implications of regulatory exposures and customer claims having regard to their specific facts and circumstances. There is aheightened level of estimation uncertainty where the customer remediation provision relates to a legal proceeding or matter. The
appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant evidence
including expert legal advice, and adjustments are made to the provisions where appropriate.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
23. SHAREHOLDERS’ EQUITYSHAREHOLDERS' EQUITY
Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

29,082

28,79729,00528,720Foreign currency translation reserve1

570

(148)

58

(6)

Share option reserve

82

78

82

78

Ordinary share capital
Reserves

(554)

(478)

(538)

(557)

(1,872)(2,036)(1,824)(2,061)FVOCI reserve
Cash flow hedge reserve

(22)

(22)

-

-

Total reserves(1,796)(2,606)(2,222)(2,546)

Retained earnings

41,306

39,71634,19532,859

Share capital and reserves attributable to shareholders of the Company

68,592

65,90760,97859,033

Non-controlling interests

522

494

-

-

Total shareholders’ equity

69,114

66,40160,97859,033

Transactions with non-controlling interests reserve2

1.

As a result of the closure of ANZ (Thai) Public Company Limited, ANZ International (Hong Kong) Limited and ANZ Singapore Limited, the associated foreign currency translation reserve was recycled from
Other comprehensive income to profit or loss, resulting in a $43 million gain recognised in Other operating income in 2023 (2022: $65 million loss from the dissolution of Minerva Holdings Limited and ANZ
Asia Limited).

2.

ANZ Bank New Zealand issued $484 million of perpetual preference shares in 2022 that are considered non-controlling interests to the Group.

ORDINARY SHARE CAPITAL
The table below details the movement in ordinary shares and share capital for the year.
2023
Number ofshares2,989,923,751$m
28,7972022
Number ofshares2,823,563,652$m
25,984

Dividend reinvestment plan issuances

8,406,978

206

7,195,108

183

Bonus option plan
Employee share and option plans

1,657,422-

2,890,268-

3,378,631

79

-

(21)

Share buy-back1--(30,831,227)(846)

Share entitlement issue2--

187,105,950

3,497

Balance at end of year

3,003,366,782

29,082

2,989,923,751

28,797

Consolidated
Balance at start of the year--

(4,209,150)-

Balance at end of year

3,003,366,782

29,082

2,985,714,601

28,797The Company
Balance at start of the year

2023
Number ofshares2,989,923,751$m
28,7202022
Number ofshares2,823,563,652$m
25,907

Dividend reinvestment plan issuances

8,406,978

206

7,195,108

183

Bonus option plan

1,657,422-

2,890,268-

Employee share and option plans

3,378,631

79

-

(21)

-

-

(30,831,227)(846)

Less: Treasury Shares

Share buy-back1
Share entitlement issue--

187,105,950

3,497

Balance at end of year

3,003,366,782

29,0052,989,923,751

28,720

2

1.

The Group completed its $1.5 billion on-market share buy-back of ANZ ordinary shares in 2022, purchasing $846 million worth of shares resulting in 31 million shares being cancelled in 2022.

2.

On 18 July 2022, the Group announced a fully underwritten pro rata accelerated renounceable entitlement offer of new ANZ ordinary shares to help fund the Group’s anticipated acquisition of Suncorp
Bank. All eligible shareholders were invited to purchase one new ordinary share for every 15 existing ordinary shares held on 21 July 2022 at an issue price of $18.90 per share. The Group issued a total of
187.1 million ordinary shares under the offer, raising $3,497 million of new share capital (net of issue costs).

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FinancialreportDirectors’
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23. SHAREHOLDERS’ EQUITY (continued)
NON-CONTROLLING INTERESTSProfit attributable tonon-controlling interests

Equity attributable tonon-controlling interests

Dividend paid to
non-controlling interests

2023

2022

2023

2022

2023

2022

Consolidated

$m

$m

$m

$m

$m

$m

ANZ Bank New Zealand PPS

26

-

512

484

26

-

Other

2

1

10

10

1

2

Total

28

1

522

494

27

2

ANZ Bank New Zealand Preference Shares
ANZ Bank New Zealand Limited (ANZ Bank New Zealand), a member of the Group, issued $484 million (NZD 550 million) of Perpetual Preference
Shares (PPS) on 18 July 2022. These are considered non-controlling interests of the Group.
The key terms of the PPS are as follows:

PPS dividends
PPS dividends are payable at the discretion of the Directors of ANZ Bank New Zealand and are non-cumulative. ANZ Bank New Zealand must notauthorise or pay a dividend on its ordinary shares, acquire its ordinary shares or otherwise undertake a capital reduction in respect of its ordinary
shares until the next PPS dividend payment date if a PPS dividend is not paid.
Should ANZ Bank New Zealand elect to pay a PPS dividend, the PPS dividend is 6.95% per annum until 18 July 2028, and a floating rate equal to theaggregate of the New Zealand 3 month bank bill rate plus 3.25%, multiplied by one minus the New Zealand company tax rate (where the PPS
dividend is fully imputed) thereafter, with PPS dividend payments scheduled to be paid on 18 January, 18 April, 18 July and 18 October each year.

Redemption features
Holders of PPS have no right to require that the PPS be redeemed. ANZ Bank New Zealand may at its option redeem all of the PPS on an optional
redemption date (each PPS dividend date from 18 July 2028); or at any time following the occurrence of a tax event or regulatory event, in each casesubject to prior written approval of RBNZ and other conditions being met.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
23. SHAREHOLDERS’ EQUITY (continued)

RECOGNITION AND MEASUREMENT
Ordinary shares

Ordinary shares have no par value. They entitle holders to receive dividends, or proceeds
available on winding up of the Company, in proportion to the number of fully paid ordinary
shares held. They are recognised at the amount paid per ordinary share net of directly
attributable costs. Every holder of fully paid ordinary shares present at a meeting of theCompany in person, or by proxy, is entitled to:• on a show of hands, one vote; and• on a poll, one vote, for each share held.

Treasury shares

Treasury shares are shares in the Company which:• the ANZ Employee Share Acquisition Plan purchases on market and have not yet
distributed, or• the Company issues to the ANZ Employee Share Acquisition Plan and have not yet been
distributed.
Treasury shares are deducted from share capital and excluded from the weighted average
number of ordinary shares used in the earnings per share calculations.

Reserves:
Foreign currency translation reserve

Includes differences arising on translation of assets and liabilities into Australian dollars when
the functional currency of a foreign operation (including subsidiaries and branches) is not
Australian dollars. In this reserve, we reflect any offsetting gains or losses on hedging these
exposures, together with any tax effect.

Cash flow hedge reserve

Includes fair value gains and losses associated with the effective portion of designated cash
flow hedging instruments together with any tax effect.

FVOCI reserve

Includes changes in the fair value of certain debt securities and equity securities included
within Investment Securities together with any tax effect.
In respect of debt securities classified as measured at FVOCI, the FVOCI reserve records
accumulated changes in fair value arising subsequent to initial recognition, except for thoserelating to allowance for expected credit losses, interest income and foreign currency
exchange gains and losses which are recognised in profit or loss. As debt securities at FVOCI
are recorded at fair value, the balance of the FVOCI reserve is net of the ECL allowanceassociated with such assets. When a debt security measured at FVOCI is derecognised, thecumulative gain or loss recognised in the FVOCI reserve in respect of that security is
reclassified to profit or loss and presented in other operating income.
In respect of the equity securities classified as measured at FVOCI, the FVOCI reserve records
accumulated changes in fair value arising subsequent to initial recognition (including any
related foreign exchange gains or losses). When an equity security measured at FVOCI is
derecognised, the cumulative gain or loss recognised in the FVOCI reserve in respect of that
security is not recycled to profit or loss.

178

Share option reserve

Includes amounts which arise on the recognition of share-based compensation expense.

Transactions with non-controllinginterests reserve

Includes the impact of transactions with non-controlling shareholders in their capacity asshareholders.

Non-controlling interests

Share in the net assets of controlled entities attributable to equity interests which the Group
does not own directly or indirectly.

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NOTES TO THE FINANCIAL STATEMENTS

24. CAPITAL MANAGEMENTCAPITAL MANAGEMENT FRAMEWORK
ANZ’s capital management framework includes managing capital at Level 1 and Level 2.
ANZ’s framework includes managing to Board approved risk appetite settings and maintaining all regulatory requirements. APRA requirements at
Level 1 and Level 2 include ANZ operating at or above APRAs expectation for Domestic Systematically Important Banks (D-SIBs) following theimplementation of APRA’s Capital Reform which was effective January 2023.
All requirements were satisfied at 30 September 2023.

CAPITAL MANAGEMENT STRATEGY
ANZ’s capital management strategy aims to protect the interests of depositors, creditors and shareholders. We achieve this through an Internal
Capital Adequacy Assessment Process (ICAAP) whereby ANZ conducts detailed strategic and capital planning over a 3 year time horizon.
The process involves:• forecasting economic variables, financial performance of ANZ’s divisions and the financial impact of new strategic initiatives to be implemented
during the planning period;• performing stress tests under different economic scenarios to determine the level of additional capital (stress capital buffer) needed to absorb
losses that may be experienced under an economic downturn;• reviewing capital ratios and targets across various classes of capital against ANZ’s risk profile; and• developing a capital plan, taking into account capital ratio targets, current and future capital issuances requirements and options around capital
products, timing and markets to execute the capital plan under differing market and economic conditions.
The capital plan is approved by the Board and updated as required. The Board and senior management are provided with regular updates of ANZ’scapital position. Any material actions required to ensure ongoing prudent capital management are submitted to the Board for approval. Throughout
the year, the Group maintained compliance with all the regulatory requirements related to Capital Adequacy in the jurisdictions in which it operates.

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Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
24. CAPITAL MANAGEMENT (continued)
REGULATORY ENVIRONMENT
Australia
As the ANZ Bank Group is an Authorised Deposit-taking Institution (ADI) in Australia, it is primarily regulated by APRA under the Banking Act 1959
(Cth). ANZ Bank Group must comply with the minimum regulatory capital requirements, prudential capital ratios and specific reporting levels that
APRA sets and which are consistent with the global Basel III capital framework. This is the common framework for determining the appropriate level ofbank regulatory capital as set by the Basel Committee on Banking Supervision. APRA minimum requirements are summarised below:
Regulatory Capital Definition
Common Equity Tier 1 (CET1) Capital

Tier 1 Capital

Tier 2 Capital

Total Capital

Shareholders’ equity adjusted forspecific items.

CET1 Capital plus certain
securities with complying loss
absorbing characteristics known
as Additional Tier 1 Capital.

Subordinated debt instruments
which have a minimum term of 5
years at issue date.

Tier 1 plus Tier 2 Capital.

CET1 Ratio

Tier 1 Ratio

Total Capital Ratio

CET1 Capital divided by total risk
weighted assets must be at least 4.5%.

Tier 1 Capital divided by total risk
weighted assets must be at least
6.0%.

Total Capital divided by total risk
weighted assets must be at least
8.0%. For D-SIBs, Total Capital
Ratio must be of at least 11% from
1st Jan 2024. Refer below for
details.

Level 1

Level 2

Level 3The ADI on a stand-alone basis (that is
ANZBGL and specified subsidiaries
which are consolidated to form the
ADI’s Extended Licensed Entity).

The consolidated Group lesscertain subsidiaries and associatesthat are excluded underprudential standards.

A conglomerate ANZGHL Group at the widest level.

Minimum Prudential Capital Ratios (PCRs)

Reporting Levels

As at 30 September 2023, APRA also requires the ADI to hold additional CET1 buffers as follows:• a capital conservation buffer (CCB) of 4.75% which is inclusive of the additional 1% surcharge for domestically systemically important banks (D-SIBs).
APRA has determined that ANZ is a D-SIB.
• a countercyclical capital buffer which is set on a jurisdictional basis. The requirement is currently set at 1% for Australia.
Additionally in December 2021, APRA announced that it requires all D-SIBs including ANZ to increase its minimum total capital ratio requirement by
3% of RWA by January 2024, and a further 1.5% of RWA by January 2026 (total increase of 4.5%). APRA expects this to be predominantly met by Tier 2
Capital, with an equivalent decrease in other senior funding. ANZ is on track to meet these requirements at reporting date.
Insurance and Funds Management
As required by APRA’s Prudential Standards, insurance and funds management activities are:• de-consolidated for the purposes of calculating capital adequacy; and• excluded from the risk-based capital adequacy framework.
We deduct the investment in these controlled entities 100% from CET1 capital, and if we include any profits from these activities in the ANZ Bank
Group’s results, then we exclude them from the determination of CET1 capital to the extent they have not been remitted.
Outside Australia
In addition to APRA, ANZ’s branch operations and major banking subsidiary operations are also overseen by local regulators such as the Reserve Bankof New Zealand, the US Federal Reserve, the UK Prudential Regulation Authority, the Monetary Authority of Singapore, the Hong Kong Monetary
Authority and the China Banking and Insurance Regulatory Commission. They may impose minimum capital levels on operations in their individual
jurisdictions.

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NOTES TO THE FINANCIAL STATEMENTS

24. CAPITAL MANAGEMENT (continued)
APRA Capital Reform
APRA released new bank capital adequacy requirements applying to Australian incorporated registered banks, which are set out in APRA’s Banking
Prudential Standard documents. ANZ implemented these new requirements from 1 January 2023.
The new capital adequacy key requirements include changes to APS 110 Capital Adequacy (APS 110), APS 112 Capital Adequacy: Standardised
Approach to Credit Risk (APS 112) and APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113) with key features of thereforms including:• improving the flexibility of the capital framework through larger capital buffers that can be used by banks to support lending during periods ofstress;• changes to risk weighted assets (RWA) through more risk-sensitive risk weights increasing capital requirements for higher risk lending anddecreasing it for lower risks;• changes to loss given default rates (LGD) including approved use of an internal ratings-based (IRB) approved LGD model for mortgage portfolios;• an increase in the IRB scaling factor (from 1.06x to 1.1x);• requirement that IRB ADIs calculate and disclose RWA under the standardised approach and the introduction of a capital floor at 72.5% of
standardised RWA; and• use of prescribed New Zealand authority’s equivalent prudential rules for the purpose of calculating the Level 2 regulatory capital requirement.
In addition, operational RWA is now calculated under APS 115 Capital Adequacy: Standardised Measurement Approach to Operational Risk (APS 115)
which replaced the previous advanced methodology from December 2022.
The application of APRA Capital Reform in January 2023 reduced RWA by $34.5 billion, equivalent to a 100 bps CET1 ratio benefit. This was partially
offset by APRA’s expectations that ADIs operate a higher capital ratio to maintain an unquestionably strong level.

ANZ BANK GROUP1
The following table provides details of ANZ Bank Group’s capital adequacy ratios at 30 September:
Consolidated
2023
$m

2022
$m

Shareholders' equity and non-controlling interests

69,114

66,401

Prudential adjustments to shareholders' equity

(425)

(175)

Qualifying capital
Tier 1Gross Common Equity Tier 1 capital

68,68966,226

Deductions(10,895)(10,354)

57,79455,872

Common Equity Tier 1 capital
Additional Tier 1 capital

8,232

7,686

Tier 1 capital

66,02663,558Tier 2 capital3

24,95919,277

Total qualifying capital

90,98582,835

Common Equity Tier 1

13.3%

12.3%

Tier 1

15.2%

14.0%

Tier 2

5.8%

4.2%

Total capital ratio

21.0%

18.2%

433,327454,718

2

Capital adequacy ratios (Level 2)

Risk weighted assets
1.

This information is not within the scope of the external audit of the Group Financial Report by the Group’s external auditor, KPMG. The information presented in this table is a regulatory requirement
disclosed in Part A of the APRA Reporting Form (ARF) 110 Capital Adequacy which will be subject to audit in accordance with Prudential Standard APS 310 Audit and Related Matters.

2.

This includes Additional Tier 1 capital of $8,232 million (2022: $7,705 million) (refer to Note 16 Debt Issuances), regulatory adjustments and deductions of nil (2022: -$19 million).
This includes Tier 2 capital of $23,707 million (2022: $17,907 million) (refer to Note 16 Debt Issuances), general reserve for impairment of financial assets of $1,776 million (2022: $1,233 million) and regulatory
adjustments and deductions of -$525 million (2022: $137 million).

3.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
25. CONTROLLED ENTITIESThe ultimate parent of the Group is ANZ Group Holdings Limited

Incorporated inAustralia

Nature of BusinessBanking

The Group holds 100% of the voting interests in all controlled entities, unless noted otherwise.
The material controlled entities of the Group are:
ANZ Bank (Vietnam) Limited1

VietnamBanking

ANZ Funds Pty. Ltd.

Australia

Holding Company

Kiribati

Banking

ANZ Bank (Samoa) Limited

Samoa

Banking

ANZ Bank (Vanuatu) Limited2

VanuatuBanking

ANZ Holdings (New Zealand) Limited1

New ZealandHolding Company

ANZ Bank New Zealand Limited1

ANZ Bank (Kiribati) Limited1 (75% ownership)
1

New Zealand

Banking

ANZ Investment Services (New Zealand) Limited1

New ZealandFunds Management

ANZ New Zealand (Int’l) Limited1

New ZealandFinance

ANZ New Zealand Investments Holdings Limited

New ZealandHolding Company

New ZealandFunds Management

ANZNZ Covered Bond Trust1,4

New ZealandFinance

ANZ International Private Limited

Singapore

Holding Company

ANZcover Insurance Private Ltd1

Singapore

Captive-Insurance

ANZ Lenders Mortgage Insurance Pty. Limited

Australia

Mortgage Insurance

ANZ Residential Covered Bond Trust4

1

ANZ New Zealand Investments Limited1
1

Australia

Finance

Australia and New Zealand Bank (China) Company Limited1

China

Banking

Australia and New Zealand Banking Group (PNG) Limited1

Papua New Guinea

Banking

Citizens Bancorp3

Guam

Holding Company

ANZ Guam Inc3

Guam

Banking

Institutional Securitisation Services Limited

Australia

Securitisation Manager

PT Bank ANZ Indonesia1 (99% ownership)

Indonesia

Banking

Audited by overseas KPMG firms — either as part of the Group audit, or for standalone financial statements as required.
Audited by Law Partners.
3. Audited by Deloitte Guam.
4. Not owned by the Group. Control exists as the Group retains substantially all the risks and rewards of the operations.
1.
2.

CHANGES TO MATERIAL CONTROLLED ENTITIESANZ Singapore Limited was deregistered on 18 August 2023. ANZ International (Hong Kong) Limited, ANZ (Thai) Public Company Limited (formerly
ANZ Bank (Thai) Public Company Limited), and Chongqing Liangping ANZ Rural Bank Company Limited are in liquidation as at 30 September 2023.

SIGNIFICANT RESTRICTIONSControlled entities that are subject to prudential regulation may be required to maintain minimum capital or other regulatory requirements whichmay, from time to time, limit the entity’s ability to transfer assets, pay dividends or make other capital distributions to the parent entity or to otherentities in the Group. The Group manages such restrictions within our risk management framework, as outlined in Note 17 Financial Risk Management
and our capital management strategy, as outlined in Note 24 Capital Management.
As at 30 September 2023, restrictions on the ability of an entity within the Group to transfer assets, pay dividends or make other capital distributions toother entities in the Group were not material to the liquidity or capital management of the Group.

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NOTES TO THE FINANCIAL STATEMENTS

25. CONTROLLED ENTITIES (continued)
RECOGNITION AND MEASUREMENTThe Group’s subsidiaries are those entities it controls through:• being exposed to, or having rights to, variable returns from the entity; and• being able to affect those returns through its power over the entity.
The Group assesses whether it has power over those entities by examining the Group’s existing rights to direct the relevant activities of theentity.
If the Group sells or acquires subsidiaries during the year, it includes their operating results in the Group results to the date of disposal orfrom the date of acquisition. When the Group’s control ceases, it derecognises the assets and liabilities of the subsidiary, any related noncontrolling interest and other components of equity.
If the Group’s ownership interest in a subsidiary changes in a way that does not result in a loss of control, then the Group accounts for thatas a transaction with equity holders in their capacity as equity holders.
All transactions between Group entities are eliminated on consolidation.

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Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
26. INVESTMENTS IN ASSOCIATES
Significant associates of the Group are:Ordinary shareinterest

Carrying amount $m

Name of entity

Principal activity

2023

2022

AMMB Holdings Berhad (AmBank)

Banking and insurance

22%

22%

881

790

PT Bank Pan Indonesia (PT Panin)

Consumer and business bank

39%

39%

1,440

1,318

Worldline Australia Pty Ltd (Worldline)1

Payment and transactional services

-

49%

-

47

-

n/a

-

26

2,321

2,181

Aggregate other individually immaterial associates
Total carrying value of associates
1.
2.

2023

2

2022

As part of the Restructure, ANZBGL’s investment in Worldline Australia Pty Ltd was transferred to ANZ NBH Pty Ltd.
Includes the impact of foreign currency translation recognised in the foreign currency translation reserve.

FINANCIAL INFORMATION ON SIGNIFICANT ASSOCIATES
Set out below is the summarised financial information of each associate that is significant to the Group. The summarised financial information is basedon the associates’ IFRS financial information and may require the use of unaudited financial information as each associate has a different financial year
to the Group (PT Panin 31 December, AmBank 31 March, Worldline 31 December).

Principal place of business and country of incorporation

Worldline Australia
Pty Ltd1
Australia

AMMB Holdings Berhad PT Bank Pan Indonesia
Malaysia
Indonesia
2023
$m

2022
$m

2023
$m

2022
$m

2023
$m

2022
$m

1,517

1,511

1,273

1,206

-

57

Summarised results
Operating income
Profit/(Loss) for the year

545

529

372

198

-

(21)

Other comprehensive income/(loss)

87

(128)

24

6

-

-

Total comprehensive income/(loss)

632

401

396

204

-

(21)

(8)

(18)

(69)

25

-

-

624

383

327

229

-

(21)

62,05757,22020,49820,537-203

Total liabilities

58,01553,234

16,92817,234-90

Total net assets2
Less: Non-controlling interests of associate

4,042

3,986

3,570

3,303

-

113

(301)

(402)

(348)

(315)

-

-

Net assets attributable to owners of associate

3,741

3,584

3,222

2,988

-

113

790

719

1,318

1,210

-

-

Less: Total comprehensive (income)/loss attributable to non–controlling interests
Total comprehensive income/(loss) attributable to owners of
associate
Summarised financial position
Total assets2
2

Reconciliation to carrying amount of Group's interest in associate
Carrying amount at the beginning of the year--

Group's share of total comprehensive income/(loss)

138

81

138

71

-

(10)

Dividends received from associate
Foreign currency translation reserve adjustments
Carrying amount at the end of the year

(42)
(5)
881

(12)
2
790

(16)
1,440

(18)
55
1,318

-

47

Market value of Group's investment in associate3

875

929

1,167

2,016

n/a

n/a

Acquired-

As part of the Restructure, ANZBGL’s investment in Worldline Australia Pty Ltd was transferred to ANZ NBH Pty Ltd.
Includes market value adjustments (including goodwill) the Group made at the time of acquisition (and adjustments for any differences in accounting policies).
3. Market value is based on a price per share and does not include any adjustments for the size of our holding.
1.
2.

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NOTES TO THE FINANCIAL STATEMENTS

26. INVESTMENTS IN ASSOCIATES (continued)
IMPAIRMENT ASSESSMENTThe Group assesses the carrying value of its associates investments for impairment indicators.
At 30 September 2023, the impairment assessment of non-lending assets identified that one of the Group’s associated investments PT Panin had
indicators of impairment. No impairment was recognised as its carrying value is supported by its VIU calculations.

RECOGNITION AND MEASUREMENT
An associate is an entity over which the Group has significant influence over its operating and financial policies but does not control. The
Group accounts for associates using the equity method. Its investments in associates are carried at cost plus the post-acquisition share ofchanges in the associate’s net assets less accumulated impairments. Dividends the Group receives from associates are recognised as a
reduction in the carrying amount of the investment. The Group includes goodwill recognised by the associate in the carrying amount of
the investment. It does not individually test the goodwill incorporated in the associates carrying amount for impairment.
At least at each reporting date, the Group reviews investments in associates for any indication of impairment. If an indication of impairment
exists, then the Group determines the recoverable amount of the associate using the higher of:• the associate’s fair value less cost of disposal; and• its value-in-use.
We use a discounted cash flow methodology, and when applicable, other methodologies (such as capitalisation of earnings methodology),
to determine the recoverable amount when determining a VIU.

KEY JUDGEMENTS AND ESTIMATES
Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication thatthe investment may be impaired. In addition, the Group is required to assess at each reporting date whether the recoverable amount of
the Group’s investment has increased to such a level as to support the reversal of prior period impairments.
Significant management judgment is required to determine the key assumptions underpinning the VIU calculation. Factors that may
change in subsequent periods and lead to potential future impairments include lower than forecast earnings levels in the near term and/or
a decrease in the long term growth forecasts, increases to required levels of regulatory capital and an increase in the post-tax discount ratearising from an increase in the risk premium or risk-free rates.
The key assumptions used in the VIU calculation are outlined below:
As at 30 September 2023

PT Panin

Post-tax discount rate

12.2%

Terminal growth rate

5.0%

Expected earnings growth (compound annual growth rate – 5 years)

5.4%

Common Equity Tier 1 ratio (5 year average)

12.8%

The VIU calculations are sensitive to changes in the underlying assumptions with reasonably possible changes in key assumptions having a
positive or negative impact on the VIU outcome, and as such the recoverable amount of the investment.
• A change in the September 2023 post-tax discount rate by +/- 50bps would impact the VIU outcome for PT Panin by $(91 million)/$105 million.
• A change in the September 2023 terminal growth rate by +/- 25bps would impact the VIU outcome for PT Panin by $55 million/($51 million).
The investment would not be impaired if the discount rate were increased or the terminal growth rate reduced by the reasonably possible
changes above.

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Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
27. STRUCTURED ENTITIESA Structured Entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in determining who controls
the entity. SEs are generally established with restrictions on their ongoing activities in order to achieve narrow and well defined objectives.
SEs are classified as subsidiaries and consolidated when control exists. If the Group does not control a SE, then it is not consolidated. This note
provides information on both consolidated and unconsolidated SEs.
The Group’s involvement with SEs is as follows:Type

Details

Securitisation

The Group establishes SEs to securitise customer loans and advances that it has originated, in order to diversify
sources of funding for liquidity management. Securitisation programs include customer loans and advances
assigned to bankruptcy remote SEs to provide either security for obligations payable on notes issued by the SEs
to external investors or create assets held by the Group eligible for repurchase agreements with applicablecentral banks.
The Group retains control over these SEs and therefore they are consolidated. Refer to Note 28 Transfers ofFinancial Assets for further details.
The Group also establishes SEs on behalf of customers to securitise their loans or receivables. The Group may
manage these securitisation vehicles or provide liquidity or other support. Additionally, the Group may acquireinterests in securitisation vehicles set up by third parties through holding securities issued by such entities. In
limited circumstances where control exists, the Group consolidates the SE.

Covered bond issuances

Certain loans and advances have been assigned to bankruptcy remote SEs to provide security for issuances ofdebt securities by the Group. The Group retains control over these SEs and therefore they are consolidated. Refer
to Note 28 Transfers of Financial Assets for further details.

Structured financearrangements

The Group is involved with SEs established:• in connection with structured lending transactions to facilitate debt syndication and/or to ring-fencecollateral; and• to own assets that are leased to customers in structured leasing transactions.
The Group may manage the SE, hold minor amounts of the SE’s capital, or provide risk management products(derivatives) to the SE. In most instances, the Group does not control these SEs. In limited circumstances wherecontrol exists, the Group consolidates the SE.

Funds management activities

The Group is the scheme manager for a number of Managed Investment Schemes (MIS) in New Zealand. TheseMIS are financed through the issue of units to investors and the Group considers them to be SEs. The Group’s
interests in these MIS are limited to receiving fees for services or providing risk management products(derivatives). These interests do not create significant exposures that would allow the Group to control the funds.
Therefore, these MIS are not consolidated.

CONSOLIDATED STRUCTURED ENTITIESFINANCIAL OR OTHER SUPPORT PROVIDED TO CONSOLIDATED STRUCTURED ENTITIESThe Group provides financial support to consolidated SEs as outlined below.
Securitisation and coveredbond issuances

The Group provides lending facilities, derivatives and commitments to these SEs and/or holds debt instruments
they have issued.

Structured financearrangements

The assets held by these SEs are normally pledged as collateral for financing provided. Certain consolidated SEs
are financed entirely by the Group while others are financed by syndicated loan facilities in which the Group is aparticipant. The financing provided by the Group includes lending facilities where the Group’s exposure is limited
to the amount of the loan and any undrawn amount. Additionally, the Group has provided Letters of Support tothese consolidated SEs confirming that the Group will not demand repayment of the financing provided for theensuing 12 month period.

The Group did not provide any non-contractual support to consolidated SEs during the year (2022: nil). Other than as disclosed above, the Group does
not have any current intention to provide financial or other support to consolidated SEs.

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FinancialreportNOTES TO THE FINANCIAL STATEMENTS

27. STRUCTURED ENTITIES (continued)
UNCONSOLIDATED STRUCTURED ENTITIESGROUP’S INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIESAn ‘interest’ in an unconsolidated SE is any form of contractual or non-contractual involvement with a SE that exposes the Group to variability of
returns from the performance of that SE. These interests include, but are not limited to: holdings of debt or equity securities; derivatives that pass-on
risks specific to the performance of the SE, lending, loan commitments, financial guarantees, and fees from funds management activities.
For the purpose of disclosing interests in unconsolidated SEs:
• no disclosure is made if the Group’s involvement is not more than a passive interest - for example: when the Group’s involvement constitutes atypical customer-supplier relationship. On this basis, exposures to unconsolidated SEs that arise from lending, trading and investing activities are
not considered disclosable interests - unless the design of the structured entity allows the Group to participate in decisions about the relevant
activities (being those that significantly affect the entity’s returns).
• ‘interests’ do not include derivatives intended to expose the Group to market-risk (rather than performance risk specific to the SE) or derivatives
through which the Group creates, rather than absorbs, variability of the unconsolidated SE (such as purchase of credit protection under a credit
default swap).
The table below sets out the Group’s interests in unconsolidated SEs together with the maximum exposure to loss that could arise fromthose interests:
Securitisation

Structured finance

Total

2023
$m

2022
$m

2023
$m

2022
$m

2023
$m

2022
$m

Investment securities

2,070

3,352

-

-

2,070

3,352

Gross loans and advances

10,367

9,433

24

43

10,391

9,476

Total on-balance sheet

12,437

12,78524

43

12,461

12,828

3,270

2,078

-

-

3,270

2,078

50

50

-

-

50

50

On-balance sheet interests

Off-balance sheet interests
Commitments (facilities undrawn)
Guarantees
Total off-balance sheet

3,320

2,128

-

-

3,320

2,128

Maximum exposure to loss

15,757

14,91324

43

15,781

14,956

In addition to the interests above, the Group earned funds management fees from unconsolidated investment funds of $177 million(2022: $181 million) during the year.
The Group’s maximum exposure to loss represents the maximum amount of loss that the Group could incur as a result of its involvement withunconsolidated SEs if loss events were to take place - regardless of the probability of occurrence. This does not in any way represent the actual losses
expected to be incurred. Furthermore, the maximum exposure to loss is stated gross of the effects of hedging and collateral arrangements enteredinto to mitigate ANZ’s exposure to loss.
The maximum exposure to loss has been determined as:• the carrying amount of Investment securities measured at amortised cost; and• the carrying amount plus the undrawn amount of any committed loans and advances.
The size of unconsolidated SEs is indicated by total assets which vary by SE with the largest single SE having a value of approximately $4.3 billion.
The Group did not provide any non-contractual support to unconsolidated SEs during the year (2022: nil) nor does it have any current intention toprovide financial or other support to unconsolidated SEs.

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Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
27. STRUCTURED ENTITIES (continued)
SPONSORED UNCONSOLIDATED STRUCTURED ENTITIESThe Group may also sponsor unconsolidated SEs in which it has no disclosable interest.
For the purposes of this disclosure, the Group considers itself the ‘sponsor’ of an unconsolidated SE if it is the primary party involved in the design andestablishment of that SE and:• the Group is the major user of that SE; or• the Group’s name appears in the name of that SE, or on its products; or• the Group provides implicit or explicit guarantees of that SE’s performance.
The Group has sponsored the ANZ PIE Fund in New Zealand, which invests only in deposits with ANZ Bank New Zealand. The Group does not provide
any implicit or explicit guarantees of the capital value or performance of investments in the ANZ PIE Fund. There was no income received from, nor
assets transferred to, this entity during the year.

KEY JUDGEMENTS AND ESTIMATES
Significant judgement is required in assessing whether the Group has control over Structured Entities. Judgement is required to determine
the existence of:• power over the relevant activities (being those that significantly affect the entity’s returns); and• exposure to variable returns of the entity.

28. TRANSFERS OF FINANCIAL ASSETSIn the normal course of business the Group enters into transactions where it transfers financial assets directly to third parties or to SEs. These transfers
may result in the Group fully, or partially, derecognising those financial assets - depending on the Group’s exposure to the risks and rewards or control
over the transferred assets. If the Group retains substantially all of the risk and rewards of a transferred asset, the transfer does not qualify for
derecognition and the asset remains on the Group’s balance sheet in its entirety.

SECURITISATIONSNet loans and advances include residential mortgages securitised under the Group’s securitisation programs which are assigned to bankruptcy
remote SEs to provide security for obligations payable on the notes issued by the SEs. The holders of the issued notes have full recourse to the pool ofresidential mortgages which have been securitised and the Group cannot otherwise pledge or dispose of the transferred assets.
In some instances, the Group is also the holder of the securitised notes issued by the SEs. In addition, the Group is entitled to any residual income of
the SEs and sometimes enters into derivatives with the SEs. The Group retains the risks and rewards of the residential mortgages and continues torecognise the mortgages as financial assets.
The Group is exposed to variable returns from its involvement with these securitisation SEs and has the ability to affect those returns through its
power over the SEs activities. The SEs are therefore consolidated by the Group.

COVERED BONDS
The Group operates various global covered bond programs to raise funding in its primary markets. Net loans and advances include residential
mortgages assigned to bankruptcy remote SEs associated with these covered bond programs. In respect of each program, a covered bond guarantor
has guaranteed payments of interest and principal pursuant to a guarantee which is secured over its assets, including these residential mortgages.
Substantially all of the assets of each covered bond guarantor consist of that covered bond guarantor’s equitable interests in mortgage loans secured
by residential real estate.
The covered bond holders have dual recourse to the issuer and the cover pool of assets. The issuer cannot otherwise pledge or dispose of thetransferred assets, however, subject to legal arrangements it may repurchase and substitute assets as long as the required cover is maintained.
The Group is required to maintain the cover pool at a level sufficient to cover the bond obligations. In addition, the Group is entitled to any residual
income of the covered bond SEs (after all payments to the covered bond holders and external parties) and enters into derivatives with the SEs. The
Group retains the majority of the risks and rewards of the residential mortgages and continues to recognise the mortgages as financial assets.
The Group is exposed to variable returns from its involvement with the covered bond SEs and has the ability to affect those returns through its powerover the SEs activities. The SEs are therefore consolidated by the Group. The covered bonds issued externally are included within debt issuances.

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NOTES TO THE FINANCIAL STATEMENTS

28. TRANSFERS OF FINANCIAL ASSETS (continued)
REPURCHASE AGREEMENTS
When the Group sells securities subject to repurchase agreements under which we retain substantially all the risks and rewards of ownership, thenthose assets do not qualify for derecognition. An associated liability is recognised for the consideration received from the counterparty.

STRUCTURED FINANCE ARRANGEMENTS
The Group arranges funding for certain customer transactions through structured leasing. These transactions are recognised on Group’s balance sheet
as lease receivables or loans. At times, other financial institutions participate in the funding of these arrangements. This participation involves a
proportionate transfer of the rights to the assets recognised by the Group. The participating banks have limited recourse to the leased assets andrelated proceeds. Where the Group continues to be exposed to some of the risks of the transferred assets through a derivative or other continuing
involvement, the Group does not derecognise the lease receivable or loan. Instead, the Group recognises an associated liability representing its
obligations to the participating financial institutions.
The tables below set out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities.

Securitisations1,2
2023
2022

Covered bonds
2023
2022

Repurchaseagreements
2023
2022

Structured financearrangements
2023
2022

Consolidated

$m

$m

$m

$m

$m

$m

$m

$m

Current carrying amount of assets transferred

886

1,121

31,18827,57547,55252,75727

36

Carrying amount of associated liabilities

880

1,115

18,223

12,96744,45447,22927

36

Securitisations1,2
2023
2022

Covered bonds
2023
2022

Repurchaseagreements
2023
2022

Structured financearrangements
2023
2022

The Company

$m

$m

$m

$m

$m

$m

$m

$m

Current carrying amount of assets transferred

886

1,121

21,017

17,95342,002

47,846--

Carrying amount of associated liabilities

886

1,121

21,017

17,95340,08042,940

-

-

1.
2.

Does not include transfers to internal structured entities where there are no external investors.
The securitisation noteholders have recourse only to the pool of residential mortgages which have been securitised. The carrying value of securitised assets and the associated liabilities approximates theirfair value.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
29. SUPERANNUATION AND POST EMPLOYMENT BENEFIT OBLIGATIONS
Set out below is a summary of amounts recognised in the Balance Sheet in respect of the defined benefit superannuation schemes:
Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Present value of funded defined benefit obligation

(959)

(930)

(839)

(809)

Defined benefit obligation and scheme assets
Fair value of scheme assets

1,131

1,123

991

988

Net defined benefit asset

172

193

152

179

As represented in the Balance Sheet
Net liabilities arising from defined benefit obligations included in Payables
and other liabilities
Net assets arising from defined benefit obligations included in Other assets

(4)

(6)

(4)

(6)

176

199

156

185

172

193

152

179

11.4

14.8

10.9

14.9

Net defined benefit asset
Weighted average duration of the benefit payments reflected in the defined
benefit obligation (years)

As at the most recent reporting dates of the schemes, the aggregate surplus of net market value of assets over the value of accrued benefits on afunding basis was $53 million (2022: $69 million surplus). In 2023, the Group made defined benefit contributions totalling $2 million(2022: $2 million). It expects to make contributions of approximately $2 million next financial year.

GOVERNANCE OF THE SCHEMES AND FUNDING OF THE DEFINED BENEFIT SECTIONS
The main defined benefit superannuation schemes in which the Group participates operate under trust law and are managed and administered onbehalf of the members in accordance with the terms of the relevant trust deed and rules and all relevant legislation. These schemes have corporate
trustees, which are wholly owned subsidiaries of the Group. The trustees are the legal owners of the assets, which are held separately from the assetsof the Group, and are responsible for setting investment policy and agreeing funding requirements with the employer through the triennial actuarial
valuation process.
The Group has defined benefit arrangements in Australia, Japan, New Zealand, Philippines, Taiwan and United Kingdom. The defined benefit sectionof the ANZ Australian Staff Superannuation Scheme, the ANZ UK Staff Pension Scheme and the ANZ National Retirement Scheme in New Zealand are
the three largest plans. They have been closed to new members since 1987, 2004 and 1991 respectively. None of the schemes had a material deficit,
or surplus, at the last funding valuation. The Group has no present liability under any of the schemes’ trust deeds to fund a deficit (measured on afunding basis). A contingent liability of the Group may arise if any of the schemes were wound up.

RECOGNITION AND MEASUREMENT
Defined benefit superannuation schemes
The Group operates a small number of defined benefit schemes. Independent actuaries calculate the liability and expenses related toproviding benefits to employees under each defined benefit scheme. They use the Projected Unit Credit Method to value the liabilities. Thebalance sheet includes:• a defined benefit liability if the obligation is greater than the fair value of the schemes assets; and• an asset (capped to its recoverable amount) if the fair value of the assets is greater than the obligation.
In each reporting period, the movements in the net defined benefit liability are recognised as follows:• the net movement relating to the current period’s service cost, net interest on the defined benefit liability, past service costs and othercosts (such as the effects of any curtailments and settlements) as operating expenses;• remeasurements of the net defined benefit liability (which comprise actuarial gains and losses and return on scheme assets, excludinginterest income included in net interest) directly in retained earnings through other comprehensive income; and• contributions of the Group directly against the net defined benefit position.
Defined contribution superannuation schemes
The Group operates a number of defined contribution schemes. It also contributes (according to local law, in the various countries in which
it operates) to Government and other plans that have the characteristics of defined contribution plans. The Group’s contributions to theseschemes are recognised as personnel expenses when they are incurred.

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NOTES TO THE FINANCIAL STATEMENTS

29. SUPERANNUATION AND POST EMPLOYMENT BENEFIT OBLIGATIONS (continued)
KEY JUDGEMENTS AND ESTIMATES
The main assumptions we use in valuing defined benefit obligations are listed in the table below. A change to any assumptions, orapplying different assumptions, could have an effect on the Statement of Other Comprehensive Income and Balance Sheet.

Consolidated
Discount rate (% p.a.)2023
1.15-5.62022
1.35-5.45

Future salary increases (% p.a.)2.0-3.5

1.5-3.8

2.9-3.4

3.1-3.5/3.0

Sensitivity analysis
change in significant
assumptions
0.5% increase

Increase/(decrease) in
defined benefit
obligation
2023
$m
(43)

2022
$m
(49)

0.5% increase

34

32

1 year increase

33

40

Future pension indexation
In payment (% p.a.)/In deferment (% p.a.)Life expectancy at age 60 for current pensioners– Males (years)

26.3-28.3

26.2-28.3– Females (years)

29.2-30.2

29.1-30.2

The Company
Discount rate (% p.a.)2023
5.5-5.62022
5.1-5.45

3.5

3.8

In payment (% p.a.)/In deferment (% p.a.)Life expectancy at age 60 for current pensioners– Males (years)

2.9-3.3/2.8

3.1-3.5/3.0

26.3-28.3

26.2-28.3– Females (years)

29.2-30.2

29.1-30.2

Future salary increases (% p.a.)

Sensitivity analysis
change in significant
assumptions
0.5% increase

Increase/(decrease) in
defined benefit
obligation
2023
$m
(38)

2022
$m
(43)

29
29

26
35

Future pension indexation
0.5% increase
1 year increase

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
30. EMPLOYEE SHARE AND OPTION PLANS
On 3 January 2023, ANZBGL established, by a scheme of arrangement, a non-operating holding company, ANZGHL, as the new listed parent holding
company of the ANZ Group. There is no impact to employee equity (deferred shares, deferred share rights, restricted rights and performance rights) as
a result of the Restructure.
ANZ operates a number of employee share and option schemes under the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan
which are operated by the Company’s ultimate parent, ANZGHL. These are Group share based payment arrangements under which shares in ANZGHL(ANZ shares) are allocated or granted to employees of the Group.

ANZ EMPLOYEE SHARE ACQUISITION PLAN
ANZ Employee Share Acquisition Plan schemes that operated during 2023 and 2022 were the Deferred Share Plan and the Variable Pay to Shares (VPS)
Offer. The ANZ Incentive Plan (ANZIP) (the variable remuneration plan operating across ANZ) has Short Term Variable Remuneration or Variable
Remuneration delivered under the Deferred Share Plan or ANZ Share Option Plan for eligible employees.
Deferred Share Plani) ANZ Incentive Plan (ANZIP) – Short term Variable Remuneration (STVR) and Variable Remuneration (VR) – deferred sharesAward TypeSTVR (deferred shares)

Eligibility

Chief Executive Officer (CEO), Group Executive Committee (ExCo) and Group
General Manager Internal Audit (GGM IA)1.

All other employees (excluding
select roles in the United Kingdom(UK)/China2)

Financial Year (FY) of
grant

2022 Performance andRemuneration Review (PRR): granted
in FY232021 PRR: granted in FY22

2022 and 2021 PRR: granted in FY23
& FY22Grant approach

50% of the CEO, ExCo and GGM IA’s
Short Term Variable Remuneration(STVR) deferred as shares.

50% of the CEO’s STVR, 25% of ExCo’s
Variable Remuneration (VR) (except
for the Chief Risk Officer (CRO)), and
33% of the CRO and GGM IA’s VR,
deferred as shares.

Conditions

Deferred over years two and three, where year 1 includes the performance
period (i.e., 1 October to 30 September). Granted in late November.

Allocation value

Deferred shares granted based on
the Volume Weighted Average Price(VWAP) of ANZ shares traded on the
ASX in the five trading days leading
up to and including 1 October.

STVR/VR historical (deferred shares)

Historical grants: on foot during FY23
& FY22VR (deferred shares)

Historical grants: on foot during FY23
& FY22
If VR is at or exceeds AUD 100,000,
then 60% of total VR amount isdeferred as shares.

Deferred over years two, three andfour, where year 1 includes theperformance period. Granted in lateNovember.

Deferred shares granted based on the VWAP of ANZ shares traded on the
ASX in the five trading days leading up to and including the date of grant.

1.

All Banking Executive Accountability Regime (BEAR) Accountable Executives.

2.

Specific deferral arrangements also exist under ANZIP for roles defined as UK Material Risk Takers (MRTs) and China MRTs, in line with local regulatory requirements.

ii) Exceptional circumstances
Remuneration
foregone

In exceptional circumstances, we grant deferred shares to certain employees when they start with ANZ tocompensate them for remuneration they have forgone from their previous employer. The vesting period generallyaligns with the remaining vesting period of the remuneration they have forgone, and therefore varies between
grants.

Retention

We may grant deferred shares to high performing employees who are regarded as a significant retention risk to ANZ.

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NOTES TO THE FINANCIAL STATEMENTS

30. EMPLOYEE SHARE AND OPTION PLANS (continued)iii) Further information
Cessation

Unless the Board1 decides otherwise, employees forfeit their unvested deferred shares if they resign, are terminatedon notice, or are dismissed for serious misconduct. The deferred shares may be held in trust beyond the deferral
period.

Dividends

Dividends are reinvested in the Dividend Reinvestment Plan.

Instrument

Deferred share rights may be granted instead of deferred shares in some countries as locally appropriate (seedeferred share rights section).

Expensing value (fairvalue)We expense the fair value of deferred shares on a straight-line basis over the relevant vesting period and we
recognise the expense as a share-based compensation expense with a corresponding increase in equity. Deferredshares are expensed based on the one-day VWAP at the date of grant.

2023 and 2022 grants

During the 2023 year, we granted 2,244,181 deferred shares (2022: 1,971,715) with a weighted average allocation
value of $24.37 (2022: $27.52).

Downward adjustment

Deferred shares remain at risk and the Board has the discretion to adjust the number of deferred shares downwards,
including to zero at any time before the vesting date (malus), and limited to select employees2, recovery post vesting(i.e., clawback). ANZ’s downward adjustment provisions are detailed in section 7.3 of the 2023 Remuneration Report.
Board discretion was not exercised to apply malus or clawback to any deferred shares in 2023 (2022: nil).

1.
2.

References to ‘the Board’ throughout this note means the Boards of ANZGHL and ANZBGL.
Clawback applies to the CEO, ExCo and GGM IA (for awards granted in 2023 financial year), and to select senior employees in jurisdictions where clawback regulations apply.

Variable Pay to Shares (VPS) Offer
Eligibility, grant
approach andconditions

VPS provides employees in Australia the opportunity to receive up to $1,000 worth of ANZ shares with concessional
tax treatment (where criteria are met). All ANZ shares are held by a custodian or nominee appointed by the Trustee
on the Trustee’s behalf and are restricted for 3 years. During this time employees benefit from dividend payments
which are reinvested through the Dividend Reinvestment Plan (DRP) and have voting entitlements. After the
restriction period has been reached the shares can sold or transferred.

Allocation value

Granted based on the VWAP of ANZ shares traded on the ASX in the five trading days leading up to and including thedate of grant.

Expensing value

Expensed based on the one-day VWAP at the date of grant.

(fair value)2023 grants

During the 2023 year, we granted 55,600 shares on 22 November 2022 at an issue price of $24.46 (no grants weremade in relation to the VPS Offer in the 2022 year).

Expensing of the ANZ Employee Share Acquisition Plan
Expensing value(fair value)

The fair value of shares we granted during 2023 under the Deferred Share Plan and VPS Offer, measured as at the dateof grant of the shares, is $56.5 million (2022: $52.6 million Deferred Share Plan only) based on 2,299,781 shares(2022: 1,971,715 Deferred Share Plan only) at VWAP of $24.57 (2022: $26.69).

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
30. EMPLOYEE SHARE AND OPTION PLANS (continued)
ANZ SHARE OPTION PLAN
Allocation

We may grant selected employees options/rights which entitle them to acquire fully paid ordinary ANZ shares at a
fixed price at the time the options/rights vest. Voting and dividend rights will be attached to the ordinary shares
allocated on exercise of the options/rights.
Each option/right entitles the holder to one ordinary share subject to the terms and conditions imposed on grant.
Exercise price of options, determined in accordance with the rules of the plan, is generally based on the VWAP of theshares traded on the ASX in the week leading up to and including the date of grant. For rights, the exercise price is nil.

Rules

Prior to the exercise of the option/right if ANZ changes its share capital due to a bonus share issue, pro-rata new shareissue or reorganisation the following adjustments are required:• Issue of bonus shares - When the holder exercises their option, they are also entitled to be issued the number ofbonus shares they would have been entitled to had they held the underlying shares at the time of the bonus issue;• Pro-rata share offer - We will adjust the exercise price of the option in the manner set out in the ASX Listing Rules;
and• Reorganisation - In respect of rights, if there is a bonus issue or reorganisation of ANZ’s share capital, then the
Board may adjust the number of rights or the number of underlying shares so that there is no advantage ordisadvantage to the holder.
Holders otherwise have no other entitlements to participate:• in any new issue of ANZ securities before they exercise their options/rights; or• in a share issue of a body corporate other than ANZ (such as a subsidiary).
Any portion of the award which vests may, at the Boards discretion, be satisfied by a cash equivalent payment rather
than shares.

Expensing value(fair value)

We expense the fair value of options/rights on a straight-line basis over the relevant vesting period and we recognise
the expense as a share-based compensation expense with a corresponding increase in equity. Factors considered indetermining the fair value include: the market performance conditions, share price volatility, life of the instrument,
dividend yield, and share price at grant date.

Satisfying vesting

Any portion of the award of options/rights (that have met the applicable time and performance conditions) may besatisfied by a cash equivalent payment rather than shares at Board discretion.
In financial year 2023, all deferred share rights were satisfied through a share allocation, other than 70,231 deferredshare rights (2022: 55,977) for which a cash payment was made.
There were no performance rights (PR) due to vest in financial year 2023, as a result of a change in the performance
period from three years to four years. In financial year 2022, the PR that vested (previously granted in
November/December 2018) were satisfied through a share allocation, other than 24,011 PR for which a cash payment
was made.

Cessation

The provisions that apply if the employee’s employment ends are in section 10.2.3 of the 2023 Remuneration Report.

Downward adjustment

As per Deferred Share Plan.

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NOTES TO THE FINANCIAL STATEMENTS

30. EMPLOYEE SHARE AND OPTION PLANS (continued)
Option Plans that operated during 2023 and 2022
i ) L o n g T e r m V ar i a b l e R e m u n e r a t i o n ( L T V R ) a n d V a r i a b l e R e m u n e r a t i o n ( V R ) - r e s t r i c t e d r i g h t s ( R R ) , p e r f o r ma n c e r i g h t s ( P R ) , a n d d e f e r r e dshare rights (DSR)
Award TypeLTVR (RR & PR)

Eligibility

CEO, ExCo and GGM IA

FY of grant2022 PRR: granted in FY23

1

LTVR / VR historical (PR)ANZIP VR (DSR)

CEO and ExCo

All other employees (excluding
select roles in the UK/China2) incountries where DSR may be
granted instead of deferred shares

1

2021 PRR: granted in FY22
Historical grants: on foot during FY23
& FY222022 and 2021 PRR: granted in FY23
& FY22
Historical grants: on foot during FY23
& FY22Grant approach

50% of the CEO and ExCo’s (except
for the CRO) LTVR was received as RR
and 50% as PR. 100% of the CRO andGGM IA’s LTVR was received as RR.

100% of the CEO’s LTVR and 50% of
ExCo’s VR (except for the CRO who
received 50% VR as DSR instead) was
received as PR.

If VR is at or exceeds AUD 100,000,
then 60% of total VR amount isdeferred.

Conditions

RR and PR provide a right to acquire
one ordinary ANZ share at nil cost –subject to time and performance
conditions.

Awarded at the end of the year
subject to shareholder approval at
AGM for CEO award.

DSR provide a right to acquire one
ordinary ANZ share at nil cost after a
specified vesting period.

• RR: pre-grant assessment (riskbased measures)

PR performance condition tested(relative and absolute TSR hurdles) at
the end of four-year performance
period.

Deferred over years two, three andfour, where year 1 includes theperformance period.

• RR and PR: shareholder approvalat Annual General Meeting (AGM)
for CEO award

The four-year performance period
commenced on 22 November to 21
November four years later.

Awarded subject to:

Performance condition tested at endof four-year performance period:• RR: pre-vest assessment (riskbased measures)

The deferral period is four years.
Further details are provided in section
5.2.3a of the 2021 Remuneration
Report.

• PR: relative and absolute Total
Shareholder Return (TSR) hurdles
Deferral period3 = four-year
performance period (commencing 1
October) + holding period (which
commences the day after end of
performance period and finishes on
the 4th, 5th or 6th anniversary of grants(CEO only for year 6)).
Further details provided in section
7.2 of the 2023 Remuneration Report.
Allocation value

Face value of ANZ shares traded on the ASX in the five trading days leading up
to and including 1 October (beginning of the financial year).

The fair value at the date of grant isused to determine the number of
DSR to be allocated and is also used
for expensing purposes. The fairvalue is adjusted for the absence ofdividends during the vesting period.

1.

All BEAR Accountable Executives.

2.

Specific deferral arrangements also exist under ANZIP for roles defined as UK MRTs and China MRTs, in line with local regulatory requirements.

3.

A dividend equivalent payment (DEP) is paid in cash at the end of the relevant deferral period, but is only made to the extent that all or part of the underlying rights meet the relevant performance
condition and vest to the individual. Dividend equivalents accrue over the full deferral period for RR, and only during the holding period for PR.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
30. EMPLOYEE SHARE AND OPTION PLANS (continued)
Award TypeLTVR (RR & PR)

LTVR / VR historical (PR)

Allocation timing

LTVR awarded around late November/December (subject to shareholder
approval for CEO).

2023 grants

During 2023, we granted 393,419 RR
and 325,880 PR (2022: 542,747 PR).

During 2023, we granted 2,386,278
DSR (no performance hurdles)(2022: 2,576,907).

Downward adjustment

Board discretion was not exercised to apply malus or clawback to any RR or PR
in 2023 (2022: nil PR).

Board discretion was not exercised
to apply malus or clawback to any
deferred share rights in 2023
(2022: nil).

Start of FY

ANZIP VR (DSR)
Granted in late November.

End of FYii) Exceptional circumstance s
Remuneration forgone
Retention

As per Deferred Share Plan in countries where DSR may be granted instead of deferred shares.

Options, Deferred Share Rights, Restricted Rights and Performance Rights on Issue
As at 10 November 2023, there were 396 holders of 4,839,042 DSR on issue, 10 holders of 362,991 RR on issue and 10 holders of 1,510,080 PR on issue.
Options/Rights Movements
This table shows the options/rights over unissued ANZ shares and their related weighted average (WA) exercise prices as at the beginning and end of2023 and the movements during 2023:

Number of options/rights
WA exercise priceOpeningbalance
1 Oct 2022

GrantedForfeited1

ExpiredExercised

Closingbalance
30 Sep 2023

6,209,040

3,105,577(428,483)

0(2,166,618)

6,719,516

$0.00

$0.00

$0.00

$0.00

$0.00

$0.00

WA closing share price$24.30WA remaining contractual life

1.9 years

WA exercise price of all exercisable
options/rights outstanding$0.00

Outstanding exercisable options/rights

124,377

This table shows the options/rights over unissued ANZ shares and their related weighted average exercise prices as at the beginning and end of 2022
and the movements during 2022:
Opening
Closingbalancebalance
1 Oct 2021
GrantedForfeited1
ExpiredExercised
30 Sep 2022
Number of options/rights
WA exercise price

6,307,778

3,119,654(747,744)0(2,470,648)

6,209,040

$0.00

$0.00

$0.00

$0.00

$0.00

$0.00

WA closing share price
WA remaining contractual life
WA exercise price of all exercisable
options/rights outstanding
Outstanding exercisable options/rights
1.

Refers to any circumstance where equity can be forfeited (for example on cessation, downward adjustment or performance conditions not met).

All of the shares issued as a result of the exercise of options/rights during 2023 and 2022, were issued at a nil exercise price.

196$25.56
1.9 years$0.00
141,633

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NOTES TO THE FINANCIAL STATEMENTS

30. EMPLOYEE SHARE AND OPTION PLANS (continued)
As at the date of the signing of the Directors’ Report on 10 November 2023:• no options/rights over ordinary shares have been granted since the end of 2023; and• no shares issued as a result of the exercise of options/rights since the end of 2023.
Fair Value Assumptions
When determining the fair value, we apply the standard market techniques for valuation, including Monte Carlo and/or Black Scholes pricing models.
We do so in accordance with the requirements of AASB 2 Share-based Payments. The models take into account early exercise of vested equity, nontransferability and internal/external performance hurdles (if any).
The table below shows the significant assumptions we used as inputs into our fair value calculation of instruments granted during the period. We
present the values as weighted averages, but the specific values we use for each allocation are the ones we use for the fair value calculation.
2023

2022
PerformancerightsDeferred
share
rightsPerformancerights

0.00

0.00

0.00

0.00

24.67

24.54

24.51

26.62

26.92

Expected volatility of ANZ share price (%)

20.0

20.0

20.0

20.0

20.0

Equity term (years)

2.1

6.6

6.6

2.2

6.0

Vesting period (years)

2.0

4.6

4.6

2.1

4.0

Expected life (years)

2.0

4.6

4.6

2.1

4.0

Expected dividend yield (%)

6.25

6.25

6.25

5.50

5.50

Risk free interest rate (%)

3.20

3.36

3.36

0.80

1.25

Fair value ($)

21.81

18.61

9.85

23.71

10.38

Exercise price ($)
Share closing price at grant date ($)
1

1.

Deferred
share
rightsRestricted
rights

0.00

Expected volatility represents a measure of the amount by which ANZ’s share price is expected to fluctuate over the life of the rights. The measure of volatility used in the model is the annualised standard
deviation of the continuously compounded rates of return on the historical share price over a defined period of time preceding the date of grant. This historical average annualised volatility is then used toestimate a reasonable expected volatility over the expected life of the rights.

SATISFYING EQUITY AWARDS
All shares underpinning equity awards may be purchased on market, reallocated or be newly issued shares, or a combination.
The equity we purchased on market during the 2023 financial year (either under the ANZ Employee Share Acquisition Plan and the ANZ Share Option
Plan, or to satisfy options or rights) for all employees amounted to 816,023 shares at an average price of $24.35 per share (2022: 4,230,962 shares at an
average price of $27.57 per share).

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
31. RELATED PARTY DISCLOSURESKEY MANAGEMENT PERSONNEL COMPENSATIONKey Management Personnel (KMP) are Directors of ANZBGL (whether executive directors or otherwise), and those personnel with a key responsibility
for the strategic direction and management of the Group (i.e., members of the Group Executive Committee (ExCo)) who have Banking Executive
Accountability Regime (BEAR) accountability and who report to the Chief Executive Officer (CEO). KMP compensation included within total personnel
expenses in Note 4 Operating Expenses is as follows:
Consolidated
20231
$'000

2022
$'000

21,072

18,294Post-employment benefits

483

394

Other long-term benefits

212

160

Termination benefits

31-

Short-term benefits

Share-based payments

8,303

7,368

Total

30,101

26,2161.

Includes former disclosed KMP until the end of their employment.

KEY MANAGEMENT PERSONNEL LOAN TRANSACTIONS
Loans made to KMP are made in the ordinary course of business and on normal commercial terms and conditions that are no more favourable thanthose given to other employees or customers, including the term of the loan, security required and the interest rate. No amounts have been written
off during the period, or individual provisions raised in respect of these balances. Details of the terms and conditions of lending products can befound on anz.com. The aggregate balance of loans (including credit card balances) made, guaranteed or secured, and undrawn facilities to KMP
including their related parties, were as follows:
Consolidated

The Company

2023
$'000

2022
$'000

2023
$'000

2022
$'000

31,06830,67921,824

17,610

Undrawn facilities

1,582

2,020

1,373

1,822

Interest charged2

1,346

790

523

293

Loans advanced1
1

1.

Balances are as at the balance date (for KMP in office at balance date) or at the date of cessation of former KMP. Comparatives have been amended to include opening balances (at date of commencement)
for new KMP in the current period.

2.

Interest charged is for all KMP’s during the period.

KEY MANAGEMENT PERSONNEL HOLDINGS OF ANZ SECURITIESKMP, including their related parties, held the Company’s subordinated debt and following the Restructure, shares, share rights and options over sharesin the ultimate controlling entity, ANZ Group Holdings Limited directly, indirectly or beneficially as shown below:
Consolidated

Shares, options and rights1
Subordinated debt

1

1.

2023
Number

2022
Number3,478,840

2,842,789

26,14026,140

Balances are as at the balance sheet date (for KMP in office at balance sheet date) or at the date of cessation of former KMP. Comparatives have been amended to include opening balances (at date ofcommencement) for new KMP in the current period.

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NOTES TO THE FINANCIAL STATEMENTS

31. RELATED PARTY DISCLOSURES (continued)
OTHER TRANSACTIONS OF KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIESThe aggregate of deposits of KMP and their related parties with the Group were $41 million (2022: $30 million) and with the Company were $27
million (2022: $21 million).
Other transactions with KMP and their related parties included amounts paid to the Group in respect of investment management service fees,
brokerage and bank fees and charges. The Group has reimbursed KMP for the costs incurred for security and secretarial services associated with theperformance of their duties. These transactions are conducted on normal commercial terms and conditions no more favourable than those given toother employees or customers. Gifts were provided to KMP on retirement amounting to $2,476 during the year (2022: $4,944).

ASSOCIATES
We disclose significant associates in Note 26 Investments in Associates. During the course of the financial year, transactions conducted with all
associates were on terms equivalent to those made on an arm’s length basis.
The Company

Consolidated
2023
$'000

2022
$'000

2023
$'000

2022
$'000

Amounts receivable from associates

13

86,469-18,572

Amounts payable to associates

990

102,042-

101,198

Interest revenue from associates

9,391

5,570

7,860

4,477

Interest expense to associates

353

34

307

26

Other revenue from associates

5,816

14,296

5,816

14,296

Other expenses paid to associates

3,088

11,159

704

8,592

-

72

-

72

42,316

38,692---

94,097-

94,097

Guarantees given to associates
Dividend income from associates
Undrawn facilities

There have been no material guarantees given or received. No amounts receivable from the associates have been written-off during the period, or
individual provisions raised in respect of these balances.

SUBSIDIARIESWe disclose material controlled entities in Note 25 Controlled Entities. During the financial year, subsidiaries conducted transactions with each otherand with associates on terms equivalent to those on an arm’s length basis. As at 30 September 2023, we consider all outstanding amounts on thesetransactions to be fully collectible.
Other intragroup transactions include providing management and administrative services, staff training, data processing facilities, transfer of tax losses,
and the leasing of premises and equipment. The Company also issued letters of comfort and guarantees in respect of certain subsidiaries in thenormal course of business.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
31. RELATED PARTY DISCLOSURES (continued)
RELATED ENTITIESFollowing the Restructure of the Group on 3 January 2023, ANZ Group Holdings Limited became the ultimate controlling entity of the Group and ANZBank HoldCo became the immediate parent entity of ANZBGL. Since the Restructure, a number of transactions have occurred between the Group andrelated parties within the ANZ Group. These transactions include leasing arrangements, funding activities, deposits and tax funding arrangements.
Additionally, as part of the Restructure, certain associate entities of the Group were transferred to ANZ NBH Pty Ltd. Following the transfer, theseinvestments ceased being associates of the Group and became other related parties of the Group.
These transactions are conducted on terms equivalent to those on an arm’s length basis. As at 30 September 2023, we consider all outstanding
amounts on these transactions to be fully recoverable.
The following balances with related ANZ Group entities were outstanding at 30 September 2023:

Amounts due from ultimate controlling entity
Amounts due from other related entities
Amounts due to ultimate controlling entity
Amounts due to other related entities
Deposits from ultimate controlling entity
Deposits from other related entities
Undrawn facilities for other related entities

2023
$m
85
696
1
270
183
111
31

During 2023, the following transactions occurred with related ANZ Group entities:
Dividend paid to parent entity
Interest paid to ultimate controlling entity
Interest paid to other related entities
Interest received from other related entities
Other revenue received from other related entities

2023
$m
4,387
6
26
42
18

In addition, ANZBGL has right-of-use assets of $689 million and lease liabilities of $815 million with ANZ Group Services Pty Ltd at 30 September 2023.
For the year ended 30 September 2023, the associated depreciation on the right-of-use assets was $36 million and interest paid on the lease liabilities
was $15 million (the interest paid on lease liabilities has been included in the table above within interest paid to other related entities).

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NOTES TO THE FINANCIAL STATEMENTS

32. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETSCREDIT RELATED COMMITMENTS AND CONTINGENCIES
Consolidated

The Company

2023
$m

2022
$m

2023
$m

2022
$m

Undrawn facilities

240,711

236,051

206,405

201,204

Guarantees and letters of credit

23,55623,72920,816

21,557

Contract amount of:

Performance related contingencies

26,61526,03625,891

24,634

Total

290,882

285,816

253,112247,395

UNDRAWN FACILITIESThe majority of undrawn facilities are subject to customers maintaining specific credit and other requirements or conditions. Many of these facilities
are expected to be only partially used, and others may never be used at all. As such, the total of the nominal principal amounts is not necessarily
representative of future liquidity risks or future cash requirements. Based on the earliest date on which the Group or the Company may be required topay, the full amount of undrawn facilities for the Group and the Company mature within 12 months.
GUARANTEES, LETTERS OF CREDIT AND PERFORMANCE RELATED CONTINGENCIES
Guarantees, letters of credit and performance related contingencies relate to transactions that the Group has entered into as principal – including
guarantees, standby letters of credit and documentary letters of credit.
Documentary letters of credit involve the Group issuing letters of credit guaranteeing payment in favour of an exporter. They are secured against anunderlying shipment of goods or backed by a confirmatory letter of credit from another bank.
Performance-related contingencies are liabilities that oblige the Group to make payments to a third party if the customer fails to fulfil its nonmonetary obligations under the contract.
To reflect the risk associated with these transactions, we apply the same credit origination, portfolio management and collateral requirements that weapply to loans. The contract amount represents the maximum potential amount that we could lose if the counterparty fails to meet its financial
obligations. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements. Basedon the earliest date on which the Group or the Company may be required to pay, the full amount of guarantees and letters of credit and performancerelated contingencies for the Group and the Company mature within 12 months.

OTHER CONTINGENT LIABILITIESThere are outstanding court proceedings, claims and possible claims for and against the Group. Where relevant, expert legal advice has been obtained
and, in the light of such advice, provisions (refer to Note 22 Other Provisions) and/or disclosures as deemed appropriate have been made. In someinstances we have not disclosed the estimated financial impact of the individual items either because it is not practicable to do so or because suchdisclosure may prejudice the interests of the Group.
A description of contingent liabilities and contingent assets as at 30 September 2023 is set out below.
REGULATORY AND CUSTOMER EXPOSURESThe Group regularly engages with its regulators in relation to regulatory investigations, surveillance and reviews, reportable situations, civil
enforcement actions (whether by court action or otherwise), formal and informal inquiries and regulatory supervisory activities in Australia andglobally. The Group has received various notices and requests for information from its regulators as part of both industry-wide and Group-specificreviews and has also made disclosures to its regulators at its own instigation. The nature of these interactions can be wide ranging and, for example,
include or have included in recent years a range of matters including responsible lending practices, regulated lending requirements, productsuitability and distribution, interest and fees and the entitlement to charge them, customer remediation, wealth advice, insurance distribution, pricing,competition, conduct in financial markets and financial transactions, capital market transactions, anti-money laundering and counter-terrorism
financing obligations, privacy obligations and information security, business continuity management, reporting and disclosure obligations andproduct disclosure documentation. There may be exposures to customers which are additional to any regulatory exposures. These could include classactions, individual claims or customer remediation or compensation activities. The outcomes and total costs associated with such reviews andpossible exposures remain uncertain.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
32. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)
OTHER CONTINGENT LIABILITIES (continued)
SOUTH AFRICAN RATE ACTION
In February 2017, the South African Competition Commission commenced proceedings against local and international banks including the Company
alleging breaches of the cartel provisions of the South African Competition Act in respect of trading in the South African rand. The potential civil
penalty or other financial impact is uncertain.
CAPITAL RAISING ACTION
In September 2018, the Australian Securities and Investments Commission (ASIC) commenced civil penalty proceedings against the Company alleging
failure to comply with continuous disclosure obligations in connection with the Company’s August 2015 underwritten institutional share placement.
In October 2023, the Federal Court of Australia found that the Company should have notified the ASX of the joint lead managers’ take-up ofplacement shares. No order has yet been made in respect of payment of legal costs or the amount of a civil penalty. The maximum penalty is $1
million.
ESANDA DEALER CAR LOAN LITIGATIONIn August 2020, a class action was brought against the Company alleging unfair conduct, misleading or deceptive conduct and equitable mistake inrelation to the use of flex commissions in dealer arranged Esanda car loans. The Company is defending the allegations.
ONEPATH SUPERANNUATION LITIGATIONIn December 2020, a class action was brought against OnePath Custodians, OnePath Life and the Company alleging that OnePath Custodiansbreached its obligations under superannuation legislation, and its duties as trustee, in respect of superannuation investments and fees. The claim also
alleges that the Company was involved in some of OnePath Custodians’ investment breaches. The Company is defending the allegations.
NEW ZEALAND LOAN INFORMATION LITIGATIONIn September 2021, a representative proceeding was brought against ANZ Bank New Zealand Limited, alleging breaches of disclosure requirements
under consumer credit legislation in respect of variation letters sent to certain loan customers. ANZ Bank New Zealand Limited is defending theallegations.
CREDIT CARDS LITIGATIONIn November 2021, a class action was brought against the Company alleging that certain interest terms in credit card contracts were unfair contract
terms and that it was unconscionable for the Company to rely on them. The Company is defending the allegations.
ROYAL COMMISSION
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released its final report on 4 February 2019.
Following the Royal Commission there have been, and continue to be, additional costs and further exposures, including exposures associated withfurther regulator activity or potential customer exposures such as class actions, individual claims or customer remediation or compensation activities.
The outcomes and total costs associated with these possible exposures remain uncertain.
SECURITY RECOVERY ACTIONS
Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets. These claims will bedefended.
WARRANTIES, INDEMNITIES AND PERFORMANCE MANAGEMENT FEESThe Group has provided warranties, indemnities and other commitments in favour of the purchaser and other persons in connection with various
disposals of businesses and assets and other transactions, covering a range of matters and risks. It is exposed to claims under those warranties,
indemnities and commitments, some of which are currently active. The outcomes and total costs associated with these exposures remain uncertain.
The Group has entered an arrangement to pay performance management fees to external fund managers in the event predetermined performance
criteria are satisfied in relation to certain Group investments. The satisfaction of the performance criteria and associated performance management fee
remains uncertain.

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NOTES TO THE FINANCIAL STATEMENTS

32. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)
OTHER CONTINGENT LIABILITIES (continued)
CLEARING AND SETTLEMENT OBLIGATIONS
Certain group companies have a commitment to comply with rules governing various clearing and settlement arrangements which could result in a
credit risk exposure and loss if another member institution fails to settle its payment clearing activities. The Group’s potential exposure arising fromthese arrangements is unquantifiable in advance.
Certain group companies hold memberships of central clearing houses, including ASX Clear (Futures), London Clearing House (LCH), SwapClear and
RepoClear, Korea Exchange (KRX), Hong Kong Exchange (HKEX), Clearing Corporation of India and the Shanghai Clearing House. These memberships
allow the relevant group company to centrally clear derivative instruments in line with cross-border regulatory requirements. Common to all of thesememberships is the requirement for the relevant group company to make default fund contributions. In the event of a default by another member,the relevant group company could potentially be required to commit additional default fund contributions which are unquantifiable in advance.
PARENT ENTITY GUARANTEES
Certain group companies have issued letters of comfort and guarantees in respect of certain subsidiaries in the normal course of business. Under
these letters and guarantees, the issuing entity undertakes to ensure that those subsidiaries continue to meet their financial obligations, subject tocertain conditions including that the subsidiary remains a controlled entity.
SALE OF GRINDLAYS BUSINESSOn 31 July 2000, the Company completed the sale to Standard Chartered Bank (SCB) of ANZ Grindlays Bank Limited (Grindlays) and certain otherbusinesses. The Company provided warranties and indemnities relating to those businesses.
The indemnified matters include civil penalty proceedings and criminal prosecutions brought by Indian authorities against Grindlays and certain of its
officers, in relation to certain transactions conducted in 1991 that are alleged to have breached the Foreign Exchange Regulation Act, 1973. Civil
penalties were imposed in 2007 which are the subject of appeals. The criminal prosecutions are being defended.

CONTINGENT ASSETSNATIONAL HOUSING BANKThe Company is pursuing recovery of the proceeds of certain disputed cheques which were credited to the account of a former Grindlays customer inthe early 1990s.
The disputed cheques were drawn on the National Housing Bank (NHB) in India. Proceedings between Grindlays and NHB concerning the proceeds ofthe cheques were resolved in early 2002.
Recovery is now being pursued from the estate of the Grindlays customer who received the cheque proceeds. Any amounts recovered are to beshared between the Company and NHB.

203

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Notes to the financial statements (continued)

ANZ 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS (continued)
33. AUDITOR FEES
Consolidated

The Company

2023
$’000

2022
$’000

2023
$’000

2022
$’000

Audit or review of financial reports1

9,567

8,217

9,134

7,726

Audit-related services

3,882

6,037

3,808

5,956

10

8
14,262

10

13,45912,952

8
13,690

Audit or review of financial reports

6,157

5,808

1,994

2,033

Audit-related services

1,933

1,459

911

831

95

-

-

-

Total

8,185

7,267

2,905

2,864

Total auditor fees

21,644

21,52915,857

16,554

KPMG Australia
2

Non-audit services

3

Total4
Overseas related practices of KPMG Australia
2

Non-audit services3

1.

Includes audit fees paid on behalf of other entities outside the Group.
2.
Group audit-related services comprise prudential and regulatory services of $4.11 million (2022: $6.26 million), comfort letters $0.57 million (2022: $0.52 million) and other services $1.14 million (2022: $0. 71
million). Company audit-related services comprise prudential and regulatory services of $3.69 million (2022: $5.90 million), comfort letters $0.53 million (2022: $0.48 million) and other services $0.50 million(2022: $0.41 million).
3.

The nature of non-audit services for the Group and the Company includes methodology, procedural and administrative reviews. Further details are provided in the Directors’ Report.

4.

Inclusive of goods and services tax.

The Group’s Policy allows KPMG Australia or any of its related practices to provide assurance and other audit-related services that, while outside thescope of the statutory audit, are consistent with the role of an external auditor. These include regulatory and prudential reviews requested byregulators such as APRA. Any other services that are not audit or audit-related services are non-audit services. The Policy allows certain non-audit
services to be provided where the service would not contravene auditor independence requirements. KPMG Australia or any of its related practices
may not provide services that are perceived to be in conflict with the role of the external auditor or breach auditor independence. These include
consulting advice and subcontracting of operational activities normally undertaken by management, and engagements where the external auditor
may ultimately be required to express an opinion on its own work.

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NOTES TO THE FINANCIAL STATEMENTS

34. PENDING ORGANISATIONAL CHANGES IMPACTING FUTURE REPORTING PERIODS
Suncorp Bank Acquisition
On 18 July 2022, the ANZ Group announced an agreement to purchase 100% of the shares in SBGH Limited, the immediate non-operating holding
company of Suncorp Bank. The acquisition was subject to Australian Competition and Consumer Commission (ACCC) authorisation or approval. The
ACCC declined to grant authorisation for this acquisition in August 2023 and this decision is currently subject to review by the Australian Competition
Tribunal. In addition, the acquisition remains subject to satisfaction of certain conditions, including Federal Treasurer approval and certain
amendments to the State Financial Institutions and Metway Merger Act 1996 (QLD). ANZBGL will also have a termination right under the Suncorp
Bank Sale Agreement if APRA issues a written communication to ANZBGL under or in connection with APS 222 Associations with Related Entities tothe effect that ANZBGL must not proceed with completion of the acquisition. Assuming these conditions are satisfied, and merger approval is granted,
it is expected to occur in mid-calendar year 2024.

35. EVENTS SINCE THE END OF THE FINANCIAL YEAR
There have been no significant events from 30 September 2023 to the date of signing this report.

205

CONSOLIDATED GROUP DIRECTORS’ DECLARATION
Directors’ Declaration
The Directors of Australia and New Zealand Banking Group Limited declare that:a) in the Directors’ opinion, the financial statements and notes of the Company and the Consolidated Entity are in accordance with the Corporations
Act 2001, including:i)

section 296, that they comply with the Australian Accounting Standards and any further requirements of the Corporations Regulations 2001;
andii) section 297, that they give a true and fair view of the financial position of the Company and the Consolidated Entity as at 30 September 2023
and of their performance for the year ended on that date; andb) the notes to the financial statements of the Company and the Consolidated Entity include a statement that the financial statements and notes of
the Company and the Consolidated Entity comply with International Financial Reporting Standards; andc) the Directors have been given the declarations required by section 295A of the Corporations Act 2001; andd) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become dueand payable.
Signed in accordance with a resolution of the Directors.

Paul D O’Sullivan
Chairman
10 November 2023

206

Shayne C ElliottManaging Director

NOTES TO THE FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORTTO THE SHAREHOLDER OF AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDREPORT ON THE AUDITS OF THE FINANCIAL REPORTS
OPINIONS
We have audited the consolidated Financial Report of Australia and New Zealand Banking Group Limited (the Group Financial Report). We have also
audited the Financial Report of Australia and New Zealand Banking Group Limited (the Company Financial Report).
In our opinion, each of the accompanying Group Financial Report and Company Financial Report are in accordance with the Corporations Act 2001,
including:• giving a true and fair view of the Group’s and of the Company’s financial position as at 30 September 2023 and of their financial performance forthe year ended on that date; and• complying with Australian Accounting Standards and the Corporations Regulations 2001.
The respective Financial Report comprises:• Balance sheets as at 30 September 2023
• Income statements, statements of comprehensive income, statements of changes in equity, and cash flow statements for the year then ended• Notes including a summary of significant accounting policies• Directors’ Declaration.
The Group consists of Australia and New Zealand Banking Group Limited and the entities it controlled at the year-end or from time to time during thefinancial year.

BASIS FOR OPINIONS
We conducted our audits in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audits of the Financial Reports section of ourreport.
We are independent of the Group and Company in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants ((including Independence Standards) (the Code) thatare relevant to our audits of the Financial Reports in Australia. We have fulfilled our other ethical responsibilities in accordance with theserequirements.

KEY AUDIT MATTERS
The Key Audit Matters we identified for the Group and Company are:• Allowance for expected credit losses• Subjective and complex valuation of financial instruments held at fair value• Organisational restructure• IT systems and controls.
The additional Key Audit Matter we identified for the Group is:• Carrying value of investment in PT Bank Pan Indonesia (PT Panin).
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our respective audits of the Financial Reports ofthe current period.
These matters were addressed in the context of our audits of each of the Financial Reports as a whole, and in forming our opinions thereon, and we
do not provide a separate opinion on these matters.

KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private
English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG
global organisation. Liability limited by a scheme approved under Professional Standards Legislation.

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Independent auditor’s report (continued)

ANZ 2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT (continued)
KEY AUDIT MATTERS (continued)
ALLOWANCE FOR EXPECTED CREDIT LOSSES (Group $4,408m; Company $3,493m)

Refer to the critical accounting estimates and judgements disclosures in relation to the allowance for expected credit losses in Note 13 to the Groupand Company Financial Reports.
The key audit matter
Allowance for expected credit losses (ECL) is a key audit matter due to the significance of the loans and advances balances to the financial statements
and the inherent complexity of the expected credit loss models (ECL models) used to measure ECL allowances. These models are reliant on data andestimates including multiple economic scenarios and key assumptions such as defining a significant increase in credit risk (SICR).
AASB 9 Financial Instruments requires the Group and Company to measure ECLs on a forward-looking basis reflecting a range of economic conditions.
Post-model adjustments are considered to address known ECL model limitations or emerging trends in the loan portfolios. We exercise significant
judgement in challenging the economic scenarios and the judgmental post-model adjustments.
Additional subjectivity and judgement is required due to the heightened uncertainty associated with the impact of the economic outlook and its
impact on customers, increasing our audit effort thereon.
SICR identification, such as a decrease in customer credit rating (CCR), is a key judgement within the ECL methodology, as this criterion determines if aforward-looking 12 month or lifetime allowance is recorded.
Additionally, allowances for individually assessed wholesale loans exceeding specific thresholds are assessed. We exercise significant judgement inchallenging the assessment of specific allowances based on the expected future cash repayments and estimated proceeds from the value of thecollateral held in respect of the loans.
How the matter was addressed in our audits
Our audit procedures for the allowance for ECL included assessing significant accounting policies against the requirements of the accounting
standard. Additionally, our procedures included testing key controls in relation to:• The ECL model governance and validation processes which involved assessment of model performance;• The assessment and approval of the forward-looking macroeconomic assumptions and scenario weightings through challenge applied by internal
governance processes;• Reconciliation of the data used in the ECL calculation process to gross balances recorded within the general ledger as well as source systems;• Customer credit rating (CCR) for wholesale loans (larger customer exposures are monitored individually). This covered elements such as: approvalof new lending facilities against lending policies, monitoring of counterparty credit quality against exposure criteria for internal factors specific tothe counterparty or external macroeconomic factors, and accuracy and timeliness of CCR and security indicator (SI) assessments against lending
policies and regulatory requirements;• IT system controls which record retail loans lending arrears, group exposures into delinquency buckets, and re-calculate individual allowances. We
tested automated calculation and change management controls and evaluated the oversight of the portfolios, with a focus on controls overdelinquency monitoring.
We tested relevant General Information Technology Controls (GITCs) in relation to the key IT applications used in measuring ECL allowances asdetailed in the IT Systems and Controls key audit matter below.
In addition to controls testing, our procedures included:• Reperforming a sample of credit assessments for wholesale loans controlled by workout and recovery teams assessed as higher risk or impaired,and a sample of other loans, focusing on larger exposures assessed by the Group and Company as showing signs of deterioration, or in areas of
emerging risk.
• For each loan sampled, we challenged the Group and Company’s assessment of CCR and SI using the customer’s financial position, the valuation of
security, and, where relevant, the risk of stranded assets, to inform our overall assessment of loan recoverability and the impact on the credit
allowance. To do this, we used the information on the Group and Company’s loan file and discussed the facts and circumstances of the case withthe loan officer.
• Exercising our judgement, our procedures included using our understanding of relevant industries and the macroeconomic environment andcomparing data and assumptions used by the Group and Company in recoverability assessments to externally sourced evidence, such ascommodity prices, publicly available audited financial statements and comparable external valuations of collateral held. Where relevant, we
assessed the forecast timing of future cash flows in the context of underlying valuations and approved business plans and challenged key
assumptions in the valuations;• Obtaining an understanding of the Group and Company’s processes to determine ECL allowances, evaluating the ECL model methodologies
against established market practices and criteria in the accounting standards;• Working with our credit risk specialists, we assessed the accuracy of the ECL model estimates by re-performing, for a sample of loans, thecalculation of the ECL allowance using our independently derived calculation tools and comparing this to the amount recorded by the Group andCompany;208

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NOTES TO THE FINANCIAL STATEMENTS

KEY AUDIT MATTERS (continued)• Working with our economic specialists, we challenged the forward-looking macroeconomic assumptions and scenarios incorporated in the ECL
models. We compared the forecast GDP, unemployment rates, CPI and property price indices to relevant publicly available macroeconomic
information, and considered other known variables and information obtained through our other audit procedures to identify contradictoryindicators;• Testing the implementation of SICR methodology by re-performing the staging calculation for a sample of loans taking into consideration
movements in the CCR from loan origination and comparing our result to actual staging applied on an individual account level in the ECL model;• Assessing the accuracy of the data used in the ECL models by checking a sample of data fields such as account balance and CCR to relevant source
systems.
We challenged key assumptions used in post-model adjustments. This included:• Assessing post-model adjustments against ECL model and data deficiencies identified in model validation processes, particularly in light of thesignificant volatility in economic scenarios;• Comparing underlying data used in concentration risk and economic cycle allowances to underlying loan portfolio characteristics of recent loss
experience, current market conditions and specific risks in the loan portfolios;• Assessing certain post-model adjustments identified against internal and external information;• Assessing the completeness of post-model adjustments by checking the consistency of risks we identified in the loan portfolios against the Groupand Company’s assessment.
• Assessing the appropriateness of the Group and Company’s disclosures in the Financial Reports using our understanding obtained from our testing
and against the requirements of the accounting standards.
SUBJECTIVE AND COMPLEX VALUATION OF FINANCIAL INSTRUMENTS HELD AT FAIR VALUE:
GROUP- FAIR VALUE OF LEVEL 3 ASSET POSITIONS $1,692m- FAIR VALUE OF LEVEL 2 ASSET POSITIONS $135,711m- FAIR VALUE OF LEVEL 3 LIABILITY POSITIONS $23m
- FAIR VALUE OF LEVEL 2 LIABILITY POSITIONS $92,892m
COMPANY- FAIR VALUE OF LEVEL 3 ASSET POSITIONS $1,691m- FAIR VALUE OF LEVEL 2 ASSET POSITIONS $129,446m- FAIR VALUE OF LEVEL 3 LIABILITY POSITIONS $14m
- FAIR VALUE OF LEVEL 2 LIABILITY POSITIONS $91,405m

Refer to the critical accounting estimates, judgements and disclosures of fair values in Note 18 to the Group and Company Financial Reports.
The key audit matter
The fair value of the Group and Company’s Level 3 and 2 financial instruments is determined by the application of valuation techniques which often
involve the exercise of judgement and the use of assumptions and estimates.
In assessing this Key Audit Matter, we involved our valuation specialists to supplement our senior team members who understand the methods,
assumptions and data relevant to their valuation of Financial Instruments.
The valuation of Level 3 and Level 2 financial instruments held at fair value is a Key Audit Matter due to:• The high degree of estimation uncertainty and potentially significant range of reasonable outcomes associated with the valuation of financial
instruments classified as Level 3 where significant pricing inputs used in the valuation methodology and models are not observable.
• The complexity associated with the valuation methodology and models of certain more complex Level 2 financial instruments including credit
valuation adjustment (CVA) and funding valuation adjustment (FVA) leading to an increase in subjectivity and estimation uncertainty.
These factors increased the level of judgement applied by us and our audit effort thereon.

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Independent auditor’s report (continued)

ANZ 2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT (continued)
KEY AUDIT MATTERS (continued)
How the matter was addressed in our audits
Our audit procedures in relation to the valuation of financial instruments held at fair value included:• Performing an assessment of the population of financial instruments held at fair value by the Group and Company to identify portfolios with ahigher risk of misstatement arising from significant judgements over valuation either due to unobservable inputs or complex models.
• Testing the design and operating effectiveness of key controls relating specifically to these financial instruments, including those in relation to:• Independent Price Verification (IPV), including completeness of portfolios and valuation inputs subject to IPV;• model validation at inception and periodically, including assessment of model limitation and assumptions;• review, approval and challenge of daily profit and loss by a control function;• collateral management process, including review and approval of margin reconciliations with clearing houses; and• review and approval of CVA and FVA, including exit price and portfolio level adjustments.
• In relation to the subjective valuation of complex Level 2 and Level 3 financial instruments, with our valuation specialists:• Assessing the reasonableness of key inputs and assumptions using comparable data in the market and available alternatives;• Comparing the Group and Company’s valuation methodology to industry practice and the criteria in the accounting standards; and• Independently revaluing a selection of financial instruments and CVA/FVA. This involved sourcing independent inputs from comparable data inthe market and available alternatives. We challenged and assessed any differences.
• Assessing the appropriateness of the Group and Company’s disclosures in the Financial Reports using our understanding obtained from our testing
and against the requirements of the accounting standards.
CARRYING VALUE OF INVESTMENT IN PT PANIN ($1,440m)

Refer to the critical accounting estimates, judgements and disclosures in Note 26 to the Group Financial Report.
The key audit matter
The carrying value of the Group’s investment in PT Panin is a key audit matter due to the impairment indicators identified at the reporting date andthe assessment of the investment’s recoverable amount involving judgement and the consideration of valuation models given historical volatility inthe market price of the shares. Impairment has been recognised in prior periods. We involved our valuation specialists to supplement our senior teammembers in assessing this key audit matter.
How the matter was addressed in our audit
Working with our valuation specialists, our procedures included:• Considering the appropriateness of the recoverable amount assessment used to conclude the carrying value of the investment is supportable;• Considering the appropriateness of the value in use valuation method applied against the requirements of the accounting standards. This
included:• Assessing the integrity of the models used, including the accuracy of the underlying calculation formulas;• Assessing the key assumptions used in the models, such as, discount rates, forecast earnings and terminal growth rates by comparing toexternal observable metrics, historical experience, our knowledge of the markets and current market practice;• Independently developing discount rates range considered comparable using publicly available market data for comparable entities, adjusted
for factors specific to the investments and the markets and industry they operate in;• Comparing the forecast earnings contained in the model to broker consensus reports and released financial results;• Assessing the accuracy of previous forecasts to inform our evaluation of current forecasts incorporated in the model;• Considering the sensitivity of the models by varying key assumptions, such as, discount rates, forecast cash flows and terminal growth rates,
within a reasonable possible range. We did this to identify those assumptions at higher risk of bias or inconsistency in application and to focus
our further procedures.
• Assessing the recoverable amount at the reporting date against the recoverable amount of the investment when it was last impaired to criticallyassess potential reversal of previous impairment losses;• Assessing the Group’s disclosures in the Financial Report using our understanding obtained from our testing and against the requirements of theaccounting standards.

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NOTES TO THE FINANCIAL STATEMENTS

KEY AUDIT MATTERS (continued)
ORGANISATIONAL RESTRUCTURE

Refer to Note 1 to the Group and Company Financial Reports.
The key audit matterOn 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established a non-operating holding company, ANZ Group Holdings
Limited (ANZGHL). ANZGHL became the newly listed parent company of the Group. The Group also implemented a restructure to separate thebanking and certain non-banking businesses into two distinct groups: ANZ Bank Group and ANZ Non-Bank Group.
The organisational restructure is a key audit matter due to:• The complexities involved in the implementation of the restructure steps plan as outlined in the Restructure Deed;• Evaluating the accounting treatment associated with the establishment of ANZGHL as the newly listed parent entity in accordance with AASB 3
Business Combinations; and• The various considerations and implications arising from the transfer of assets out of ANZ Bank Group and into ANZ Non-Bank Group and theservice company, including the evaluation of the accounting policy choice available under common control transactions.
How the matter was addressed in our audits
Our audit procedures in relation to the organisational restructure included:• Assessing the accounting considerations involved in the establishment of ANZGHL and the acquisition of ANZBGL shares from existing
shareholders to create the newly listed parent entity, in accordance with AASB 3 Business Combinations;• Evaluating, with the assistance of our transaction services specialists, the Restructure Deed and identifying and assessing the accounting
implications inherent in each restructure step;• Testing the transfer of business assets from ANZ Bank Group to ANZ Non-Bank Group and the separate service company for completeness andaccuracy by comparing transfers to the Restructure Deed. This included challenging and evaluating recognition and measurement criteria in
accordance with accounting policies selected;• Checking the gain or loss on transfer and its basis of presentation against the Group’s selected accounting policy choice;• Working with our tax specialists to evaluate the taxation considerations of the formation of a new tax consolidated group and potential stamp duty
implications of the restructure steps; and• Assessing the appropriateness of the Group’s disclosures in the Financial Report using our understanding obtained from our testing and against
the requirements of the accounting standards.
IT SYSTEMS AND CONTROLSThe key audit matter
As a major Australian bank, the businesses utilise many complex, interdependent Information Technology (IT) systems to process and record a highvolume of transactions. The controls over access, changes to and operation of IT systems are key to the recording of financial information and the
preparation of financial reports which provide a true and fair view of the Group and Company’s financial positions and performance.
The IT systems and controls, as they impact the financial recording and reporting of transactions, is a key audit matter as our audit approaches could
significantly differ depending on the effective operation of the IT controls. We work with our IT specialists as a core part of our audit team.
How the matter was addressed in our audits
Our testing focused on the technology control environments for key IT applications (systems) used in processing significant transactions andrecording balances in the general ledgers, and the automated controls embedded within these systems which link the technology-enabled businessprocesses. Our audit procedures included:• Assessing the governance and higher-level controls across the IT environments, including those regarding policy design, policy review andawareness, and IT Risk and cyber security management practices;• Design and operating effectiveness testing of key controls across the user access management lifecycle, including how users are on-boarded,
reviewed for access levels assigned, and removed on a timely basis from key IT applications and supporting infrastructure. We also examined the
management of privileged roles and functions across relevant IT application and the supporting infrastructure;• Design and operating effectiveness testing of key controls for IT change management including authorisation of changes prior to development,
testing performed and approvals prior to migration into the production environment of key IT applications. We assessed user access to releasechanges to IT application production environments and whether access was commensurate with their job responsibilities;

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Australia and New Zealand Banking Group Limited 2023 Annual Report

Independent auditor’s report (continued)

ANZ 2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT (continued)
KEY AUDIT MATTERS (continued)• Design and operating effectiveness testing of key controls used by the technology teams to restrict access to and monitor system batch job
schedules;• Design and operating effectiveness testing of key automated business process controls including those relating to enforcing segregation of duties
to avoid conflicts from inappropriate role combinations within IT applications. Our testing included:• Configurations to perform calculations, mappings and flagging of financial transactions, and automated reconciliation controls (both between
systems and intra-system); and• Data integrity of key system reporting used by us in our audit to select samples and analyse data used to generate financial reporting.
• Where our testing identified design and operating effectiveness matters relating to IT systems or application controls relevant to our audits, we
performed alternative audit procedures, including consideration of mitigating controls.

OTHER INFORMATIONOther Information is financial and non-financial information in Australia and New Zealand Banking Group Limited’s annual reporting which is provided
in addition to the Financial Reports and the Auditor’s Report. The Directors are responsible for the Other Information.
Our opinions on the Financial Reports do not cover the Other Information and, accordingly, we do not express an audit opinion or any form ofassurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audits of the Financial Reports, our responsibility is to read the Other Information. In doing so, we consider whether the Other
Information is materially inconsistent with the Financial Reports or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performedon the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.

RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL REPORTS
The Directors are responsible for:• preparing the Financial Reports that give a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
• implementing necessary internal controls to enable the preparation of a Financial Reports that gives a true and fair view and is free from material
misstatement, whether due to fraud or error• assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting isappropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless theyeither intend to liquidate the Group and Company or to cease operations or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDITS OF THE FINANCIAL REPORTS
Our objective is:• to obtain reasonable assurance about whether each of the Financial Reports as a whole are free from material misstatement, whether due to fraud
or error; and• to issue an Auditor’s Report that includes our opinions.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Reports.
A further description of our responsibilities for the audits of the Financial Reports is located at the Auditing and Assurance Standards Board website at:https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report.

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NOTES TO THE FINANCIAL STATEMENTSREPORT ON THE REMUNERATION REPORTOPINION
In our opinion, the Remuneration Report of Australia and New Zealand Banking Group Limited for the year ended 30 September 2023 complies with
Section 300A of the Corporations Act 2001.

DIRECTORS’ RESPONSIBILITIESThe Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of
the Corporations Act 2001.

OUR RESPONSIBILITIESWe have audited the Remuneration Report included in the Directors’ report for the year ended 30 September 2023.
Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian AuditingStandards.

KPMG

Martin McGrath

Partner

Maria Trinci

Partner

Melbourne
10 November 2023

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Australia and New Zealand Banking Group Limited 2023 Annual Report

GLOSSARY

AASs means Australian AccountingStandards.
AASB means Australian AccountingStandards Board. The term ‘AASB’ iscommonly used when identifying AASs
issued by the AASB.
ADI means Authorised Deposit-taking
Institution as defined by APRA.
ANZ Bank Group means all businesses andentities owned by ANZ BH Pty Ltd, including
ANZBGL and ANZ Bank New Zealand.
ANZ Bank New Zealand means ANZ BankNew Zealand Limited.
ANZBGL means Australia and New Zealand
Banking Group Limited.
ANZBGL Group means ANZBGL and eachof its subsidiaries.
ANZEST means ANZ Employee Share Trust.
ANZGHL means ANZ Group Holdings
Limited.
ANZGHL Group means all businesses
owned by ANZGHL after the Restructure(including ANZ BH Pty Ltd, ANZBGL,ANZ Group Services Pty Ltd and ANZ
NBH Pty Ltd).
ANZ Group means the ANZBGL Grouppre Restructure or the ANZGHL Group
post Restructure.
ANZ Non-Bank Group means all
businesses and entities owned by ANZ NBH
Pty Ltd, including ANZ’s beneficial interestsin the 1835i trusts, non-controlling interestsin the Worldline merchant acquiring joint
venture, and ANZ Group Services Pty Ltd.
ANZ Research – Economics, a business
unit within ANZ, which conducts analysis
of key economic inputs and developments
and assessment of the potential impacts on
the local, regional and global economies.
APRA means Australian Prudential
Regulation Authority.
APS means ADI Prudential Standard.
ASX means Australian Securities Exchange.
AT1 means Additional Tier 1 capital.
Board means ANZBGL Board of Directors.

Cash and cash equivalents comprisecoins, notes, money at call, balances heldwith central banks, liquid settlementbalances (readily convertible to known
amounts of cash which are subject toinsignificant risk of changes in value) andsecurities purchased under agreements toresell (reverse repurchase agreements) inless than three months.

Committed Liquidity Facility (CLF) The
RBA established a CLF to offset the shortageof High-Quality Liquid Assets in Australia. In
September 2021, APRA wrote to ADIs toadvise that APRA and the RBA consider
there to be sufficient HQLA for ADIs to meettheir LCR requirements, and therefore theuse of the CLF should no longer be required
beyond calendar year 2022.

Cash profit is an additional measure of
profit which is prepared on a basis otherthan in accordance with accounting
standards. Cash profit represents ANZ’s
preferred measure of the result of the corebusiness activities of the Group, enabling
readers to assess Group and Divisional
performance against prior periods andagainst peer institutions. To calculate cash
profit, the Group excludes non-core items
from statutory profit as noted below. These
items are calculated consistently period on
period so as not to discriminate between
positive and negative adjustments.

Company means ANZBGL.

Gains and losses are adjusted where they
are significant, or have the potential to besignificant in any one period, and fall into
one of three categories:
1. gains or losses included in earnings
arising from changes in tax, legal or
accounting legislation or other non-core
items not associated with the core
operations of the Group;
2. economic hedging impacts and similaraccounting items that represent timing
differences that will reverse throughearnings in the future; and3. accounting reclassifications between
individual line items that do not impact
reported results, such as credit risk on
impaired derivatives.
Cash profit is not a measure of cash
flow or profit determined on a cash
accounting basis.
Collectively assessed allowance for
expected credit loss represents the
Expected Credit Loss (ECL), which
incorporates forward-looking informationand does not require an actual loss eventto have occurred for a credit loss provision
to be recognised.

Covered bonds are bonds issued by an
ADI to external investors secured against
a pool of the ADI’s assets (the cover pool)assigned to a bankruptcy remote special
purpose entity. The primary assets forming
the cover pool are mortgage loans. The
mortgages remain on the issuer’s balance
sheet. The covered bond holders have dual
recourse to the issuer and the cover poolassets. The mortgages included in the
cover pool cannot be otherwise pledged
or disposed of but may be repurchased
and substituted in order to maintain thecredit quality of the pool. The Groupissues covered bonds as part of its
funding activities.
Credit risk is the risk of financial loss
resulting from the failure of ANZ’s customers
and counterparties to honour or performfully the terms of a loan or contract.
Credit risk weighted assets (CRWA)
represent assets which are weighted for
credit risk according to a set formula asprescribed in APS 112/113.
Customer deposits represent term
deposits, other deposits bearing interest,
deposits not bearing interest and borrowing
corporations’ debt excluding securitisation
deposits.
Funding for Lending Programme (FLP)
refers to three-year funding announced by
the RBNZ in November 2020 and offered to
New Zealand banks, which aimed to lower
the cost of borrowing for New Zealandbusinesses and households.
Gross loans and advances (GLA) is madeup of loans and advances, capitalised
brokerage and other origination costs lessunearned income.

OverviewOperatingenvironment

GovernanceGroup means ANZBGL and each of its
subsidiaries.
Impaired assets are those financial assets
where doubt exists as to whether the fullcontractual amount will be received in atimely manner, or where concessional terms
have been provided because of the financial
difficulties of the customer.
Individually assessed allowance for
expected credit losses is assessed ona case-by-case basis for all individually
managed impaired assets taking into
consideration factors such as the realisablevalue of security (or other credit mitigants),
the likely return available upon liquidation
or bankruptcy, legal uncertainties, estimatedcosts involved in recovery, the market priceof the exposure in secondary markets andthe amount and timing of expected receipts
and recoveries.
Interest rate risk in the banking book
(IRRBB) relates to the potential adverse
impact of changes in market interest rates
on ANZ’s future net interest income. The risk
generally arises from:
1. Repricing and yield curve risk - the risk
to earnings or market value as a result ofchanges in the overall level of interest rates
and/or the relativity of these rates across theyield curve;
2. Basis risk - the risk to earnings or market
value arising from volatility in the interest
margin applicable to banking book items;
and3. Optionality risk - the risk to earnings ormarket value arising from the existenceof stand-alone or embedded options inbanking book items.
Internationally comparable ratios are
ANZ’s interpretation of Basel Calculationof RWA for credit risk regulations (effective
1 Jan 2023) documented in the Basel
Framework and the ‘Australian Banking
Association Basel 3.1 Capital Comparison
Study’ (Mar 2023). This definition is formeasures from March 2023 onwards.
Level 1 in the context of APRA supervision,
ANZBGL consolidated with certain
approved subsidiaries.

Performanceoverview

Remuneration
reportDirectors’
reportLevel 2 in the context of APRA supervision,means consolidated ANZ Bank Group,
excluding insurance and funds
management entities, commercial
non-financial entities and certain
securitisation vehicles.
Level 3 in the context of APRA supervision,means ANZ Group, the conglomerate groupat the widest level.
Net interest margin is net interest
income as a percentage of average interest
earning assets.
Net loans and advances represent grossloans and advances less allowance for
expected credit losses.
Net Stable Funding Ratio (NSFR) is theratio of the amount of available stable
funding (ASF) to the amount of required
stable funding (RSF) defined by APRA. The
amount of ASF is the portion of an ADI
capital and liabilities expected to be areliable source of funds over a one year time
horizon. The amount of RSF is a function of
the liquidity characteristics and residual
maturities of an ADI’s assets and off-balance
sheet activities. ADIs must maintain an NSFR
of at least 100%.
Net tangible assets equal share capitaland reserves attributable to shareholders of
the Company less unamortised intangible
assets (including goodwill and software).
NZX means New Zealand’s Exchange.
OECD means Organisation for Economic
Co-operation and Development.
RBA means Reserve Bank of Australia,
Australia’s central bank.
RBNZ means Reserve Bank of New Zealand,
New Zealand’s central bank.
Regulatory deposits are mandatory
reserve deposits lodged with local
central banks in accordance withstatutory requirements.
Restructure means the restructure of the
ANZ Group, as part of the establishmentof the non-operating holding company,
implemented by the scheme ofarrangement under the Corporations Act
between ANZBGL and shareholders.

Financialreport215

Return on average assets is the profit
attributable to shareholders of theCompany, divided by average total assets.
Return on average ordinary
shareholders’ equity is the profit
attributable to shareholders of theCompany, divided by average ordinary
shareholders’ equity.
Risk weighted assets (RWA) are risk
weighted according to each asset’s inherent
potential for default and what the likely
losses would be in the case of default. In thecase of non-asset backed risks (i.e. market
and operational risk), RWA is determinedby multiplying the capital requirements
for those risks by 12.5.
Settlement balances owed to/by ANZ
represent financial assets and/or liabilities
which are in the course of being settled.
These may include trade dated assets andliabilities, vostro accounts and securities
settlement accounts.
Term Funding Facility (TFF) refers to
three-year funding announced by the RBA
on 19 March 2020 and offered to ADIs in
order to support lending to Australianbusinesses at low cost.
Term Lending Facility (TLF) refers to
three to five-year funding offered by the
RBNZ between May 2020 and July 2021
to promote lending to New Zealandbusinesses.

shareholder.anz.com

Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522.
ANZ’s colour blue is a trade mark of ANZ.

Dated: 10 November 2023

Principal risks and uncertainties faced by Australia and New Zealand Banking Group
Limited (ABN 11 005 357 522) (“ANZBGL” and, together with its subsidiaries, “ANZBGLGroup” or the “Group”) (DTR 4.1.8 R (2)) (“Principal Risks and Uncertainties”)
Introduction
The Group’s activities are subject to risks and uncertainties that can materially andadversely impact its business, business model, operations, results of operations, reputation,
prospects, liquidity, capital resources, financial performance and financial condition(together, the “Group’s Position”). These risks and uncertainties may be financial or nonfinancial and may result from external factors over which the Group may have little or nocontrol. The risks and uncertainties described below are not the only ones that the Groupmay face. Additional risks and uncertainties that the Group is unaware of, or that the Groupcurrently does not consider material, may also become important factors that affect it. If
any of the specified or unspecified risks and uncertainties actually occur (individually orcollectively), the Group’s Position may be materially and adversely affected, with the resultthat the trading price or value of the Group's equity or debt securities could decline andinvestors could lose all or part of their investment.
Risks related to the Group's business activities and industry

1.

Changes in political and economic conditions, particularly in Australia, New Zealand, theAsia Pacific region, the United Kingdom (“UK”), Europe and the United States (the“Relevant Jurisdictions”), may adversely affect the Group’s Position
The Group’s financial performance is influenced by the political, economic and financial
conditions in the countries and regions in which the Group, its customers and its
counterparties carry on business. The Group can give no assurances as to the likely future
conditions in the economies of the Relevant Jurisdictions where the Group has its main
operations, or other jurisdictions in which the Group operates or obtains funding.
The political, economic and financial conditions in the Relevant Jurisdictions may be
impacted by a range of factors including, but not limited to, domestic and international
economic events, the stability of the banking system and any related implications forfunding and capital markets, other changes in financial markets, global supply chain
developments, political developments, pandemics and natural disasters.
Instability in political conditions may result in uncertainty, declines in market liquidity,
increases in volatility in global financial markets and adversely impact economic activity in
the Relevant Jurisdictions, which could adversely affect the Group’s Position. Recent
examples include the conflict in Ukraine, the Israel-Hamas war and the associatedimplementation of economic security-related legislation, sanctions and trade restrictions invarious markets, and heightened tensions between the United States and China.
Although the Group does not operate in and does not currently have any material direct
exposure to Israel, Gaza, Russia or Ukraine, any prolonged market volatility or economic
uncertainty could adversely affect the Group’s Position. Tensions between the United States
and China also have the potential to adversely impact the markets in which the Group
operates and the Group’s Position. These geopolitical issues have led to the implementationof economic security-related legislation and trade restrictions in many markets, including
enhanced inbound and outbound investment screening mechanisms, anti-coercion
instruments, sanctions, export controls and security-related industrial policy.
Inflationary pressure is high in many economies, including in the Relevant Jurisdictions.
Excessively strong demand for goods and services, geopolitical tensions, and global
economic challenges such as supply chain issues, weather conditions in agricultural regions,high energy prices, high food prices and tight labour markets, have contributed to highinflation. The risk of persistent inflation may exacerbate market volatility, further slow
economic growth and increase unemployment, each of which may cause further declines in3

business and investor confidence and increase the risk of customer defaults, which could
adversely affect the Group’s Position.
China is one of Australia’s and New Zealand’s major trading partners and a significant driverof commodity demand and prices in many of the markets in which the Group and its
customers operate. Any heightening of geopolitical tensions and the occurrence of events
that adversely affect China’s economic growth and Australia’s and New Zealand’s economic
relationship with China, including the implementation of additional tariffs and otherprotectionist or economic security-related trade policies, including sanctions, could
adversely affect Australian or New Zealand economic activity, and as a result, could
adversely affect the Group’s Position. Furthermore, if there was a broad-based andsustained economic slowdown in China, the health of the Chinese financial system may be
adversely impacted, which could have negative effects on the global financial system andeconomy. This could result in an economic downturn, counterparties defaulting on their
obligations, and countries introducing capital controls, and could adversely affect theGroup’s Position Refer to risk factor 5 “Changes in the real estate markets in Australia, New
Zealand or other markets where the Group does business may adversely affect the Group’s
Position”.
The stability of banking systems has come under scrutiny in recent times as a result of the
failure of certain banking institutions in the United States. The risk of contagion from thefailure of a bank or other financial institution could materially impact the Group’s ability toreplace maturing liabilities and access funding in a timely and cost effective manner, which
could adversely affect the Group’s Position. Refer to risk factor 13 “Liquidity and funding
risk events may adversely affect the Group’s Position”.
There has been a rise in investor caution across global commercial real estate markets asinvestors are reallocating to other investment classes or waiting for greater certainty withrespect to inflation and interest rates, particularly as a result of weakening sentiment in the
United States and Europe. A global liquidity constraint could compound the effects of
weakening fundamentals on valuations and refinance risk in commercial real estate markets.
Changes in the real estate markets in Australia, New Zealand or other markets where theGroup does business may adversely affect the Group’s Position. Negative developments incommercial real estate markets could lead to increased credit losses from businessinsolvencies, increased mortgage stress and defaults from higher leveraged borrowers, which
could adversely affect the Group’s Position. Refer to risk factor 5 “Changes in the real estatemarkets in Australia, New Zealand or other markets where the Group does business may
adversely affect the Group’s Position”
If economic conditions deteriorate in the Relevant Jurisdictions, asset values in housing,commercial or rural property markets could decline, unemployment could rise and corporate
and personal incomes could decline. Deterioration in global markets, including equity,
property, currency and other asset markets, may impact the Group’s customers and the
security the Group holds against loans and other credit exposures. This may impact theGroup’s ability to recover loans and other credit exposures. Should any of these occur, theGroup’s Position could be adversely affected. Refer to risk factor 10 “Credit risk may
adversely affect the Group’s Position”.

2.

The COVID-19 pandemic and future pandemics may adversely affect the Group’s
Position
The effects of the COVID-19 pandemic continue to impact the Group’s Position, and thedomestic and global economy. The future impacts of the COVID-19 pandemic remain
uncertain. Further variants may develop that impact the Group’s customers and businesses
and could lead to government having to take action which could adversely impact theGroup’s Position. COVID-19 related supply chain disruption and mobility constraints could
result in a decline in the Group’s profit margins, and could impact customers’ cash flows,
capital, liquidity and financing needs. Substantially reduced global economic activity during
the COVID-19 pandemic caused substantial volatility in global financial markets. This is
expected to continue to have a significant impact on the Relevant Jurisdictions. Customers
enduring hardship may suffer detriment if the Group cannot provide tailored support and4sustainable arrangements based on individual circumstances. Political and economic
conditions following the COVID-19 pandemic or other pandemics may cause a reduction indemand for the Group’s products and services, an increase in loan and other credit defaults,
bad debts, and impairments and an increase in the cost of the Group’s operations. If any ofthese occur, the Group’s Position could be adversely affected.

3.

Competition in the markets in which the Group operates may adversely affect theGroup’s Position
The markets in which the Group operates are highly competitive. Competition is expected tocontinue to increase. Competitors include non-Australian financial service providers who
expand in Australia, new non-bank entrants and smaller providers. Examples of factors that
may affect competition and negatively impact the Group’s Position include:•

entities that the Group competes with, including those outside of Australia and New
Zealand, could be subject to lower levels of regulation and regulatory activity. This
could allow them to offer more competitive products and services, because thoselower levels of regulation may give them a lower cost base and/or the ability to attract
employees that the Group would otherwise seek to employ;•

digital technologies and business models are changing customer behaviour and thecompetitive environment. Competitors are increasingly utilising new technologies
including artificial intelligence (“AI”) and disrupting existing business models in thefinancial services sector;•

companies from outside of the financial services sector are directly competing with theGroup by offering products and services traditionally provided by banks. This includes
competitors obtaining banking licenses and partnering with existing competitors;•

consumers and businesses may choose to transact using, or to invest or store valuein, new forms of currency (such as cryptocurrencies or central bank digital currencies)
in relation to which the Group may choose not, or may not be able, to provide
financial services, competitively. A new form of currency could change how financial
intermediation and markets operate and, with that, may adversely impact thecompetitive and commercial position of the Group;•

Open Banking (as described below) may lead to increased competition (see risk factor
16 “Regulatory changes or a failure to comply with laws, regulations or policies may
adversely affect the Group’s Position”); and•the Australian and New Zealand Governments may consider implementing policies thatfurther increase competition in the banking market. Recent examples include theAustralian Parliament’s inquiry into economic dynamism, competition and businessformation and the Australian Competition and Consumer Commission’s (“ACCC”)
inquiry into the market for the supply of retail deposit products. The AustralianGovernment has also recently commenced a review of its competition laws andinstitutions. In New Zealand, the Commerce Commission has also recently commenced
a market study into any factors that may affect competition for the supply or acquisitionof personal banking services. Whilst these inquiries and reviews may result in theimplementation of policies that increase competition in the banking market, the exact
impact of inquiries and reviews on the Group remains unclear.

The impact on the Group of an increase in competitive market conditions or a technologicalchange that puts the Group’s business platforms at a competitive disadvantage, especiallyin the Group’s main markets and products, could lead to a material reduction in the Group’s
market share, customers and margins and adversely affect the Group’s Position. Increased
competition for deposits may increase the Group’s cost of funding. If the Group is not able
to successfully compete for deposits, the Group may be forced to rely on less stable and/or
more expensive forms of funding, or to reduce lending. This may adversely affect theGroup’s Position. Geopolitical and economic disruptions could have a significant impact oncompetition and profitability in the financial services sector due to funding cost and credit
provision increases, changes in interest rates, insufficient liquidity, implementation ofbusiness continuity plans, changes to business strategies and regulatory safe harbours. A
low-growth environment may lead to heightened competitive intensity and margin

5

compression, particularly amongst traditional competitors with strong business models.

4.

The Restructure of the Group that established a non-operating holding company may
adversely affect the Group’s Position
The Group implemented a restructure (“Restructure”) that resulted in ANZ Group Holdings
Limited (“ANZGHL”) becoming the new listed parent company of the Group in place of
ANZBGL in 2023. ANZGHL is a non-operating holding company (“NOHC”) and is authorised
as such for the purposes of the Australian Banking Act. The Australian Prudential Regulation
Authority’s (“APRA”) prudential framework for NOHCs is expected to become effectivefrom 2025, following a period of industry consultation. There is a risk that APRA’s final
regulatory framework for NOHCs of Authorised Deposit-Taking Institutions (“ADI”) and theregulation of ANZGHL over time will differ from the existing regulatory framework andincrease the regulatory risk of the Group. This may have negative consequences for theGroup and require further changes to be made to its structure. A number of Restructure
implementation steps remain outstanding and need to be implemented. The failure to
execute the implementation steps may have an adverse impact on the Group’s Position. The
post Restructure operating model may fail to function as expected and/or may fail to realise
the anticipated benefits and further changes may therefore be required to the Groupstructure. To the extent this occurs, this may adversely affect the Group’s Position.

5.

Changes in the real estate markets in Australia, New Zealand or other markets where
the Group does business may adversely affect the Group’s Position
Residential and commercial property lending, together with real estate development andinvestment property finance, are important businesses of the Group. Major sub-segments
within the Group’s lending portfolio include:•

residential housing loans (owner occupier and investment); and•commercial real estate loans (investment and development).

The scale and pace of interest rate rises have resulted in property prices declining inAustralia and New Zealand. The extent of property price changes will ultimately depend on
any further future interest rate rises or persistently high interest rates and the impact on
the economy.
APRA included credit-based macroprudential policy measures within its Prudential Standard
APS 220 Credit Risk Management (“APS 220”) with effect from 1 January 2023. These may
be used by APRA to address systemic risks if needed. Future changes to these measures by
APRA could restrict the Group’s flexibility and impact the profitability of one or morebusinesses. (Refer to risk factor 16 “Regulatory changes or a failure to comply with laws,
regulations or policies may adversely affect the Group’s Position”.)
In New Zealand, median prices for residential property peaked in November 2021, before
declining in the 2022 calendar year and early 2023. More recently, prices appear to havelevelled out. Higher interest rates and rising costs of living have put pressure on households
and there has been a material reduction in demand for residential and commercial
property.
Increases in interest rates may affect debt serviceability, increase loan defaults experienced
by the Group’s borrowers, place pressure on loan covenants and reduce demand forcommercial and residential property and the Group’s associated lending products in both
Australia and New Zealand. To address the current high inflation levels, there may befurther interest rate increases. Any future interest rate rises or persistently high interest
rates could also lead to increased credit losses from business insolvencies, increased
mortgage stress and defaults from higher leveraged borrowers, a potential adverse impact
on markets, and a potential downturn in the Australian and New Zealand economies. This
may in turn impact the ability of tenants to pay rent and in turn decrease the quality of realestate earnings of the Group’s borrowers.
Recent interest rate increases, asset price inflation and yield compression, may cause declines
in interest coverage ratios and asset values. Valuations are presently lagging market
6sentiment. The Group has been observing declining values for existing security and expects
further declines in some segments in the next 12 months. Dated valuations benefit from a
buffer created following asset price inflation until the middle of 2022. This may result inincreased refinance risk and require equity contributions from borrowers towards debt
reduction and/or a restructure of facilities. Secondary grade assets may be more susceptible
to a decline in prices. This may be the case if investors have overlooked “fundamentals” in ahighly competitive and liquid market (debt and equity). Refinance risk could be increased if
there are liquidity constraints in the banking sector. The Group has observed some signs ofchange in sentiment in non-bank debt markets as investors re-balance portfolios and change
expectations in the face of greater uncertainty and volatility. This has resulted in an increased
cost of financing rather than reduction in liquidity and the non-bank debt market remains anavailable source of refinancing. Non-bank financiers have supported the pre-development
land and property development sector in recent years, so the number of new project starts
may decline given higher cost of funding or if non-bank financiers begin to withdraw support
from weaker sponsors.
Construction risk, including contractor stability, supply chain constraints, the cost of
materials and high labour costs may impact commercial and larger residential project (landand apartments) developments and land values in the short to medium term.
The COVID-19 pandemic has triggered a change in the demand and supply dynamics in theoffice sector as flexible working arrangements have become a trend, which may impact
investor demand and yield expectations, given a more modest demand and rental growth
outlook, particularly for secondary grade assets.
Institutional investor clients may see their real estate investment portfolios in various
geographies diminish in value as a result of changes in the real estate market, which could
potentially lead to a reduction in their willingness and/or ability to repay related loan facilities
owed to the Group.
Separately, the general downturn and current reduced growth in the Chinese economy
resulting from the slowdown of property development and downturn in the real estatemarket may result in future reduced demand for commodities (such as iron ore) resulting ina reduction in commodity prices and adversely impact demand for some Australian and New
Zealand exports. Additionally, a slowdown of Chinese output may result in disruption to
supply chains across a range of industry segments including discretionary retail, wholesale,
manufacturing, packaging, and automotive segments.
Each of the factors outlined above may adversely affect the Group’s Position.

6.

Sovereign risk events may destabilise global financial markets and may adversely
affect the Group’s Position
Sovereign risk is the risk that governments will default on their debt obligations, be unable
to refinance their debts as and when they fall due, thereby destabilising parts of theireconomy. Sovereign risk may adversely impact the Group directly, through adversely
impacting the value of the Group’s assets, or indirectly through destabilising global financial
markets, thereby adversely impacting the Group’s Position. Sovereign risk exists in many
economies, including the Relevant Jurisdictions. If a sovereign defaults, it could impact
other markets and countries, the consequences of which may be similar to or worse thanthose experienced during the global financial crisis and subsequent sovereign debt crises.

7.

Market risk events may adversely affect the Group’s Position
Market risk is the risk of loss arising from adverse changes in interest rates, currency
exchange rates, credit spreads, or from fluctuations in bond, commodity or equity prices.
For purposes of financial risk management, the Group differentiates between traded andnon-traded market risks. Traded market risks principally arise from the Group’s trading7

operations in interest rates, foreign exchange, commodities and securities. The non-tradedmarket risk is predominantly interest rate risk in the banking book. Other non-tradedmarket risks include transactional and structural foreign exchange risk arising from capital
investments in offshore operations and non-traded equity risk. Losses arising from theoccurrence of such market risk events may adversely affect the Group’s Position.

8.

Changes in exchange rates may adversely affect the Group’s Position
The Group conducts business in several different currencies. Accordingly, its businesses may
be affected by movements in currency exchange rates. The Group’s annual and interim
reports are prepared and stated in Australian dollars. Any change in the value of theAustralian dollar against other currencies in which the Group earns revenues (particularly
the New Zealand dollar and the U.S. dollar) or holds capital, may adversely affect theGroup’s reported earnings and capital ratios. The Group currently hedges to partiallymitigate the impact of currency changes. There is no assurance that the Group’s hedges will
be sufficient or effective, and any change in the value of the Australian dollar against othercurrencies in which the Group earns its revenue, or holds capital, may have an adverse
impact on the Group’s Position.

9.

Acquisitions and divestments may adversely affect the Group’s Position
The Group regularly examines a range of corporate opportunities, including acquisitions anddivestments, to determine whether those opportunities will enhance the Group’s strategic
position and financial performance. Integration (or separation) of an acquired (or divested)business can be complex and costly. It sometimes includes combining (or separating)accounting and data processing systems, technology platforms and management controls,
as well as managing relationships and contracts with employees, customers, regulators,
counterparties, suppliers and other business partners. The loss of key relationships andpersonnel from an acquisition or divestment could have an adverse effect on the Group’s
Position.
There is no assurance that any acquisition (or divestment) will have the anticipated positive
results around synergies, cost or cost savings, time to integrate (or separate) and overall
performance, as the underlying assumptions for the acquisition (or divestment) may notprove to be accurate or achievable. Any acquisition (or divestment) may also impact theGroup’s credit ratings, cost of funds and access to further funding, which could in turnadversely affect the Group’s funding and liquidity positions.
Integration (or separation) efforts could create inconsistencies in standards, controls,
procedures and policies, as well as diverting management attention and resources. There isa risk of counterparties making claims in respect of completed or uncompleted transactions
against the Group that could adversely affect the Group’s Position. All or any of thesefactors could adversely affect the Group’s ability to conduct its business successfully andimpact the Group’s operations or results. There is no assurance that employees, customers,
counterparties, suppliers and other business partners of newly acquired (or retained)businesses will remain post-acquisition (or post-divestment). Further, there is a risk thatcompletion of an agreed transaction may not occur whether in the form originally agreed
between the parties or at all, including due to failure of the Group or the counterparty tosatisfy completion conditions or because other completion conditions such as regulatory,
shareholder or other approvals are not satisfied. Should any of these integration or
separation risks occur, this could adversely affect the Group’s Position.
Transactions that the Group has announced but not completed include an agreement with
Suncorp Group Limited (“SGL”) to purchase 100% of the shares in SBGH Limited, theimmediate non-operating holding company of Suncorp Bank. The ACCC declined to grantauthorization for this acquisition in August 2023, but this decision is currently subject toreview by the Australian Competition Tribunal. This acquisition is subject to the satisfactionof certain conditions, including those described below and assuming those conditions are
satisfied, and merger approval is granted, it is expected to occur in mid calendar year 2024.
The acquisition of Suncorp Bank from SGL is subject to satisfaction of certain conditions.

8

These include Federal Treasurer approval, ACCC authorisation or approval (see above) andcertain amendments to the Queensland State Financial Institutions and Metway Merger Act.
ANZBGL will also have a termination right under the Suncorp Bank Sale Agreement if APRA
issues a written communication to ANZBGL under or in connection with APS 222(Associations with Related Entities) to the effect that ANZBGL must not proceed withcompletion of the acquisition. The terms and conditions of the approvals that are granted
may impose conditions, limitations, obligations or costs, or place restrictions on the conductof the Group or its business following the acquisition or require changes to the terms of thetransaction. There can be no assurance that the regulators will not impose any suchconditions, obligations or restrictions, and that such conditions, limitations, obligations or
restrictions will not have the effect of delaying or preventing completion of the transaction,
imposing additional material costs on or materially limiting the revenues of the Group
following the acquisition or otherwise reducing the anticipated benefits of the acquisition to
the Group, any of which might have an adverse effect on the Group.
ANZBGL undertook a due diligence process in relation to the proposed acquisition of
Suncorp Bank which relied in part on a review of financial, technology, legal and otherinformation provided in respect of Suncorp Bank or was otherwise provided at meetings with
Suncorp Bank management. Despite making reasonable efforts as part of the due diligence
investigations, ANZBGL has not been able to verify the accuracy, reliability or completenessof all the information provided to it. If any information provided or relied upon by ANZBGL in
its due diligence proves to be incorrect, incomplete or misleading, there is a risk that theactual financial position and performance of Suncorp Bank may be different to the
expectations. There is also no assurance that the due diligence conducted was conclusive,
and that all material issues and risks in respect of the proposed acquisition have been
identified and avoided or mitigated, therefore, there is a risk that issues or risks may arisethat may adversely impact the Group. SGL has provided ANZBGL with certain indemnities
relating to certain pre-completion matters as well as certain representations and warranties
in favour of ANZBGL. There is a risk that these protections may be insufficient to coverliabilities relating to these matters, which may have an adverse impact on the Group’s
financial performance and position. As is usual, the warranties and indemnities are also
subject to certain financial claims thresholds and other limitations.
If for any reason any announced acquisition or divestment, including the acquisition of
Suncorp Bank, is not completed, the Group’s ongoing business may be adversely impacted
and the Group may be subject to a number of risks. These risks include:••••

financial markets may react negatively, resulting in negative impacts on the Group’s
securities and other adverse impacts;
the Group may experience negative reactions from its customers, vendors, andemployees;
the Group will have incurred expenses and will be required to pay certain costs
relating to the acquisition, whether or not the acquisition is completed, such as legal,
accounting, investment banking, and other professional and administrative fees; andmatters relating to the acquisition may require substantial commitments of time andresources by the Group’s management, which could otherwise have been devoted toother opportunities that may have benefited the Group.

Risks related to the Group’s financial situation

10.

Credit risk may adversely affect the Group’s Position
As a financial institution, the Group is exposed to the risks resulting from or associated withextending credit, including incurring credit-related losses that can occur as a result of acounterparty being unable or unwilling to honour its contractual obligations. Credit losses
can and have resulted in financial services organisations realising significant losses and, insome cases, failing.
The risk of credit-related losses continues to be impacted by conditions relating to increased
interest rates, high inflation, global supply chain disruptions and heightened politicaltensions, particularly those referred to in risk factor 1 “Changes in political and economic

9

conditions, particularly in Australia, New Zealand, the Asia Pacific region, the United
Kingdom (“UK”), Europe and the United States (the “Relevant Jurisdictions”), may adversely
affect the Group’s Position”. The risk of credit-related losses has increased due to thefactors described above and may further increase as a result of less favourable conditions,
whether generally or in a specific industry sector or geographic region which could cause
customers or counterparties to fail to meet their obligations. These conditions include but
are not limited to, weakened confidence in the stability of the banking system generally or
particular financial institutions that may impact the Group, its customers or counterparties,
a sustained high level of unemployment, continued increase in interest rates andinflationary conditions, and a reduction in the value of assets the Group holds as collateralor the market value of the counterparty instruments and obligations it holds.
Some of the Group’s customers and counterparties with exposures to these sectors may bevulnerable:•industries exposed to the unwinding of government stimulus packages and increasing
interest rates;•industries reliant on consumer discretionary spending;•industries that are exposed to fuel supply shortages and rising costs including aviation,road transport, shipping and agriculture, particularly given the Ukraine conflict and its
impact on oil and gas prices, production and supply;•

participants in energy or commodity markets that are exposed to rising margin
requirements under derivatives that arise due to price volatility;•

industries at risk of sanctions, geopolitical tensions or trade disputes (these include
technology, agriculture, communications and financial institutions);•

industries exposed to declining global growth and disruption to global supply chains.
These include but are not limited to the retail, wholesale, automotive, manufacturing
and packaging industries;•

the commercial property sector (including construction and contractors) which is
exposed to rising interest rates impacting serviceability and downward pressure on
valuations, particularly in the office sector given occupancy levels have not returned
to pre-COVID-19 levels and in the retail sector given an expectation for a reduction indiscretionary household spending resulting in a reduction in base rental, turnover
rental and rental growth expectations. In some markets, commercial contractors andsub-contractors may face cash flow and liquidity issues over the next 12 to 24 months
as current projects run off and the volume of forward looking projects arediminished. Whilst supply chain constraints and building material cost increases havesomewhat stabilized, labour availability and mobility issues have increased given
competing demand from Australian Government infrastructure projects in major
capital cities;•

industries facing labour supply shortages and who are reliant on access to both skilled
and unskilled migrant workers, including tourism and hospitality, technology,
agriculture, retail, health, construction and services;•

customers and industries exposed to disruption from physical climate risk (e.g.
bushfires, floods, storms and drought) and transition risk (e.g. industry exposed tocarbon reduction requirements and resulting changes in demand for goods andservices or liquidity). For more information on climate-related risks, see risk factor 30“Impact of future climate events, biodiversity loss, human rights, geological events,
plant, animal and human diseases, and other extrinsic events may adversely affect
the Group’s Position”;•

industries exposed to the volatility in exchange rates and foreign exchange markets
generally; and•banks and financial services companies, as they may experience pressure on liquidity
due to impacts of rapidly rising interest rates and the flow on impacts to asset values,
which could result in the deterioration of credit ratings, the need for restructuring and10

recapitalisation, losses of confidence in financial institutions or a financial default.
The Group is also subject to the risk that its rights against third parties may not be
enforceable in certain circumstances, which may result in credit losses. Should material
credit losses occur to the Group’s credit exposures, this may adversely affect the Group’s
Position.
Credit risk may also arise from certain derivative, clearing and settlement contracts that theGroup enters into, and from the Group’s dealings with, and holdings of, debt securities
issued by other banks, financial institutions, companies, governments and government
bodies where the financial conditions of such entities are affected by economic conditions in
global financial markets.
In assessing whether to extend credit or enter into other transactions with customers andcounterparties, the Group relies on information provided by or on behalf of customers andcounterparties, including financial statements and other financial information. The Group
may also rely on representations of customers and independent consultants as to theaccuracy and completeness of that information. The Group’s financial performance could be
negatively impacted to the extent that it relies on information that is incomplete, inaccurate
or materially misleading.
The Group holds provisions for credit impairment that are determined based on current
information and subjective and complex judgements of the impairment within the Group’s
lending portfolio. If the information upon which the assessment is made is inaccurate or theGroup fails to analyse the information correctly, the provisions made for credit impairment
may be insufficient, which may adversely affect the Group’s Position.

11.

Challenges in managing the Group’s capital base could give rise to greater volatility incapital ratios, which may adversely affect the Group’s Position
The Group’s capital base is critical to the management of its businesses and access tofunding. Prudential regulators of the Group include, but are not limited to, APRA, theReserve Bank of New Zealand (“RBNZ”) and regulators in the United States, the UK and thecountries in the Asia Pacific region. The Group is required to maintain adequate regulatory
capital by its primary regulator APRA and the RBNZ for ANZ Bank New Zealand Limited andits subsidiaries (the “ANZ New Zealand Group”).
Under current regulatory requirements, risk-weighted assets and expected loan losses
increase as a counterparty’s risk grade worsens. These regulatory capital requirements arelikely to compound the impact of any reduction in capital resulting from lower profits intimes of stress. As a result, greater volatility in capital ratios may arise and may require theGroup to raise additional capital. There is no certainty that any additional capital required
would be available or could be raised on reasonable terms.
The Group’s capital ratios may be affected by a number of factors including (i) lower
earnings (including lower dividends from its deconsolidated subsidiaries such as those in theinsurance business as well as from its investment in associates), (ii) increased asset growth,(iii) changes in the value of the Australian dollar against other currencies in which the Group
operates (particularly the New Zealand dollar and U.S. dollar) that impact risk weighted
assets or the foreign currency translation reserve, (iv) changes in business strategy(including acquisitions, divestments and investments or an increase in capital intensive
businesses) and (v) changes in regulatory requirements. APRA issued a discussion paper in
September 2023 to explore options for, and seek feedback from stakeholders on, improving
the effectiveness of Additional Tier 1 Capital in Australia. APRA has indicated that it intends
to discuss its paper with relevant stakeholders and may formally consult in 2024 on any
proposed amendments to prudential standards. At this stage, it is not possible to confirm
what impact (if any) the options proposed by APRA may have on the Group.
APRA and the RBNZ have implemented prudential standards to accommodate Basel III.
Certain other regulators have either implemented or are in the process of implementing
regulations, including Basel III, that seek to strengthen, among other things, the liquidity
and capital requirements of banks, funds management entities and insurance entities,
11though there is no assurance that these regulations have had or will have their intended
effect. The recent collapse of certain financial institutions in the United States and Europe
may raise the likelihood of changes to capital and other regulatory requirements applicableto the Group, which may impact the Group’s Position. For more information on recent
prudential regulation changes that have impacted, or that may impact the Group, see risk
factor 16 “Regulatory changes or a failure to comply with laws, regulations or policies may
adversely affect the Group’s Position”. An inability of the Group to maintain its regulatory
capital may adversely affect the Group’s Position.

12.

The Group’s credit ratings could change and adversely affect the Group’s ability to raise
capital and wholesale funding and constrain the volume of new lending, which may
adversely affect the Group’s Position
The Group’s credit ratings have a significant impact on its access to, and cost of, capital andwholesale funding. The Group’s credit ratings may also be important to customers or
counterparties evaluating the Group’s products and services. Credit ratings and rating
outlooks may be withdrawn, qualified, revised or suspended by credit rating agencies at any
time. The methodologies used by ratings agencies to determine credit ratings and rating
outlooks may be revised in response to legal or regulatory changes, market developments
or for any other reason.
The Group’s credit ratings or rating outlooks could be negatively affected by a change in thecredit ratings or rating outlooks of the Commonwealth of Australia or New Zealand, theoccurrence of one or more of the other risks identified in this section, a change in ratings
methodologies or by other events or factors, including volatility in the banking sector. As aresult, downgrades in the Group’s credit ratings or rating outlooks could occur that do notreflect changes in the general economic conditions or the Group’s financial condition. The
ratings of individual securities (including, but not limited to, certain Tier 1 capital and Tier 2
capital securities and covered bonds) issued by the Group (and other banks globally) could
be impacted by changes in the regulatory requirements for those instruments as well as theratings methodologies used by rating agencies.
Any downgrade or potential downgrade to the Group’s credit ratings or rating outlooks may
reduce access to capital and wholesale debt markets and could lead to an increase infunding costs, constrain the volume of new lending and affect the willingness ofcounterparties to transact with the Group which may adversely affect the Group’s Position.
Credit ratings are not a recommendation by the relevant rating agency to invest in securities
offered by the Group.

13.

Liquidity and funding risk events may adversely affect the Group’s Position
Liquidity and funding risk is the risk that the Group is unable to meet its payment
obligations as they fall due (including repaying depositors and wholesale creditors) or that
the Group has insufficient capacity to fund increases in assets. Liquidity and funding risk isinherent in banking operations due to the timing mismatch between cash inflows and cash
outflows.
Reduced liquidity could lead to an increase in the cost of the Group’s borrowings andconstrain the volume of new lending which may adversely affect the Group’s Position.
Deterioration and volatility in market conditions and a decline in investor confidence in theGroup may materially impact the Group’s ability to replace maturing liabilities and accessfunding in a timely and cost effective manner, which may adversely impact the Group’s
Position. Advances in technology allow customers to withdraw funds deposited with theGroup faster and may accelerate the risks associated with on-demand liabilities, such as
deposits.
The Group raises funding from a variety of sources, including customer deposits andwholesale funding in domestic and offshore markets to meet its funding requirements andto maintain or grow its business. Developments in major markets can adversely affectliquidity in global capital markets. For example, in times of liquidity stress, if there is12damage to market confidence in the Group or if funding inside or outside of domestic
markets is not available or constrained, the Group’s ability to access sources of funding andliquidity may be constrained and the Group will be exposed to liquidity and funding risk.

14.

Changes in the valuation of some of the Group’s assets and liabilities may adversely
affect the Group’s earnings and equity and the Group’s Position
The Group applies accounting standards, which require that various financial instruments,
including derivative instruments, assets and liabilities classified as fair value through othercomprehensive income, assets and liabilities classified as fair value through profit or loss,
and certain other assets and liabilities (as per Note 18 of the consolidated financial
statements for the financial year ended 30 September 2023 as set out in the Group’s 2023
Annual Report (“2023 Financial Statements”) are measured at fair value with changes infair value recognised in earnings or equity.
Generally, to measure the fair value of these instruments, the Group relies on quoted
market prices, present value estimates or other valuation techniques that incorporate theimpact of factors that a market participant would take into account when pricing the asset
or liability. Certain other assets, including some unlisted equity investments, are valued
using discounted cash flow techniques. The fair value of these instruments is impacted bychanges in market prices or valuation inputs that may adversely affect the Group’s earnings
and/or equity.
The Group may be exposed to a reduction in the value of non-lending related assets as aresult of impairments that are recognised in earnings. The Group must test at least annually
the recoverability of goodwill balances and intangible assets with indefinite useful lives or
not available for use and other non-lending related assets including premises andequipment (including right-of-use assets arising from leases), investment in associates,
capitalised software and other intangible assets where there are indicators of impairment.
To assess the recoverability of goodwill balances, the Group uses a multiple of earnings
calculation. Changes in the assumptions upon which the calculation is based, together withchanges in earnings, may materially impact this assessment, resulting in the potential
write-off of a part or all of goodwill balances.
In respect of other non-lending related assets, if an asset is no longer in use, or the cash
flows generated by the asset do not support the carrying value, impairment charges may berecorded. This, in conjunction with the other potential changes above, could impact theGroup’s Position.

15.

Changes to accounting policies may adversely affect the Group’s Position
The accounting policies that the Group applies are fundamental to how it records andreports its financial position and results of operations. Management exercises judgement inselecting and applying many of these accounting policies. This is so that the Group complies
with the applicable accounting standards or interpretations and reflects the mostappropriate manner in which to record and report on the Group’s financial position andresults of operations. These accounting policies may be applied inaccurately, resulting in a
misstatement of the Group’s financial position. The application of new or revised accounting
standards or interpretations may also adversely affect the Group’s Position. The Group
discloses the impact of new accounting standards that are effective for the first time in any
reporting period, in the notes to the condensed consolidated financial statements for that
period. In some cases, management must select an accounting policy from two or morealternatives, any of which would comply with the relevant accounting standard orinterpretation and be reasonable under the circumstances, yet might result in reporting
materially different outcomes than would have been reported under the alternative.
Legal and regulatory risk

16.

Regulatory changes or a failure to comply with laws, regulations or policies may
13

adversely affect the Group’s Position
The Group’s businesses and operations are highly regulated. The Group is subject to laws,
regulations and policies, including industry self-regulation in the Relevant Jurisdictions(“Regulations”). Regulations continue to change and generally increase in scope, scale,complexity, cost and speed of required compliance (“Regulatory Change”). A failure by
the Group to comply with Regulations or manage Regulatory Change could result in
regulatory investigations, legal or regulatory sanctions, financial or reputational loss,
litigation, fines, penalties, restrictions on the Group’s ability to do business, revocation,suspension or variation of conditions of regulatory licences or other enforcement oradministrative action or agreements (such as enforceable undertakings) any of which may
adversely affect the Group’s Position. Such failures may also result in the Group being
exposed to the risk of litigation brought by third parties (including through class action
proceedings). The outcome of any litigation (including class action proceedings) may resultin the payment of compensation to third parties and further remediation activities. For
information in relation to the Group’s litigation and contingent liabilities, see risk factor 17“Litigation and contingent liabilities may adversely affect the Group’s Position” and Note 32of the 2023 Financial Statements.
Regulations can also affect the operating environment of, and impose significant compliancecosts on, the Group. Changes to the Group’s operating environment and the Regulations towhich the Group is subject to may affect the profitability of the Group, change the level ofcompetition that the Group faces or impact the ability of the Group to conduct one or moreelements of its business. Increases in compliance costs could also decrease profitability anddivert resources away from other priorities of the Group, thereby impacting the Group’s
ability to innovate and compete.
Prudential regulation
Prudential regulation is a type of Regulation and is subject to Regulatory Change.
Developments in APRA and RBNZ prudential regulation may materially impact the Group.
There are typically a number of prudential regulatory proposals open for consultation with
APRA and the RBNZ at any time. Changes to prudential regulation can increase the level ofregulatory capital that the Group is required to maintain, restrict the Group’s flexibility,
require it to incur substantial costs and impact the profitability of one or more businesslines, any of which may adversely affect the Group’s Position.
Recent prudential regulation changes that have impacted, or that may impact the Group,
include:•Market risk and counterparty credit risk: APRA is consulting on revisions to prudential
standards and guidance relating to market risk, being Interest Rate Risk in the Banking
Book (“IRRBB”), Market Risk and Counterparty Credit Risk.

•

Unquestionably strong capital framework: APRA implemented its final requirements inrelation to capital adequacy and credit risk for ADIs on 1 January 2023. However, APRA
continues to consult and finalise revisions to a number of remaining prudential
standards, being IRRBB, Market Risk and Counterparty Credit Risk. Given the number of
items that are yet to be finalised by APRA, the aggregate outcome from all changes to
APRA’s prudential standards relating to their review of ADIs ‘unquestionably strong’capital framework remains uncertain.

•

Macroprudential policy framework: APRA finalised its macroprudential policy frameworkin June 2022. To support the implementation of the framework, APRA formalised andembedded credit-based macroprudential policy measures within its prudential
standards, within a new attachment to APS 220. APRA’s objective is to strengthen thetransparency, implementation and enforceability of macroprudential policy. The updates
to APS 220 which became effective from 1 January 2023 included a set of credit-based
macroprudential measures to be used to address systemic risks if needed. The updates
to APS 220 include two main types of credit-based macroprudential measures: (i)lending limits (the purpose of temporary lending limits would be to moderate any
excessive growth in higher-risk lending during periods of heightened systemic risks)

14and (ii) lending standards, where APRA may also set minimum requirements for lending
standards, including measures such as the serviceability buffer for residential
mortgages. APRA confirmed the current settings of (i) for lending limits, no limit
restrictions in place on higher-risk lending but APRA continues to monitor higher risk
lending at outlier banks for commercial property lending and (ii) for lending standards,
the serviceability buffer is maintained at 3.0% above the loan rate. Future changes tothese settings could restrict the Group’s flexibility and impact the profitability of one ormore business lines. For further information, see risk factor 5 “Changes in the realestate markets in Australia, New Zealand or other markets where the Group does
business may adversely affect the Group’s Position”.
•

Operational risk management: APRA finalised prudential standard CPS 230 Operational
Risk Management (“CPS 230”) in July 2023, which sets out minimum standards for
managing operational risk, including updated requirements for business continuity
planning and service provider risk management. The new standard incorporates
updated requirements for service provider management (currently outsourcing) andbusiness continuity management that are currently contained in prudential standards
CPS 231 Outsourcing and CPS 232 Business Continuity Management. The effective dateof compliance moved from 1 January 2024 to 1 July 2025. APRA will provide fortransitional arrangements for pre-existing contractual arrangements with service
providers. The requirements in the standard will apply from the earlier of the next
contract renewal date or 1 July 2026. A project team has been formed and the Groupwill continue to work through the implementation process which is complex, andrequires changes to systems, operations, and contractual arrangements with third
parties.

•

Recovery and exit planning: APRA finalised Prudential Standard CPS 190 Recovery andExit Planning (“CPS 190”) in December 2022. CPS 190 is aimed at reinforcing theresilience of the financial system. It is designed to ensure that APRA regulated entities
are better prepared to manage periods of severe financial stress. Under CPS 190,
entities will be required to develop and maintain credible plans for managing periods ofsevere financial stress, including actions that could be taken to stabilise and restore
financial resilience and actions that effect an orderly and solvent exit from regulated
activity. These requirements will apply across all APRA regulated industries. CPS 190
will come into effect from 1 January 2024 for banks and insurers.

•

Resolution planning: APRA finalised Prudential Standard CPS 900 Resolution Planning(“CPS 900”) in May 2023. CPS 900 requires entities that are significant financial
institutions or those that provide critical functions, to support APRA in the development
and implementation of a resolution plan so the entity can be managed by APRA in anorderly manner where the entity is unable to, or is likely to be unable to, meet its
obligations or suspends, or is likely to suspend, payments. CPS 900 sets out certain
requirements for entities to cooperate with APRA in resolution planning. Under CPS 900,
APRA will develop a resolution plan, which sets out APRA’s strategy for resolving an
entity in the event of its failure. This could include, for example, plans to recapitalise,wind-down or transfer operations. It is an important complement to a financial
contingency plan, which sets out an entity’s plan for managing risks to its financial
viability. The standard will come into effect on 1 January 2024.

•

ADI capital framework: APRA issued a discussion paper in September 2023 to explore
options for, and seek feedback from stakeholders on, improving the effectiveness of
Additional Tier 1 Capital in Australia. APRA has indicated that it intends to discuss its
paper with relevant stakeholders and may formally consult in 2024 on any proposed
amendments to prudential standards. At this stage, it is not possible to confirm what
impact (if any) the options proposed by APRA may have on the Group.

•

Loss absorbing capacity: APRA announced its decision on loss-absorbing capacity
requiring Australian D-SIBs in July 2019, including ANZBGL, to increase their total
capital by 3% of risk weighted assets (“RWA”) by January 2024. On 2 December
2021, APRA announced that it had finalised its loss-absorbing capacity requirements
and stated that it will require Australian D-SIBs to increase their total capital by afurther 1.5% of RWA by January 2026. Inclusive of the previously announced interim
increase of 3%, this will result in a total increase to the minimum total capitalrequirement of 4.5% of RWA. APRA expects the requirement to be satisfied
15

predominantly with additional Tier 2 capital with an equivalent decrease in othersenior funding. The amount of the additional total capital requirement will be based on
the Group’s actual RWA as at January 2026.
•

RBNZ revisions to capital adequacy: The RBNZ’s revised capital adequacy
requirements for New Zealand banks, which are set out in the Banking Prudential
Requirements documents, are being implemented in stages during a transition period
from October 2021 to July 2028. The net impact on ANZBGL’s Level 1 CET1 capital is
expected to be an increase in capital requirements of approximately A$1 billion to
A$1.5 billion between 30 September 2023 and the end of the transition period in 2028
(based on the Group’s 30 September 2023 balance sheet). The amount could also
vary over time subject to changes to the capital position in ANZ New Zealand (e.g.
from RWA growth, management buffer requirements, potential dividend payments).

•

NZ contingent capital instruments: ANZ New Zealand’s contingent capital instruments
will no longer be treated as eligible regulatory capital. The contingent capital
Additional Tier 1 instruments will progressively lose eligible regulatory capitaltreatment over the transition period to 1 July 2028.

ASIC regulation
The Australian Securities and Investments Commission’s (“ASIC”) current enforcement
priorities focus on the need to reduce the risk of financial harm to consumers and uphold theintegrity of Australia’s financial markets. Specifically, ASIC has identified the following
priority areas: enforcement action targeting poor design, distribution and marketing offinancial products; misleading conduct in relation to sustainable finance including
greenwashing and climate-related financial disclosures; misconduct involving high risk retailproducts including Contracts For Difference (CFDs) and crypto-assets; combating anddisrupting investment scams and phishing websites; taking enforcement action where there
are egregious failures to mitigate the risks of cyber-attacks and governance failures relating
to cyber resilience; misleading and deceptive conduct relating to investment products;
manipulation in energy and commodities derivatives markets; and unfair contract terms. A
failure by the Group to comply with applicable laws may have a negative impact on
consumers or market integrity, or the Group’s reputation and financial performance and may
give rise to litigation and regulatory enforcement proceedings, which may in turn, have an
adverse impact on the Group’s Position.
Competition regulation
Competition in the Australian and New Zealand financial services sectors continues to be an
important driver for Regulation and Regulatory Change. On 14 February 2023 the AustralianTreasurer directed the ACCC to conduct an inquiry into the market for retail deposit products
supplied by ADIs. It includes how banks set interest rates, as well as other terms andconditions. On 21 April 2023, the ACCC published an issues paper for the inquiry. The ACCC
must provide the Australian Treasurer with a report on the inquiry by 1 December 2023.
(refer to risk factor 3 “Competition in the markets in which the Group operates may
adversely affect the Group’s Position”). The ACCC announced its compliance andenforcement priorities for the year in March 2023. The ACCC announced that it will continue
to focus on competition issues in the financial services sector, particularly with payment
services and also noted its focus on promoting “healthy” competition in the financial services
sector and investigating anti-competitive conduct. Increased scrutiny by ACCC may result inan associated increase in costs for the Group in addition to adversely impacting the Group’s
ability to grow through the implementation of potential acquisitions which may in turn, havea negative impact on the Group’s Position.
The New Zealand Government directed the Commerce Commission to commence a market
study into competition in the New Zealand retail banking sector in June 2023. The market study
is focused on the nature of competition in personal banking services, particularly deposit
accounts and home loans. The study is considering consumer behaviours and preferences,barriers to new competitors entering or expanding in the personal banking market, barriers to
new or innovative products and services, and barriers that limit a consumer’s ability to switch
banks. As part of the study, the Commerce Commission will examine bank profitability andother financial measures to assess competition in the sector. The study is focused on personalbanking services such as home loans and deposit accounts (including current savings and16overdraft facilities). The Commerce Commission released a preliminary issues paper on 10
August 2023, in which the Commerce Commission indicated that its initial view of the existing
research was that New Zealand banks appeared more profitable than in comparable economies
over the past decade, raising questions about the intensity of competition, including for
personal banking services. The Commerce Commission is expected to issue its final report after
the market study’s completion in August 2024. Whilst it is currently uncertain what impact (ifany) the market study will have on the Group’s Position, there is no guarantee that any
recommendations or policy initiatives adopted by the New Zealand Government as a result of
this market study will not have a material impact on the Group's profitability.
The Australian Government also announced a review of competition policy settings on 23
August 2023. Over two years, the review will look at competition laws, policies andinstitutions. The Australian Government has announced that the initial issues to be consideredas part of the review include proposed changes to merger laws, as well as other competition
law issues, non-compete and related clauses that restrict workers from changing employers
and providing advice on competition issues raised by new technologies and the net zerotransformation. The review will not issue a single report but will undertake rolling policy
projects. It is uncertain what impact the review will have on the Group’s Position. However,there is no guarantee that the proposed changes will not have a material effect or impact on
the Group's Position.
Product regulation
There is a strong focus on the suitability of products offered by financial services providers,
including the Group. Regulatory policy development and monitoring of responsible consumer
lending has increased significantly and continues to impact business practices. If additionalchanges in Regulation are implemented, as a result of the development and monitoring of
responsible consumer lending, such changes may impact the manner in which the Group
provides consumer lending services in the future that may in some respects adversely affect
the Group’s operations in this area and consequently, the Group’s Position. ASIC publishedupdated regulatory guidance on responsible lending laws in December 2019. The AustralianFinancial Complaints Authority (“AFCA”) is consulting on its approach to assessing
compliance by lenders, such as the Group, with both consumer and small business lending
requirements. There are new stricter anti-hawking prohibitions in relation to financial
products and a deferred sales model for add on insurance. The design and distribution
obligation legislation requires product issuers and distributors to, among other things,
identify appropriate target markets for financial and credit products and distribute those
products so that they likely reach the relevant target market. There are significant penalties
for non-compliance and such legislation could impact the Group’s ability to issue and market
financial products in the future. Increased compliance costs resulting from financial productdistribution requirements and AFCA’s new approach to assessing compliance may adversely
impact the Group’s Position.
Senior executive regulation
The Financial Accountability Regime Act 2023 (the “FAR”) received Royal Assent on 14
September 2023. The FAR will be implemented in stages for in-scope entities within theGroup commencing with ANZGHL and ANZBGL from 15 March 2024, and then from 15
March 2025 for any insurers or licensed superannuation trustees within the Group. Under
the FAR, the Group and certain senior personnel will be subject to, or impacted by, new orheightened accountability obligations. For example, the FAR will require ANZBGL to takereasonable steps to (a) conduct its business with honesty and integrity, and with due skill,care and diligence; (b) deal with APRA and ASIC in an open, constructive and cooperative
way; (c) prevent adverse effects on its prudential standing or prudential reputation; (d)ensure that certain directors, senior executives and other key personnel meet the above
standards of conduct, and take reasonable steps to ensure compliance with applicable laws;and (e) ensure that related entities whose business and activities materially andsubstantially affect ANZBGL comply with the FAR in the same way as ANZBGL is required
to. Potential risks to the Group include the risk of penalties and the risk to the Group’s
ability to attract and retain high-quality directors and senior executives.
Compensation Scheme of Last Resort
17

The Group will incur costs and further exposures associated with the establishment of theAustralian Government’s Compensation Scheme of Last Resort (“CSLR”). The purpose of the
CSLR is to support confidence in the financial system’s dispute resolution framework byfacilitating compensation payments to eligible consumers who have received a determination
for compensation from the Australian Financial Complaints Authority. The AustralianGovernment passed a bill implementing the CSLR in June 2023. The CSLR will be funded by
the Australian Government in its first year of operation and thereafter will be fundedthrough industry levies. The maximum industry funding in any year of operation is A$250
million. In addition, funding to pay for certain determinations that relate to ‘precommencement’ disputes will be provided by an initial levy of up to A$250 million to be paidby ten industry participants, including the Group. Neither the amount of the initial levy nor
the Group’s share of it have been determined by the Australian Government. The outcomes
and total costs associated with remaining possible exposures and the legislative changeremain uncertain and their impact may adversely affect the Group’s Position.
Industry self-regulation
Industry best practice guidance and standards impacting retail and small business banking isa focus of regulators, interest groups and industry participants. In particular, an
independent review of the Australian Banking Code (“Code”) made 116 recommendations in
2021. The Australian Banking Association (“ABA”) and member banks have been working to
implement the accepted recommendations in an updated Code. The accepted
recommendations include new definitions for ‘vulnerability’ and ‘small business’, theintroduction of a requirement to meet with prospective guarantors before accepting aguarantee, and a replacement of the requirement to engage with customers in a ‘fair,reasonable and ethical manner’ with a requirement aligning to the ‘efficiently, honestly andfairly’ standard in the Australian Corporations Act. It is expected that the new Code will be
implemented in March 2024, although this is subject to its approval by ASIC and the timingof any such approval. A failure to comply with the Code may have a negative impact on theGroup’s reputation and may result in litigation or regulatory enforcement actions, which may
in turn, have an adverse impact on the Group’s Position.
Open banking regulation
Open Banking is part of a consumer data right (“CDR”) in Australia that came into effect inAugust 2019. The CDR gives customers access to and control over their data and establishes
and seeks to improve consumers’ ability to compare and switch between products and services.
It is expected to reduce the barriers to new entrants into the banking industry in Australia. The
CDR regime is evolving. The Australian Government released a statement in response to the
Statutory Review of the CDR in June 2023 noting that the Australian Government will continue
supporting operations in banking and energy and pause implementation of the CDR in othersectors to allow time for the CDR to mature across the banking and energy sectors. In June
2023, the New Zealand Government released a consultation bill which contemplates theintroduction of a CDR in New Zealand. Open Banking may lead to increased competition that
may adversely affect the Group’s Position. Refer to risk 3 “Competition in the markets in which
the Group operates may adversely affect the Group’s Position”.
Cyber regulation
The Australian Security of Critical Infrastructure Act was extended in 2021 to the financial
services and markets sector. It includes ‘last resort’ powers for the Australian Government
to direct an entity to take a particular action and to authorise the Australian Signals
Directorate (“ASD”), to intervene against cyber-attacks and registration and reporting
requirements for critical infrastructure assets and cyber incidents. ASD is an intelligenceagency that focuses on signals intelligence and cyber operations. Further reforms including
positive security obligations for critical infrastructure assets to be delivered through sectorspecific requirements and enhanced cyber security obligations for systems of nationalsignificance came into force in 2022. Implementation of the legislation could increase costs
for the Group, and may give rise to regulatory enforcement proceedings, which may in turn,adversely affect the Group’s Position.

18

Payments regulation
The Australian Government responded to three inquiries and reviews relating to payments in
2021. These were a review into the Australian payments system, an inquiry into mobile
payments and digital wallets and an inquiry into Australia as a technology and financial
centre (covering de-banking of fintech and cryptocurrency exchanges). The AustralianGovernment agreed to many of the recommendations and the Australian Treasury is
consulting on the implementation of the recommendations. The impact of this work on theGroup is not clear. Potential policy responses include new regulatory requirements andbroader access to payment systems which could increase competition, which may adversely
affect the Group’s Position. The Australian Government published its “Strategic Plan for the
future of Australia’s payments system” in 2023 which sets out its policy objectives andpriorities for the payments system. The strategic plan provides businesses with certainty
and clarity on the Australian Government’s approach to important issues in the payments
system. The Strategic Plan also outlines the Australian Government’s commitment toensuring that Australia’s payments system is safe, affordable, can be trusted and will remain
readily accessible. The impact on the Group of any resulting regulatory changes toimplement the Government’s policy objectives and priorities for the payments system is notclear. The timing of any impact to the Group’s Position as a result of this strategic plan is
not known.
Privacy regulation
Recent legislation has enhanced enforcement measures and increased penalties for serious orrepeated privacy breaches of the Australian Privacy Act. The imposition of such penalties on
the Group may adversely affect the Group’s Position. The Australian Government announced
the pathway for privacy reform following the Australian Privacy Act review. It includes
amendments to the Australian Privacy Act addressing some proposals and further consultationon broad reform proposals which would have a significant impact on how an entity can use
individuals’ information. The implications of the reforms for the Group are not clear and will
depend on the Australian Government’s policy. The implementation of additional regulatory
obligations regarding privacy may adversely affect the Group’s Position.
Digital identity
The Australian Government is consulting on draft legislation and rules to establish aframework for digital identities. This framework enables the phased expansion of theAustralian Government Digital ID system, sets up a system that could see Australians
provided with greater choice in which accredited state and territory digital ID service
providers they use to access Commonwealth services and appoints the ACCC as the initial
digital ID regulator. Although the implications of this framework are not yet clear for theGroup, the Group may need to adhere to certain Australian Government requirements if itwishes to become a provider of digital identity or to use digital identities as part of its
onboarding process for customers. Such adherence could result in significant implementationand compliance costs, which may adversely affect the Group’s Position.
Quality of financial advice regulation
The Australian Government released a report on the “quality of advice” in 2023. The reportcontains recommendations for reforming the regulatory framework for the provision offinancial advice. These recommendations include broadening the scope of ‘personal advice’,
introducing a requirement for personal advice to be ‘good advice’ and replacing the current
duty of financial advisers to act in a client’s best interests with a new statutory duty. The
Australian Government accepted some of the review’s recommendations and advises it willremove the ‘safe harbour’ from the current best interests duty. The removal of the safe
harbour and, if implemented, the new framework, could place additional regulatory
obligations on banks and may adversely affect the Group’s Position.
Artificial intelligence regulation
The Australian Government commenced consultation on the regulation of AI in 2023. The
implications of the consultation for the Group are not clear. They will depend on the policy
19implemented by the Australian Government. The introduction of additional regulatory
obligations relating to the use of AI may adversely affect the Group’s Position.
Scams regulation
The Australian Government has indicated it will introduce mandatory industry codes ofconduct to help prevent and detect scams and consult on the development of these industry
codes in 2023. The ultimate form which this policy action will take is not known. The ACCC
has separately authorized the ABA and its member banks to participate in discussions todevelop an industry standard to prevent, detect, and disrupt scams affecting individual andsmall business customers. Although it is unclear whether this authorisation will result in anindustry standard at all or, if it does, what impact this standard will have on the Group, it ispossible that the Group will need to meet increased standards with respect to theidentification, prevention and remediation of scam activity that concerns its customers. This
may include standards or expectations concerning when the Group will be liable to reimburse
or compensate customers for losses arising from scam activity. Any failure to meet thesestandards or expectations may adversely affect the Group’s Position.
Unfair trading practices
The Australian Government released consultation on policy options to address unfair trading
practices in the Australian consumer law in August 2023. The Australian Government statesthat unfair trading practices are particular types of commercial conduct that are not coveredby existing provisions of Australia’s consumer laws but which nevertheless can result insignificant consumer and small business harm. The consultation proposes four options, which
include amending the statutory prohibition against unconscionable conduct, introducing ageneral prohibition on unfair trading practices and introducing a combination of general andspecific prohibitions on unfair trading practices. While the Australian consumer law does not
apply to ASIC-regulated financial products of the kind offered by the Group, the consultation
paper notes that a separate regulation impact assessment process will consider the extensionof reform to ASIC-regulated financial services in 2024. Although it is not clear which option
the Government will adopt for the Australian consumer law, and how, if at all, this will be
carried across to ASIC-regulated financial services, there is a risk that the Group would face
increased compliance costs in meeting any new law which prohibited unfair trading practices.
In the event of contravention of such a law, the Group may face penalties. Any such increased
costs or contraventions may adversely affect the Group’s Position.
New Zealand regulation
The New Zealand Government and regulatory authorities have proposed and have
implemented significant legislative and regulatory changes for New Zealand financial
institutions. These changes include the RBNZ’s reform of capital requirements and revised
outsourcing policy (BS11), conduct regulations for financial institutions, a climate related
financial risk disclosure regime, the replacement of the existing prudential supervision
regime for banks with a deposit takers regime, including a depositor compensation scheme,changes to the consumer credit contract regime and a consumer data right. Such changes
may adversely affect the ANZ New Zealand Group, potentially impacting its corporate
structures, businesses, strategies, capital, liquidity, funding and profitability, cost structures,and the cost and access to credit for its customers and the wider economy. This in turn may
adversely affect the Group’s Position.
Other Australian inquiries
There are other inquiries and interventions into Australia’s financial sector. In 2022-23,
these included four separate Parliamentary inquiries into ‘the cost of living’, ‘promoting
economic dynamism, competition and business formation’, a ‘review of Australia’s four
major banks’ and ‘bank closures in regional Australia’. These inquiries are wide ranging andcould lead to legislative or regulatory changes or measures that may adversely affect theGroup’s Position, including through taxes and levies. For example, based on the conduct ofthese inquiries to date, the inquiry concerning bank closures in regional Australia could
recommend that the Australian Government impose standards on banks concerning theirpresence in regional and rural areas while the major banks inquiry could recommend that20

the Australian Government impose standards on banks concerning scams. However, even if
there are recommendations from these inquiries, it is not clear if the Australian Government
would adopt those recommendations.
Other Australian regulation
The Australian Government finalised a regional banking taskforce in 2022 which assessed
the impact of bank branch closures on regional communities. Banks are in the process of
implementing the taskforce’s recommendations, including by adding new requirements to
the ABA’s “Branch Closure Protocol”, which will apply to the Group when branches areclosed.
Finally the Australian Government has announced that it will ban the use of credit cards foronline wagering. This will occur by using bank identification numbers to identify and block
credit card payments. The impact of this work on the Group is not clear. See also risk factor
18 “Significant fines and sanctions in the event of breaches of law or regulation relating toanti-money laundering, counter-terrorism financing and sanctions may adversely affect theGroup’s Position”.
Regulator powers and penalties
There are increased penalties for breaches of laws in Australia, including the Australianconsumer law, as well as increased powers to regulators and funding for regulators to
enforce breaches. Increasing regulatory powers include ASIC’s product intervention power
and proposed expansions of ASIC’s directions powers. The Australian Treasury Laws
Amendment (Strengthening Corporate and Financial Sector Penalties) Act significantly
increased the sanctions applicable to the contravention of a range of corporate and financial
sector obligations. Maximum fines and civil penalties for breaches of the Competition andConsumer Act (including the Australian consumer law) have increased and a civil penalty
regime introduced for unfair contract terms. This includes increasing the maximum
pecuniary penalty for corporations where relevant from 10% of a corporation’s annual
turnover to 30% of adjusted turnover over the period the breach occurred. The imposition ofsuch penalties on the Group may adversely affect the Group’s Position.

17.

Litigation and contingent liabilities may adversely affect the Group’s Position
From time to time, the Group may be subject to material litigation, regulatory actions, legal
or arbitration proceedings and other contingent liabilities that may adversely affect theGroup’s Position.
The Group had contingent liabilities as at 30 September 2023 in respect of the matters
outlined in Note 32 of the 2023 Financial Statements. Note 32 includes, among other things,
the following matters:•

regulatory and customer exposures;•South African rate action;•

capital raising action;•

Esanda dealer car loan litigation;•

OnePath superannuation litigation;•

New Zealand loan information litigation;•

Credit cards litigation;•

the Royal Commission;•

security recovery actions; and•warranties, indemnities and performance management fees.

The Group regularly engages with its regulators in relation to regulatory investigations,surveillance and reviews, reportable situations, civil enforcement actions (whether by court
action or otherwise), formal and informal inquiries and regulatory supervisory activities in21

Australia and globally. The Group has received various notices and requests for informationfrom its regulators as part of both industry-wide and Group-specific reviews and has also
made disclosures to its regulators at its own instigation. The nature of these interactions
can be wide ranging and, for example, include or have included in recent years a range ofmatters including responsible lending practices, regulated lending requirements, productsuitability and distribution, interest and fees and the entitlement to charge them, customer
remediation, wealth advice, insurance distribution, pricing, competition, conduct in financial
markets and financial transactions, capital market transactions, anti-money laundering andcounter-terrorism financing obligations, privacy obligations and information security,business continuity management, reporting and disclosure obligations and productdisclosure documentation. There may be exposures to customers which are additional to
any regulatory exposures. These could include class actions, individual claims or customer
remediation or compensation activities. The outcomes and total costs associated with such
reviews and possible exposures remain uncertain. There is however a risk that contingent
liabilities may be larger than anticipated or that additional litigation, regulatory actions,
legal or arbitration proceedings or other contingent liabilities may arise.

18.

Significant fines and sanctions in the event of breaches of law or regulation relating toanti-money laundering, counter-terrorism financing and sanctions may adversely affect
the Group’s Position
Anti-money laundering (“AML”), counter-terrorism financing (“CTF”) and sanctions
compliance have been the subject of significant regulatory change and enforcement inrecent years. The increasingly complicated environment in which the Group operates hasheightened these operational and compliance risks. Furthermore, increased transparency
around the outcomes of compliance issues at financial institutions domestically and globally
together with related fines and settlement sums mean that these risks continue to be anarea of focus for the Group.
The Australian Government began a consultation process on potential reforms to the AML
and CTF regulatory regime in 2023. The consultation has two parts: the simplification andmodernisation of the regime; and the implementation of ‘Tranche II’ reforms to extend theregime to certain ‘high-risk’ professions, including lawyers, accountants, trust and company
service providers, real estate agents and dealers in precious metals and stones. The impactof this development on the Group is not yet clear. The reform process could lead to new
regulatory requirements, which may adversely affect the Group’s Position.
The New Zealand Government has also recently undertaken a review of its Anti-Money
Laundering and Countering Financing of Terrorism Act 2009 (“AML/CFT Act”), with areport tabled in New Zealand’s parliament by the Minister of Justice in November 2022
outlining more than two hundred potential areas for law reform (ranging from minor
clarifications to existing requirements and definitions to new obligations imposed onreporting entities). Several of the proposed recommendations have been accepted andintroduced in an early package of reform through newly issued regulations, with the firsttranche of regulations being introduced in July 2023 (largely definitional changes andclarifications). The second and third tranches of regulation are being introduced in June
2024 and June 2025 respectively and will make changes to various existing obligations(including customer due diligence, enhanced due diligence, and ongoing due diligencerequirements) as well as introducing new obligations. It is anticipated that further reform
will be made via amendments to the primary AML/CFT Act in due course, following further
public consultation on areas identified through the review that have not been introduced via
regulations. The timing for any further legislative change is currently unknown. Although
there is no clear view of the outcome of the reforms at this stage, the reform process could
lead to new regulatory requirements being imposed on the Group, which may adversely
affect the Group’s Position.
Due to the Ukraine conflict, there are currently a large number of sanctions applied to
Russia, and other countries, by regulators around the globe. Whilst many governments
across the United States, Europe and Australia agree in relation to sanctions targets, thenuances and specific restrictions are not fully aligned. Companies are assessing their risk
appetite regarding ongoing business activity with or in Russia or with Russian owned

22entities. This has heightened the operational and compliance risks in navigating thosetransactions and dealings that are considered lawful, or within other counterparties’ risk
appetite. This situation is expected to continue whilst the conflict persists.
In Australia, in recent years, there has been an increase in action taken by AML/CTF
regulators against ‘Reporting Entities’. A ‘Reporting Entity’ is a legal entity that provides atleast one ‘designated service’ to a customer, such as opening a bank account or providing aloan. Since 2017, the Australian Transaction Reports and Analysis Centre (“AUSTRAC”) has
taken three public enforcement actions (resulting in fines and other penalties) against majorbanks in Australia, as well as actions against a number of other banks, casinos and other
Reporting Entities, using its various regulatory powers including appointment of auditors andinfringement notices.
In New Zealand, the RBNZ has stated that its appetite for taking formal enforcement action
for breaches of the New Zealand AML and CTF legislation has increased. The propensity forother regulators (including in Asia and the Pacific) to take action for non-compliance with
AML/CTF laws has also increased.
Close monitoring of the different levels and types of financial crimes continues across theGroup. Scams continue to be pervasive and evolve quickly and to the extent that new risks
emerge, there is a continuing risk that the management of alerts for potential money
laundering or terrorism financing activities may be impacted.
The risk of non-compliance with AML/CTF and sanction laws remains high given the scaleand complexity of the Group and the lack of clarity around some mandatory reporting
requirements. Emerging technologies, such as those provided by virtual asset service
providers (e.g. digital currency exchanges and wallet providers) as well as increasingly
complex remittance arrangements via fintechs and other disruptors, may limit the Group’s
ability to track the movement of funds, develop relevant transaction monitoring, and meet
reporting obligations. The complexity of the Group’s technology, and the increasing
frequency of changes to systems that play a role in AML/CTF and sanctions compliance puts
the Group at risk of failing to identify an impact on the systems and controls in place. A
failure to operate a robust program to report the movement of funds, combat money
laundering, terrorism financing, and other serious crimes may have serious financial, legal
and reputational consequences for the Group and its employees.
Consequences can include fines, criminal and civil penalties, civil claims, reputational harmand limitations on doing business in certain jurisdictions. These consequences, individuallyor collectively, may adversely affect the Group’s Position. The Group’s foreign operations
may place the Group under increased scrutiny from regulatory authorities and subject theGroup to increased compliance costs.

19.

Changes in monetary policies may adversely affect the Group’s Position
Central monetary authorities (including the RBA, the RBNZ, the United States Federal
Reserve, the European Central Bank, the Bank of England and monetary authorities in the
Asian jurisdictions in which the Group operates) set official interest rates or take othermeasures to affect the demand for money and credit in their relevant jurisdictions. In somejurisdictions, currency policy is used to influence general business conditions and thedemand for money and credit. These measures and policies can significantly affect theGroup’s cost of funds for lending and investing and the return that the Group will earn on
those loans and investments. These factors impact the Group’s net interest margin and canaffect the value of financial instruments it holds, such as debt securities and hedging
instruments. The measures and policies of the central monetary authorities can also affect
the Group’s borrowers, potentially increasing the risk that they may fail to repay loans.
Changes in interest rates and monetary policy are difficult to predict and may adversely
affect the Group’s Position. Refer to risk factor 5 “Changes in the real estate markets inAustralia, New Zealand or other markets where the Group does business may adversely
affect the Group’s Position” and risk factor 10 “Credit risk may adversely affect the Group’s
Position”.
23

20.

Ongoing significant compliance costs with respect to the evolving and extensive
Automatic Exchange of Information (“AEoI”) obligations imposed by global customer
tax transparency regimes may adversely affect the Group’s Position
There continues to be mandatory and substantial changes to, and increasing regulatory
focus on, compliance by all global Financial Institutions (“FIs”), including the Group, with
global customer tax transparency regimes, under the Foreign Account Tax Compliance Act(“FATCA”), the Organisation for Economic Co-operation and Development’s (“OECD’s”)
Common Reporting Standard (“CRS”) and similar anti-tax avoidance regimes. This includes
global regulatory movement to enforcement and penalty activities and increasing regulatory
implementation of additional compliance framework requirements, compliance assessment
requirements, questionnaires, onsite financial institution audits, evidentiary requirements,
detailed rules and frameworks to close down circumventions and deter, detect and penalise
non-compliance. The ongoing OECD government level peer reviews and IRS and regulatory
FI compliance review/audit requirements increase scrutiny and therefore unplanned
workload of FIs globally. Each country of CRS adoption is being pushed by the OECD toensure its penalty regime is sufficient to deter and penalise non-compliance.
As the Group is an in scope FI operating in a globally interlinked operating environment, thehighly complex and rigid nature of the obligations under each country’s varied
implementation of these regimes present heightened operational and compliance risks for
the Group. As international regulatory compliance frameworks mature and regulators shiftfocus to enforcement (which may include financial penalties and other more general tax risk
framework implications), this may result in significant penalty provision requirements andreputational damage in the event of failures. Accordingly compliance with global customer
tax transparency regimes is a key area of focus and major cost for the Group.
Under FATCA and other relevant U.S. Treasury Regulations, the Group could be subject to:•a 30% withholding tax on certain amounts (including amounts payable to customers),
and be required to provide certain information to upstream payers, as well as otheradverse consequences, if the ongoing detailed obligations are not adequately met;
and•broader compliance issues, significant withholding exposure, competitive
disadvantage and other operational impacts if the FATCA Intergovernmental
Agreements between the United States and the applicable jurisdictions in which theGroup operates cease to be in effect.

Under the CRS, the Group:•

faces challenges in developing countries where the Group has operations, such as the
Pacific region. The local regulators in these countries are generally assisted by a‘partner’ country. The introduction of standards and evidentiary requirements
continue to be challenging to implement and adhere to;•must deal with substantial ongoing country specific variations in local law andregulatory implementation, with significant broader ‘justified trust’ ramifications andpenalties for non-collection or failed reporting in respect of prescribed customer
information;•is under increasingly stringent regulatory scrutiny and measures as regulators turntheir focus to the effectiveness of FI implementation. This tightening of regulatory
focus, at a varying pace in each country, can lead to a significant negative experience
for affected customers (including unilateral account blocking and closure, underlying
client issues resulting from same and potential direct customer penalties), which may
adversely affect the Group’s Position and if not similarly implemented by other FIs,
may present a significant competitive disadvantage and loss of business;•

faces poor customer outcomes with customers who may feel aggrieved as a result ofblocking and closure impacts including increased potential exposure to legal and third
party liability. This may be particularly the case if the Group has not communicatedthe regulatory issue clearly to a customer or has blocked or closed the accountincorrectly (for example, due to a data or process error); and24

•continues to deal with the substantial implementation challenges associated with thecomplex requirements relating to intermediaries, which may increase the risk ofregulatory ramifications.

The scale and complexity of the Group means that the risk of non-compliance with FATCA,
CRS and other tax reporting regimes is high. The loss of key resources and critical subject
matter expertise, combined with the challenge of finding qualified replacements, increases
the risk of non-compliance with these obligations. A failure to successfully operate theimplemented processes or to identify and implement all obligations could lead to legal,financial and reputational consequences for the Group and its employees. Consequences
include fines, criminal and civil penalties, civil claims, reputational harm, competitive
disadvantage, loss of business and constraints on doing business.
External factors such as natural disasters and the COVID-19 pandemic have resulted inchallenges for staff including unplanned staff absences, access to systems, tools andinformation, and impacted the delivery of the Group’s regulatory obligations on requisite
timeframes, including mandatory FATCA and CRS regulatory reporting, customer follow-up
strategies, resolution and action of regulatory recommendations, as well as continuous
improvement activities required to achieve the zero rate of error expected by regulators.
The Group’s global taxation obligations in relation to the enterprise’s own tax lodgements
and payments may similarly be impacted. Initial leniency from global regulators continues
to be tightened or withdrawn due to the regulatory expectation for FIs to adapt to theongoing challenges presented by external factors, thus heightening the risk of regulatory
scrutiny, associated penalties and reputational ramifications resulting from any deficiencies
or delays in meeting regulatory obligations.
These consequences, individually or collectively, may adversely affect the Group’s Position.

21.

Unexpected changes to the Group’s licence to operate in any jurisdiction may adversely
affect the Group’s Position
The Group is licensed to operate in various jurisdictions. Unexpected changes in theconditions of the licenses to operate by governments, administrations or regulatory
agencies that prohibit or restrict the Group from trading in a manner that was previously
permitted may adversely affect the Group’s Position.
Internal control, operations and reputational risk

22.

Operational risk events may adversely affect the Group’s Position
Operational risk is the risk of loss and non-compliance with laws resulting from inadequate
or failed internal processes, people and systems or from external events. This includes legalrisk, and the risk of reputational loss or damage arising from inadequate or failed internal
processes, people, and systems, but excludes strategic risk.
Operational risk categories under the Group’s risk taxonomy include:•

financial crime (the risk of money laundering, sanctions violations, bribery andcorruption, and “Know-Your-Customer” failure). See risk factor 18 “Significant fines andsanctions in the event of breaches of law or regulation relating to anti-money
laundering, counter-terrorism financing and sanctions may adversely affect the Group’s
Position”;•

internal fraud (fraud attempted or perpetrated by an internal party (or parties)
against the organisation);•external fraud (fraud attempted or perpetrated against the organisation by an
external party (that is, a party without a direct relationship to the Group (excluding
customers)) without involvement of an employee);•business continuity (failure of the business continuity management framework);•

physical safety (the risk of damage to the Group’s physical assets, client assets, or25

public assets for which the Group is liable, and (criminal) injury to the Group’s
employees or affiliates);•

people (the risk of breaching employment legislation, mismanaging employee relations
and failing to ensure a safe working environment);•

transaction processing and execution (failure to process, manage and executetransactions and other processes correctly and appropriately);•technology (the risk associated with the failure or outage of systems, including
hardware, software and networks). See risk factor 26 “Disruption of information
technology systems or failure to successfully implement new technology systems could
significantly interrupt the Group’s business, which may adversely affect the Group’s
Position”;•

conduct (the risk of loss or damage arising from the failure of the Group, its
employees or agents to appropriately consider the interests of consumers, theintegrity of the financial markets and the expectations of the community, in
conducting the Group’s business activities). See risk factor 25 “Conduct risk events
may adversely affect the Group’s Position”;•

legal (the risk of execution errors in legal procedures and processes);•regulatory risk (failure to comply with any legal or regulatory obligations that are notcaptured through other mentioned risks). See risk factor 16 “Regulatory changes or a
failure to comply with laws, regulations or policies may adversely affect the Group’s
Position”;•

third party (the risk of failing to manage third party relationship and risks
appropriately, for example, not taking reasonable steps to identify and mitigate
additional operational risks resulting from the outsourcing of services or functions);•

information security including cyber (the risk of information security incidents,
including the loss, theft or misuse of data/information — this covers all types of data,and can include the failure to comply with rules concerning information security). Seerisk factor 27 “Risks associated with information security, including cyber-attacks,
may adversely affect the Group’s Position”;•

data (the risk of failing to appropriately manage and maintain data, including all typesof data, for example, client data, employee data and the Group’s proprietary data(includes privacy)). See risk factor 28 “Data management risks may adversely affect
the Group’s Position”;•

model (the risk of incorrect model design, improper implementation of a correct model,
or inappropriate application of a correct model). See risk factor 29 “Modelling risks may
adversely affect the Group’s Position”; and•statutory reporting and tax (the risk of failing to meet statutory reporting and tax
payments/filing requirements). Statutory reporting includes all external reporting that
the Group is obliged to perform (e.g. regulatory reporting, financial reporting).

Loss from operational risk events may adversely affect the Group’s Position. Such losses can
include fines, penalties, imposts (including capital imposts), loss or theft of funds or assets,
legal costs, customer compensation, loss of shareholder value, reputation loss, loss of life or
injury to people, and loss of property and information.
Operational Risk can arise from a number of causes, such as change risk events (forexample, a failure to deliver a change or risks resulting from change initiatives), and have anumber of different impacts, including reputational impacts (see risk factor 24 “Reputationalrisk events as well as operational failures and regulatory compliance failures may give rise
to reputational risk, which may undermine the trust of stakeholders, erode the Group’s
brand and adversely affect the Group’s Position”).
Pursuant to APRA and RBNZ requirements, the Group and ANZ New Zealand Group mustalso maintain “operational risk capital” reserves in the event future operational events

26

occur.
Most major offices have returned to a blended/hybrid working environment, including
adapting to remote working arrangements since the COVID-19 pandemic. Reliance on
digital channels continues to remain high, which in turn heightens the risks associated withcyber-attacks and any disruption to system/service availability. Whilst business continuity
plans have been well tested and refined during the pandemic, impact to system/service
availability still has the ability to impact the Group’s Position from a reputational, financial
and compliance perspective.
As the Group increases the adoption of AI which includes, technologies such as machinelearning through predictive analytics, process automation and decision generation to support
its customers and business processes, the Group may become more exposed to associated AI
risks, such as lack of transparency, inaccurate decisions or unintended consequences that areinconsistent with the Group’s policies or values. These could have adverse financial and nonfinancial impacts on the Group.

23.

Human capital risk, which relates to the inability to attract, develop, motivate andretain the Group’s people to meet current and future business needs, could result inpoor financial and customer outcomes and reduce the ability of the Group to deliver
against customer and other stakeholders’ expectations
Key executives, employees and directors play an integral role in the operation of theGroup's business and its pursuit of its strategic objectives. The unexpected departure of anindividual in a key role or the Group's failure given the challenges in the current
environment to recruit, develop and retain an appropriately skilled and qualified person into
these roles particularly in areas such as digital, technology, risk or compliance, could havean adverse effect on the Group’s Position.

24.

Reputational risk events as well as operational failures and regulatory compliance
failures may give rise to reputational risk, which may undermine the trust of
stakeholders, erode the Group’s brand and adversely affect the Group’s Position
The Group’s reputation is a valuable asset and a key contributor to the support that it
receives from the community in respect of its business initiatives and its ability to raisefunding or capital. Reputational risk may arise as a result of an external event or theGroup’s actual or perceived actions and practices, which include operational and regulatorycompliance failures. The occurrence of such events may adversely affect perceptions about
the Group held by the public (including the Group’s customers), shareholders, investors,
regulators and rating agencies. The impact of a risk event on the Group’s reputation may
exceed any direct cost of the risk event itself and may adversely impact the Group’s
Position.
The Group may suffer reputational damage where one of its practices fails to meet
community expectations. Community expectations are continually changing and evolving. If
expectations exceed the standard required to comply with applicable law, the Group may
incur reputational damage even where it has met its legal obligations. A divergence between
community expectations and the Group’s practices could arise in a number of ways including
in relation to its product and services disclosure practices, pricing policies and use of data.
The Group’s reputation may be adversely affected by community perception of the broader
financial services industry, particularly in an environment of rising interest rates. Reputational
damage may arise from the Group’s failure to effectively manage risks, enforcement or
supervisory action by regulators, adverse findings from regulatory reviews and failure orperceived failure to adequately respond to community, environmental and ethical issues.
From time to time the Group may be subjected to heightened public scrutiny and potential
reputational damage as a result of the actions of activist shareholders. Areas which haveattracted investor activism in Australia primarily relate to environmental and social issues andinclude concerns about the actions of the Group itself or parties that the Group finances.
Operational and regulatory compliance failures or perceived failures may give rise to27

reputational risk. Such operational and regulatory compliance failures include, but are notlimited to:•

failures related to fulfilment of identification of obligations;•failures related to new product development;•

failures related to ongoing product monitoring activities;•

failures related to suitability requirements when products are sold outside of thetarget market;•

failure to comply with disclosure obligations;•failure to properly manage risk (e.g. credit, market, operational or compliance);•

market manipulation or anti-competitive behaviour;•

inappropriate crisis management/response to a crisis event;•

inappropriate handling of customer complaints;•

inappropriate third party arrangements;•

privacy breaches; and•unexpected risks.

Damage to the Group’s reputation may have wide-ranging impacts, including adverse
effects on the Group’s profitability, capacity and cost of funding, increased regulatory
scrutiny, regulatory enforcement actions, additional legal risks and limiting the availabilityof new business opportunities. The Group’s ability to attract and retain customers could also
be adversely affected if the Group’s reputation is damaged, which may adversely affect theGroup’s Position.

25.

Conduct risk events may adversely affect the Group’s Position
Conduct risk is the risk of loss or damage arising from the failure of the Group, its
employees or agents to appropriately consider the interests of consumers, the integrity of
the financial markets, and the expectations of the community in conducting the Group’sbusiness activities.
Conduct risks include:•

the provision of unsuitable or inappropriate advice to customers;•

the representation of, or disclosure about, a product or service which is inaccurate, ordoes not provide adequate information about risks and benefits to customers;•a failure to deliver product features and benefits in accordance with terms,
disclosures, recommendations and advice;•a failure to appropriately avoid or manage conflicts of interest;•

inadequate management of complaints or remediation processes;•a failure to respect and comply with duties to customers in financial hardship; and•unauthorised trading activities in financial markets, in breach of the Group’s policies
and standards.

There has been an increasing regulatory and community focus on conduct risk, including inAustralia and New Zealand. Financial pressure has increased for customers with the risingcost-of-living and reduction in disposable income creating pressure on affordability. This
may impact both the ability to lend to customers, the extent to which forbearance may need
to be offered to those already struggling. It is expected to increase the number ofcustomers that may fall into financial difficulty, and therefore increase the need for theGroup to provide enhanced support. As this occurs, it is likely to have the greatest impact
on customers in challenging financial circumstances. This is an evolving situation. The
Group will need to continue to address the increased demand for forbearance and provide

28

appropriate tailored solutions to address complex customer needs to help mitigate the riskof customer harm.
Where a conduct risk event occurs, the Group has a centralised team responsible forcustomer remediation programs, including addressing conduct issues identified in Group
reviews. Conduct risk events may not only negatively impact customers and market
integrity, but may expose the Group to regulatory actions, restrictions or conditions onbanking licenses and reputational consequences that may adversely affect the Group’s
Position. Remediation programs may not be implemented appropriately or may lead tofurther remediation work being required, resulting in litigation, regulatory action andincreasing cost to the Group, which may adversely affect the Group’s Position. For further
discussion of the increasing regulatory focus on conduct risk, see risk factor 16 “Regulatorychanges or a failure to comply with laws, regulations or policies may adversely affect theGroup’s Position” and risk factor 17 “Litigation and contingent liabilities may adversely affect
the Group’s Position”.

26.

Disruption of information technology systems or failure to successfully implement newtechnology systems could significantly interrupt the Group’s business, which may
adversely affect the Group’s Position
The Group’s day-to-day activities and its service offerings (including digital banking) arehighly dependent on information technology (“IT”) systems. Disruption of IT systems, orthe services the Group uses or is dependent upon, may result in the Group failing to meetits compliance obligations and customers’ banking needs. In a digital world, customer’s
expectations of “always on” “24/7” banking services necessitates highly available andresilient IT systems.
The Group has an ongoing obligation to maintain its IT systems and to identify, assess andrespond to risk exposures associated with these systems, including IT asset lifecycle, IT
asset project delivery, technology resilience, technology security, use of third parties, dataretention and restoration and business rules and automation. Inadequate responses tothese risk exposures could lead to unstable or insecure systems, which could adversely
impact customers, increase the Group’s costs, and result in non-compliance with regulatory
requirements, any of which may adversely affect the Group’s Position.
The Group has incident response, disaster recovery and business continuity measures inplace designed to ensure that critical IT systems will continue to operate during both shortterm and prolonged disruption events for all businesses across the Group’s network,
including ANZ New Zealand and international branches, which rely on the Group to provide anumber of IT systems. A failure of the Group’s systems may affect the Group’s network,
which may in turn, adversely affect the Group’s Position. The COVID-19 pandemic
highlighted that these arrangements must cater for improbable events and ensure critical IT
systems can be supported and accessed remotely by a large number of technologists andbusiness users for extended periods. If such measures cannot be effectively implemented,
this may adversely affect the Group’s Position.
The Group must implement and integrate new IT systems, most notably cloud, data andautomation technologies, into the existing technology landscape to ensure that the Group’s
technology environment is cost-effective and can support evolving customer requirements.
Inadequate implementation and integration of these systems, or improper operation andmanagement, including of their vendors and the supply chain, may adversely affect theGroup’s Position.
This risk factor should be read in conjunction with risk factor 27 “Risks associated withinformation security, including cyber-attacks, may adversely affect the Group’s Position” asinformation security breaches and cyber-attacks have the potential to result in the
disruption of IT systems.

27.

Risks associated with information security, including cyber-attacks, may adversely
affect the Group’s Position

29

The primary focus of information security is to protect information and technology systems
from disruptions to confidentiality, integrity or availability. As a bank, the Group handles aconsiderable amount of personal and confidential information about its customers and its
own internal operations, from the multiple geographies in which the Group operates. This
information is processed and stored on both internal and third party hosted environments.
Any failure of security controls operated by the Group or its third parties could adversely
affect the Group’s business.
Information security risks for the Group have increased significantly in recent years in part
because of the proliferation of new technologies, such as the internet and mobile banking toconduct financial transactions, and the increased sophistication and activities of organised
crime, hackers, terrorists, nation-states, activists and other external parties. Cyber threats,such as advanced persistent threats, distributed denial of service, malware andransomware, are continuously evolving, becoming more sophisticated and increasing involume. As cyber threats evolve, the Group expects to adapt to modify or enhance layers ofdefense or to investigate and remediate any information security vulnerabilities. Systemenhancements and updates may create risks associated with implementing new systems
and integrating them with existing ones.
Following the COVID-19 pandemic, hybrid working has increased the number of staff
working in flexible arrangements, which may increase information security risks to theGroup. Cyber criminals may attempt to take advantage through pursuing exploits in end
point security, spreading malware, and increasing phishing attempts. Furthermore, theserisks may be further exacerbated by geopolitical risks.
In the past year, there has been a record level of exposure for individuals and organisations
from data breaches. Millions of Australians now have their data publicly exposed, coinciding
with a significant rise in fraud and scams across the region. Failures in the Group’s
cybersecurity policies, procedures or controls, could result in loss of data or other sensitive
information (including as a result of an outage) and may cause associated reputational
damage. Any of these events could result in significant financial losses (including costs
relating to notification of, or compensation for, customers), regulatory investigations or
sanctions or may affect the Group’s ability to retain and attract customers and may
adversely affect the Group’s Position.

28.

Data management risks may adversely affect the Group’s Position
Data management processes include capturing, processing, distributing, accessing,retaining and disposing of large quantities of data, including sensitive data. Data
management is reliant on the Group’s systems and technology. Data quality management isa key area of focus, as data is relied on to assess various issues and risk exposures. Any
deficiencies in data quality, or the effectiveness of data gathering, analysis and validation
processes, or failure to appropriately manage and maintain the Group’s data, systems andtechnology, could result in ineffective risk management practices and, inaccurate risk
reporting which may adversely impact the Group’s Position. Furthermore, failure to comply
with data management obligations, including regulatory obligations may cause the Group to
incur losses, or result in regulatory action.

29.

Modelling risks may adversely affect the Group’s Position
The Group relies on a number of models for material business decision making including but
not limited to lending decisions, calculating capital requirements, provision levels, customer
compensation payments and stressing exposures. If the models used prove to beinadequately designed, implemented or maintained or based on incorrect assumptions or
inputs, this may adversely impact the Group’s Position.
Environmental, social and governance risks

30.

Impact of future climate events, biodiversity loss, human rights, geological events,
plant, animal and human diseases, and other extrinsic events may adversely affect theGroup’s Position

30

The Group and its customers are exposed to environmental, social and governance risks,
including climate related events, geological events (such as volcanic or seismic activity or
tsunamis), biodiversity loss including as a result of species extinction or decline, ecosystemdegradation and nature loss (“Biodiversity Loss”), plant, animal and human diseases or
pandemics such as COVID-19 and human rights risks. Each of these can cause significant
impacts on the Group’s operations and its customers.
Climate related events may include severe storms, drought, fires, cyclones, hurricanes,
floods and rising sea levels. The impact of these events may be widespread through second
order impacts. For example, the economic impacts of a drought may extend beyond primary
producers to other customers of the Group, including suppliers to the agricultural sector,
and to those who reside in, and operate businesses within, affected communities. As aresult, the Group may be exposed to climate-related events directly, and through theimpact of these events on its customers (Refer to Risk Factor 32 “Risks associated withlending to customers that could be directly or indirectly impacted by climate risk may
adversely affect the Group’s Position”).
Biodiversity Loss is an emerging risk that the Group is seeking to understand further.
Biodiversity risks are closely linked to climate related risks. Biodiversity risks can arise fromlending to customers that are dependent on nature including biodiversity or whose actions
may have negative impacts on nature. These risks can also arise from legal and regulatorychanges, which impact the Group directly or indirectly through the Group’s customers.
Failure to manage these risks may lead to financial and non-financial risks and may
adversely affect the Group’s Position.
Human rights risks relate to the safety and security of the Group’s people, labour rights,
modern slavery, privacy and consumer protection, corruption and bribery, and land rights.
The Group uses risk-based due diligence to identify human rights risks and impacts
associated with its business relationships. Failure to manage these risks may adversely
affect the Group’s Position.
Laws and regulations relating to climate change, biodiversity, human rights, or otherenvironmental, social or governance risks, as well as the perspectives of shareholders,
employees and stakeholders, may affect whether and on what terms and conditions theGroup engages in certain activities or offers certain products. Depending on their frequency
and severity, these risks may interrupt or restrict the provision of services such as theGroup branch or business centres or other Group services. They may also adversely affect
the Group’s financial condition or collateral position in relation to credit facilities extended tocustomers, which in turn may adversely affect the Group’s Position.

31.

The Group’s risk management framework may fail to manage all existing risks
appropriately or detect new and emerging risks fast enough, which could adversely
affect the Group’s Position
Risk management is an important part of the Group’s activities. It includes theidentification, measurement, monitoring and mitigation of the Group’s risk and reporting on
the Group’s risk profile and effectiveness of identified controls. There is no assurance that
the Group’s risk management framework will be effective. This includes effectiveness inrelation to existing risks and new and emerging risks that the Group may not anticipate or
identify in a timely manner and for which its controls may not be effective. Failure to
manage risks effectively could adversely impact the Group’s reputation or compliance withregulatory obligations.
The effectiveness of the Group’s risk management framework is connected to theestablishment and maintenance of a sound risk management culture, supported byappropriate remuneration structures. A failure in designing or effectively implementing
appropriate remuneration structures, could have an adverse impact on the Group’s risk
culture and effectiveness of the Group’s risk management frameworks.
The Group seeks to continuously improve its risk management frameworks. It has
implemented, and regularly reviews, its risk management policies and allocates additional31

resources across the Group to manage and mitigate risks. Such efforts may not insulate theGroup from exposure to risks and no assurance is given that the Group’s risk management
framework will be effective. A failure in the Group’s risk management processes orgovernance could result in the Group suffering unexpected losses and reputational damage,and failing to comply with regulatory obligations, which could adversely affect the Group’s
Position.
32.

Risks associated with lending to customers that could be directly or indirectly impacted
by climate risk may adversely affect the Group’s Position
The Group’s most material climate-related risks arise from lending to business and retailcustomers. Customers may be affected directly by physical and transition risks. These include
the effect of extreme weather events on a customer’s business or property, including impacts
to the cost and availability of insurance and insurance exclusions, changes to the regulatory
and policy environment in which the customer operates, disruption from new technology andchanges in demand towards low carbon products and services. Climate related risks may
indirectly affect a customer through impacts to its supply chain.
Climate risks may affect the ability of customers to repay debt, result in an increased
probability of default, result in ‘stranded assets’, and impact the amount the Group is able torecover due to the value or liquidity of collateral held as security being impaired. Other recent
examples of climate-related events in Australia that have impacted customer revenue include
severe drought conditions, bushfires in 2019 and 2020, and severe flooding in 2021 and2022. Similar events have occurred in New Zealand in recent years such as Cyclone Gabriellein February 2023.
The Group may also face legal proceedings and suffer reputational damage if it acts
inconsistently with public commitments or stakeholder expectations. These may adversely
affect the Group’s Position.
Risks associated with climate change are subject to increasing regulatory, political andsocietal focus.
Further embedding climate change risk into the Group’s risk management framework in linewith APRA’s expectations and adapting the Group’s operation and business strategy toaddress the risks and opportunities posed by climate change and the transition to a low
carbon economy, could have a significant impact on the Group.

32Responsibility statement of the Directors of ANZBGL in accordance with Rule4.1.12 (3)(b) of the Disclosure and Transparency Rules of the United Kingdom
Financial Conduct Authority
The Directors of Australia and New Zealand Banking Group Limited confirm to the best of
their knowledge that:ANZBGL’s 2023 Annual Financial Report (as defined on page 1 of this DTR Annual Financial
Report submission) includes:(i)a fair review of the development and performance of the business and the positionof the Group and the undertakings included in the consolidation taken as a whole;
together with(ii)

a description of the principal risks and uncertainties faced by the Group.

Signed in accordance with a resolution of the Directors.

Paul D O’Sullivan
ChairmanShayne C ElliottManaging Director

10 November 2023

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